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Operator: Hello, ladies and gentlemen. Welcome to Futu Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Daniel Yuan, Chief Staff to CEO, Head of Strategy and IR at Futu. Please go ahead, sir. Daniel Yuan: Thanks, operator, and thank you for joining us today to discuss our fourth quarter and full year 2025 earnings results. Joining me on the call today are Mr. Leaf Li, Chairman and Chief Executive Officer; Arthur Chen, Chief Financial Officer; and Robin Xu, Senior Vice President. As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which, by their nature, are not certain and are outside of the company's control. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC, including its annual report. With that, I will now turn the call over to Li. Li will make his comments in Chinese, and I will translate. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] Thank you all for joining our earnings call today. In 2025, we delivered another year of strong client acquisition, adding more than 950,000 menu funded accounts and surpassing our full year guidance by 19%. Total funded accounts reached around $3.4 million, up 40% year-over-year. We remain confident in our ability to acquire 800,000 net new funded accounts in 2026, supported by strong bottom-up growth opportunities across both our established markets and newer ones. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] And the robust growth in funded accounts in 2025 was broad-based, driven primarily by solid client additions from Hong Kong and Malaysia. In 2025, net new funded accounts in Hong Kong recorded high double-digit year-over-year increase as we continue to extend our market leadership on top of a high market share. Significant share gain was also observed in Malaysia, and we expect this momentum to continue given our competitive product offering and growing brand trust. In Japan, cumulative app downloads as of November last year crossed 2 million, further solidifying our position as the #1 foreign securities firm. Momo was also the most downloaded trading app in Australia in 2025. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] In the fourth quarter, we added roughly 230,000 net new funded accounts, down 8% quarter-over-quarter, but up 9% year-over-year. While client growth in Hong Kong moderated sequentially following a sharp downturn in the local stock market, net new funded accounts in Japan and Malaysia recorded double-digit sequential growth, underpinned by strong client interest in U.S. stock trading and our superior U.S. stock offerings. In the U.S., we rolled out another round of off-line marketing campaign highlighting key features for active traders. During the quarter, the number of auction contracts traded at, stock and crypto training volume in the U.S. market all posted double-digit sequential growth. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] In the fourth quarter, net asset inflow remained strong. The mark-to-market losses on clients' Hong Kong stock holdings weighed on overall client assets. Total client assets were HKD 1.23 trillion at quarter end, up 66% year-over-year and flat quarter-over-quarter, with Hong Kong and Singapore saw rising net outside flow contribution from high net worth clients. While in the U.S., average client assets recorded the fastest sequential increase among all regions. Underpinned by heightened U.S. stock margin trading activity, margin financing and securities lending balance expanded 7% sequentially to HKD 67.7 billion as of quarter end. A number of popular Hong Kong IPOs during the quarter further contributed to the increased use of leverage driving a double-digit sequential rise in daily average margin balance. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] Total trading volume climbed to a record HKD 3.98 trillion, up 38% year-over-year and 2% quarter-over-quarter. The U.S. equity markets featuring numerous investment themes in 2025 and and we've observed our clients diversify and beyond large technology names into a broader range of sectors and across the AI value chain. As a result, U.S. stock trading turnover was up 17% sequentially to HKD 3 trillion in the fourth quarter. Hong Kong stock trading volume contracted 31% quarter-over-quarter to HKD 821 billion, as investor appetite to China technology stocks weighed the market correction in the second half. This decline was partially offset by elevated trading interest in gold and other precious metals related names. Crypto trading volume remained resilient at approximately HKD 20 billion despite market headwinds, with crystal penetration among trading clients rising across Hong Kong, Singapore and the U.S. During the quarter, we expanded our crypto offerings by adding more than 10 points in both Singapore and the U.S. and further enrich to our market data and information around crypto. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] Both management client assets reached HKD 179.6 billion, up 62% year-on-year and 2% sequentially. In response to growing client demand for portfolio diversification, we broadened our portfolio suite across key markets. In Hong Kong, we enhanced our lineup of high dividend funds and further lower the minimum investment threshold for structure product, making them more accessible to retail investors. In Singapore, we introduced more Singapore equity funds as well as for duration volume funds. In Malaysia, we launched sari-compliant bold tracker funds, which were met with strong demand from local investors. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] During the quarter, we streamlined Airstar Bank's account opening processes and launched mutual funds and insurance products in the banking app. A desktop version was also introduced to clients with a seamless cross-platform experience. On the internal fund, we strengthened Airstar Bank's compliance and risk management capabilities by developing an anti-money laundering system and AI-powered fraud detection infrastructure. Looking ahead, we'll continue to enhance the technology infrastructure and user experience while exploring synergies between Airstar Bank and the group as we advance toward a comprehensive one-stop financial services platform in Hong Kong. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] At quarter end, we have 600 IPO distribution in our clients, a 24% year-over-year increase. In 2025, we reinforced our standing as the leading online broker for Hong Kong IPO distribution and subscription. In 2025, we provided investment banking services to over half of the newly listed Hong Kong Board Company, with full year subscription amount on our platform, representing 49% of the total public offering subscription amount. The number of Hong Kong IPO subscribers on our platform grew nearly 5x year-over-year. In the fourth quarter, we assumed the role of overall coordinators for a number of high-profile Hong Kong IPOs, including those of Technology and. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] Next, I'd like to invite our CFO, Author, to discuss our financial performance. Arthur Chen: [Foreign Language] Thank you, Hua and Daniel. Please allow me to walk you through our financial performance in the fourth quarter. All the numbers are in Hong Kong dollars, unless otherwise noted. Total revenues were HKD 6.4 billion, up 45% from HKD 4.4 billion in the fourth quarter of 2024. We concluded another strong year with full year revenue growing HKD 22.8 billion, up 68% year-over-year. Brokerage commission and handling charge income was HKD 2.8 billion, up 35% year-over-year and down 5% Q-o-Q. Total trading volume grew both year-over-year and a Q-o-Q basis, while blended commission rates moderate as clients trade more higher-priced U.S. stocks and options during the quarter. Interest income was HKD 3 billion, up 50% year-over-year and the flat Q-Q. The year-over-year increase was driven by higher interest income from security borrowing and lending business, banking deposits and margin financing. On a sequential basis, interest income remained stable as higher interest income from banking deposits and margin financing was offset by lower interest income from security borrowing and the lending business. Other income was HKD 630 million, up 79% year-over-year and 42% Q-o-Q. The year-over-year increase was primarily attributable to higher fund distribution service income and IPO subscription service charge income. The Q-over-Q increase was mainly driven by higher enterprise public relationship service charge income and IPO subscription service charge income. Our total cost was HKD 729 million, a decrease of 6% from HKD 776 million in the fourth quarter of 2024. Brokerage commission and handling charge expenses was HKD 141 million, up 26% year-over-year and down 12% Q-over-Q. Both the year-over-year and Q-over-Q movement were roughly in line with the change of brokerage commission and handling charge income. The interest income were HKD 437 million, down 15% year-over-year and 8% Q-o-Q. Both the year-over-year and Q-o-Q decrease was mainly due to lower interest expenses associated with our security borrowing and letting business. Processing and servicing costs was HKD 150 million, flat year-over-year and down 6% Q-o-Q. The Q-o-Q decrease was mostly driven by the sequential decrease in cloud service fees. As a result, total gross profit was HKD 5.7 billion, an increase of 56% from HKD 3.7 billion in the fourth quarter of 2024. Gross margin was 88.7% as compared to 82.5% in the fourth quarter of 2024. Operating expenses were up 9% year-over-year and down 8% Q-o-Q to HKD 1.6 billion. R&D expenses was HKD 507 million, up 27% year-over-year and down 12% Q-o-Q. The year-over-year increase was mainly due to an increase in R&D headcount to support crypto and AI-related initiatives. The cumulative decrease was largely attributable to bonus accrual made in previous quarters. Selling and marketing expenses was HKD 507 million, up 9% year-over-year and down 13% Q-o-Q. The year-over-year increase was in line with the growth of our new -- net new fund accounts and the Q-o-Q decrease was largely attributable to sequential lower new client additions and to a less extent, the decrease in client acquisition costs. G&A expenses were HKD 549 million, down 5% year-over-year and flat Q-o-Q. The year-over-year decrease was primarily due to the lower professional service expenses compared to the year ago quarter. As a result, income from operations increased 87% year-over-year and 6% Q-o-Q to HKD 4.1 billion. Operating margin increased to 64.4% from 50% in the fourth quarter of 2024, mostly due to strong top line growth and operating leverage. Our net income increased by 80% year-over-year and 5% Q-o-Q to HKD 3.4 billion. Net income margin expanded to 52.3% in the fourth quarter as compared to 42.2% in the same quarter last year. Our effective tax rate for the quarter was 16.3%. