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The ongoing closure of the Strait of Hormuz threatens both energy and critical helium supplies, impacting semiconductor manufacturing, especially for TSMC. TSMC and other chipmakers have stockpiles, but a prolonged disruption could compress sector multiples and trigger a sell-off before actual shortages hit.
Gold has underperformed despite the Middle East conflict due to surging oil prices, higher yields, and a stronger U.S. dollar. Oil supply disruptions, especially in diesel, are fueling inflation risks and raising the specter of stagflation.
It probably helps that Wall Street analysts have continued to raise their earnings forecasts, according to Ed Yardeni, founder of Yardeni Research.
Sam Vadas takes on Monday's final takeaways solo to start the new trading week by talking about the discussions between the U.S. and China in Paris. She also tackles the tech trade with a surge in AI memory chips like Micron (MU), along with the start to Nvidia's (NVDA) GTC 2026 conference.
A widening war in the Middle East has struck energy infrastructure across multiple Persian Gulf producers, escalating systemic supply risk. Crude oil initially surged above $100 per barrel; Strait of Hormuz shipping disruptions and refinery/LNG outages have tightened markets.
I don't think many investors would debate that the magnitude of the war with Iran qualifies as a shock. Now the question is, "How big will the shock be?
I reiterate a buy recommendation for assets tracking major U.S. indices, targeting the S&P 500 at 7778 by year-end. Despite the ongoing Iran conflict and oil price spikes, historical precedent supports long-term resilience and opportunity in U.S. equities.
This year is pivotal for US debt sustainability, with $10 trillion in marketable debt maturing and refinancing costs highly sensitive to interest rates. Rising geopolitical tensions, particularly the US-Iran conflict, have driven up oil prices and inflation expectations, pushing the US 10Y yield toward 4.25%.
We think the warnings about an AI bubble by well-qualified people are correct, just far too early. There is still money to be made.
While sitting for a "Bloomberg Money Stuff" podcast episode taping, Saba Capital Management CIO Boaz Weinstein speaks about private credit "infecting" public markets. -------- More on Bloomberg Television and Markets Like this video?
A modest decline in oil prices proved enough to lift U.S. stocks. The tech-heavy Nasdaq composite rose 1.2% and the S&P 500 added 1%, with all of its sectors gaining.
Comprehensive cross-platform coverage of the U.S. market close on Bloomberg Television, Bloomberg Radio, and YouTube with Romaine Bostick, Bailey Lipschultz, Carol Massar and Tim Stenovec. -------- More on Bloomberg Television and Markets Like this video?
The war in Iran represents the "final battle" that stands to change not just oil prices but the world, according to investor Ray Dalio.
The Middle East conflict and oil supply disruption are pressuring markets and testing investor confidence. Credit spreads, inflation expectations, and rate cut assumptions are challenged, but aren't flashing warning signals yet.
Operator: Good morning, and welcome to Bitcoin Depot Inc.'s fourth quarter and full-year 2025 conference call. My name is John, and I will be your operator today. Before this call, Bitcoin Depot Inc. issued its financial results in a press release. A copy will be furnished in a report on Form 8-K filed with the SEC and will be available in the Investor Relations section of the company's website. Joining us on today's call are Bitcoin Depot Inc.'s CEO, Scott Buchanan, and CFO, David Gray. Following their remarks, we will open the call for questions. Before we begin, Cody Slach from the Gateway Group will make a brief introductory statement. Mr. Slach, please proceed. Cody Slach: Thank you, operator. Good morning, everyone. Before management begins their formal remarks, we would like to remind everyone that some statements we are making today may be considered forward-looking statements under securities laws and involve a number of risks and uncertainties. As a result, we caution you that there are a few factors, many of which are beyond our control, that could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the SEC. We disclaim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date forward-looking statements are made, except as required by law. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics. We refer you to our filings with the SEC for detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances, including but not limited to, risks and uncertainties identified under the caption Risk Factors in our recent filings. You may get Bitcoin Depot Inc.'s SEC filings for free by visiting the SEC website at sec.gov. I would like to remind everyone this call is being recorded and will be available for replay via a link in the Investor Relations section of Bitcoin Depot Inc.'s website. A supplemental earnings presentation highlighting our performance has also been made available on our IR website. I will now turn the call over to Bitcoin Depot Inc.'s CEO, Scott Buchanan. Scott Buchanan: Thanks, Cody, and good morning, everyone. Thank you for joining us today. 2025 was a strong year for Bitcoin Depot Inc. with growth across the majority of our key operating and financial metrics and meaningful progress executing on our long-term strategy. While our fourth quarter results declined year over year, this was primarily driven by recently enacted state regulations that introduced transaction size caps and, to a lesser extent, enhancements to our compliance standards that modestly impacted transaction activity. Importantly, we view both developments as constructive for the long-term health, credibility, and sustainability of the digital asset industry. As the largest operator in North America, with one of the most robust compliance programs, Bitcoin Depot Inc. is best positioned to navigate this evolving regulatory environment. We ended the fourth quarter with approximately 9,700 active machines, reflecting both organic growth and targeted acquisitions. In October, we completed the transition of the assets acquired from National Day Bitcoin ATM to our operating platform, adding more than 500 kiosks to our network. We also expanded through new retail partnerships, including GPM Investments, a subsidiary of Arco Corp., placing our kiosks in 188 initial locations with one of the country's largest convenience store operators. Additionally, we announced a new partnership with Wild Bill Tobacco, launching with a pilot installation in 10 stores and the opportunity to expand across a portfolio of more than 250 locations. Subsequent to quarter end, we acquired the assets of Instant Coin Bank, further strengthening our presence across the South Central United States. Relocation remains an important lever in our growth playbook. By continuously evaluating kiosk-level performance, we can redeploy machines into higher-traffic, higher-conversion locations, improving unit economics without incremental capital investment. On the regulatory front, we expect continued activity at the state level in 2026. While jurisdictions may introduce additional transaction limits or enhanced consumer protection requirements, we believe these measures ultimately raise industry standards and reinforce the advantages of scale, compliance infrastructure, and regulatory engagement, areas where Bitcoin Depot Inc. has led for years. Building on our previously announced first-transaction ID verification in February, we extended identity verification requirements for returning users, adding an additional layer of oversight and real-time transaction monitoring. These measures strengthen our consumer protection, deter bad actors, and further differentiate Bitcoin Depot Inc. as a trusted, compliant platform as the industry matures. Earlier this month, we announced the acquisition of Cut, a peer-to-peer social betting platform that enables users to wager directly against one another across sports, entertainment, and user-generated events. This acquisition marks our entry into the P2P social betting market and reflects our broader strategy to thoughtfully diversify beyond Bitcoin ATMs by leveraging our existing payment infrastructure, compliance capabilities, and consumer engagement expertise. To add to this diversification strategy, just last week, we announced the launch of ReadyBox, a standalone business advance platform providing working capital solutions to small businesses, gig workers, and independent contractors. ReadyBox offers advances ranging from $500 to $2,000 in its initial rollout across select states. Importantly, this platform operates independently from our Bitcoin kiosk business, while leveraging the same compliance, underwriting, and payment infrastructure that underpins our core operation. Together, Cut and ReadyBox represent important steps in our evolution from a single-product operator into a broader fintech platform. Both initiatives leverage our core strengths—compliance, payment, risk management, and customer trust—while expanding our addressable market and creating new, scalable revenue streams. I will now turn the call over to our CFO, David Gray, to walk you through our financial results in more detail. David? David Gray: Thanks, Scott, and good morning, everyone. Jumping right into our results for the fourth quarter, revenue in the fourth quarter was $116,000,000 compared to $136,800,000 in the prior-year period, reflecting the impact of recently enacted state regulations and enhanced compliance standards. For the full year, revenue increased 7% to $615,000,000, driven by kiosk expansion and continued growth in median transaction size. In fact, at the end of 2025, installed kiosks were 9,721, up 15% from 2024. Median transaction size also grew to $400, up 43% from 2024. We now also define lifetime value, which measures the average cumulative dollar value of all purchases users acquired from inception through the most recent quarter. Users who have completed at least one transaction between 2016 and 12/31/2025 have transacted a total of $5,311 on average. This is up 5% from the previous year. Gross profit in 2025 was $15,300,000 compared to $23,500,000 in 2024. Fourth-quarter gross margin was 13.2% compared to 17.2% last year, primarily reflecting lower revenue volume in the quarter. For the full year, gross margin expanded 300 basis points to 17.2%, demonstrating the underlying operating leverage in our model. Total operating expenses were $21,400,000 compared to $15,000,000 in last year's fourth quarter, with the increase due to higher legal and incentive compensation-related expenses. For the year, total OpEx was up 7% to $72,100,000 due to the higher legal expenses. GAAP net loss for 2025 was $24,900,000 compared to net income of $5,400,000 for 2024. 2025 included an $18,500,000 accrual for an arbitration judgment liability. Net loss attributable to common shareholders in 2025 was $21,000,000, or -$2.80 per share, compared to a net loss of $6,600,000, or $2.54 per share, in last year's fourth quarter. GAAP net income for the year was down slightly to $5,100,000 compared to $7,800,000 in 2024. Adjusted EBITDA in the fourth quarter was $1,600,000 compared to $13,000,000 in the prior year, reflecting lower revenue and higher operating expenses. For the full year, adjusted EBITDA increased 42% to $56,400,000, underscoring the strength of our operating model over a full-cycle view. Now turning to our balance sheet and cash flow, cash, cash equivalents, and cryptocurrencies as of 12/31/2025 increased to $76,600,000, compared to $31,000,000 at the end of 2024. During the fourth quarter, we completed a $15,000,000 registered direct offering of our Class A common stock, which we are using for general corporate purposes. We generated $34,000,000 of cash from operating activities in 2025, compared to $22,500,000 last year, an increase of 51%. Debt, including a term loan, finance leases, and profit share arrangements, was $62,500,000 at quarter end compared to $60,900,000 at the end of 2024. Of the total debt balance, $18,000,000 is our term loan, and $40,000,000 is comprised of profit-sharing liabilities. As a reminder, these profit share arrangements contain an upfront lump-sum payment to the company by our partners in exchange for a portion of future profits generated from a specified group of kiosks for a specified period of time. Because we continue to operate and typically retain title to the machines, we must account for these arrangements as debt under U.S. GAAP. We currently do not anticipate further expansion of the profit share program moving forward. Now turning to our outlook, given the dynamic regulatory environment Scott discussed, 2026 is likely to be a challenging year for our core BTM business, where we expect revenue to decline between 30% to 40% year over year as the industry resets and adapts to a changing landscape. We will be focused on cost containment and fleet optimization to adapt to these changes, while also working to scale our recently acquired P2P betting platform and newly launched merchant cash advance products. However, we do not expect these to have a material impact on our overall revenue in the current year. Thank you for joining us today and for your continued interest in Bitcoin Depot Inc. We appreciate your support and look forward to keeping you updated as we continue to build a compliant, diversified fintech platform designed for long-term growth. With that, I will turn it over to the operator to take questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your questions, simply press star 1 again. Our first question comes from the line of Michael Anthony Colonnese from H.C. Wainwright. Please go ahead. Michael Anthony Colonnese: Thank you for taking my questions. And Scott, congratulations, Don, on the new role with Pharma. Well deserved. First question for me, I was wondering if you could unpack the 2026 revenue guidance a bit. Just trying to get a better sense of the underlying kiosk growth assumption embedded in the outlook. And, David, you touched on this a bit that the Cut acquisition is not going to be a material contributor, but it would just be great to get a better idea as to what that revenue contribution from Cut could look like for 2026. Scott Buchanan: Yeah. Hey, Mike. This is Scott. Thank you for the question. For the core BTM business, I mean, the revenue decline obviously is a big range that David gave, and that is largely because we do not know exactly what regulatory changes will happen this year. Right? We know states will pass additional measures that will limit the economics in those states, but we do not know how many states or exactly what bills will pass. So that is our best estimate at this point in terms of what the revenue decline could be. In terms of number of kiosks, that will likely stay flat or down slightly depending on how we want to handle relocations for states that pass particularly negative bills. But it will really just depend on what specifically gets done during this year, and we will continue to update guidance as we have better clarity on that throughout the year. David Gray: On Cut, Cut is a relatively small business. We think we can accelerate the growth substantially by investing more into their marketing and engineering teams. They have had a very small team prior to us acquiring them, and we think there are a lot of quick wins we can get there. As far as a specific revenue forecast, we do not have that, but revenue will definitely be below $5,000,000 for Cut this year. Michael Anthony Colonnese: Got it. Very helpful, Scott. Appreciate that. And how do you guys envision the new Bitcoin ATM regulations that have been passed and ones that are to be passed at the state level changing the M&A landscape from here? Obviously, you guys have been acquisitive in the past. Can we expect Bitcoin Depot Inc. to be more acquisitive this year given some of the changes to the laws? Scott Buchanan: Potentially. Again, it will really depend on what exactly passes and how the rest of the industry reacts to those regulatory changes. We have kind of been opportunistic in the way we approached M&A, where if we have seen some smaller competitors that are struggling to comply with these challenging regulations from an engineering and operating standpoint, it has been us an ability to buy these at attractive valuations. We are not going out and hunting to acquire people in the space, but if there are attractive opportunities out there, we are going to be strategically acquisitive. So it could happen, but it is not like we are actively trying to roll up the entire industry right now. We really want to see how everyone else reacts to the changes and how well they can comply and how that affects all of our volume going forward. Operator: And if you would like to ask a question, please press star followed by the number 1 on your telephone keypad. Our next question comes from the line of Patrick Joseph McCann with Noble Capital Markets. Patrick Joseph McCann: Hey, good morning. Thanks for taking my questions. Just have a couple here. First, both with regard to regulations, I guess, with regard to 2026 and what you are seeing there in terms of which states are in the process of passing regulations and which ones, you know, recently did. I was wondering if, you know, by the end of 2026, do you have a sense of where the regulatory landscape will settle for the—you know, for your largest states? I guess, you know, really, my question is, will—do you believe you will be at a point where many of your largest states will have gone through the regulatory changes, or maybe how much more disruption or meaningful disruption would you expect that would still be ahead in terms of states that have not yet gotten around to this? Scott Buchanan: Yeah. I think a great question. Thank you, Pat. I think in 2026, we will have seen 80% to 90% of the states decide where their stance is on this from a regulatory standpoint, at least initially. So 2027 should be much, much less activity. There could be some revisions to existing states with bills in 2027 as they kind of learn more and see what the impact is of what they passed initially. But, generally, I would say by the end of 2026, we will have clarity on which states are going to regulate them now. Patrick Joseph McCann: Great. That is helpful. And then my other question is really just a follow-up. With the regulatory actions going on in the states, I was just wondering how that affects your view of the markets. Are those going to be having similar issues or similar developments, or do those become more appealing now? Has that changed or maybe accelerated your ambitions in the international markets at all? Scott Buchanan: I do not know that we have seen changes internationally anywhere like what we are seeing in the U.S. So we are still actively working on two more countries currently that we would hope to launch in either late Q1 or early Q2. We are still actively working on international expansion, and we still have high hopes for that being a successful path for us. But, again, it will depend on each jurisdiction. Right? Like, there are still so few kiosks in most of these countries that these countries probably have not even thought about regulating the industry. And so we will just have to pay close attention as we are going into these spaces on how they view the industry once there starts to be a meaningful number of kiosks in those countries. Operator: At this time, that concludes our question-and-answer session. I will now turn the call back over to Scott Buchanan for closing remarks. Scott Buchanan: Thank you, everybody, for joining the call today. We look forward to keeping you updated on our progress throughout the year. Operator: Thank you for joining us today for Bitcoin Depot Inc.'s fourth quarter call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Science Applications International Corporation's Fourth Quarter Fiscal Year 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to John Raviv, Vice President of Investor Relations. Please go ahead. John Raviv: Good morning, and thank you for joining Science Applications International Corporation's Fourth Quarter Fiscal Year 2026 Earnings Call. My name is John Raviv, Vice President of Investor Relations, and joining me today to discuss our business and financial results are Jim Reagan, our Chief Executive Officer, and Prabhu Natarajan, our Chief Financial Officer. Today, we will discuss our results for the quarter that ended January 30. Please note that we may make forward-looking statements on today's call that are subject to known and unknown risks and uncertainties that could cause results to differ materially from statements made on this call. I refer you to our SEC filings for a discussion of these risks. In addition, we will discuss non-GAAP financial measures and other metrics, which we believe provide useful information for investors. These non-GAAP measures should be considered in addition to and not a substitute for financial measures in accordance with GAAP. A more fulsome explanation of these measures can also be found in our SEC filings. It is now my pleasure to turn the call over to our CEO, Jim Reagan. Jim Reagan: Thank you, John, and thanks to everyone for