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead. Operator: [Operator Instructions] We will now take the first question from the line of Peter Zhang from JPMorgan. Peter Zhang: [Foreign Language] This is Peter Zhang from JPMorgan, and many thanks for giving me the opportunity to ask questions and congratulations on the results. I have 2 questions. My first question is on the -- among the first quarter business trend. I'm wondering whether management can give us some color on the fee income growth, net asset inflow and trading velocity in the first quarter year-to-date? And also, how about the commission fee rate trend in 2026? My second question is regarding the trading volume breakdown particularly for the U.S. trading volume. This maybe because in the past few years, some investors may view Futu as stock to China. And some investors think that our clients trade a lot Chinese AR stocks. But I guess given that we have very successful overseas expansion, the trading volume mix may change over time. So I'm wondering whether management can give us some color on the breakdown of your U.S. stock trading volume into Chinese ADI and other stock. Arthur Chen: [Foreign Language] Let me just do the translation for your second question, I will do the answers regarding the Chinese ADR contribution for our U.S. stock trading volumes in the latest quarter, this portion is less than 10%. And even we compare with the third quarter last year, the number was still roughly around 10%. So I think structure-wise, the contribution from Chinese ADRs to our overall U.S. stock has been gradually decreased. I will now hand over to my colleague, Daniel, who will answer your first question. Daniel Yuan: [Foreign Language] So based on the trends we have seen year-to-date, we expect net new funded accounts and trading volume to be flattish quarter-over-quarter. And we've seen very strong bottom activities from our clients. So we expect a double-digit sequential increase in net asset inflows, and we expect the quarterly net asset inflow in the first quarter to be the highest quarterly number. And mark-to-market impact had -- was pretty strong, and it was pretty negative quarter-to-date. So we expect, all in all, total client assets to increase modestly by the end of the first quarter. Thank you. And in terms of commissions -- blended commission rate, so far, I think we are seeing flattish Q-on-Q blended commission rate. Thanks. Operator: We will now take the next question from the line of Emma Xu from Bank of America Securities. Emma Xu: [Foreign Language] The first one is about the crypto business. So what are the latest developments in the crypto-related business after the relaxation of Hong Kong's regulatory policies in February this year? What new products have been launched? And what is the current implementation status and performance? The second question is about the AI. What specific empowerment that AI currently bring to your business? Will AI bring challenges to some business or put pressure on given the SLI model of your business? Arthur Chen: [Foreign Language] In terms of the crypto development, I think in the first -- in Hong Kong, we are still waiting for the Hong Kong regulators for our VAT license approvals. We are very confident in the near future, we can get this license. And after the launch of the VAT piece, hopefully, we can, in the near future, Futu can start to provide our traditional clients for crypto trading on the back of the margin using their stock for the margins. And also, we will provide taking service for them as well. In the future, we also wish to provide a crypto service to our high net worth clients alongside with the service to our institution clients for the one-stop solutions. And then in the past one quarter, we further enriched our product offering trading different tokens in Singapore and in the U.S. And at the same time, as we've mentioned in the opening remarks, in Hong Kong, Singapore and the U.S., the number of clients trading for the cryptos all include a double-digit increase, and the penetration rate for these [indiscernible] trading crypto also increased a lot to the latest high single-digit and low teen levels. We think this penetration rate can continue to grow in the foreseeable future. Thank you. Leaf Li: [Foreign Language] Daniel Yuan: [Interpreted] So AI is the company level of strategic priority at Futu. We've actually started AI assessments in 2022 and over the past few quarters, we have ramp up AI investment by deeply integrating AI capabilities into our product experience and internal operations. We now leverage AI to enhance the efficiency with which our clients discover investment opportunities and gather information. Our AI-generated daily and weekly reports automatically filter and key insights, cover over 20 types of market data, including technical indicators, patterns and loads and these offer better timeliness and broader content coverage compared to our peers. Furthermore, AI power's summaries of earnings reports and news has also significantly improved client efficiency and gathering information. In the fourth quarter, we launched AI which allows users to generate quantitative trading strategies using simple natural language. This feature has been very well received by the advanced traders on our platform, lowering the barrier to creating professional investment strategy. We have also expanded the asset classes coverage of our AI chatbot and AI analysis. So for the open it's quite popular recently. We now offer access through our open API. We've actually started developing open API in 2014 has been optimizing that experience ever since. And we've also supported skills that are accessible to open as well. So thanks to the years of development and accumulation and market data information in the trading infrastructure as well as our execution and clearing capabilities as well as our determination to embrace AI and our capabilities and leveraging AI to empower our business. We believe Futu will stay as a leading player in the AI era. Thank you. Operator: We will now take the next question from the line of Chiyao Huang from Morgan Stanley. Chiyao Huang: [Foreign Language] So the first question is regarding the HKD 800,000 guidance on new founded accounts, which is a very strong number. And considering the rising market volatility year-to-date, I'm just wondering what will be the main drivers and the main areas that the management sees has larger potential to help achieve this target, especially including any new markets that we are targeting? Second question is regarding the Airstar Bank. Just wondering what's the long-term planning -- strategic planning for the bank's positioning in the market? What kind of differentiation will be there compared to other virtual bank and the traditional banks? And do we have a time line of the product pipelines? Over time, what would be the expected revenue structure for Airstar Bank will be more balance sheet business or more fee income business in wealth management? Arthur Chen: [Foreign Language] For the first question, for our 800 fund accounts, this number we have already in that one new markets, we will have potential to enter into in 2026. Despite the year-to-date, there is some market volatility arising from geopolitical tensions and a lot of macro headwinds, our client acquisitions run rate still remain very robust, and we are very confident to achieve these targets towards the end of this year. Then for the Airstar Banks, we will continue to focus how to generate meaningful synergies between Airstar banks and the Futu existing business. As Leaf mentioned in the opening remarks in the fourth quarter and also in the next couple of quarters, our most work in Airstar Bank will center around in 2 aspects, externally is to upgrade the user experience and internally, we will further to enrich the infrastructure. On the -- in the external side, we have already launched some new wealth management products in Airstar Bank app. Like mutual funds and insurance products, there will be more wealth management-related products to be launched in the app in the next couple of quarters. Then internally, we further to enhance the compliance and the risk controls, a lot of proprietary developed products to enhance the business efficiency and the lower operating cost for the banks. In the long run, we think the revenue stream will be more schooled to these fee income arising from the wealth management and associated activities supplement by some balance sheet expansion business. But having said that, this is a very long-term targets for revenue generation. So in the near term, we will still continue to focus the 2 aspects I mentioned before. Thank you very much. Operator: We will now take the next question from the line of You Fan from CICC. You Fan: [Foreign Language] This is You Fan from CICC, and I have 2 questions. The first one is about the user regional breakdown. We still see strong customer growth we've captured despite the market downturn. So what's the regional breakdown of our existing and also the new paying clients? And the second question is about AUM. How much is from client net asset inflow and how much from market-to-market depreciation? And what is the regional breakdown of the client asset? Arthur Chen: [Foreign Language] For the contribution of the fourth quarter net add, Malaysia and Hong Kong collectively contribute over 50% of new client adds in the fourth quarter. Then other remaining markets like U.S., Singapore and Japan, their contribution rate is in the percentage of 10% to 20%. And as the year ends, the fund accounts in the universe of our overseas brand moomoo has already increased to 55% of total group fund accounts. Among them the contribution from Singapore and the U.S. was most. And for the second question regarding the new net asset flow inflows in the fourth quarter. The Q-on-Q basis, the net asset inflows have some moderations in the fourth quarter. But on the absolute levels, it remains in a very high levels, the momentum keeps very strong, but you can imagine in the fourth quarter, Hong Kong market got a lot of retreat. For instance, Hansa Index down 5% Q-o-Q and Hansa Tech Index, down 15% Q-o-Q. Therefore, we got some negative impact from the market-to-market loans, which almost fully offset the net asset inflows in the fourth quarter. And at year-end, Hong Kong remains the largest in terms of clients' assets AUM breakdown, followed by Singapore and some new markets like Japan and the U.S. the contribution, we see a very good momentum to increase. Thank you very much. Operator: We will now take the next question from the line of Leon Qi from CLSA. Leon Qi: [Foreign Language] I will briefly translate my questions into English. This is Leon Qi from CLSA and congrats again on very strong fourth quarter results. I have 2 questions today. First one is actually a follow-up on our new markets this year. Is it possible for management to give us some clues in terms of our rationale of entering these new markets? Is it going to replicate one of our existing markets? Is the significance mostly on new paying clients or any new strategy in terms of products, et cetera. So if it is possible for management to share with us some clues of entering market this year? The second question is actually a bit operational. We just want to understand the reasons behind the very resilient quarterly net asset inflow. In particular, in Hong Kong, we do understand that high net worth clients a few years ago. How do we evaluate the performance of our relationship managers for these high net worth clients, is net client inflow, a major metric that we actually look at or we actually look at other metrics such as total assets, new funded accounts or even metrics such as the performance of client assets or the number of different products that our clients hold. So this kind of operational metrics will be very helpful for us. Arthur Chen: [Foreign Language] Regarding the first question for this new market, it is still too early to share the exactly the market name, given that we are still in the process of the license applications, but we think this market will be in the universe of Asia. Then for the second question for the certain performance measurements for our internal colleagues regarding the high net worth clients. As you said, the new asset inflow is definitely one factor of the -- of our overall metrics which is very comprehensive and also outline is to care about the clients like and values. Therefore, the net asset inflows and also including the clients' total asset retention rate all these factors into this metrics. Thank you. Operator: We will now take the next question from the line of Cindy Wang from China Renaissance. Yun-Yin Wang: [Foreign Language] Congrats for the great fourth quarter results. So I have 2 questions here. First, for your new funding accounts target HKD 800,000 in 2026, could you break down the expected contributions from Hong Kong and overseas market? And what is the expected average customer acquisition cost for the whole year? Second is quarter-to-date, we saw a strong market really starting in January, but followed by recent stock market volatility due to geopolitical risk. So based on investors' trading activity on your platform, could you provide some guidance on trading volume, trading velocity and margin financing and security spending demand trend in first quarter? Arthur Chen: [Foreign Language] In terms of the breakdown of the new fund account targets for 2026, we think largely it will be the same stock contributions from different markets in 2025. And Hong Kong will continue to be a very strong contributor in terms of the geographic locations. Then for the cap, our initial objective for this year's cap will be around 25,000 to 30,000 -- sorry, 250,000 to -- sorry, HKD 2,500 to HKD 3,000 considering the uncertainty of this year's market volatility. And also, there will be some fund loaded cost in this new market expansion, as I mentioned before. Therefore, there we want to leave some flexibility in the CAC objective. But year-to-date, we think the CAC acquisition situations remain very robust and CAC for the first 2 months, I think will be in the low end or even lower than the range I mentioned before. Daniel Yuan: [Foreign Language] So in the first quarter, quarter-to-date, the market has been quite volatile, and we've seen our clients engaging very actively with the market. We expect the first quarter's total trading volume to be flattish during the quarter. So it's going to stay at the historic high that we've seen in the fourth quarter last year. And when the market experienced a pullback, we've seen lots of activities from our clients. We're expected a sequential increase in our margin financing and securities lending balance. And as we shared earlier, net asset inflow is also very strong, and we expect a historic high quarterly net asset inflow in the first quarter. Thank you. Operator: We will now take the next question from the line of Zoey Zong from Jefferies. Yi Zong: [Foreign Language] This Zoey from Jefferies. I have 2 questions. First, could you please elaborate on the competitive landscape in Hong Kong? And how do we see the market share momentum in Q4 and recently in Q1? And second, in November last year, we announced a share repurchase program of up to [ USD 800 million ] till December '27, could you please give us an update on the progress? And how should we expect the pace in the next 2 years? Arthur Chen: [Foreign Language] Regarding share buyback programs, so far, in the fourth quarter, actually, we have not conducted any share buyback within this [ 800 million ] share buyback programs, which will cover toward the end of 2027. So we will continue to closely work the market conditions and looking for potential market opportunities to come up with share buyback program, which is more preemptive. Thank you. Daniel Yuan: [Foreign Language] So we haven't seen any incremental changes in terms of the competitive landscape in Hong Kong. We think our performance in Hong Kong is still influenced by the overall market sentiment. And in the fourth quarter due to the sharp pullback of the Hong Kong stocks, the Hong Kong retail investors had -- was overall quite bearish about the market. So our client acquisition decelerated sequentially of the very active Hong Kong IPO market to some extent listed investor sentiment. And just looking back at 2025, Hong Kong contributed the highest number of net funded accounts within the Food Group and the net funding accounts achieved high double-digit year-over-year increase. So we're able to extend our leadership and further solidified our leadership on top of a very high market share. And we not only saw very strong client growth in 2025, we also saw very strong net asset inflow. And we've seen a higher percentage of contribution in terms of net asset inflow from our high net worth claims, which was largely due to a growing portfolio of wealth management products and our more professional -- in our image of a professional finance platform, thanks to the series of brand initiatives that we carried out and lots of investment forms and lectures that we did throughout the year. And we think that very strong performance in Hong Kong 2025 really speaks to our assessment of the market potential earlier. We believe that Hong Kong has huge headroom to growth for us in terms of both client numbers and client assets. And looking to [ 2026 ], we'll continue to enhance our product capabilities. We'll continue to invest in brand building, and we are very optimistic about the long-term growth opportunity in Hong Kong. Thank you. Operator: We will now take -- sorry, I would like to hand back over to the speakers for closing remarks. Daniel Yuan: That concludes our call today. On behalf of the Futu management team, I would like to thank you for joining us. If you have any further questions, please do not hesitate to contact me or any of our Investor Relations representatives. Thank you, and goodbye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.
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: Good day, and thank you for standing by. Welcome to the GPGI, Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker host for today, Sean Mansouri, Investor Relations for GPGI. Please go ahead. Sean Mansouri: Good morning, and welcome to GPGI's conference call today. where we will review GPGI's fourth quarter 2025 financial results. With me on the call are the business leaders from GPGI, Resolute Holdings, CompoSecure and Husky. We will begin with prepared remarks and then open the call for Q&A. During the call, we will make statements related to our business that may be considered forward-looking, including statements about our growth strategy, customer demand, our ability to maintain existing and acquire new customers; implementation of the Resolute operating system and our guidance for 2026, as well as other statements regarding our plans and prospects. For a discussion of material risks and other important factors that could affect our actual results, please refer to the information in our annual report on Form 10-K and other reports filed with the SEC which are available on the Investor Relations section of our website and on the SEC's website at sec.gov. Please note that effective as of February 28, 2025, and the date of the spin-off of Resolute Holdings management and as a result of the management agreement between Resolute Holdings management and GPGI's fully owned subsidiary, GPGI Holdings LLC, the results of operations of GPGI Holdings and the operating companies, which are its subsidiaries are not consolidated in the financial statements of GPGI and instead are accounted for under the equity method ofaccounting. For more information about our financial presentation, please see our annual report on Form 10-K. In the earnings release we issued earlier today, and in the discussion on today's call. We also present non-GAAP financial measures to help investors better understand our operating performance. The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends impacting the