joining our call. I am happy to be here as CEO, and I am grateful to our board, to our team, and to all of our stakeholders for the faith that they have put in me to continue the critical work of sharpening our focus, strengthening our execution, and driving better results. After a thorough search for a permanent CEO by a leading executive search firm, the board concluded that, among other things, maintaining continuity and leadership, along with deep industry knowledge, was essential to Science Applications International Corporation's long-term success. After careful consideration, they selected me for the role. And, honestly, when I stepped in as interim CEO in October, I did not expect to enjoy the role as much as I have. One of the most rewarding aspects has been working alongside an outstanding team supporting critical customer missions and creating value for our stakeholders. This includes my partnership with our CFO, Prabhu Natarajan, whose leadership has been invaluable. So while accepting the permanent role was not my original intention, I am humbled and honored to have this opportunity. Since joining the board in 2023, my appreciation for Science Applications International Corporation's past achievements, current strengths, and future potential grew even deeper with a career focused on operational excellence and value creation across this industry. I am excited to continue building on our strong foundation to deliver meaningful results to all of our stakeholders. FY 2027 is a year of commitment. We are committed to our strategy to align and focus the portfolio. We are committed to improving our internal processes and external results. And as always, we are committed to serving our customers' most important missions, including elevated operational tempo around the globe. The tragic reality of war underscores the importance of mission expertise and customer intimacy that companies like Science Applications International Corporation have cultivated over many years. It also demands that our industry continue to invest and innovate to deliver capabilities and capacity. This is what we have done for decades and this is what we will continue to do. Science Applications International Corporation's legacy of innovation and commitment to high-value customer priorities are valuable assets. At times, we may have struggled to convert these assets into consistent performance. But we are making discrete changes across the company to improve our results. I want to focus briefly on business development, where we recently hired a seasoned Chief Growth Officer to the leadership team to prioritize BD and drive higher win rates for recompetes and new business. This involves being selective as we approach cost-plus, less-differentiated work. And it means leaning into the pursuit of opportunities where we have a greater right to win and higher rates of customer retention. This is addition by subtraction. Being selective in some areas frees up resources to pursue others. This means that we are going to be more focused with our bidding in FY 2027 and we are now aiming for $25 billion to $28 billion of submissions where we expect to support our dual goals of growing the top line and improving margin. The team is also performing well on our existing book of business, removing indirect costs, and achieving higher growth in higher-margin programs. This supports double-digit margins going forward. And as I said last quarter, we are committed to building on this progress in three ways. First, sharpening our focus on execution to increase capacity for investment in the business. Second, more efficiently deploying our financial resources to drive growth. And third, prioritizing yield and bid quality across our business development function, which, taken together, enables us to inject speed and innovation into our core capabilities to drive better growth and continued margin expansion. Turning to results, as we discussed in our preannouncement last month, fourth-quarter revenue was below our initial expectations largely due to procurement delays and customer disruptions as the environment continues to be uneven. However, I am encouraged by our margin performance despite this top-line choppiness, with FY 2026 margin of 9.7%. And we see improvement ahead as we guide to 10 adjusted EBITDA margin at the midpoint for FY 2027, the first time the company is guiding to double-digit margin on a full-year basis. Cash flow continues to be exceptional, thanks to efforts across the organization. And despite revenue finishing about 5% below our initial guidance from last year, our free cash flow exceeded our guidance by 10%. This demonstrates strong execution as well as the resilience of our business model. We expect another year of organic contraction in FY 2027, largely due to recent recompete losses in the large enterprise IT market. While we are encouraged to hear senior leaders emphasize fixed price, outcome-oriented contracting, we have yet to see these laudable goals translate into reality evenly across our customers as some continue to use acquisition approaches where it is hard to differentiate. Instead, we are focused on opportunities where clients establish clear outcomes that enable Science Applications International Corporation to deliver innovation and measurable value throughout the life of the program. Across our civilian enterprise IT portfolio, these principles have driven stronger performance and elevated win rates. Our successful work with Treasury, Commerce, Transportation, and the State of Texas demonstrates our cost-effective strategy for modernizing and supporting vital networks. By continually evaluating new technologies and delivering enhancements, we sustain long-term partnerships like the State Department's Vanguard program, which we have supported for fifteen years. Looking ahead, we are collaborating with clients to pilot and implement AI-powered agents to stabilize and secure critical networks. The speed of these innovations is essential for helping our customers address the evolving threat landscape and meet affordability objectives. While this large enterprise IT market has weighed on our results, it is a shrinking piece of the pie, from 17% of company revenues in FY 2025 to an expected 10% in FY 2027. And we have good visibility into most of this remaining portfolio. It includes the tCloud takeaway, has four years of performance remaining, and includes the Vanguard program, which is performing exceptionally well. These are both fixed-price or T&M enterprise IT contracts, the kind of work where we can differentiate and have the greater right to win. In the meantime, we continue to be excited about what made Science Applications International Corporation great to begin with: delivering innovative science, technology, and engineering solutions in support of the security of the United States and its allies. For instance, our GMAS program sustains and upgrades radar critical to homeland defense. Our DHS work delivers integrated hardware and software solutions to help secure the border. Our JRE data link router provides real-time battlespace awareness. Our recent COBRA and TENCAP HOPE awards support multi-domain warfighting by enabling rapid technology insertion, integration, and innovation. And our munitions programs enhance combat capability and capacity. These are all customer priorities for securing the present and winning the future. We are also investing in areas with the highest and clearest demand signals, whether it is expanding production capacity on key programs or investment for greater innovation and differentiation. We are currently engaging with customers at the highest levels to increase our throughput across multiple efforts. And our continued focus on executing against the $100 million in cost reduction targets is expected to provide us with operational and financial flexibility to continue to invest in areas with the greatest return potential while continuing to improve our margins. Our recently announced enterprise transformation initiative is the first time the company has done a bottoms-up review of its processes and procedures since the split in 2013. We have some of our best people committed to this project, which should result in a more efficient Science Applications International Corporation, with increased investment capacity to support innovation, growth, and margins. We are also encouraged that we will be making this journey in a supportive budget environment marked by large appropriations already in place with expectations for further budget growth ahead. I can speak for our board in saying that we see significant opportunity to drive value for our shareholders, create greater opportunities for our employees, and most importantly, continue the mission of supporting our customers and our country. I will now turn the call over to Prabhu. Prabhu Natarajan: Thank you, Jim, and good morning to those joining our call. My comments today will focus on a review of our fourth quarter and full year results, our outlook for FY 2027, and the meaningful opportunities we see to create value for shareholders. Turning to slide four, our fourth-quarter results were consistent with the update we provided on February 11. We reported fourth-quarter revenue of $1.75 billion, representing an organic contraction of approximately 6% due primarily to a $60 million year-over-year reduction of low-margin revenue from the Cloud One program we no-bid and a $45 million headwind related to a nonrecurring software license sale in the prior-year fourth quarter. Full-year revenue of $7.26 billion declined approximately 3% organically primarily due to our decision to no-bid low-margin Cloud One revenue, which was an approximately $200 million headwind for the year. We reported adjusted EBITDA of $181 million in the quarter, resulting in a margin of 10.3%, which reflects strong program execution and recently enacted cost-efficiency efforts. This performance contributed to full-year margin of 9.7%, which is roughly 20 basis points ahead of the guidance we provided last quarter. We continue to see meaningful opportunities to improve margins in the near future while also investing to drive innovation and growth. Adjusted diluted earnings per share was $2.62 in the quarter, and $10.75 for the year, and benefited from stronger margins and a favorable tax rate which offset lower revenues. Free cash flow was $336 million in the quarter, and resulted in full-year free cash flow of $577 million, a robust result as we remain focused on maintaining our peer-best cash conversion and deploying the capital to maximize long-term value for all stakeholders. Turning to slide six, I want to put the fiscal year 2026 results in context. It was a year of multiple disruptions, including internal leadership changes, budget headwinds, and significant customer workforce impacts. While we saw top-line pressure, we are proud of the team's resilience and hard work to achieve robust margins and cash flow. Our reported EBITDA at year-end was 2% below our initial guidance last year, and free cash flow was better than our initial guidance. We see similar dynamics compared to the initial FY 2026 targets we shared about three years ago. As Jim said, these results demonstrate the resilience of our business model and the enduring nature of our mission work, although we know we have work to do to improve growth. Turning to slide seven, we are reaffirming the guidance for fiscal year 2027 we provided on February 11. As we indicated at that time, we expect total revenue in a range of $7.0 billion to $7.2 billion, representing organic contraction of 2% to 4%. The year-over-year decline is driven mainly by recompete losses, which we have previously discussed. Collectively, we expect these programs to represent a headwind of approximately $400 million in FY 2027. We expect to partially offset this headwind with the continued ramp-up of new business wins from FY 2025 and FY 2026. Our guidance for adjusted EBITDA in a range of $705 million to $715 million reflects margins between 9.9% to 10.1%, representing a year-over-year increase at the midpoint of approximately 30 basis points. And we are executing our cost-efficiency efforts which we believe can drive upside to our margin outlook. We have also begun a multiyear enterprise transformation journey to unlock significant value and eliminate burdensome and outdated business processes to create a more agile organization focused on innovation, speed, and growth. We will provide an update on our Q2 call relative to progress on this initiative. Our adjusted diluted earnings per share guidance of $9.50 to $9.70 is unchanged from our previous FY 2027 guidance last quarter with the lower top line offset by a decline in our share count. We are maintaining our guidance for free cash flow of at least $600 million, which will translate into over $14 of free cash flow per share. As we have previously highlighted, our FY 2027 guidance reflects approximately $70 million in nonrecurring cash tax benefits from recent legislation. Even without this benefit, in FY 2028, we expect to generate at least $530 million in free cash flow, or approximately $13 of free cash flow per share. As Jim indicated, we recognize the significant value-creation potential that exists based on our ability to deliver more sustained revenue growth in the future. As a result, I want to discuss some of the key risks and opportunities moving forward. As I mentioned, our guide for an organic revenue decline assumes that our recompete losses are only partially offset by the continued ramp on previously won work. There are several large wins ramping at a slower rate than we expected, likely due to budget uncertainty and the lingering effects of a more resource-constrained customer procurement function. Total revenue from these programs was $350 million in FY 2026, and we are assuming $500 million in FY 2027 based on reasonable assumptions. This compares to a potential run rate in excess of $800 million based on contract value and period of performance. While there is potential downside, should some of this ramp not materialize, we believe that on balance, the upside scenario is more likely over the next twelve to eighteen months based on customer demand and supportive budgets. This could be a meaningful tailwind. In addition, our strong pipeline and alignment with customer priorities, which we expect to be well funded in a trillion-dollar-plus defense budget, are strong indicators of future growth. As we previously said, outside of our cost-plus enterprise IT work, our win rates on both recompetes and new business are in line with or higher than industry standards. Turning to slide eight, our pipeline and submission goals are more focused on these higher-return efforts, reflecting initial results of our renewed BD discipline. While submission levels are lower than our previous target, we view them as sufficient to achieve our goals. And we expect trailing book-to-bill to improve over the course of the year as we play more offense than defense this year on our captures. We recognize that an increasingly favorable budget backdrop is only relevant if we can improve enterprise-wide performance, focus on the markets where we have the strongest right to win, and deliver for our customers. The leadership that Jim has provided in these areas and his emphasis on focus and accountability across the company has had tangible results over the past several months. I am confident that our efforts will continue to translate into significant value creation for our shareholders in the coming years. With that, I will turn the call over for Q&A. Operator: And wait for your name to be announced. To withdraw your question, please press 11 again. In the interest of time, we ask that you limit yourself to one question and one follow-up. Our first question comes from Jeremy Jason on behalf of Citi. Jeremy Jason: Hi, this is Jeremy Jason on John Gaudin. Team, I just want to kind of hit things off by saying, Jim, congrats on your role. I just want to ask, now that you have moved from the interim role to the permanent one, what is the single most significant sort of portfolio pivot you believe is required to align the company with the next roughly ten years of government budget priorities? And more importantly, what is the message you want to say to the investor base who are trying to bridge that between your experience and the specific issues like recompetes have hampered growth in recent years? Jim Reagan: Yeah. Well, thanks for your kind words, Jason. I think that for, first of all, the moment that I stepped from being an interim to being the permanent person in charge, it was pretty amazing how my perspective changed from managing the day to day and being focused on getting our business development function back in gear, which is still a focus of mine, but adding to that the need to reassess our strategy, which is a process that we normally undertake during the summertime and I am actively engaged in right now. I think it might be premature for me to announce any strategic pivots other than a couple of notes that are probably worth providing for you. First of all, the first thing that I think that we needed to do, and I think of it as a bit of a pivot, is to get focused on those areas where we have the right to win and those areas where customer retention is the reward for innovation and strong performance. And the thing that we have been seeing over the last year has been the things that are more commoditized where you are not only finding it more difficult to differentiate and keep customers but it is also more difficult to get paid for the hard work that we do. On some of the more vanilla enterprise IT, things are things that we want to continue doing to the extent we have got it, but also to deemphasize it as kind of a strategic imperative. So that, I think, is the first epiphany that it did not take very long for me and Prabhu to wrap our heads around. I think that the next thing is to start moving into some pretty hard focus on realizing the benefits of the business model we acquired with SilverEdge. We think that the things that we have acquired from them on the intellectual property side as well as some of the capabilities that we have to serve our intelligence customers with AI enablement in classified networks is something that we think is extensible beyond the customers that they brought with them, and we are working to leverage that. Probably have more to talk about in terms of any further strategic pivots as we work through the strategy process through the season. Probably you are going to get that. I am not interested. Okay. Thanks. Appreciate it, Jason. Thank you so much. Operator: Our next question comes from Jonathan Siegman with Stifel. Sebastian Rivera: Hey. Good morning. This is actually Sebastian Rivera on for Jonathan Siegman. Congrats to Jim as well on the full-time position now. I guess we would love to kind of hear your thoughts regarding the FY 2027 guidance, roughly $35 million of CapEx here. I get it does not suggest too much change relative to last year, and I believe that FY 2026 number was about $4 million lower than the year prior. And I guess would have thought the changed environment today kind of creates incremental opportunities to invest, but we would love to get your thoughts there. Jim Reagan: Sure. And appreciate the question, Sebastian. Because, you know, with what we have today in hand, we think that the CapEx is adequate to meet the current demand signals that we have on programs that require production capacity that largely exists in a number of our, for the programs where we actually make things. But I think that in Prabhu's remarks, he mentioned that we have a flexible business model, and we are in active discussions with customers about what they might see as the need to ramp up production on certain programs. And to the extent that we get the demand signals, which, by the way, I have talked to senior leadership at the Department of War. They understand very clearly that industry, when they receive demand signals, they could pivot. We are no exception. To the extent that we get demand from customers to ramp up production of certain weapons capabilities, we are prepared to increase the plant capacity, increase space, spend money on tooling, to meet those demands. The revenue and the take rate on those is not reflected in the guide today. But to the extent that there is any reason to update it in future, we will certainly let you know. But so I think that the short answer to your question, Sebastian, is we have a business model, and we are prepared to flex it. And we are prepared to spend more money on additional capacity to the extent that our customer comes to us and asks for it. Prabhu Natarajan: Hey, Sebastian. Prabhu here. Thank you for the question. I think the only thing that I would add to Jim's response is that we are investing where we see clear demand signals. And we are engaging with customers at their highest levels on some of these opportunities. I would also think of the $100 million cost reductions as freeing up capacity for investment that may not show up in CapEx necessarily, but it does provide us some ammunition to be able to invest in some differentiation as we go to market in a handful of areas. Finally, I would also say that investment takes many forms. We actively think of the investments that we make to include the time we spend with customers, helping understand needs, shaping solutions to fit the needs, and then actually actively investing in a business development and capture function that allows us to be more differentiated when we offer, I think, real solutions. We are also investing—SilverEdge is a classic example of investing a couple hundred million off our balance sheet to be able to fund, to bring some real new capabilities into the organization. And I think finally, but certainly not the least important of which, is we are actively building capabilities, whether that is mission labs, or our Mission Data Platform, or our classified. There are areas that show up beyond a CapEx line that we are investing in. And finally, I would foot-stomp the fact that we are investing in some really key talent, and Jim talked about the Chief Growth Officer we brought to the company. But we are investing in some real talent inside the organization, refreshing our org structure. And so our investment has taken multiple forms. But we are very comfortable that we are investing in line with the signals that we are getting, and we are frankly not waiting for contracts to start the investment. We are trying to get ahead of where the needs are going to be so that we can be ready for when those things show up in a pipe somewhere. So thank you for the question. Sebastian Rivera: Thank you. Very helpful. I just a quick— Operator: Our next question comes from Gavin Parsons with UBS. Thank you. Good morning. Gavin Parsons: Good morning. Jim, I mean, you have been sharpening the BD process for a few months now. I know that is ongoing. How long does that take you to build momentum and actually start converting that to revenue and how much opportunity is there on a shorter-term basis to drive maybe some OCG growth? Jim Reagan: Yeah. It is a great question, Gavin. I think that there is kind of two elements to that answer. The first one is to say that, as you know, the sales cycle in this business, converting a proposal into revenue, can take a painfully long period of time in some cases, not in all. I think that to the extent that our team is able to move the needle on win rates on work that is already in production in the proposal shop and build some more innovation, perhaps even some more discipline around how the finished product comes out, that can move the needle on win rates within six months. I think it is probably worth noting that while we were disappointed by the outcome on a couple of these large recompetes during the year, our win rates on new work in the year, but the most recent quarters, has been in line with our expectation and industry averages. So I think that we are really pleased with that and with, you know, less exposure in FY 2027 to the large recompetes like we had some significant exposure last year. I feel really good about our ability to achieve the kind of book-to-bill that we need to get us back on a growth trajectory after we have lapped out the impact of these losses that we have recently experienced. I think that the last comment that I would have, and Prabhu might want to amplify on this as well, is that one of the things that I think that we are doing really well already is ensuring that the spend and investment on capture and winning work is focused on the $28 billion or so of opportunities that we have the greatest opportunity to win, to differentiate, to drive margin improvement in the business, in addition to whatever margin improvement we are going to be seeing out of the business initiatives that we have been outlining. This year, we have called it addition by subtraction earlier, and what that really means is that focusing on the things that will drive higher win rates and higher opportunities to retain customers for longer. Prabhu Natarajan: Thank you, Jim. Hey, Gavin. Appreciate the question. Maybe a couple of data points on the guide itself. We are right now assuming about a 2% to 3% OCG in our current baseline guide for fiscal 2027. That is consistent with our 2% to 3% last year, which was the lowest of the five years that I have been here. So while we are not expecting things to get better, we do not expect things to get worse either on those, and therefore, on balance, I would say bias to the upside to the extent that the enacted budget translates into tangible procurement action over the course of the next three quarters or so. I think, as Jim said, I would foot-stomp the fact that our win rates on non-enterprise IT work—some of the work we do on the engineering side as well as the mission IT side—our win rates on new have approached 50% or more at various points over the last couple of years. So our win rates really demonstrate, I think, that we have the right to win in these areas. And I think just as importantly, our recompete win rates on noncommoditized enterprise IT is sort of in that 85% to 90% range. So good win rates outside of the commoditized enterprise IT work and, again, while it does not help lose these recompetes, the reality is I think there is very little of that left in the portfolio at this point. As we said in the prepared remarks, about 10% left of revenues from large, I would say, cost-plus EIT work. And so I do think that on balance, we are probably at the other side of this slope here. And given that we have about 5% of recompete headwinds, with the $400 million or so that we disclosed, the reality is the absence of this headwind going into next year is going to be a tailwind in and of itself. So again, I think we feel good about where the positioning is. None of this matters. None of what I say matters unless we execute well, and this is a message internally as well as externally. But we have got to keep every recompete that comes our way. And we have to keep up the win rates on new, and that is where the focus is for the team. Gavin Parsons: Thank you for that. Operator: Our next question comes from Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: Morning, guys. Thank you. Congrats, Jim and to Joe as well. Maybe two questions if I could start. The first question would be just on the, you know, what do you think on the enterprise IT work? And I know Prabhu did a good job of this at conference, so thank you, Prabhu, for that. Like, what changed? Was it a Science Applications International Corporation decision? Did the competitive landscape change? And then as we think about the $25 billion pipeline, how do we think about Science Applications International Corporation getting on the offensive? Jim Reagan: I will start. I think Prabhu might amplify on my enterprise IT answers. I think that what we have seen is increasingly customers—there is a handful of our customers that are buying based on what I might say is kind of more of a cookie-cutter recipe for what they are looking for, where it is heavily embedded with network management, network uptime, help desk support, things that are harder to differentiate than in the things that blend more of a mission focus in with the IT side. Think about on the—maybe one of the more toward mission IT, it is probably supporting networks that support the warfighter and networks that blend multiple areas of information and synthesize it into a pane of glass for people that do mission planning. Those are the things that we think that we can continue to excel at or earn our share on recompetes and new work. So I think that when we stepped back and took a hard look at different flavors of enterprise IT work, that gave us some greater visibility into the kind of things that we would continue to pursue, continue to win, and the things that we are probably going to deemphasize in our pipeline going forward. Probably everything, Dan. Yeah. Prabhu Natarajan: Sheila, a couple of things I would probably want to add. I think the recognition that, you know, being selective on, I would say, cost-plus enterprise IT was sort of a conclusion we came to over the course of the last several months. I think, if you looked at the track record of where our largest recompete challenges have been, and it does not take a bunch of research to get to NASA Aegis, parts of Cloud One, U.S. CENTCOM, Army RITS, I think the common thread line running through all of these is that it is very hard to differentiate on predominantly cost-plus work where it is very hard to separate yourself from the competition. And sometimes the magic is in how one writes a proposal more than what the delivery on the ground looks like. So I think it is just a recognition that we have come to. We also had perhaps more of that enterprise IT work in our pipeline five years ago than we do today. So that has been a gradual evolution. Our decision to consciously no-bid $200 million of compute and store as part of Cloud One—candidly, we contracted 3%. All of that 3% was related to one decision to no-bid that Cloud One contract. That was a recognition that we communicated externally that, you know, that is not the kind of work we want to be doing long term as we think about focusing the resources of the company into meaningful areas that will truly, I would say, restore and reassess the legacy of this company. So I think it is an evolution of what we have come to in terms of our own portfolio. Broadly speaking, I would say if you looked at competitors and where win rates are for enterprise IT versus non-enterprise IT work, you will see some of the same, I am going to say, volatility in recompete win rates within our competitors. I think the reality was we had more of it than perhaps others, but you should expect to see some of the same volatility. And then finally, on the pipeline question, the only thing I would add to the comment that we are playing more offense than defense is the fact that our pipeline is inflecting to higher levels of non-EIT work, mission work, engineering work, and more of our opportunities on our submits this year and next year are more towards the takeaway side than the recompete side. Our largest single recompete coming up is our Vanguard Department of State program that we are feeling really good about. Had it for fifteen years. We have done it for fifteen years, and candidly, I think that is our sentiment underlying the narrative that we get to play a little bit more offense this year than we have had the luxury of the last couple of years. Thanks, Sheila. Operator: Our next question comes from Gautam Khanna with TD Cowen. Gautam Khanna: Good morning and congratulations, Jim. And John and Joe. I wanted to just ask, within the midpoint of the guidance, maybe if there is any parameter you could tell us on how much you have to quite go get. You know, you told us about on-contract growth, but based on the backlog you have today, how do you get to—what do you still need to bid and turn, if you will, in the year? And then if you could just remind us of when the year-over-year headwinds on the $400 million of recompete losses abates, you know, when is the last quarter that that becomes the headwind, that one moves out of the numbers? Thank you. Prabhu Natarajan: Hey, Gautam. Prabhu here. Thank you for the question. I will take the guidance one. In terms of the negative two to negative four of contraction, as I said earlier, we are assuming nominal amounts of OCG, 2% to 3% of OCG, and not a ton in the way of new business go-get. And so I think very much focused on what is within our control this year, and not a lot of assumptions built in around what we need to win in order to actually get to the guide that we have out there. So I think there is always going to be a mix of some recompetes and new that is in the mix in the business. Our backlog is sufficient with our trailing twelve-month book-to-bill of 1.1. I think the backlog exists for us to get to the guide without a lot of heroics this year. But that is how we wanted to position the conversation coming into this fiscal year compared to perhaps last year where we had a little more in the way of go-gets and, of course, we had a tremendous amount of disruption from those and other procurement disruptions over the course of the year. So I think it is very much a guide that we have control over, that the team is fully committed to, and does not take a ton of heroics for us to get to over the course of the year. But candidly, that means we just have to put our head down and execute every single quarter. In terms of the headwinds, on a quarterly basis, I think I would say it is fair to assume that the headwinds are going to persist with us for all four quarters of the year. I think that is probably the most sensible way to think about it. Naturally, there will be some changes over the course of the quarter as we lap on some programs and lapped into some other programs. But the reality is you should assume that there is about four quarters of headwinds and that Q1 of next year is probably going to be the cleanest quarter on a compare basis. Gautam Khanna: Terrific. Thank you. Alright. Goodbye. Operator: Our next question comes from Colin Canfield with Cantor Fitzgerald. Colin Canfield: Hey, thank you for the question. Maybe focusing on FAR 3.0. If you could talk a little bit about federal acquisition regulation and essentially what you are hearing in terms of kind of the next set of objectives look like, what that means for Science Applications International Corporation, and any sort of timing around outcomes. Thank you. Jim Reagan: Sure. I had the chance to meet with a senior Department of War official about that just this past Friday, along with some other CEOs in a small forum. And I think that, first of all, there is tremendous urgency that we have not seen in decades around procurement reform in general, including updates and upgrades to the FAR. There is a lot that I think we can expect to see stripped down and stripped out, and some new provisions put in there are going to be really aimed at improving speed and throughput from the defense industrial base. I think that with that said, there is going to be some spotty implementation. And there is a large acquisition community that needs to be retrained, needs to be upskilled, reskilled. But in the meantime, when the need exists, I think that our customer in the building is going to be relying on things like OT, OTAs, other innovative contracting vehicles, including the use of commercial pricing and commercial contracting mechanisms to get what they need done faster. That said, we do have a commercial operating segment that is available, and we are actively using it to bid some of these things that the customer is needing. We have made some changes in our own procurement and contracting organization to be ready to meet the requirement for speed. And we have an internal initiative aimed at not just handling it from the procurement side, but also how we bid differently. And that is one thing that our new Chief Growth Officer is actively engaged at so that we can meet the customer demand when they bring it to us. Colin Canfield: Got it. Got it. And then maybe as you think about kind of your future as a hardware integrator, can you just perhaps talk about kind of your relationship and your opportunity set across the branches? We have seen obviously a lot of capital start to flow into VC-developed products, but not as much focus on kind of the integration of all of the capabilities. Right? There are the leading players, but you still have a lot of stuff that is kind of series B, series C, that fundamentally will need something like Science Applications International Corporation's kind of acquisition pipeline or the creds around national security and the cleared folks. So can you just maybe talk about, within that context so far, how you think about Science Applications International Corporation's ability to go and integrate a lot of these kind of earlier-stage products? Thank you. Prabhu Natarajan: Hey, Colin. Prabhu here. I will take that one. I think you are hitting on something that is incredibly important. The strength of the total defense industrial base is going to be relevant and necessary to deliver what the warfighter needs. And so I think there are folks like Science Applications International Corporation that are in the ecosystem that have for decades brought evolving capabilities to the warfighter because we have an acute understanding of how the mission works. And I do not think that that demand signal is going to look any softer in the next five years. So we are actively partnering with venture companies. We have a venture program that we are very proud of, that we actively bring capabilities, integrate them in the number of hardware-software integration centers we have across the country, whether that is Huntsville, or Charleston in South Carolina, or in Crane, Indiana, where we do a tremendous amount of hardware and software integration, and we are just getting better at that kind of work. And there is a decent chunk of it in our pipeline, and so I do think that we have the sort of mission set, if you will, where our expertise and our mission and our domain understanding is going to be critical as we graduate more of these smaller companies into the larger ecosystem. So we are looking forward to partnering with them. And, as you know, this is how this business, this industry, has evolved over the last, I would say, fifty years, and I do not expect the next twenty or thirty to look any different. I think, to be fair, some of the new entrants have put, I think rightfully so, pressure on the incumbents to deliver faster, better capability, and at cheaper prices. I think that competition is a good thing. So we are looking forward to it, and we are doing a really nice job integrating some really good capability into the ecosystem. Colin Canfield: That is great color, Prabhu. Thank you. Prabhu Natarajan: You bet. Operator: Our next question comes from Tobey Sommer with Truist. Tobey Sommer: Thanks. You mentioned the evaluation that you have ongoing is the first, I think, bottoms-up evaluation on processes and so forth since the split, but the company has been trying to address these issues for a number of years. Maybe the process is different this time, but the pursuit is an ongoing one. How do you manage the culture and the morale when you are sort of reexamining something that has been kind of a focal point? And do you envision any changes in compensation as being helpful in achieving your end? Jim Reagan: Toby, I appreciate that question. I think at least once or twice every week, I get an email from one of our 23,000 employees applauding what we are doing and giving me some real-life examples of things that we could do differently to help them get their jobs done easier. Sometimes they are seemingly mundane, but still important. Some of them are things that I would not have been made aware of had someone not sent me an email directly. And I look at that. I read it. I send it to the team in the program office that is running this. So I would say that the employees are saying, finally, we are doing some things to get some of the gunk out of the system. Gunk is a technical term for me on this, and we are definitely working hard in getting this program to get things working better, faster, more efficient, not just for our internal teams, but it also will translate into gains for our customers as we are able to be a bit more nimble. So I would say that there is tremendous receptivity to this, and I think that it is going to allow us to make decisions faster, get stuff done faster, but also take a lot of the cost that is going to fall out of that and reinvest it into the things that we have been talking about in terms of growth. I think that we have the capability with that to add more account management teams, people who are walking the halls of the building, to bring new ideas to customers and increase the daily communication about what we need to do to help them be more successful. And with that, I think it is probably one of the most important things that we are going to get done this year. Operator: Our next question comes from Noah Poponak with Goldman Sachs. Noah Poponak: Hey, good morning, everyone. Morning, Don. Is it possible to give us the details of recompetes of size that you have in your fiscal 2027 and fiscal 2028, just kind of cover the next two years, which programs, when, and how big are they for you now in revenue? Prabhu Natarajan: Hey, Noah. Prabhu here. I will take the first stab at this. I think, you know, if I think about significant programs, as you know, with 10% to 20% of the business comes up for recompete every year. So if I think about the largest recompetes out there, Department of State Vanguard is the single largest program that is going through a recompete cycle in fiscal 2027. Okay? And that program, as we know, the scope of the program is increased. We are on year fifteen of that program, and we have been qualified to bid and compete for work on four of the five workstreams. The one workstream that we chose not to bid because it would have created the OCI for us for the other four workstreams. So that is the single largest recompete that we have. Beyond that, we always have programs that are in the, I am going to say, $75 million to $150 million range. Let us call it 1% or 2% a year. We always have one or two of those every year, but in reality, we are also bidding a multiple of that in the