company's financial condition and results of operations. These non-GAAP financial measures should not be considered as an alternative to performance measures derived in accordance with U.S. GAAP and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation of GAAP to non-GAAP measures is available in our press release and earnings presentation available on the IR section of our website. Thank you. And with that, let me turn the call over to Executive Chairman, Dave Cote. David Cote: Good morning, everyone. Before we get into the fourth quarter and full year results, I want to begin with a more detailed overview of what we are building at GPGI to provide more context on the platform and our objectives going forward. Now this is going to be a longer introduction than you can expect in the future as we want to clearly articulate our strategy and structure on this first earnings call as GPGI. There will also be longer presentations from each business for the same reason than you will see in the future. GPGI is a diversified multi-industry platform that was purpose-built to acquire and operate companies that hold great positions in good industries, representing the acronym behind our new name. Following the completion of our acquisition of Husky, GPGI now owns 2 high-quality, market-leading businesses with best-in-class financials and durable growth profiles. Importantly, we believe Compo and Husky have opportunities to benefit from the systematic deployment of the Resolute operating system, ROS. And that work is already underway at both businesses. Our vision for the GPGI platform is to help Compo, Husky and businesses we may acquire in the future, achieve their full potential by combining GPGI's permanent capital base with the systematic deployment of the Resolute operating system and implementation of a high-performance culture. This idea to marry permanent capital with superior operating practices began years ago when Tom and I first partnered together and ultimately acquired Vertiv. With the creation of GPGI, we are now refining this approach and believe it represents a needed innovation in the marketplace that is well positioned today and for the future. Going to Slide 5. We have our business leaders on the call today, and you will hear directly from both the Compo and Husky teams regarding their respective businesses. Before getting there, I want to highlight how we think about GPGI's long-term growth algorithm. Specifically, we're focused on delivering mid- to high single-digit annual organic growth, over 100 basis points of annual margin expansion through the deployment of ROS, double-digit plus annual EBITDA growth and 90% to 100% free cash flow conversion over time. The plan is simple. We intend to grow GPGI's earnings and cash flow faster than the market to deliver superior durable through-the-cycle returns for our investors. That is the whole point of GPGI. On Slide 6, which you have seen before, we outlined the relationship between GPGI and Resolute Holdings. They are intentionally inextricably linked. The success of Resolute Holdings is tied to the success of GPGI. We designed the structure to empower the leadership teams of each acquired business to operate with all the benefits of permanent capital but without the constraints that often come with a bureaucracy of typical public company corporate infrastructure. This allows us to help with the efficient implementation of ROS M&A strategy and capital allocation without distracting leadership teams at each business. A final point. I've mentioned on previous calls how confusing the accounting we are required to use is. To keep it simple, you should evaluate GPGI's performance by looking at the core non-GAAP operating results, which includes the deduction from the management fee paid to Resolute. GPGI is the operating company. Conversely, RHLD's results reflect that same management fee income less its own operating expenses. It is the asset management company. It really is pretty simple, entirely complexified by the accounting were required to use. Moving to Slide 7. The value creation playbook at GPGI marries disciplined underwriting from a permanent capital base with operating excellence to drive superior performance. We do this by relentlessly implementing the Resolute operating system, developing a truly high-performance culture at each business and investing with discipline in assets that meet our tried and true 6 investment criteria. We have a structural advantage for acquisitions. And on the right side, you can see it works. The Resolute operating system with a high-performance culture applied to businesses that have a great position in a good industry works quite effectively. The strategy is not new. It's one we have consistently deployed and delivered across multiple public companies over the years. Turning to Slide 8, establishing a high-performance culture is central to the value creation process. A high-performance culture does not just happen. It involves people and process. It starts with everyone focusing on what is right for the customer. Every company talks about the customer, but few focus their entire culture on it. I will not go through each item on the page. It involves starting with the customer than aggressively setting expectations making strategy and people daily instead of annual activities, regularly measuring performance and providing candid and direct feedback. These are the process pillars of how cultures begin to transform. These are the tools that help foster high-performance cultures and teams, which in turn are what ultimately deliver results. We are intentionally embedding these norms across GPGI and view a high-performance culture as foundational to maximizing the potential impact of ROS in each business. When everyone across the business buys in, that's attitude, and fully applies these ROS principles to good businesses, that's aptitude. This is how we achieve performance and deliver results and at altitude. It is not just about a great attitude. You have to have something fundamentally strong to apply it to. Hence, the need for GPGI, great positions in good industries. Moving to Slide 9. The Resolute operating system is our proprietary approach to operating businesses. It's an adaptation of the Toyota production system. It really comes down to 3 areas of focus: growing sales, controlling costs and generating the cash necessary for seat planning and delivering returns for investors. Starting with growing sales. Our approach is centered around our customers, delivering end-to-end commercial excellence and continuing to innovate on new products and services that meet and exceed customer demand. This strategy is made possible by a capital structure that allows us to prioritize investments in R&D for new products and services and provide support to the go-to-market functions to appropriately cover the markets we serve. On the cost side, we worked diligently to identify and implement robust reporting around fixed and variable costs to drive efficiencies and ensure our fixed costs stay flat or grow much slower than sales. The fall-through of the variable margin rates in our businesses is impressive. So being able to retire fixed cost growth relative to sales growth enables a huge amount of flexibility for us. Taken together, we improved cash generation with greater profitability, which allows us to invest more back into the business to drive more innovation and growth, while concurrently being able to deliver returns for investors. The flywheel begins spinning when these investments drive growth that delivers increasing profit through necessary cost controls, which in turn enables more investment growth than profits. This is the add of making the right decisions for each business today and for the long-term at the same time. Some might even call it winning now, winning later. Shifting to Slide 10. I want to spend some time on how we think about implementing ROS in our underlying businesses. ROS is the operational cornerstone of every GPGI business, and it consists of 3 phases. We start with a period of seed planting where we laid the foundation for excellence. This represents the time immediately after we acquire a business where monthly growth days and deployment of our playbook of best practices across all functions begins. The second phase is where we continue making strategic investments to catalyze growth and innovation, implement lean principles and firm up cultural change from top to bottom. The third phase is where everything comes together in a culture of continuous improvement powers the flywheel necessary for a long-term compounding. The key is that ROS is not a one-and-done activity. It is a daily mindset for sustaining performance over time, and it's in every function. We are just beginning this journey with Husky, and while we are encouraged by our early efforts, there remains significant opportunity to continue the work underway at both Compo and Husky. Starting on Slide 11 to demonstrate how an operating transformation begins. We have a case study compiled on CompoSecure's performance since we got involved. From the time we made our initial investment in the company, we deployed ROS to catalyze growth, control costs and make strategic investments in the business. Over the past 5 quarters, you can see these efforts are beginning to take hold and drive a phased inflection in financial performance. We're pleased with this early progress at Compo, but also know there is a lot more to achieve there over time. However, the inflection in performance you've been able to see, both top and bottom line performance is what cultural transformation paired with the deployment of the operating system is designed to do. This is the same approach we are taking at Husky, and we know that deploying ROS consistently across each business, while helping to cultivate a high-performance culture is a winning formula. And one we will apply to all GPGI businesses. With that, I'll turn it over to Tom Knott, our Chief Investment Officer, to review our investment philosophy. Thomas Knott: Thanks, Dave. I want to begin this section about our investment philosophy by explaining how we think about acquisitions. Fundamentally, we view acquisitions as opportunities and are focused on using the same discipline that we have used in the past for every opportunity we evaluate