form of takeaway opportunities in the pipeline. So I tend to not think of those actively as, you know, sort of significant recompete risk. I think the reality is the way we are approaching this, Noah, is keep as much of the work share on Vanguard as possible, hopefully even eke out a little gain there. But our baseline assumption right now for this year is that we have accommodated all kinds of contingencies into the minus two to minus four. But Vanguard is probably the only one that is worth calling out right now. Noah Poponak: When will you be recompeting that? And can you size it for us approximately annual revenue for you? Prabhu Natarajan: Yeah. So we will be going through a recompete cycle on Vanguard. Again, it is going to go by workstream to workstream. There are four workstreams that will get recompeted over the course of this year. We are the incumbent. We will be competing for all four. We have been qualified to compete, and we are in the down-selected category. And so it is unlikely to materialize in terms of impacts to revenue anytime, I would say, safely in the first half of this year. If anything, we may have some nominal impacts in the second half. But I say nominal. So more of the impacts, if we were to be in an unfortunate position of not keeping most of that work, most of that impact will be felt next year and not this year. So that is how I would probably preface it. Noah Poponak: Okay. And then would it be possible to talk about how the funding environment has evolved year to date? I know that is a short-term question. Maybe it gets into splitting hairs. But just given the, as you described, the funding of obligated dollars has been slow and choppy and uneven. In January, it sounded like some in the industry saw that getting better. I am just curious if that improved through the quarter or got worse through the quarter? Is it better or worse today or the same versus how the year ended? Prabhu Natarajan: Yeah. I am going to say, the health warning here is that whatever I say now is probably going to be OBE probably at the end of the week. But here is what we have seen. I think it is true that January for outlays was better than the preceding three months for sure. I think on outlays, as you know, there is probably about a three-month lag between outlays and revenue performance. So a good January month on outlays means that April, May should look healthier than it would have looked otherwise. I think the more important milestone that we are tracking to is a milestone in the second quarter of our fiscal year, sort of the June, July, August timeframe. Certainly, June or July, if you look at where the agencies are relative to their—relative comparing outlays to the appropriations or the budget amounts, I think that will tell us if we are going to see a year-end flush in terms of money that needs to be spent before the end of the government fiscal year. So that is probably the clearest goalpost that we would say is out there. But in reality, we do think that the appropriations have to get spent; therefore, the money will have to come. I think for us, it is very much a question of timing and how quickly is the spigot going to open up. And this is where the constraints on the government procurement functions have been difficult to size and estimate. But hopefully, things get better here, certainly in the second half, from the summertime through the end of the fiscal year, Noah. Then perhaps, an immediate change in the first quarter of this fiscal year for us. Noah Poponak: I understand. Okay. Thank you. Operator: I am showing no further questions in queue at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day. And thank you for standing by. Welcome to the OPAL Fuels Inc. Fourth Quarter and Full Year 2025 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your speaker for today, Todd M. Firestone, Vice President, Investor Relations. Please go ahead. Todd M. Firestone: Thank you, and good morning, everyone. Welcome to the OPAL Fuels Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. With me today are our Co-CEOs, Adam J. Comora and Jonathan Gilbert Maurer, as well as Kazi Kamrul Hasan, OPAL Fuels Inc.’s Chief Financial Officer. OPAL Fuels Inc. released financial and operating results for the fourth quarter and full year 2025 this morning, and those results are available on the Investor Relations section of our website at investors.opalfuels.com. The presentation and access to the webcast for this call are also available on the website. After completion of today’s call, a replay will be available for 90 days. Before we begin, I would like to remind you that our remarks and answers to your questions contain forward-looking statements, which involve risks, uncertainties, and assumptions. Forward-looking statements are not a guarantee of performance, and actual results could differ materially from what is contained in such statements. Several risk factors that could cause or contribute to such differences are described on slides 2 and 3 of our presentation. These forward-looking statements reflect our views as of the date of this call, and OPAL Fuels Inc. does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this call. Additionally, this call will contain discussion of certain non-GAAP measures. A definition of non-GAAP measures used and a reconciliation of these measures to the nearest GAAP measures are included in the appendix of the release and presentation. Adam will begin today’s call by providing an overview of the quarter’s results and recent highlights. Jonathan will then give a commercial and business development update, after which Kazi will review financial results. We will then open the call for questions. I will now turn the call over to Adam J. Comora, Co-CEO of OPAL Fuels Inc. Adam J. Comora: Good morning, everyone, and thank you for participating in OPAL Fuels Inc.’s Fourth Quarter and Full Year 2025 Earnings Call. We are pleased to be here today and look forward to discussing our 2025 results, our outlook and plans for 2026, and the current macro and regulatory environment. Starting with full-year and fourth-quarter results, we are pleased the year ended strongly and adjusted EBITDA finished at $90.2 million, within our guidance. On the surface, 2025 adjusted EBITDA was a flat year versus 2024; however, production grew 28%, which was masked in our financial results by several factors, including 22% lower RIN prices. Despite the macro headwinds faced by our Fuel Station Services segment throughout 2025, we are pleased we achieved strong growth in the segment. I will offer some high-level thoughts here at the top of the call regarding outlook for 2026, and Kazi will share more details later. For RNG production outlook in 2026, we continue to be encouraged by our improved operations team, new opportunities to improve gas collection, and greater efficiencies at our plants, all driving incremental production growth from our existing assets. For our Fuel Station Services segment, we are beginning to see improving macro conditions and other factors that could make 2026 an inflection point for new fleet adoption of CNG and RNG in heavy-duty trucking. It is important to note that these business development activities would not necessarily have a direct benefit to 2026 financial results. It typically takes us about a year to build a fueling station and begin selling fuel. So for 2026, this segment will still be feeling the effects of the sluggish 2025 business development activity, but we are hopeful new fleet deployments will begin setting the segment up for stronger growth in 2027 and beyond. I do want to comment on some policy developments as well. As many of you likely saw, on February 25, the EPA sent to OMB the final SET rule with updated 2026 and 2027 RVO targets. The rule is expected to be released shortly. Although we have seen strengthening bipartisan support of RNG, with proactive, positive tax policy from the Republican-led House and Senate—specifically, the extension of the 45Z tax credit through 2029—in our view, the cellulosic category within the RFS has not been as much a focus for policymakers as liquid agricultural biofuels. That being said, we do believe the recent relative stability in the D3 RIN market will continue and could have an upward bias with the broader biofuels complex. I also want to comment on our new $180 million preferred stock facility provided by Fortistar. The additional capital from this facility can be targeted for incremental infrastructure investments across the RNG value chain. Our vertically integrated business model—from producing RNG to providing access to transportation fuel offtake for CNG and RNG—drives advantaged project returns relative to market peers and helps unlock the value of OPAL Fuels Inc.’s project opportunities. In closing, I would remind listeners, since going public nearly four years ago, our compounded annual growth rate for RNG production and adjusted EBITDA is 32% and 22%, respectively. We are excited about where OPAL Fuels Inc. is positioned. Our integrated model is resilient, and our results demonstrate the value of controlling the product we sell from production through dispensing to our customers. I will now turn the call over to Jonathan. Jonathan Gilbert Maurer: Thank you, Adam, and good morning, everyone. 2025 and early 2026 were important periods for OPAL Fuels Inc. from an operational standpoint as well as in strengthening our capital structure and positioning the company for the next phase of growth. Recently, we successfully completed a $180 million Series A preferred facility, which allowed us to fully repay an existing $100 million preferred investment and further strengthen the company’s liquidity position. In addition, we drew approximately $128 million under our senior secured credit facility, which provides improved visibility to execute on our project portfolio. On the upstream side, our focus remains on improving performance across our existing operating assets while advancing the next wave of RNG projects currently in construction and development. Production from facilities commissioned late in 2024 significantly increased during 2025 and sets up a stronger 2026 operating position when compared to this time last year. I want to highlight that our upgraded operating teams have done well in bringing efficiencies to drive higher production. Despite an extraordinarily cold winter resulting in difficult operating conditions, same-facility sales growth has been meaningful, and we expect this trend to continue. Also contributing to our 2026 production growth is a full year of operations at our Atlantic facility, which came online in late 2025 and is performing well, ramping quicker compared with recent project experience, driven by higher gas flows at the landfill, allowing us to operate at higher production levels entering 2026. Looking ahead, we continue to progress our projects in construction, as we expect them to contribute to the next phase of growth for the company. On the downstream side, we continue to expand our Fuel Station Services platform, which supports RNG and CNG fueling infrastructure for heavy-duty trucking fleets. At year-end, we have grown to 61 OPAL Fuels Inc.-owned stations. While the trucking and logistics sector experienced macro softness during 2025, market fundamentals stabilized and have improved entering 2026. These improving macro fundamentals are supporting a reengagement by fleets on their deferred truck purchases. OPAL Fuels Inc. believes CNG and RNG are garnering more attention as a replacement for diesel due to lower and more stable fuel costs, regulatory clarity regarding combustion engines, and long-term tailwinds from sustainability initiatives. Many fleet operators remain highly focused on fuel cost stability and carbon reduction, and RNG and CNG continue to be among the most practical solutions for large-scale heavy-duty fleet decarbonization. As a reminder, CNG and RNG are fueling only 2% of the heavy-duty trucking market and represent a large growth opportunity. Our downstream platform provides critical services and infrastructure for the fleets as they transition. Expanding this infrastructure also supports the long-term economics of our RNG production platform by providing direct access to transportation fuel markets. While large-scale deployments will take time to fully translate into financial results, the work we are doing today is positioning OPAL Fuels Inc. for meaningful growth in this segment over the coming years. We continue allocating capital to the Fuel Station Services segment, positioning OPAL Fuels Inc. to deliver on our 2026 operating plan and beyond. I will now turn the call over to Kazi to discuss the quarter’s financial performance. Kazi? Kazi Kamrul Hasan: Thank you, Jonathan, and good morning to everyone joining today’s call. This quarter showed continued operational progress across the platform. This morning, we issued our earnings press release, posted an updated investor presentation on our website, and filed our Form 10-Ks. Before walking through the details, I would frame our financial performance around three key points. First, the resilience of our earnings despite commodity headwinds in 2025. Second, continued operational growth across both our RNG and Fuel Station Services platforms. And third, the strengthening of our liquidity and capital position to support disciplined growth in 2026 and beyond. Our 2025 results demonstrate the strength of our platform. In the fourth quarter, revenue was $99.8 million and adjusted EBITDA was $34.2 million, compared with $80.0 million and $22.6 million in the same period last year, driven primarily by increased production and recognition of 45Z tax credits. For the full year, OPAL Fuels Inc. generated adjusted EBITDA of $90.2 million, essentially flat year over year despite declining environmental credit prices. D3 RIN pricing declined roughly $0.70—equivalent to approximately $33 million in adjusted EBITDA—with our realized RIN price averaging $2.45 in 2025 compared to $3.13 in 2024. This decline offset much of our operational progress achieved during the year. I would also remind listeners that the ISCC pathway, which expired in November 2024, contributed in excess of $10 million to adjusted EBITDA in 2024. Operational growth across the platform helped offset these headwinds. RNG production reached 4.9 million MMBtu in 2025, representing 28% growth year over year, with fourth-quarter production exceeding 1.3 million MMBtu, up approximately 24% from 2024. As recently commissioned facilities moved through their first full year of operation—including a full year of Atlantic in 2026—we began to see the benefits of scale and EBITDA flow-through embedded in the platform. Our Fuel Station Services segment continues to strengthen the stability of our earnings mix. In 2025, segment EBITDA increased to $46.7 million from $38.4 million in 2024, 22% higher than 2024. Although this segment exhibited strong growth in 2025, it was below our guidance, primarily due to deferred investment decisions by our fleet partners regarding new stations and new truck purchases. This quarter’s results also reflect the restatement of our G&A presentation, where facility-specific G&A is now allocated to operating segments rather than corporate. We restated 2024 for comparability and will apply this approach going forward, as we believe it better reflects segment economics. Turning to liquidity and capital deployment, we ended the year with $184 million of total liquidity, including approximately $30 million of cash and short-term investments, $138 million of undrawn capacity under our term facility, and $16 million of revolver availability. Capital expenditures and investments in joint venture projects for the quarter were approximately $16 million, primarily related to new RNG facilities and OPAL Fuels Inc.-owned fueling stations, and $90 million for full-year 2025. In 2025, we monetized approximately $43 million of investment tax credits. Our current liquidity is further bolstered by the recent closing of the $180 million Series A preferred facility, operating cash flow, and drawdown of the remaining $128 million of availability under our term loan facility. Looking ahead, we are providing 2026 adjusted EBITDA guidance of $95 million to $110 million, representing approximately 14% growth at the midpoint compared to 2025. We expect RNG production between 5.4 million and 5.8 million MMBtu, representing more than 14% growth versus 2025, driven primarily by improved performance from our existing asset base, continued ramp of recently commissioned projects, and marginal contributions from projects entering service during 2026. Our guidance also considers what has been a challenging winter to start 2026. Additionally, we are assuming approximately $15 million to $20 million of 45Z credits during the year. Stepping back, our financial strategy remains clear. We are focused on growing operating and free cash flow and allocating capital within the capacity of our operating cash flow, balance sheet strength, and access to capital markets. OPAL Fuels Inc. is generating an increasingly balanced and durable earnings base, with the flexibility to accelerate growth where returns justify it. With that, I will turn the call back over to Jonathan for closing remarks. Jonathan? Jonathan Gilbert Maurer: In closing, we remain well positioned for continued disciplined execution of our strategic growth objectives and the expansion of OPAL Fuels Inc.’s vertically integrated platform. I will now turn the call over to the operator for Q&A. Thank you all for your interest in OPAL Fuels Inc. Operator: Thank you. As a reminder, if you would like to ask a question, please press 11 on your telephone. You will hear that automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. Our first question for today will be coming from the line of Derrick Whitfield of Texas Capital. Your line is open. Derrick Whitfield: Good morning, all, and congrats on a strong year-end update. Adam J. Comora: Thanks, Derrick. Thanks, Derrick. Good morning. Derrick Whitfield: Starting with liquidity and your growth outlook on slide six. With the preferred financing behind you, could you speak to what the next phase of growth looks like for OPAL Fuels Inc. beyond the projects that are currently in your development queue? And if you could also just comment on how much CapEx is required to bring those projects in your development queue online. Adam J. Comora: Yes, thanks, Derrick. This is Adam here. I will maybe start, and then if Kazi or Jonathan want to fill in. I think most, or hopefully most, saw that we updated our liquidity position on March 10 and currently have about $160 million of liquidity available to complete the projects that we had noted that are in construction. It is about 2.8 million MMBtu of in-construction projects, and some Fuel Station Services fueling stations as well. In addition to that liquidity position to complete what we have announced, we have also got $60 million unused drawn capacity on the preferred facility, plus operating cash flows that continue to grow and are also available for new capital deployment. We have a number of robust project opportunities between new biogas rights, conversion projects on our renewable power, and what we are really getting excited about is allocating more capital to the Fuel Station Services business. If you just look at what is in construction today and what that could contribute to EBITDA and cash flow, we always talk about rough guidance of $20 per MMBtu of EBITDA and cash flow from RNG production. If you do the math on what we have in construction and earmarked with that $160 million of liquidity that is available today, based on how these things come out of the gates, that could be another 2.0 million of production in the early days of production. We think we are in a really good spot to grow our EBITDA and operating cash flow from what we have announced so far. We have a number of projects on the upstream side that we think are really good candidates to deploy and invest capital. We are always going to be mindful of our balance sheet and making sure that our liquidity and leverage ratios stay lockstep with the cash flow generation of the business. You should expect us to talk about some new projects on the RNG production side, and we are really hopeful and optimistic that a larger part of our capital will be getting deployed into fuel stations. I know there will be some questions later on fleet conversions and what our outlook is there. You should think about OPAL Fuels Inc. as a growth company. If you look at our four-year track record, we think we have the capital in place and operating cash flow to continue to grow in those sorts of fashions as you look at us over the next several years. Derrick Whitfield: Great. And then maybe perhaps for Jonathan. You have accomplished a nice increase in your inlet utilization levels in 4Q. Could you speak to some of the drivers and also highlight where you expect utilization levels to level out based on some of the capture opportunities Adam referenced in his prepared remarks. Jonathan Gilbert Maurer: Sure, and thanks for the question. We are really proud of the team that we have been building on the operations side. We have been growing our capabilities both on the upstream and downstream side, and I think this is reflected over the course of the year in terms of the operations of these projects, which we measure through the efficiency and availability of the projects, which has increased over the course of 2025 from the roughly 70% level closer to the 80% level now that we are seeing. So really strong kudos to the team for doing that. In terms of where we are headed with it and what the possibilities are, you really see the opportunity for continued improvement there, and we think about kind of an 85% to 86% utilization level as something that ought to be readily achievable. In certain instances, we are able to keep that as well. You combine that utilization with our open and growing landfills that our projects are located on, as well as the headroom for additional capacity—the projects are larger than the amount of gas coming out. As a result, we see growth not only from operating the projects better but also from the growth in the gas. That gives us a lot of optimism in 2026. You have hit on a focus of ours this year. We are going to be very focused on growing that utilization, growing the gas, and resulting in better output per project—for each of the projects and for the whole portfolio in total. We are looking forward to that. Thanks. Derrick Whitfield: That is great, guys. Sounds like it is very capital-efficient growth for you in 2026. Operator: Thank you. One moment for the next question. Our next question is coming from the line of Matthew Blair of TPH. Your line is open. Matthew Blair: Thank you, and good morning, everyone. Maybe just to stack on to the last question, are there any specific examples of things that you are changing going forward to help improve operations, and are there any specific assets where you are really looking to improve the overall utilization? And then also, I think there was a comment that most of the growth is coming from the existing asset base, but just want to check, are Cottonwood and Burlington still expected to start up in 2026? I guess the idea would be that due to the ramp process that probably would not help out too much on 2026; that would really help out more in later years. Is that the right way to think about it? Thank you. Jonathan Gilbert Maurer: Yep. Thank you very much. First off, most of the growth in output that we are looking forward to this year is coming from the same-store sales. We have really incorporated very little from those projects into our guidance. While we do continue to focus on those projects in construction and bringing them online, as I said, I think our focus really is on operating efficiencies and availabilities for our existing projects. In terms of some specific examples, some of our projects, for example, have no nitrogen rejection units associated with them. In projects like that, we are focused on tuning gas to a higher quality—higher methane and lower amounts of nitrogen and oxygen. For other ones with nitrogen rejection, we are focused on increasing the amounts of the gas there. In terms of the teams themselves, we are really focused on training across the platform in each of the units. These are process-driven projects, and the processes require a balance across the quality of the gas, the quantity of the gas, the membrane CO2 rejection, the nitrogen rejection, PSAs, etc. Balancing that has been a bit of a learning process for the team over the last couple of years. That is why we are seeing the continued improvement there. Other projects that are closer to, or at, their nameplate capacity, in terms of gas, we are focused on improving the quality of the inlet gas so that for every unit of gas that comes in, if you have more methane in that unit of gas, then you will have greater output. We are focused on those aspects as well, and we just see that focus continuing during the course of the year with our output increasing. Adam J. Comora: I would just add there, this is Adam. There are no significant delays in either of those two projects. We just think it is best to be conservative in terms of the exact timing and the exact ramp. So we have focused our guidance around just improving the operations at the existing facilities. Matthew Blair: Okay. Sounds good. Thanks for the color. And then could you talk about the relationship going forward with NextEra? They called the preferred, but I think they also have an equity ownership in OPAL Fuels Inc. and then a fairly extensive commercial relationship with you. Is anything changing on those fronts? Adam J. Comora: I will take that one. NextEra has been a terrific partner of ours for a long period of time, and we do still work with them quite closely on that environmental credit trading agreement that you referenced. They still are 50% owners in our Noble and Pine Bend projects. We continue to work with NextEra, continue to view them as a good partner. We advocate side by side with them on a lot of key issues and do not see anything really materially changing from that perspective at this point. Matthew Blair: Sounds good. Thank you. Operator: Thank you. One moment for the next question. Our next question will be coming from the line of Ryan James Pfingst of B. Riley Securities. Your line is open. Ryan James Pfingst: Just curious about a KPI you have referenced in the past. Do you have a goal for how much MMBtu capacity you would like to place into construction in 2026? Adam J. Comora: This is Adam here, and I appreciate the question. We do see a significant, strong pipeline of new project opportunities to place into construction, both from new greenfield biogas rights that we have secured and also renewable power conversion projects, which we have a few sizable ones in our portfolio. As I was trying to reference in an earlier question, we also see other opportunities in our Fuel Station Services segment to invest in fuel stations. We also see opportunistic M&A opportunities, and we will continue to invest capital in our business, being mindful of our balance sheet strength and liquidity. We feel that as we are allocating capital across those different segments, different opportunities may not be all on the production side. They may be in these other areas of our business, which, by the way, there are so many reasons why we like the Fuel Station Services segment—diversity of earnings stream, open-ended growth opportunity where we think diesel-to-CNG could be a really interesting, large growth potential, and a little diversity away from some of the regulatory policy out there. We do not think it is wise just to talk about one segment for where we are investing capital. We do expect to put more RNG projects into construction. We have a large RNG production growth profile just from what we have announced already. That is how we are thinking about it, but you should expect us to continue to invest in production assets. Ryan James Pfingst: Appreciate that color. And it leads up to my follow-up, which is around CapEx, and that number for 2026 looks like $154 million this year. Curious if you could give us a sense of the breakdown between RNG projects and fuel stations there. Kazi Kamrul Hasan: Let me give you a bit of a carryover from what Adam just mentioned. The $154 million primarily includes most of the committed construction projects we have and a little bit of committed downstream dispensing station investments as well. So the lion’s share is production, and a smaller part is dispensing stations. I want to reiterate that, as you have heard from Adam, we would prefer not to provide guidance specifically around where we are going to make the most of our investments. Every investment will be competing for the dollar that is available from our capital, operating cash flow, and the future capital availability from the capital markets. We are going to be a little bit more judicious, so that is where I am going to end it. Operator: Thank you. One moment for the next question, please. The next question will be coming from the line of Adam Samuel Bubes of Goldman Sachs. Your line is open. Adam Samuel Bubes: Hi. Good morning. It sounds like you are seeing some green shoots in Fuel Station Services, but as you alluded to, because of the lag, it is maybe a 2027 story. What level of growth are you embedding in guidance for Fuel Station Services in 2026? And is low 20s the right way to think about margins in that segment on a sustained basis, or are there any levers for margin expansion? Adam J. Comora: Adam, this is Adam here. A couple of things. Yes, you are correct; there is always, just like on our RNG project investments that take 18 months or so on average, when you invest the capital and when you start recognizing revenues, EBITDA, and cash flow. Fuel Station Services has a slightly shorter cycle when we invest in new fuel stations, but we really think of 2026 as the business development activity that sets the stage for future growth. So in 2026, we are not anticipating the same levels of growth in Fuel Station Services that we have experienced after the next several, but we are really excited about some of those green shoots. We can go into what those macros are, where we see them alleviating, and some interesting market structure dynamics that we think we are breaking through there. As for margin expansion, from a margin perspective, it is a higher-margin business when we own fuel stations and dispense RNG at those stations versus typical construction and service margins. We do anticipate, as we own more fueling stations, that the margins will naturally move higher in that segment, and that is where we see a lot more of the growth coming. Kazi Kamrul Hasan: When we do the Fuel Station Services capital investments, we definitely rely on a base level of dispensing volume, but in more cases than not, we see embedded growth in fuel dispensing—similar to the growth we have in production on the upstream side. We also see the throughput going through these stations in the downstream side as well. There are similar types of growth embedded there, and we do expect that to be realized. Adam J. Comora: You should also understand that there is certain inter-segment tightening in the dispensing market, which also assists in margins on the Fuel Station Services side. Adam Samuel Bubes: And then maybe as the natural follow-up there, based on your conversations with customers and what you are seeing in the macro environment, what is giving you that underlying confidence and visibility for a potential inflection in 2027 and the potential rise in natural gas vehicle adoption? Adam J. Comora: I appreciate that question. It is something that I think about quite a bit as I look both to the U.S. market and what is happening overseas in places like China, which, by the way, I think is deploying about 30,000 natural gas engines, the X15, each year. China is on a path to have its heavy-duty trucking move up to 20% to 25% of its fuel mix. We have not gotten there yet in the U.S. We are at about 2%, which is really interesting when you think about it, given the position the U.S. has in natural gas as a commodity and the low cost and stable nature of that versus diesel and oil. Specifically in 2025, there were macro headwinds that were affecting some of our largest customers in the logistics and trucking space—tariffs, a continued freight recession, some overhang on combustion engines, and initial testing of the X15-liter engine. All of those factors delayed some investment decisions, either around deferred new truck purchases or new station purchases. As we are now moving into 2026, a lot of those fleets have started acclimating to the macro environment and started thinking about new truck purchases and reengaging. You have now moved through the X15 testing phase, so fleets are more comfortable with the technology and the performance. The volatility and absolute price that folks are starting to see in diesel and oil are really making natural gas a lot more attractive, and then you layer in the fact that it also assists those that are thinking about their sustainability metrics or emissions profiles. It is really setting up for what we think are investment decisions here in 2026 around this technology. CNG and RNG have proven themselves as something that works for fleets. Those are some of the things that have either alleviated or are new potential positive macros with what we have seen with diesel and oil prices. One thing that is interesting about the U.S. versus China is the market structure. Here in the U.S., you still have to work through not only the engine price, the OEMs, and the dealerships in order to get that product to market. We are encouraged that a lot of those things are starting to break through. One other interesting one here in the U.S. I will touch on is fuel surcharges, where the economics look good on paper, and then fleets have to think about how to deal with fuel surcharges and make sure that it does not disrupt how they are doing business. We are seeing movement across that whole spectrum of either macros or market structure here, and we are cautiously optimistic that the business development activity will accelerate in 2026 and then really provide some visibility into 2027 and beyond. Adam Samuel Bubes: Very interesting. Thanks so much. Operator: Thank you. If you would like to ask a question, please press 11 on your telephone. One moment for the next question. Our next question is coming from the line of Betty Zhang of Scotiabank. Your line is open. Betty Zhang: Thanks. Good morning. Thanks for taking my question. In your opening remarks, you mentioned the RFS. I just wanted to get your take on the cellulosic side. Do you expect any impacts on D3 RINs, and what are your expectations there? Adam J. Comora: I appreciate that question. This is Adam again. As we had noted and people probably saw, the EPA did send their final rule over on 2026–2027 to OMB, and we hope that recent geopolitical events do not slow down the process, as we have seen a little bit of an oil price shock and that sort of thing. We hope that the EPA still sticks to ordinary course of business timing and it gets released pretty soon. What I would say about the cellulosic category is we feel really good about the bipartisan support that we have in Congress as it pertains to tax policy and how they view RNG in the spectrum of smart or pragmatic policy on where folks should invest. I would say it still feels like the cellulosic category is not getting the same level of attention as liquid agricultural biofuels, where it seems apparent there is clear focus to support those areas and really lean in. From the cellulosic category, it is not a lean-out; it is not a lean-in; it is business as usual. I do not think we are really expecting any real surprises there, and we think the cellulosic category remains stable. As I said in the prepared remarks, there could be an upward bias in the cellulosic category with the entire biofuels complex. It just does not feel like it is the area of focus, and there are other areas where the EPA may be trying to emphasize. Betty Zhang: Great. Appreciate the detailed answer. For my follow-up, I wanted to ask on 2026 EBITDA guidance. Would you be able to share a bit more color between your different segments? Adam J. Comora: I am going to pass it over to Kazi in a moment here. We are not giving specific segment guidance because that will also be driven by where we invest capital and that sort of thing. One thing I do want to caution folks about is the challenging operating environment that we have experienced so far in the first quarter. I know there is another wave of storms that is rolling through right now. It was factored into our guidance, but there was a challenging start to the year with the snowstorms, which impact production a little bit and impact operating costs a little bit. We do not give specific quarterly guidance; I just wanted to caution folks on the first quarter. I will pass it over to Kazi. Kazi Kamrul Hasan: Thanks, Adam. This is a great question. As Adam noted, we have had a hard winter. Obviously, it is going to have an impact on our upstream production and likely on how much we are dispensing through our dispensing network, too. For the year, think about the growth we have seen on upstream production—similar type of growth we can expect. Downstream, 2026, as Adam mentioned, is going to be a more pivoting year. Most likely, the growth would be more around 2027 or onwards. I will stay away from giving you specific guidance, but you can look at our existing breakdown; that should give you an understanding of what we are adding. Operator: Thank you. I am not showing any more questions in the queue. I would like to turn the call back over to Adam J. Comora for closing remarks. Please go ahead. Adam J. Comora: We appreciate everybody logging in today for their interest in OPAL Fuels Inc., and we look forward to sharing more updates in the future. Operator: This does conclude today’s programming. Thank you all for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Telos Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Allison Phillipp. Please go ahead, ma’am. Allison Phillipp: Good morning. Thank you for joining us to discuss Telos Corporation's fourth quarter 2025 financial results. With me today is John B. Wood, Chairman and CEO of Telos Corporation; G. Mark Bendza, Executive Vice President and CFO of Telos Corporation; and Mark D. Griffin, Executive Vice President of Security Solutions. Let me quickly review the format of today's presentation. Mark will begin with remarks on our fourth quarter 2025 results and 2026 outlook. Next, John will follow up with concluding commentary. We will then open the line for Q&A, where Mark Griffin, Executive Vice President of Security Solutions, will also join us. The fourth quarter financial results were issued earlier today and are posted on the Telos Corporation Investor Relations website and this call is being simultaneously webcast. Additionally, we have provided presentation slides on our Investor Relations website. Before we begin, I want to emphasize that some of our statements on this call, including all of those relating to 2026 company performance, plans, and operations, are forward-looking statements and are made under the safe harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ for various reasons, including the factors described in today's financial results summary and comments made during this conference call and in our SEC filings. We do not undertake any duty to update any forward-looking statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are supplemental and clarifying measures to help investors understand Telos Corporation’s financial performance. These non-GAAP financial measures should be considered in addition to, and not as a substitute for or in isolation from, GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our fourth quarter results summary and on the Investor Relations portion of our website. Please also note that financial comparisons are year over year unless otherwise specified. The webcast replay of this call will be available on our company website under the Investor Relations link. With that, I will turn the call over to Mark. G. Mark Bendza: Thank you, Allison, and good morning, everyone. We have a lot of good news to share again this quarter. We are pleased to report another strong quarter and an exceptional finish to an incredibly strong 2025. Before turning to the slides, let me highlight three key takeaways for the quarter and the year. First, we delivered significant revenue growth and exceeded our guidance across key financial metrics every quarter, including the fourth quarter. Second, our continued focus on disciplined program execution, rigorous operating expense management, and working capital efficiency drove strong operating leverage, excellent incremental adjusted EBITDA margins, and robust cash flow. Third, we returned capital to shareholders through share repurchases. Looking ahead, large programs in Telos ID continue to ramp, and earlier this month, we expanded the confidential IT security work that we are performing for the federal government. Given this momentum, we remain well positioned for another year of double-digit revenue growth, adjusted EBITDA margin expansion, strong cash flow, and additional share repurchases in 2026. Our board of directors recently increased our share repurchase authorization from $50,000,000 to $75,000,000 to support our capital deployment activity. With that overview, let us turn to slide three. We delivered another quarter of strong execution and exceeded our guidance across key metrics. Revenue increased 77% year over year to $46,800,000, exceeding our guidance range of $44,000,000 to $46,300,000. This performance was primarily driven by strong execution in Telos ID and the ramp of large programs. We expect large programs in Telos ID to continue growing into 2026. As we continue to scale the business, our focus remains on program execution combined with operating expense management. During the fourth quarter, we approved a company-wide restructuring plan designed to further streamline operations and position the company for additional growth and adjusted EBITDA margin expansion in 2026. As a result of these actions, we expect adjusted operating expenses to decline in 2026, even as revenue continues to grow at a double-digit rate. The restructuring plan