in the future. Deals must make sense, both in terms of business quality and in terms of valuation. We built GPGI to encourage the discipline, specifically because we have no deployment targets or timing pressure to acquire new businesses. We are very enthusiastic about the 2 businesses we currently own and believe in the opportunity to deliver strong organic top and bottom line performance with a continued focus on ROS implementation and cultural transformations underway at each company. This is where we focus much of our day-to-day efforts and having good businesses with rich organic opportunities ahead is a great place from which to operate. While we are constantly evaluating potential investment opportunities for GPGI, we will only acquire additional platform businesses if they solidly meet our 6 investment criteria and if they can be acquired at a fair price. Today, we do believe GPGI is uniquely positioned as a structurally advantaged acquirer of the increasing number of high-quality private businesses that need to access the public markets and that can benefit from our operating system. This universe consists of family-owned businesses, noncore divisions of public companies and a significantly growing number of businesses owned by private equity firms. We are confident in our platform's ability to offer superior outcomes for each of these different types of businesses. but we see the largest opportunity today among private equity firms that need to monetize their investments to return capital to their investors. Specifically, we are confident that our platform can deliver transactions that result in a win-win for both GPGI and a selling private equity firm that is superior relative to a traditional IPO. The list of large, high-quality private equity-owned businesses that need to reach the public market is growing, and as a result, our platform is well positioned as a unique solution. This paired with the excellent organic prospects for CompoSecure and Husky allows us to be selective as we evaluate potential businesses to add to the GPGI platform in the future. Wrapping up my comments with Slide 13. I believe it is important to again review the 6 investment criteria we use to evaluate businesses. It is how we look at companies, and it's important to discuss so that investors and potential sellers know what is important to us. As we have said before, we want GPGI to be an aspirational home for market-leading businesses, which must operate in a good industry, have a great position in that industry, differentiate with technology, can grow both organically and inorganically and have the potential for significant margin expansion. This list is what we measure for each potential acquisition and it's one that we will remain consistent in applying. From Dave's time at Honeywell to my involvement with Myriam to our partnership on Vertiv, CompoSecure and now with Husky, this approach is proven and serves as a highly effective screen for selecting high-quality businesses that can generate superior investor returns. With that, I will turn the call over to Graham Robinson, the CEO of CompoSecure. Graham Robinson: Thank you, Tom. As announced in January, I recently joined as President and Chief Executive Officer of CompoSecure. In my short time here, it has become quickly evident that this is the most dynamic and compelling business that I have been involved with. The company has already proven its strategy with a differentiated value proposition, and we are now in a position to accelerate growth with disciplined execution. I am delighted to lead our expanding teams on this journey. Turning to Slide 16. We delivered strong organic growth and profitability in the fourth quarter and for fiscal year 2025, driven by disciplined execution, operational focus, and the continued support from the Resolute team and the Board on our strategic initiatives. Mary Holt, our CFO, will go into more detail on the quarter later. But I would note Net sales increased to $462.1 million in fiscal year '25, up 9.9%. We also delivered strong operating performance as pro forma adjusted EBITDA increased to [indiscernible] million in fiscal year '25, up 23.5%. As Tom mentioned, implementation of the revenue operating system at CompoSecure [indiscernible] real inflection in financial performance. With that, let me take a step back and talk about where CompoSecure sits in the market today for those who are new to [indiscernible] [indiscernible] going to Slide 17. CompoSecure is the go premium entertainment cards with over 200 active made programs. We rent 9 of the top 10 U.S. additions, along with our growing rest of disruptive context. Our leadership position is reinforced by 1,000 design and utility patents and 25 years of technical expertise, we have built a unique, competitive mode that combines proprietary design, engineering and scaled manufacturing capabilities will enable us to deliver high-quality metal cards at scale. In 2025, we shipped more than 30 million cards to our customers. Moving to Slide 18. Our business is much, much more than making the metal card. We deliver a tire value proposition to our customers. As a pioneer of metal cards, we uniquely understand evolving customer needs. -- and use that understanding to inform our customer-centric innovation, coupled with our advanced manufacturing capabilities and integrated authentication capabilities with -- we are a trusted partner for issuers as they launch their signature core programs. Turning to Slide 19, where we speak about the industry. Our offerings are in mission-critical but low-cost component of the overall value proposition for payment card programs. Launching a metal card enhances brand loyalty and delivers accelerated returns through higher acquisition, customer acquisition, spending and retention, resulting in significant ROI for our customers. Our products elevate our customers' position and deliver measurable financial impact by enriching their programs while driving differentiation and positioning their cards at top of wallet. Importantly, metal cars remain significantly underpenetrated at less than 1% of all cards ship globally. When combined with our expectation of low double-digit growth for the premium car segment globally, this creates a long runway for growth and continued share gains versus plastic cards. On Slide 20, this brings me to the strength of our model and industry. We're seeing continued adoption of payment cards globally, increasing the total addressable base of cards in circulation. Additionally, the new users in international markets and the Fintech segment, are launching their first metal card programs and existing customers are expanding their programs through tiering to further drive improved customer acquisition spend and retention, which also needs to higher ASPs. According to industry data, credit and debit card in circulation, including plastic cards, have grown at approximately 8% over the past 5 years. And CompoSecure is well positioned to further capture field within that expanding. All of this supports a durable recurring revenue model as new cards are introduced, reissued, refreshed and upgraded over term. In addition to our core offering, CompoSecure is extending its technology leadership through its Oculus platform a multifactor authentication and digital asset storage solution that embeds secure login technology directly into metal cards. Instead of relying on passwords, which can be lost or compromised, [indiscernible] seamlessly integrates 3 secure elements. One, phone biometrics; two, a pin; and thirdly, a metal card. This makes it ideal for high-security applications like logging into financial accounts or safeguarding sensitive digital information. While the platform was originally designed to protect digital assets its broader applications now include passwordless login, identity verification and transaction approvals, especially in environments where both security and simplicity are critical. This represents a natural adjacency for CompoSecure. We are leveraging our expertise in secure physical products and trusted issuer relationships to expand into authentication use cases. In 2025, [indiscernible] continued to scale and is now a growing contributor to revenues and cash flows, reinforcing our belief that this platform can be a long-term value creator. So when you step back, we have a core metal card platform with structural growth tailwinds, and we are extending that platform into adjacent authentication opportunities through Arculus. Going to Slide 22. While we often talk about new program wins, a significant portion of our growth is supported by the installed base of metal cards already in circulation. Approximately 75% of our revenue is recurring, driven by replacement and reissuer cycles. Over the past 4 years, we have shipped approximately 123 million metal cards. That growing installed base creates a predictable stream of replacement volume over time. As metal cards in circulation continue to scale, this recurring component of our revenue base will grow alongside it. This is an important flywheel and structural [indiscernible] of our model, which provides strong visibility into our future growth. On Slide 23. In addition to that recurring foundation, organic growth is also driven by continued innovation and customer wins. There is incredible innovation and engineering complexity behind our products. Our cards integrate secure elements near field communication capabilities and layered material construction, all of which require advanced manufacturing. That technical differentiation is a key reason why we continue to secure high-profile customer wins. This includes recent wins with Wells Fargo Autograph, Bilt's re-launch of a tiered portfoliosn and Citi's American Airlines Centennial card among others, these recent wins underscore the strength of our customer relationships, the breadth of demand for differentiated premium car solution. and the value we deliver to use tissues. With that overview, let me hand the call over to our CFO, Mary Holt, to review our financial results. Mary Holt: Good morning, everyone. Let's turn to our financial performance. In the fourth quarter, CompoSecure delivered non-GAAP net sales of $117.7 million up approximately 17% compared to prior year, reflecting strong domestic demand and continued momentum across our core customer base. Non-GAAP gross margins in the fourth quarter reached 55.7%, up approximately 360 basis points from last year, as we continue to benefit from the implementation of the Resolute operating system which has led to increased discipline across manufacturing, sourcing and end-to-end execution. Pro forma adjusted EBITDA for the quarter increased approximately 41% to $43 million, while pro forma adjusted EBITDA margin increased approximately 640 basis points to 36.5%. This performance highlights the operating leverage in our business and the continued benefits from driving operational efficiencies. For full year 2025, CompoSecure once again delivered across the board. Non-GAAP net sales were up approximately 10% year-over-year to approximately $462 million. Non-GAAP gross margin improved approximately [ 20% ] and up 420 basis points to 56.3%, and pro forma adjusted EBITDA increased approximately 24% to $171 million, with pro forma adjusted EBITDA margins expanding more than 400 basis points to 36.9%. Let me hand it back to Graham to close out the CompoSecure section. Graham Robinson: Thank you, Mary. Looking ahead, I am very encouraged by where CompoSecure stands. Entering 2026, we see continued strength in our core metal card business, supported by a healthy pipeline. We also expect Arculus to remain an important growth range as adoption broadens across authentication and payment adjacent use cases. Equally important, we see significant opportunities to continue improving execution and margins as the Resolute operating system becomes further embedded across the organization. Some of those gains will continue to flow through to profitability, and some will be strategically invested to support sustained growth. In closing, CompoSecure has a strong position, a compelling value proposition and a proven ability to translate growth into cash flow and earnings. I am excited to lead this business into its next phase and deliver long-term value for investors. I'll now pass the call back to Tom. Thomas Knott: Thanks, Graham. Before we get to the Husky results, I'm excited to introduce Rob Domodossola as the new President and CEO of Husky. Rob brings a long and tremendously successful Husky career to the position and his background in technology, engineering, sales and marketing adds a lot to our increased growth focus. Rob has 30 years of dedicated service to Husky, having joined in 1996 and most recently serving as the President of Systems and Tooling. Throughout his career, Rob has demonstrated exceptional leadership across multiple divisions, including President of Rigid Packaging, President of Medical and Specialty Packaging Systems and Vice President of Engineering and Business Development. He is admired internally and externally for his relentless commitment to the customer, and we could not be more excited about working with him in this new role. Rob, over to you. Unknown Executive: Tom, thanks for the kind words. I'm really excited and honored to serve as only the fourth CEO in Husky's 70-year history. What's company on Husky for the past 3 years is our passion for innovation with an 18- to 24-month cadence of new product launches that kept us in the lead. Our deep customer intimacy, investments in our go-to-market approach that has strengthened our customer loyalty, while helping us diversify our customer base and our desire and capability to serve our customers anywhere in the world, 24/7, and now with the capital structure that Resolute brings and the Resolute operating system, which is essentially a playbook for commercial excellence, we can leverage these core competencies and develop new capabilities for growth. I'm really excited about Husky's prospects. For those who are new to Husky, Slide from 6 captures who we are and white Husky is such an attractive addition to the GPGI platform. We certainly hold great positions in a good industry and are the global leader in highly engineered injection molding systems and related aftermarket services. Husky has a global recognized brand with a long-standing reputation for manufacturing best-in-class systems over 70 years. We primarily serve attractive food, beverage and medical packaging end markets and have a large installed base with approximately 65% of our sales coming from reoccurring high-margin aftermarket parts and services. Now if we turn to Slide 27. Husky has a leading competitive position derived from its mission-critical products and a long-standing track record that creates a durable competitive advantage. We have an installed base of approximately 13,500 total systems that drive high recurring revenues from aftermarket parts, tooling and services. Our installed base is well distributed globally, and we benefit from growth in both developed as well as emerging markets. Husky is the global leader in PT markets across both new systems as well as aftermarket [Audio Gap] Operator: [Operator Instructions] Unknown Executive: Okay. Sorry about that. I'll continue here. Husky maintains its market leadership position because we have the premium product offering in our markets. We deliver our customers the lowest cost of ownership enabled by the fastest cycle times, the highest quality, the lowest energy consumption and the highest output in the industry. Our customer base is large and diverse with no significant customer concentrations. And we have an excellent tension rate with customers who come back to us to purchase new systems year after year. Now to help contextualize our business, Slide 28 shows how we deliver end-to-end solutions to customers. Given our legacy of innovation and close connectivity with customers, we clearly understand emerging customer needs and use this knowledge to develop customer-centric innovations with a proven product market fit. We are a trusted partner to our customers and advise them on unpackaged design material selection, and we even designed their factories to noise throughput. Our advanced manufacturing capabilities across a global footprint gives us the ability to meet demand across markets and meet stringent customer tolerance at scale, while our 24/7 remote learning solutions help customers significantly increase their overall equipment performance to drive improved business outcomes. Taken together, our offering support customers along every step of their product ownership journey. Turning to Slide 29. We operate in a large and growing industry, characterized by a cyclical customer demand. The industry has supported strong growth for years, and we believe the fundamentals are firmly in place to continue that for a long time to come, especially when it comes to growing awareness of PET superior material properties. It has a superior carbon footprint. It has regulatory push for plastic circularity and there's growing adoption for recycled plastics and packaging. Growth in PET beverage demand is the underlying secular trend driving market for Husky's equipment. It's hard to imagine the future without a lot more PET bottles as work continues to urbanize and demand for safe, affordable, convenient packaged beverage continues to grow. Importantly, PET has demonstrated a consistent share gain over other substances. We tend -- we expect to continue. PET's peer to glass to aluminum and to paper with lower overall production costs, stronger performance characteristics and it's 100% recyclable over and over again from bottle to bottle. Husky's certain systems are capable of processing up to 100% recycled PET, positioning the business to benefit from global regulatory initiatives that increasingly favor higher recycle content. Overall, Husky is well positioned to capitalize on favorable long-term demand drivers across its key end markets. Moving to Slide 30. We A key differentiator for our business is our remote monitoring capability called [indiscernible] Elite. It's an internally developed technology that enables us to remotely monitor the health of our customers' equipment in real time, optimize system performance and proactively inform our customers of operational challenges or were in terror before any downtime happens. Husky machines sit at the core of our customers' operations and typically runs close to 24/7 and with our highest output machines producing approximately 1 billion preforms per year, meaning any downtime or performance segregation can materially impact our customers' unit economics. Advantage+Elite has -- Advantage+Elite increased uptime and overall performance of our customer systems and deliver significant value. This has resulted in increased adoption since we first launched it back in 2019. And we see tremendous white space as we look to connect the rest of our existing installed base. We expect these growth initiatives to accelerate service contract revenues, while also supporting incremental spare part sales through proactive identification of maintenance needs, which increases customers' uptime. Going to Slide 31. Our global installed base and rising content per system drive high-margin reoccurring aftermarket revenue streams that underpins our organic growth. For each new system sale, we expect to generate about 2 to 3x the initial sale value in aftermarket products and services over the life cycle of the system. While our equipment can run for over 20 years, and it does, and we generally view the economic life of a system being approximately 15 years. And with more than 50% of our installed base over 15 years old, we're excited by the favorable demand dynamics this creates for upcoming replacement cycles. Our technology focus results in constant improvements, so machine today is significantly more productive than one say from 10 years ago. Importantly, this aftermarket revenue stream has demonstrated resilience across economic cycles and carries higher margins than new system sales. As the installed base continues to expand, increase a self-reinforcing flywheel that supports durable long-term aftermarket growth. Now Slide 32 outlines our key organic growth drivers and how we plan to capture the significant white space ahead. We delineate growth opportunities by new markets and through capturing share within our existing installed base. The 4 primary pillars of our growth include: one, expanding share in our core PET markets through stronger sales execution continued technology differentiation and asset renewal to support recycled