resulted in a $1,500,000 charge during the quarter, including approximately $500,000 recorded in cost of sales. Separately, our review of intangible assets resulted in a $14,900,000 noncash goodwill impairment within the Secure Networks segment. This charge represents a full write-off of the segment's goodwill and reflects the decline in contract backlog as several large programs reached their natural completion in recent periods. Secure Networks represents a meaningful portion of our business development pipeline and we continue to pursue new contracts in that segment. In total, these items resulted in a $16,400,000 charge in the quarter. Turning to gross margins, GAAP gross margin for the quarter was 35%. Excluding the $500,000 charge included in cost of sales, gross margin was 36%, while cash gross margin was 41.9%. Both metrics exceeded our guidance range, primarily reflecting performance in Telos ID. As a reminder, due to the diversity of our revenue streams, gross margins will naturally fluctuate depending on the mix of revenue recognized in a given quarter. Turning to operating expenses and adjusted EBITDA, our focus on expense management translated into strong overall profitability. Adjusted operating expenses came in approximately $1,000,000 better than our guidance assumptions. As a result of better-than-expected revenue, cash gross margin, and operating expenses, adjusted EBITDA exceeded the high end of our guidance range. Adjusted EBITDA was $7,300,000, compared to our guidance range of $4,000,000 to $5,700,000. Adjusted EBITDA margin was 15.6%. Turning to cash flow, strong cash generation remains a priority. Operating cash flow in the quarter was $8,000,000. Free cash flow was $6,300,000, representing a free cash flow margin of 13.4%. This performance reflects the success of our company-wide working capital initiatives as well as our revenue growth and gross margin profile. Our strong cash generation, when combined with our highly liquid balance sheet, provides flexibility to invest in growth initiatives while also continuing to return capital to shareholders. Let us now turn to slide four for a brief recap of our year-over-year performance for the full year 2025. We delivered an exceptional year in 2025 despite the challenging macro environment within the U.S. federal government. Revenue increased 52% to $164,800,000. Growth was driven by new program wins in both 2024 and 2025, as well as the continued ramp of our TSA PreCheck program. At the same time, we significantly improved the efficiency of our operating model. Cash operating expenses declined by $8,000,000, or nearly 12%, reflecting the impact of the expense management initiative we launched at the end of 2024. As a result, adjusted EBITDA was $18,100,000, representing a $27,800,000 improvement year over year. Adjusted EBITDA margin expanded nearly 20 percentage points to 11%, and incremental adjusted EBITDA margin was 49.1%. In other words, for every dollar of revenue growth, the company generated more than $0.49 of additional adjusted EBITDA. Cash generation also improved significantly. Free cash flow was $21,300,000, representing a $61,000,000 improvement year over year, and free cash flow margin was 12.9%. Finally, we returned significant capital to shareholders. During the year, we deployed $13,600,000 to repurchase approximately 4.3% of our outstanding shares at an average price of $4.38 per share. Our capital allocation priorities remain consistent: investing in organic growth, maintaining a liquid balance sheet, and returning capital to shareholders. With that, let us turn to slide five to discuss our outlook for 2026. As we enter 2026, we expect the continued ramp of large programs and recent new business to drive another year of strong growth, adjusted EBITDA margin expansion, and robust cash flow. For the year, we forecast revenue to grow 14% to 21% year over year to a range of $187,000,000 to $200,000,000. Substantially all of our forecast represents revenue from existing programs. The revenue range is primarily driven by the third-party hardware and software component of our IT GEMS program as well as the confidential IT security work that we are performing for the federal government. We forecast cash gross margin of approximately 37% to 39.5%, lower than 2025 primarily due to revenue mix and the timing of certain prepaid expense recognition in cost of sales. We forecast cash operating expenses to be approximately $1,500,000 to $4,000,000 lower year over year, reflecting the benefits of the expense management plan approved in the fourth quarter. Based on these assumptions, we forecast adjusted EBITDA of $20,600,000 to $28,000,000, representing an adjusted EBITDA margin of 11% to 14%. Lastly, we forecast another year of robust cash flow and share repurchases. Turning to the first quarter, we forecast revenue to grow 44% to 47% year over year to a range of $44,000,000 to $45,000,000. We forecast cash gross margin to be over 39%. We forecast cash operating expenses to be approximately $1,000,000 lower year over year, reflecting the expense management plan approved in the fourth quarter. We forecast adjusted EBITDA of $4,500,000 to $5,000,000, representing an adjusted EBITDA margin of 10.2% to 11.1%. Lastly, we forecast another quarter of strong cash flow. With that, I will turn it over to John for concluding commentary. John B. Wood: Thanks, Mark. Before I wrap up, I want to spend a few minutes on where we are as a business and where we are headed. As Mark noted, 2025 was an exceptional year financially, but the numbers reflect something much more fundamental, and that is the investments we have made in our people, our systems, and our customer relationships are paying off. Our 90% of total revenue, and the momentum there is strong. Let me touch on a few areas. Starting with Xacta, our cyber governance, risk management, and compliance platform continues to be the standard for the most security-conscious organizations in the world. Demand for automated GRC solutions is growing as our customers recognize the value in incorporating machine-readable data sets for more actionable compliance and risk information on a continuous or ongoing basis. We are well positioned to capture that demand. During the year, we launched Xacta AI, bringing meaningful AI-driven risk and compliance insights to our customers' complex environments. Our AI integration within the Xacta platform focuses on a novel and secure approach to utilize highly contextualized and enriched datasets, resulting in high-confidence, risk-focused recommendations and insights. Xacta AI saves customers time and effort by delivering expert-level guidance related to a customer's specific circumstances and their risk tolerance. To date, 400 Xacta AI licenses have been sold to two major federal government customers, and the new prospect response has been very positive. We see Xacta AI as a meaningful differentiator as we compete for new business in 2026 and beyond. Our Telos ID business remains a significant growth driver. Our TSA PreCheck enrollment program ramped nicely throughout the year, supported by strong travel demand. We also continue to expand our broader identity and biometric portfolio, including ID vetting and aviation channeling services. Enrollment is a scale business, and our biometric solutions now process millions of identity transactions annually across the nation. We are pleased with the progress we are making and have the potential for additional growth in these areas. Beyond these programs, earlier this month, we expanded the confidential IT security work that we are performing for the federal government. Now turning to the broader market, over 90% of our revenue comes from governments here and around the world. Our customer base spans the Department of War, the intelligence community, Department of Homeland Security, multiple civilian agencies, and the Five Eyes Nations. These customers are funded to address enduring national security and compliance missions. Cybersecurity, identity verification, and secure communications are not discretionary line items for these organizations. They are indeed mission critical. We recognize that the federal spending environment is receiving heightened scrutiny and we are monitoring it closely. However, in general, the programs we support continue to be well funded, operationally essential, and in many cases tied to mandated security and compliance requirements. That gives us confidence in the durability of our revenue base. Our growth opportunities and pipeline are driven by strategic positioning and well-funded national security priorities, including the ever-changing cybersecurity threat environments, digital enterprise solutions, and modernization of core infrastructures. Our pipeline remains strong at over $4,200,000,000. We have seen a shift in awards to the right as a result of the government shutdown, funding constraints, and a more detailed review from the government of submitted bids. We expect additional award decisions on previously submitted bids over the course of 2026. With that, I would like to wrap up on slide number six. In summary, 2025 was a transformational year for Telos Corporation, marked by strong revenue growth, significant adjusted EBITDA margin expansion, and a dramatic improvement in cash generation. We successfully executed on large programs and secured new business. At the same time, our continued focus on cost management and working capital efficiency enabled us to convert growth into meaningful improvements in profitability and cash flow. Importantly, we also returned capital to shareholders through our share repurchase program while maintaining a highly liquid and flexible balance sheet. As we enter 2026, the continued ramp of large programs and recent new business positions us well for another year of double-digit revenue growth. At the same time, the expense management plan approved in the fourth quarter enables us to drive further operating leverage and adjusted EBITDA margin expansion as we scale. In short, we believe our strong program execution and expense discipline are creating a business that is increasingly profitable, cash generative, and positioned for long-term value creation for our customers and our shareholders. With that, we are happy to take questions. G. Mark Bendza: Operator, please open the line for Q&A. Thank you. Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question is going to come from the line of Zachary Cummins with B. Riley Securities. Your line is open. Please go ahead. Zachary Cummins: Hi. Good morning, Mark and John. Congrats on the strong results to end the year. Mark, maybe just starting with the initial guidance for the year. It sounds like it is largely driven by expansion with existing programs. So can you talk about what is going on in the pipeline—like a few opportunities maybe were pushed to the right—in terms of does that provide potential upside versus the initial guidance, or what are some of the puts and takes when we think about your initial outlook? G. Mark Bendza: Yes. So let me start, and maybe I will turn it over to Mark Griffin for his comments on the pipeline. First, we are very encouraged by how our existing programs have evolved since November when we originally indicated $180,000,000 of revenue in 2026. As I said in the script, we have grown the confidential IT work that we were performing for the federal government. That is something that we started back in the third quarter of last year. That body of work continues to expand with the federal government, so that is a very encouraging development. Second, our IT GEMS program continues to ramp and will continue to ramp into 2026. There are revenue streams within that program that we had a partial year of revenue last year, so we are going to have full annualization this coming year in 2026. Based on orders that we have received in that program since November, we are getting more and more visibility into how 2026 is shaping up for that program. So that is trending extremely well also. Lastly, on TSA PreCheck, transaction volumes have been trending very well for us since November as well as market share gains. So we have improved our outlook for that program as well. The good news, as you said, is that $187,000,000 to $200,000,000 is primarily a function of existing programs and there is very little contingency in terms of additional new business go-get to achieve those numbers. Regarding the pipeline, I will turn it over to Mark. Mark D. Griffin: Hello, Zach. As John mentioned, there is a significant value in the pipeline. The analysis that we have done to date indicates about 20% of that value is in the first half of this year. That gives us a good line of sight on additional opportunity that we would then also bring into the year. It is a mixture of the pipeline across the different business lines. The majority is still within Security Solutions but supported by Secure Networks as well. So we are very bullish on the pipeline right now with a good chunk of it in the first half of this year from an award point of view. Zachary Cummins: Understood. And just my one follow-up question for Mark is around your gross margin assumptions for this year. I think you outlined it a bit in your script, but can you give us the key puts and takes on why we are seeing a little bit of compression in the assumed gross margin this year versus 2025? G. Mark Bendza: Yes. Historically, if you look back over the last five years, our weighted average gross margins are typically in the upper 30s. That is what you are seeing for 2026. The year-over-year dilution in 2026 is really driven by a few key things. First, the third-party hardware and software on our IT GEMS program represents the lowest margin of revenue streams in our portfolio. That revenue stream is growing year over year, and so you are going to see some dilutive impact from the growth of that lower-margin revenue stream. Second, as we discussed in prior periods, we have some expenses on our TSA PreCheck program—actually, pretty meaningful expenses on the TSA PreCheck program—that were prepaid over the last few years, and now that expense is being compressed and recognized through the P&L and through cost of sales in a relatively short period of time, especially in 2026. So we are getting some artificial gross margin pressure from that GAAP accounting phenomenon. That alone is a couple hundred basis points into 2026. Third, the rest of the portfolio is actually accretive year over year. Gross margins are expanding in the rest of the portfolio once you normalize for those two items that I just mentioned. I will also point out that although cash gross margins are forecasted to contract in 2026, adjusted EBITDA margins are forecasted to expand, and that is a function of top-line growth and lower OpEx all lining up nicely to drive adjusted EBITDA margin expansion. Zachary Cummins: Understood. Thanks for taking my questions, and best of luck with the rest of the quarter. G. Mark Bendza: Thanks, Zach. Operator: Thank you. One moment for our next question. Our next question comes from the line of Matt Cliche with Needham and Company. Your line is open. Please go ahead. Matt Cliche: Hey. Good morning, guys. This is Matt Cliche over at Needham. Thanks for taking our questions. When we think about the strong revenue performance and guide for next year, is there any sort of framework you can provide on how much Xacta is contributing or the size of the cohort that will come up for renewal in 2026? G. Mark Bendza: So our renewal rates are excellent, Matt. We experience, I would say, very little to no revenue loss in a typical year on Xacta renewals, generally speaking, year to year. So as we forecast from one year to the next, renewals tend to be a very low variable for us as we forecast our revenues in a typical year. Matt Cliche: Okay. Great. And then what exactly are you seeing in terms of Xacta AI attach rates or momentum? What are you hearing from the agency side? John B. Wood: Matt, you were breaking up a little bit, but I believe your question was what are we seeing in terms of Xacta AI demand, attach rate, and volume of conversations with new prospective customers. Our plan is to go after existing customers who already use Xacta to start with, and there we are in the tens of millions of dollars of opportunities—several tens of millions of dollars of opportunities. I think our customers are really excited because if they are able to see the kind of outcomes that we have seen in our testing, then they could see as much as a 90% reduction in the time and effort it takes to get to an Authority to Operate. Matt Cliche: That is great. Thank you so much. Sorry for the connectivity issues there too. John B. Wood: No problem. Thanks for your question. Operator: Thank you. One moment for our next question. Our next question comes from the line of Rudy Kessinger with D.A. Davidson. Your line is open. Please go ahead. Rudy Kessinger: Hey, guys. Thanks for taking my questions, and apologies if this might have been asked. I had to drop off for a bit here and jump back on. In the 2026 guide, the revenue growth, how much of that revenue growth is tied to the one large DMDC contract? G. Mark Bendza: The one large CNBC contract—I would say relative to the $180,000,000 that we mentioned in November, it is roughly a third of the improvement from the November outlook. Rudy Kessinger: Okay. That is a good way to think about it, I think. So there certainly is some new business win contribution in there. Okay. And then for this year, as you look at the pipeline—realistic pipeline that you could potentially win this year in terms of revenue contribution this year or into 2027—what does that pipeline look like today, and how many large highly likely deals do you have in that pipe? Mark D. Griffin: Hey, Rudy. In 2026, we have, supposed to be awarded in 2026, about 64 opportunities that are supposed to hit. Thirty-four of those, as I mentioned, are in the first half of the year, representing about 20% of the value of the pipeline. So we expect most of that is going to hit by the June timeframe, and based on the timing of that and the rollout of that, you are probably talking about some modest revenue in 2026 but then ramping and building in 2027 as well. Rudy Kessinger: Okay. And then last one for me. Clearly, the expense discipline has been great to see and the improved EBITDA margins as well. At the same time, gross margin, even your cash gross margin, continues to come under pressure. It is going to come down again this year as well. What strategies do you have in place to maybe help put a floor in that cash gross margin? Do you think that range you gave this year can be a floor? And how should we think about that line longer term? G. Mark Bendza: Yes. Some of the commentary I have made in the past, and I will reiterate today, is that we do have a lot of different revenue streams and a lot of different margin profiles. Quarter to quarter, year to year, total company gross margins will fluctuate based on mix. The margins that we are guiding for 2026, on the surface, are in line with where margins have been over the last five or six years. Keep in mind, as I mentioned earlier, there are about 200 basis points of more accounting-oriented year-over-year dilution associated with that compressed expense recognition, which is well in excess of actual cash expense in cost of sales. If you adjust for that, we are still in that low 40s cash gross margin. So I think we are in a really good spot. In terms of the recent dilution that we have seen over the last few quarters associated with the IT GEMS revenue mix, I would say this year, we should pretty much be at the full dilutive effect. Does that help to answer your question? Rudy Kessinger: Yes. Yes, it does. Thank you. Operator: Okay. Thank you. I am showing no further questions at this time, and I would like to hand the conference back over to John Wood for any further remarks. John B. Wood: Thank you very much. I want to thank our shareholders for your ongoing support. With robust and recession-resistant markets, well-funded customers, and a decades-long track record of serving the world's most security-conscious organizations, Telos Corporation has a really strong foundation for the future. So, again, thank you. This concludes today's Allison Phillipp: conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Aurora Mobile Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Christian Arnell. Please go ahead, sir. Christian Arnell: Thank you. Hello, everyone, and thank you for joining us today. Aurora Mobile's earnings release was distributed earlier today and is available on the IR website at ir.jiguang.cn. On the call today are Mr. Weidong Luo, Chairman and Chief Executive Officer; Mr. Shan-Nen Bong, Chief Financial Officer; and Mr. Guangyan Chen, General Manager. Following their prepared remarks, they will be available to take your questions and give you answers during the Q&A session that follows. Before we begin, I'd like to remind you that this conference call contains forward-looking statements made within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions, which are difficult to predict and may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties and/or factors are included in the company's filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. With that, I'd now like to turn the conference over to Mr. Luo. Please go ahead. Weidong Luo: Thanks, Christian. Hi, everyone. Welcome to Aurora Mobile's 2025 Fourth Quarter Earnings Call. Before I comment on our Q4 results, I would like to remind everyone that we have uploaded the quarterly earnings day on our IR website. You may reference the deck as we proceed with the call today. I'm truly excited about the various things that are going here at Aurora Mobile. Revenue is surging and our financials are as strong as ever. By the end of this call, I trust you will agree with me, our 2025 and Q4 numbers are truly exceptional. As we have done in the past, when looking at the fourth quarter and the year as a whole, a single phase comes to mind a year of pure brilliance. Why? Because we recorded first ever full year net GAAP profit in our history. Not only that, but we achieved 3 consecutive quarters of non-GAAP profit leading to this quarter, which just as importantly achieved quarterly revenue exceeding RMB 100 million mark. It's been a truly historic year. Let me now dive deeper into the outstanding work and numbers that make this success possible. Firstly, the group's revenue this quarter surged to RMB 105.2 million, representing a remarkable double-digit 13% year-over-year and 16% sequential growth. This performance brought through the guidance we shared in our Q3 earnings call. Secondly, our global flagship product, EngageLab continued to fire on all cylinders, winning new customers across the globe. This momentum drove EngageLab's ARR for December 2025 to a record high of USD 10 million, representing 186% year-over-year growth. Further, gross profit grew by 23% year-over-year and by 9% quarter-over-quarter. This is the highest gross profit we have seen over the past 16 quarters. Last but not least, we delivered another standout quarter on cash management. Net operating cash inflow hit RMB 35.1 million, the highest we have seen since Q4 of 2020. With so many record highs this quarter, I am incredibly proud of what our team has managed to accomplish. It's truly gratifying to share these results with you today, and it was driven by our strategy, hard work and passion, not by luck. Everyone in Aurora Mobile for the effort and energy toward our collective growth day in and day out, 2025 stands as one of our most successful year-to-date, the result of true commitment and strong execution. With that said, the work is not done. The solid foundation we have built over the past few years position us to achieve even great things. I sincerely believe we are ready to seize the next wave of global opportunities and our track record proves we can. As we move into 2026, we will continue on our expansion path with the same discipline and focus we show in the past years, enhancing our products and services, accelerating growth and maintaining strong financial management. I am optimistic of what 2026 will bring. The path ahead is rich with opportunities and our brightest moments are still to come. After a year of pure brilliance, I think for 2026 is clear growth acceleration. Now let me share more on the individual business performance. Our total Q4 group revenue has exceeded RMB 100 million mark for the first time in history since the transition to pure SaaS business model. It has grown both year-over-year and quarter-over-quarter. In particular, the lion's share of year-over-year revenue was contributed by strong numbers from developer subscription services. Our solid execution in 2025 across different markets provided an excellent platform to drive our top line performance. In this quarter, both developer subscription services and vertical application record solid acceleration with double-digit year-over-year revenue growth. Developer Services revenue, which consists of subscription services and Value-Added Services delivered strong performance with 7% growth year-over-year and 18% growth quarter-over-quarter. Subscription revenue performed well, increasing by 13% year-over-year and 7% quarter-over-quarter. Value-Added Services revenue grew by an impressive 101% quarter-over-quarter, but decreased 13% year-over-year. Our core business developer subscription services gave a revenue of RMB 61.9 million, representing growth of 13% year-over-year and 8% quarter-over-quarter. The year-over-year revenue growth was mainly driven by increase in both customer number and ARPU. In this quarter, subscription revenue both for the RMB 60 million 1 quarter revenue mark and reached its highest level in history. Now it's time for what many of you have been waiting for, an update on our global flash product, EngageLab, which continued its remarkable growth trajectory quarter after quarter since it was launched. First, EngageLab's ARR has achieved a new and important milestone, USD 10 million as of December 2025. Following triple-digit growth in Q3, we record 186% year-over-year ARR growth this quarter. Secondly, we delivered another very strong quarter of EngageLab. Cumulative signed contract value amount to RMB 157 million by the end of Q4 of 2025. In Q4 alone, we signed up more than RMB 29 million worth of new contracts. This, in our view, is simply outstanding. We expect this revenue growth momentum to continue for the next 24 months. Thirdly, we secured new wins from global customers across all corners of the world. Our number of customers increased by 142% year-over-year to reaching 1,641. Our global go-to-market initiatives are proving highly effective in driving this growth. Fourthly, our EngageLab products and services are now sold to customers in more than 70 different countries and regions globally. We expanded our footprint into 18 new countries in Q4 alone. Ultimately, the rollout of EngageLab into global market has been a resounding success. Looking back to 2025, we are immensely pleased with the expansion of our global flash product. We have come a long way since we launched EngageLab in Q4 of 2022. In a nutshell, EngageLab provides a suite of products and services for omnichannel infrastructure, helping our customers to strengthen engagement with their users in an efficient and effective manner. The customers of EngageLab are from various industry verticals with no specific industry concentration risk. The very strong numbers we have recorded in 2025 have given us great confidence in the acceleration profit of this business. Historical 2025 numbers aside, in the beginning from 2026, we have seen healthy signs from the overseas markets in terms of potential needs and customers. Let me also touch on the excellent partners we have globally. As of December 2025, within our EngageLab ecosystem, we have 17 partners in different countries and regions. These partners are selected to strengthen, rigorous and often multistage process. We think that our representative in different markets, which means we have high expectation of the contribution from this partner in overseas market in the future. They are another important driver of our sustainable long-term growth. We will continue to work and engage with more local partners to better utilize their resource and local networks. Within subscription revenue, some of the notable wins in this quarter include but are not limited to Kimi large language model, J&T Express, Citibank and China Unicom. Value-Added Services revenue were RMB 14.2 million, up 101% quarter-over-quarter. The solid revenue quarter-over-quarter growth was mainly due to the significant increase in spend by advertisers. The traditional quarterly online shopping festival in Q4 also contributed to significant revenue growth sequentially. Now let me pass the call over to Shan-Nen, who will take you through the metrics of vertical applications and financial performance for this quarter. Take it away. Shan-Nen Bong: Thanks, Chris. And next, I'll go over the revenue for vertical application that includes financial risk management and market intelligence. Overall, Vertical Applications had a good quarter where revenue grew both year-over-year and quarter-over-quarter. And within vertical application, financial risk management recorded a strong 43% growth in revenue year-over-year and 12% quarter-over-quarter. Financial Risk Management delivered another excellent performance. We recorded robust revenue growth of 43% year-over-year and 11% quarter-over-quarter. Notably, this segment achieved revenue of more than RMB 22 million in each of the 4 quarters in 2025. In particular, the strong year-over-year performance was driven by impressive 20% in customer number growth and a 20% increase in ARPU. The customers that we signed up or renewed in Q4 include, but not limited to ChongXiing, Xiao, Chengduinhang and many more licensed credit or financial institutions throughout China. Market Intelligence revenue, on the other hand, decreased by 24% year-over-year and 3% quarter-over-quarter due to the continued weak market demand for Chinese APP data. This result is in line with our expectation. Next, I'll go over some of the profit and loss items. Our gross profit delivered another exceptional quarter, growing 23% year-over-year and 9% quarter-over-quarter. The RMB 69.7 million gross profit we had also was the highest gross profit recorded among any of the past 16 quarters. In this quarter, our revenue grew 13% year-over-year, yet our gross profit grew by 23% year-over-year. Notably, we saw this trend in Q3 as well. This tells a clear story. We are strengthening our ability to generate high-quality revenue with higher margins. Our strong gross profit number has proven instrumental in bringing us to a full year profitability in 2025. On net profit, after 3 consecutive profitable quarters, we have landed ourselves in a new territory, our first ever full year GAAP net profit for 2025. This is a great way for us to conclude our brilliant Q4 and full year 2025 story on a high note. On to operating expenses. Q4 operating expenses was at RMB 68.2 million, up 13% year-over-year and 6% quarter-over-quarter. Overall, we are pleased with the trending of OpEx to support revenue and profitability growth. I'll now dive deeper into the individual OpEx category. R&D expenses increased 16% year-over-year to RMB 28.3 million, mainly due to the higher staff costs and associated expenses. Technical service fee also contributed to the year-over-year increase in R&D expenses. Selling and marketing expenses increased by 16% as well year-over-year and to RMB 28.4 million, mainly due to the higher sales commission in line with the revenue growth and cash collection recorded in this quarter. Marketing expenses for investment in global business expansion also contributed to the year-over-year increase in SMS -- in selling and marketing expenses. G&A expenses remained flat at RMB 11.4 million, representing no change from the same quarter of last year. Next, I will share 3 very important KPIs that we closely monitor. Our net dollar retention rate, NDR, a commonly used KPI for SaaS companies stood at 103% for our core developer subscription business for the trailing 12-month period ended December 31, 2025. This is the second consecutive quarter where the NDR number has exceeded the 100% threshold. We are proud of this number as this demonstrates how our SaaS business model is widely accepted by the market. Customers have increased their spending on our platform over time. Secondly, another financial KPI for tracking the performance of SaaS company is the total deferred revenue. This represents cash collected in advance from customers for future contract performance, which exceeded the historical high we had last quarter and stood at RMB 178.7 million in Q4 of 2025. This historical high deferred revenue balance is a hallmark of high-quality, scalable business. It signifies strong customer loyalty, predictable future revenues, healthy cash flow and an effective sales strategies. Thirdly, we continue to maintain a healthy level of AR turnover days at 37 days. This number is simply fantastic. It shows we are collecting cash quickly and effectively. And this has really improved our financial liquidity while mitigating the risk of bad and doubtful debts. And there was no shortcut to achieving this. It was simply due to the result of our team's diligence, hard work and timely effort to engage with customers. On to the cash flow. We recorded yet another great number this quarter. For the quarter ended December 31, we recorded net operating activity cash inflow of RMB 35.1 million. This exceeds the last quarter and is now our best quarterly cash flow result since Q4 of 2020. Another metric to share with you, between the years, our cash and cash equivalent balance has increased by RMB 53.8 million. It represents a whopping 45% increase to RMB 173 million as of December 31, 2025. This reflects not only the significant step-up in our financial results, but also a meaningful improvement in the overall quality of our operations. Now let me take a few minutes here to recap. As you have heard Chris mention a year of pure brilliance at the beginning of this call. And throughout the entire 12 months of 2025, we have been operating under a high level of focus and rigor together with financial discipline. Our financial profile has fundamentally improved and moving in the right direction. And we closed a very strong and exceptional fiscal 2025. The numbers we have presented today speak for themselves. And this quarter, we achieved many historical milestones. Each one, a strong statement about the exceptional 2025 we have had and each one building momentum as we look forward to the next 12 months ahead of 2026. First, we achieved our very first full year GAAP net profit in history. Number two, the group quarterly revenue exceeded RMB 100 million mark, a historical first since we transitioned to the pure SaaS business model. Third, our core developer subscription business achieved a record of RMB 61.9 million in revenue this quarter, breaking through the RMB 60 million threshold for the first time. Our flagship product, EngageLab, continues to shine. Our EngageLab business reached another very important key milestone, ARR of USD 10 million in December 2025. This represents a stunning 186% of year-over-year growth. Number five, gross profit grew significantly at 23% year-over-year and the highest it has been for the past 16 quarters. Number six, operating activities brought in a net cash flow of RMB 35.1 million. Our net dollar retention, NDR, for core developer service surpassed 100%, reaching 103%. The 2025 numbers demonstrate our excellent execution. We have exceeded most, if not all, of our targets. With this in mind, Chris and I believe we are exceptionally well positioned to continue this momentum into 2026. Now let's turn to the business outlook. Based on the current available information, the company sees the 2026 full year revenue guidance to be in the range of RMB 450 million to RMB 480 million, representing a very solid and strong growth of 20% to 28% year-over-year compared to 2025. And the above outlook is based on current market conditions and reflects the company's current and preliminary estimate of the market and operating conditions and the customer demand, which are all subject to change. Lastly, before I conclude, I'll give a quick update on the share repurchase plan. In this quarter ended December 31, 2025, we repurchased 73,000 ADSs. Cumulatively, we have repurchased a total of 400,000 ADS since the start of our repurchase program. And this concludes our prepared remarks. We're happy to take your questions now. Operator, please proceed. Operator: [Operator Instructions] And our first question is going to come from Calvin Wong with Spica Capital. Calvin Wong: First of all, congrats to you guys for delivering a year of pure brilliant financials today. Both the Q4 and the full year 2025 numbers have been very, very impressive. One question for me, if I may. Can the management shed some light on the top 3 things that you have done well to deliver this set of such good financials. Shan-Nen Bong: Calvin, good to hear from you, and thanks for the kind words. Let me take this question. Yes, we are very proud of ourselves to be able to share such a wonderful set of financials earlier on during the call. And to get to where we are, it is by no means easy, and we work very hard and smart to navigate the volatile business environment globally. As on the 3 things that we have done well, let me have a go. First, it has to be the courage to venture outside our comfort zone. And looking back in 2022, when the idea of going overseas was first brought up by Chris as the next important strategic initiative for Aurora Mobile. At that time, I think we didn't have any single overseas employees nor did we have any partners outside of China. But then forward-looking vision was a brief one. So making -- I think making the right decision to go overseas would be my #1 thing that we have done right. If we did not make such brave or bold decision, we will not have this conversation today. And secondly, making the monumental shift of the product service offering outside of China is another game changer. We will not be as successful as we are today if we're simply making slip service of going overseas. Over the course of the past, I think, 2 to 3 or 3 to 4 years, we have made considerable amount of investment and resources to actually having a brand-new EngageLab product, specifically for our overseas market with its own distinct spec and features for global customers, along with the overseas data centers catering for the needs of our global customers. If you were lazy or took a shortcut of simply using what we had before in China for overseas market, it will not work. The third factor would be the commitment to excel throughout the organization to support this going overseas initiative that Chris brought up. When we started, there was no how to go overseas guide book to show us the way. We took the hard way by figuring out all ourselves and doing it all ourselves. I still remember at the early stage when we started EngageLab, Chris and I were standing at our booth in Singapore Tech Expo to introduce EngageLab and to answer questions from potential customers, and we have since come a long way. Just to recap, looking back, one, we made the right decision to venture overseas. Two, we make serious commitment in terms of investment in the right product offering. Third, the entire organization was in sync and aligned to this strategic initiative. And this took us back a little bit to the memory lane. I hope I answered your question, Calvin. Operator: And our next question will come from Jack Sun with Gelonghui Research. Jack Sun: I'm Jack Sun from Gelonghui Research. Congratulations to the management team on another quarter with good numbers. in particular, a full year GAAP net profit is a really great turning point. My question for the management is, how should we look at Aurora's financials for the first quarter of 2026 and beyond? Shan-Nen Bong: Jack, thanks for the question. And you're right, we have a great 2025 when we achieved our very first GAAP profit for the year. And equally important was the spectacular Q4 numbers that we have presented earlier today. And in Q4, our total revenue exceeded RMB 100 million and go through the revenue guidance we have provided in Q3 and marking the best quarter revenue in our history. And of course, you heard about the fact that our global flagship product, EngageLab continues its great acceleration path. All the KPIs we have achieved has done through meaningful and significant growth year-over-year and quarter-over-quarter, be it ARR, customer numbers, total contract value signed or revenue recognized, they just exceeded all our internal targets. And of course, all these were the fruit of a hard labor that we started 3 years back. Results like this will not happen overnight or over 1 quarter. And we sowed the seeds of EngageLab growth when we committed to venture overseas in late 2022. We invested the appropriate resources in terms of capital and infrastructure with a balance of ensuring expansion without blinding spending for sake of spending. And now that we have laid a solid foundation for EngageLab, the growth prospect is very certain. We have presented and delivered such sequential growth without fear in the past. If I may summarize on how one should view Aurora Mobile, you can think of our business as, one, we have proven to be able to achieve full year net profit with positive cash inflow. Two, domestic business continued its solid and relatively stable growth. Three, our global flagship product, EngageLab will provide the lion's share of the growth momentum for the next 3 years. Four, our AI strategy will provide the next phase of growth momentum. And thus, we -- management as a whole are very confident on the business prospects in 2026 and beyond. And I hope this answers your question, Jack. Operator: And I'm showing no further questions at this time. I would now like to turn the call back over to Christian for closing remarks. Christian Arnell: Thank you, everyone, for joining the call tonight. If you have any further questions or comments, please don't hesitate to reach out to the Jiguang IR team. This concludes the call. Have a great evening or morning. Thank you. Operator: This does conclude the conference call. Thank you for participating, and you may now disconnect.