PET regulatory requirements; two, by leveraging our brand and engineering capabilities to grow our install base beyond PET with new products, particularly across packaging systems, beverage closure systems and medical end markets; three, by capturing the full aftermarket opportunity with our own installed base and finally, by becoming the digital leader in our industry through Advantage+Elite. We are already leveraging sales in Resolute tools from the Resolute operating system to execute against each 1 of these initiatives, deliver growth and drive collaboration across go-to-market, finance and operational functions. We remain excited about the opportunities ahead of us. And with that, I'll turn it over to John Linker, Husky's CFO, to wrap up the Husky section. Unknown Executive: Thanks, Rob. Closing out with Slide 33, we cover Husky's financial performance for the fourth quarter and full year 2025, noting that the business combination closed after the quarter end in January 2026. Net sales increased to $521 million in the fourth quarter, up over 6% from prior year, primarily from volume and also a small tailwind from FX. Fourth quarter volume growth came primarily from China, India, Europe and Latin America, while North America and the Middle East were flat and Africa declined. Net sales increased to approximately $1.57 billion for full year 2025, up 5% from 2024, again, due to volume with a small tailwind from FX. Full year 2025 volume growth was driven by strength in Europe, Latin America, the Middle East and India, while China declined due to a tough year-over-year comp. However, the momentum in sales growth was offset by margin compression in both the fourth quarter and full year 2025. Margins were adversely impacted by 3 primary drivers unique to 2025 that we have confidence will not recur going forward. First, from a product mix standpoint, we delivered higher sales growth in new system sales versus aftermarket. This transient mix brought down blended margins in 2025, but it also means that we're seeing an acceleration in new systems demand, which grows the installed base and drives margin accretive aftermarket sales in future periods. Second, we made strategic investments in sales force coverage, service contract labor and new product prototyping to support long-term value growth in future periods. Lastly and most acutely in the fourth quarter, we faced variable cost inefficiencies in labor and overhead as we ramp the organization to deliver the record level of sales throughput. With respect to ongoing investments, particularly now as a GPGI company, we are focused on catalyzing sales growth, improving profitability through operational efficiencies and accelerating new product introductions. All of these initiatives are being enabled by the significantly enhanced capital structure under GPGI and operating focus and expertise from Resolute paired with the long-standing culture of innovation at Husky that is no longer capital constrained. We are firmly in the early stages of implementing the Resolute operating systems, and we are encouraged by initial progress, and we're confident in our ability to return to margin expansion in 2026. I'll now turn it back to Tom to discuss GPGI's guidance. Thomas Knott: Thanks, John. Let's go to Slide 35, where we address our pro forma forward guidance for fiscal year '26. We are encouraged by the trends we see at both businesses and are introducing a guidance range for fiscal year '26 that represents this, while also accounting for the dynamic macroeconomic and geopolitical backdrop. We currently expect non-GAAP net sales of approximately $2.18 billion to $2.23 billion, pro forma adjusted EBITDA of approximately $620 million to $650 million and pro forma adjusted free cash flow of approximately $325 million to $375 million. The midpoint figures represent 8.5% non-GAAP net sales growth approximately 17% adjusted EBITDA growth and approximately 29% adjusted EBITDA margins. We expect continued momentum at both businesses in fiscal year '26. At CompoSecure, increasing adoption of metal payment cards and ongoing share gains are driving new program launches and expanding cards in circulation, creating meaningful opportunities with both new and existing customers. At Husky, pipeline activity is building with continued strength expected in higher growth emerging markets alongside growth in North America supported by aftermarket performance and packaging systems demand. across both businesses, new product introduction, targeted investments and improved go-to-market execution are expected to catalyze growth. On the margin side, we expect to drive margin expansion through organic sales growth cost savings through operational efficiencies and realizing fixed cost leverage. We are deploying the Resolute operating system and are investing in R&D, commercial excellence and operational improvements at both Husky and CompoSecure. In terms of cadence through the year, we anticipate GPGI revenue growth and margin expansion to accelerate in the second half versus the first half, with growth in the first half anticipated to be mid-single digits year-over-year expanding to double-digit year-over-year growth in the second half. Margins are expected to be relatively flat in the first half of the year, with margin declines at Husky in the first quarter. as key investments and in-flight operational improvement initiatives at Husky take time to be fully realized. These costs will offset anticipated margin expansion that CompoSecure early in fiscal year '26, but will contribute to margin expansion that is expected in the second half and the full year. Concluding my comments on Slide 36, we provide a summary of our pro forma financial metrics for fiscal year '26 and the supplemental bridge for pro forma adjusted free cash flow. We are enthusiastic about the opportunities ahead for CompoSecure and Husky and view 2026 as a foundational year of cultural change ROS implementation and strategic seed planting that gives us confidence in delivering best-in-class top line growth, margin expansion and free cash flow generation. With that, I'll hand the call back to Dave for some closing remarks. David Cote: Well, as I said at the beginning, the formation of GPGI establishes the foundation for a best-in-class diversified compounder that we believe can be a home for market-leading businesses and best-in-class operators. We have a proven value creation plan that implements our operating system to catalyze organic growth, improve margins. It builds a high-performance culture and brings rigorous discipline around capital allocation to pursue accretive inorganic growth. We are operating from a position of strength. The opportunity ahead is substantial, and we're focused on building upon our momentum to deliver long-term value for our investors. So with that, I'd like to open up the call for Q&A. Operator: [Operator Instructions] Our first question coming from the line of Moshe Orenbuch with TD Cowen. Moshe Orenbuch: Great. I was hoping you could talk a little bit on the Campo secure side. about the factors that could drive the difference in terms of your range of expectations for revenue, what sorts of things it take to get to the higher end of that? And I've got a follow-up, if that's okay. Graham Robinson: So as we look at the CompoSecure business, the key drivers that we look at in terms of growth are what we do in terms of our core business, our core card payment business, how we drive growth internationally and how we ramp up our Arculus business overall. Those 3 factors really drive what will influence the range in terms of our outcomes. Moshe Orenbuch: Okay. And maybe as part of the guidance, you talked about getting leverage down to about 3x on an adjusted basis. Could you talk about kind of how that -- how you think about that level, like what that means? Is that insufficiently improved to think about other actions? Or how do you think about that level for the -- by the end 2026? Thomas Knott: Yes. Moshe, this is Tom. Thanks for the question. We would expect total leverage to be below 3x. We talked about it pretty consistently. I think Dave and I don't like worrying about debt or cash. And so -- you can expect us to continue moving that lower. We're certainly not afraid of leverage in the context of where it is now. We think the business is incredibly durable, both on the demand side and in the cash generation side. But you're going to see us bring that down to below 3x. I think that would be pretty comfortable and normal place for us to operate on a go-forward basis. Operator: Our next question coming from the line of Reggie Smith with JPMorgan. Reginald Smith: You guys typically, I guess, disclosed card shipments in the U.K. So I guess we can look for. But I was curious, I really would love to dig into the margin expansion -- gross margin expansion you've seen this year of Compo. And specifically, if you can kind of break that down or break that out between maybe increases in price per car versus reductions and COGS itself per card. And then maybe if you could highlight 2 or 3 things operationally that you did that made those gross margins so strong this year? And then I have one follow-up. Mary Holt: Right. Thanks for the question. So if you think about the implementation of the ROS operating system, that is really lended to lean principles being deployed throughout the organization. And as we've talked about before, having a focus on yields. So when I think about our margin expansion, there is a favorable price mix impact in the 2025 results -- but there's also a pretty healthy impact from yields. So I think if you think of those 2 things together, those are really the things that drove our gross margin expansion, again with ROS helping drive the improved yields? Reginald Smith: Yes. Is there a way to frame that? Maybe 1/3, 2/3, like how should we think about those 2 different components. Mary Holt: I don't think we're going to get into that level of detail here, but just rest assured that we are going to continue to focus on our margin expansion for '26 and have a number of terrific programs lined up to ensure that we continue to drive the operational efficiencies. Reginald Smith: And then my last question, and it really just came to me as you guys were talking, listening to your ROS system. I was curious are there any plans