Operator: Greetings, and welcome to HF Foods Group Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jon DeDomenico with ICR. Thank you, Jon. You may begin. Jon DeDomenico: Hello, everyone. Welcome to HF Foods Group Inc.'s 2025 Earnings Conference Call. Joining me on today's call are Felix Lin, the company's President and Chief Executive Officer, and Paul McGarry, the company's Chief Financial Officer. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on management's current beliefs and expectations about future events, which are subject to several known and unknown risks and uncertainties. If you refer to HF Foods Group Inc.'s earnings release, as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from those expressed or implied by these forward-looking statements. The company undertakes no obligation to update or revise these forward-looking statements in the future. In these remarks, the company will make several references to non-GAAP financial measures, including adjusted EBITDA and non-GAAP diluted earnings per share. We believe that these measures provide investors with a useful perspective on the underlying growth trend of the business and have included in the earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. I will now turn the call over to Felix. Felix Lin: Hello, everyone. Welcome to HF Foods Group Inc.'s 2025 earnings call. I will provide a business update, and Paul will speak to our 2025 financial results. Then we will open up the line for Q&A. It is no secret that 2025 brought headwinds for the broader foodservice industry in terms of tariff pressure and lower foot traffic. But against this backdrop, we drove meaningful continuous momentum for our business. Net revenue increased 2.2% year over year to $1.23 billion, and gross profit increased 1.2% to $207.6 million. Also notably, adjusted EBITDA increased 6.9% year over year. We made meaningful progress on our long-term transformation plan with respect to sales operations, digital infrastructure, and facilities upgrades. On sales operation, we have consolidated two sales call center operations into one as of late December 2025. This consolidation provides us better control over the overall sales process and improved customer service while maintaining the distinct connection we have with our customers through our understanding of their business language and product needs. This will reduce costs while further strengthening our competitive positioning. On digital transformation, we completed the full ERP implementation across all of our distribution centers. The new system will enable us to achieve higher levels of purchasing and operational efficiencies over time. I would like to note that as part of this implementation, we re-categorized many of our SKUs, which drives some variability in our year-over-year sales by category. You will see clean comparisons once we lap the implementation in the second half of 2026. I am also happy to announce that with the implementation of the new ERP system, we have fully remediated IT general controls-related deficiencies as of year-end 2025. This is a significant milestone. On facilities, the renovation of our Charlotte location is largely complete with final permits imminent. We expect Charlotte to be operational in 2026, which will shorten our seafood distribution routes in the Southeast. Phase one construction of our new state-of-the-art Atlanta DC has been completed, becoming operational in January 2026. We plan to kick off phase two cold storage capacity expansion in Atlanta to launch in 2026. Once complete, our cold storage capacity in the Atlanta market will have almost doubled, expanding from 10,000 square feet to 20,000 square feet. We see cross-selling as a major organic growth playbook and expect the Atlanta facility to be a cornerstone of our cross-selling strategy in the Southeast in the future. Between the Southeast and Midwest, there is several hundred million dollars worth of organic growth opportunity as we continue to invest and expand capacity. In September, we announced the acquisition of our Chicago warehouse. This strategic acquisition advances HF Foods Group Inc.'s ongoing transformation plan to improve operational efficiency, reduce costs, and strengthen organic growth through cross-selling opportunities. Acquiring the facility enables us to exit the lease agreement early, improve operating expense, and invest to grow additional capacity and drive consolidation opportunities. These exciting infrastructure investments reflect our ongoing commitment to optimizing our distribution network and creating a stronger foundation for sustainable growth. Based on current trends, we expect 2026 to be like 2025, with low single-digit growth on the top line as well as the bottom line for both adjusted EBITDA and gross profit. This also reflects our strategy to ramp up cross-selling opportunities over time, focusing on increasing our share of customers’ wallet size and combating competitive pricing pressure in the short term. While we continue to navigate macro headwinds, including tariff pressures and shifts in consumer spending behaviors, our transformation initiatives are paving the way for continued growth and improvement. We remain extremely confident in our long-term growth strategy and are committed to our capital investment plans as we continue our growth momentum in 2026 and beyond. M&A remains a core pillar of our growth strategy. HF Foods Group Inc. is the only scale foodservice provider in the Asian market in the United States, and we believe we are the strategic acquirer of choice within our space. We are focused on expanding our geographic footprint in high-potential markets, capturing operational synergy, broadening our customer base, and enhancing our product and service capabilities. We remain disciplined but optimistic about M&A opportunities in 2026 and are actively evaluating opportunities for potential sellers who understand our unique position. We believe our proven abilities to successfully navigate the tariff landscape position us uniquely to identify and execute attractive tuck-in acquisitions that will benefit from our operational expertise and scale. I want to emphasize the significant runway ahead of us. We operate in a $50 billion addressable market, and at just over a billion dollars in net revenue, we are the largest player in the Asian specialty space. No one, whether larger or smaller competitors, is better positioned than HF Foods Group Inc. to capture this opportunity in the coming years. Now over to you, Paul, our CFO, to walk you through more detail of the financial performance for the year. Paul McGarry: Thanks, Felix. I will now review our results for the year ended 12/31/2025 versus 2024. Net revenue for the year increased 2.2% to $1.23 billion from $1.20 billion in the prior year. The increase was primarily attributable to volume growth and pricing improvement in seafood and meat and poultry, and volume growth in commodity, partially offset by volume decreases within other categories. Gross profit increased by 1.2% to $207.6 million for the year compared to $205.2 million in 2024. The increase was attributable to an increase in net revenue, partially offset by increased costs. Gross profit margin decreased slightly to 16.9% compared to 17.1% in 2024. Distribution, selling, and administrative, or DS&A, expenses increased by $3.7 million to $201.8 million for the year, primarily due to increases in depreciation, occupancy, and nonrecurring transformation expenses, partially offset by a decrease in professional fees. DS&A expenses as a percentage of net revenue remained relatively consistent at 16.4% in 2025, compared to 16.5% in the prior year. Adjusted EBITDA increased 6.9% to $45 million for the year compared to $42 million in 2024. Total interest expense increased slightly to $11.5 million in 2025 compared to $11.4 million in the prior year. Net loss attributable to HF Foods Group Inc. was $38.8 million compared to a net loss of $48.5 million in 2024. The year-over-year improvement was primarily driven by a lower goodwill impairment charge and improved operating results. These favorable items were partially offset by the absence of the prior year gain on lease guarantee liability termination and by the year-over-year change in fair value of interest rate swaps. Importantly, following the 2025 impairment, we have no remaining goodwill, so this item will not affect results going forward. Adjusted net income attributable to HF Foods Group Inc. increased $2.9 million, or 20.9%, to $16.9 million compared to $14 million in the prior year period. Loss per share improved to $0.73 compared to a loss of $0.92 in the prior year period. Adjusted earnings per share increased to $0.32 compared to $0.26 in the prior year period. To summarize, 2025 was a year of steady progress in a challenging operating environment. We delivered year-over-year growth in net revenue, expanded adjusted EBITDA, and continued to invest in the infrastructure and systems that support more scalable, efficient execution going forward. Importantly, we finished the year having completed our ERP rollout across the network and remediated our IT general control deficiencies while also advancing key facility initiatives like Atlanta and Charlotte and positioning the business for improved operating leverage. As we move into 2026, we remain focused on disciplined execution, driving operational efficiency, supporting organic growth through cross-selling and network optimization, and maintaining prudent capital deployment. With the transformation foundation now largely in place, we believe we are well positioned to sustain momentum while remaining selective and strategic in pursuing tuck-in M&A that strengthens our footprint and capabilities. I will now hand it back to Felix for closing remarks. Felix Lin: Thanks, Paul. As we look ahead to 2026 and beyond, I want to emphasize our commitment to the comprehensive transformation initiatives that are reshaping HF Foods Group Inc. 2025 was a year of strategic investment for HF Foods Group Inc., and the investments we are making in our facilities, digital infrastructure, and operations will establish a strong foundation for our next phase of growth. While short-term uncertainties persist, we remain focused on our long-term strategic objectives. Our investments in digital transformation and infrastructure are strategically designed to drive organic growth through cross-selling opportunities while positioning us to complement this expansion with targeted M&A initiatives. Our key competitive advantages stem from the growing demand for authentic Asian cuisine and our unmatched position as a leading nationwide Asian specialty distributor. We are methodically building the infrastructure, systems, and capabilities needed to fully capitalize on these strategic advantages. As we move forward, we will continue to identify and implement additional efficiency measures while maintaining our commitment to service excellence and sustainable growth. Thank you for your continued support as we execute our strategic transformation. We look forward to sharing our progress with you on our next call. I will now hand over to the operator for live Q&A. Operator: Thank you. We will now open for questions. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. One moment while we poll for questions. Our first question comes from the line of Daniel Scott Harriman with Sidoti & Company. Please proceed. Daniel Scott Harriman: Hey, guys. Good afternoon. Thank you for taking my questions. And Paul, congratulations on the official title. Felix, congratulations on great execution for the year despite, you know, the noticeable headwinds. But I am just curious to start off, moving beyond 2025, can you talk a little bit about the biggest opportunities you see to drive incremental organic growth, particularly around cross-selling and expanding product availability across the customer base? And then secondly, just curious to hear a little bit more about how the operational initiatives implemented in 2025 are beginning to impact the day-to-day execution across the business. Felix Lin: Hi, Daniel. I appreciate the question. I think the biggest opportunity is going to be around cross-selling with respect to the Southeast. We just moved into our new facility that is effectively twice as big as the older facility in Atlanta, and we started to acquire some new accounts within the region. But I think we are still going through a ramp-up phase here. As I noted earlier, it is going to take a little bit of time to complete ramp-up of the volume and utilize the space, and second phase of our freezer construction is going to start here in 2026. So likely, it is going to be the second half before we see some meaningful incremental frozen seafood volume come into play for the Southeast market for us. And then fast forward, we also announced the acquisition of our Chicago facility, so the investments going in in 2026 as well are prepping us for meaningful cross-selling organic growth in the Midwest region in 2027 and beyond. Operator: Thank you. Our next question comes from the line of William Joseph Kirk with ROTH Capital Partners. Please proceed. Nick (for William Kirk, ROTH Capital Partners): Hey, this is Nick on for Bill. Thanks for taking the questions. First from me on February traffic, it was weaker last year. Just wondering if you could comment on the year-over-year change you saw this year just lapping that softer comp, and whether you have seen more or less traffic year to date would also be helpful. Thank you. Felix Lin: Yes, sure. With respect to February and Q1, obviously, we are still in the middle of it, but I do see that there have been a lot of good initiatives put in place, specifically even starting in late Q3 in 2025. We have been working with a handful of strategic vendors to run promotional campaigns where the vendors are the ones that are providing initiatives on the table for our customers and our sales team to go out and drive new product growth or push out additional volume. So that has been very impactful for us in the second half of 2025, and we are seeing that in the first quarter of the year as well. So I do see perhaps there is going to be some meaningful uptick from a volume standpoint so far in Q1 versus 2025. Nick (for William Kirk, ROTH Capital Partners): Understood. I appreciate that. Second for me on the IEPA tariffs, do you have an estimate as to what you paid? Are you taking any action to get that money back? And what would you do with that capital if you did manage to get any capital back there? Thank you. Felix Lin: Yes. I think it is still too early to say exactly how much refund is going to be available. As you might recall, not 100% of the tariffs were part of the IEPA. There were some other tariff measures that the administration had put in place last year, and it is also a reflection of the industry that we are in. Largely, the supplier network, the supply chain itself, is made up of brokers. And in the past year, even prior to Liberation Day, we had really effectively negotiated with a large number of our overseas vendors for them to absorb quite a bit of the tariff impact. So we are still assessing the situation and keeping it very, very close. I think in the coming months here, perhaps in the next quarterly earnings call, there might be a little bit more information for us to offer. Nick (for William Kirk, ROTH Capital Partners): Great. That is it for me. I will pass it on. Thank you. Operator: Thank you. There are no further questions at this time. I would like to turn the call back over to Felix for any closing remarks. Felix Lin: Overall, I think 2025 was a great year of strategic investment for the company, and we made some pretty good strides here in terms of our overall three-to-five-year transformation plan. So we look forward to 2026. 2026 is going to be a continuation of the momentum that we have built on 2025 results. And again, M&A is going to be a huge part of our business, so that is where we are going to spend a lot of our time, thoroughly evaluating all the inbound calls that we have been getting on M&A and making some impact there, and then at the same time, continuing to improve our operational efficiency. We appreciate everyone continuing to follow the HF Foods Group Inc. story and the support, and look forward to updating everyone here in the coming quarters. Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.