to possibly just license it out to other companies rather than acquire them? And then secondarily, I wanted to give you guys a chance to kind of address, I guess, the questions and concerns that may relate to potential conflict of interest between RHLD and GPGI shareholders and how you guys are managing those confidence. Jonathan Wilk: Well, the first question is no. The second one, I don't see a conflict. So I mean, the 2 are inextricable. So the success of RHLD comes from the success of GPGI. So I don't see a conflict, Tom. I don't know... Reginald Smith: No, I think maybe I can be more specific. So I guess the concern is that RHLD is compensated on EBITDA. And I guess, presumably, shareholders are driven by EPS. And so there's, I guess, a leverage in interest costs and is -- so directionally, yes... Jonathan Wilk: I guess I mean you rephrase the question, but the answer is still the same is there's no conflict there. This is -- they're tied together. The success of one depends on the success of the other. And we're very focused on the success of GPGI because that's, again, as we've said many times, the foundation of everything we see as a success at RHLD, GPGI has to be the foundation for that. We've got a lot of money invested in GPGI. We want to see it grow and be successful. That's where we apply ROS. That's where we work on growing sales, EBITDA and cash flow because that's the foundation for RHL. So I'm hard for us to see any kind of conflict. Reginald Smith: I appreciate that. I only ask because if we get the question from investors, and I wanted you to be able to address it. Jonathan Wilk: Yes, it's -- we've got -- I have to say we have gotten the question before, -- it didn't make sense then, it doesn't make sense now. So I think that's [indiscernible] you have to go back to everyone is to say, okay, we'll point out what the conflict is. And sometimes they say, "Well, get paid in RHL because of the EBITDA, it's okay." But if EBITDA is going down in GPGI, that means it will be going down for RHL, so how is that a conflict or a potential problem? It's not. The 2 are tied and we get paid based upon the success of GPGI. So I would tell -- [indiscernible] an interesting question, but no, we're not relevant a year ago when it was asked and it's not relevant now. Operator: Next question in queue coming from the line of Jacob Stephan with Lake Street Capital Markets. Jacob Stephan: Congrats on getting the deal closed in Q1 here. Maybe just to start out, obviously, margins -- gross margins have improved pretty significantly at Compo. I'm wondering what kind of opportunity you're seeing at Husky? Is it similar to the operating structure in COGS that you see at Campo and maybe how it differs from a margin improvement perspective over the next year or so. Thomas Knott: I would say the answer is yes, and I will let Rob explain how. Unknown Executive: The single biggest -- this is John speaking. The single biggest unlock that we have at Husky is really accelerating the organic volume growth. This is a business that has performed very well and historically in margins, but as not outgrown the market in terms of volume and with our very high variable contribution margins, given our cost structure, if we can accelerate volume growth as sort of embedded in the guidance that Tom described, that alone drops through very meaningfully to the bottom line. Aside from that, the Resolute operating system brings great discipline around the cost side of business, both on direct and indirect costs, and we've got a good pipeline of cost savings programs that are in place to drive cost out of the business, and that's well underway and good visibility there. And then I'd say the other side of things is more on the pricing and commercial excellence side. That is an area where we've already been working with the Resolute team to make sure that we're optimizing price and the right products and regions that will drive the balance between volume and pricing to drop through to margins. So I mean, those are the big buckets that I would see at Husky, but Rob,any comment. Unknown Executive: Yes. Maybe just add some color to that too, John. One of the biggest initiatives this year for growth is in our aftermarket tooling business. We ran a pilot campaign last year to recapture share in emerging markets, and it was exceptional. So we're doubling down on that at the same time, using the Resolute operating system, we think there's tremendous opportunity to improve our cost competitiveness to make us even more competitive while maintaining and improving margins. But I think those are the biggest drivers. Jonathan Wilk: I would just say generally, and we put the little bit of case study in for Compo, which you've been able to see. I think every business we look at has the same fundamentals in terms of the opportunity where we focus on sales, focus on controlling cost and focusing on reinvesting and marrying all those 3 together with an appropriate capital structure allows us to really get after that, and you're going to see the same thing at Husky. So I think just as a general view, -- that's as simple as it is, which we're focused on the top line, we're focused on getting after the cost of the fall through, as John mentioned, on variable margins, gives us the flexibility to keep investing and Husky particularly has tremendous opportunities on the R&D side, given the tech for a company that it is and the capabilities it brings to its customers. So we're quite excited about it. Jacob Stephan: Okay. Got it. Very helpful. Obviously, with the cash flow profile changing pretty significantly. I'm wondering from a capital allocation perspective, does it make sense to be repurchasing shares at this point? Or how do you kind of think through just what your priorities are? Unknown Executive: Yes. And our first priorities, we've said several times hasn't changed, and that's to pay down debt. That's going to be our focus. Operator: Thank you. And' there are no further questions in the queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good day, and welcome to the Fourth Quarter and Full Year 2025 Harvard Bioscience Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Taylor Krafchik, Senior Vice President at Ellipsis TA. Please go ahead. Taylor Krafchik: Thank you, operator, and good morning, everyone. Thank you for joining the Harvard Bioscience Fourth Quarter and Full Year 2025 Earnings Conference Call. Leading the call today will be John Duke, President and Chief Executive Officer; and Mark Frost, Chief Financial Officer. In conjunction with today's call, we have provided a presentation that will be referenced during our remarks that is posted to the Investor Relations section of our website at investor.harvordbioscience.com. Please note that statements made in today's discussion that are not historical facts, including statements on management, expectations or future events or future financial performance are forward-looking statements and are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the current views of Harvard Bioscience management and Harvard Bioscience assumes no obligation to update or revise any forward-looking statements. Actual results may differ materially from those expressed or implied. Please refer to today's press release, the Harvard Bioscience Form 10-K, which we expect will be filed within 24 hours of this call and other filings with the Securities and Exchange Commission for additional disclosures on forward-looking statements and the risks, uncertainties and contingencies associated therewith. During the call, management will also reference certain non-GAAP financial measures, which can be useful in evaluating the company's operations related to our financial condition and results. These non-GAAP measures are intended to supplement GAAP financial information and should not be considered as a substitute. Reconciliations of GAAP to non-GAAP measures are provided in today's earnings press release. I will now turn 8:03 AM the call over to John. John, please go ahead. John Duke: Thanks, Taylor, and good morning, everyone. Thank you for joining us for our fourth quarter and full year 2025 earnings call. On today's call, I'll review our recent actions, provide a brief overview of our fourth quarter financial results and then discuss our priorities and outlook for 2026. 2025 was a pivotal year of foundation building. Over the past 8 months, we improved our financial flexibility, took action to reorganize operations and clarified our long-term strategic direction. To recap, we took several key actions to improve the health of the business. In December, we completed our comprehensive refinancing. This transaction extended our debt maturity to 2021. We reduced annual debt service to $5 million, generating $3 million in annual cash savings and strengthen liquidity and financial flexibility. Shortly thereafter, we announced a strategic consolidation of our manufacturing footprint with the phased closure of the Holliston facility and consolidation into Minneapolis and European centers of excellence. This is expected to generate $3 million in savings in 2027 and $4 million of savings thereafter. Since June, we have strengthened our governance by appointing 4 new Board members and we are in the process of establishing a product and Scientific Advisory Board of experienced industry leaders. We also further solidified our executive leadership as we officially named Mark Frost as Chief Financial Officer. As many of you know, Mark is an experienced CFO and has held that role with several public companies. While we have more work to do, these actions are structural improvements to simplify our operating model and provide the foundation required to scale our business. All of these actions were driven to take -- to drive improved financial results, which is what we saw in the fourth quarter. Revenue of $23.7 million was above the midpoint of our guidance range. Gross margin of 60% at the high end of guidance and adjusted EBITDA of $3.8 million, reflecting 27% year-over-year growth. The drivers of this performance were favorable mix shift toward higher-margin product lines, benefits from cost reductions, disciplined expense management and sharpened operational execution. We exited the year a leaner and more focused organization with a fortified balance sheet and a clear path to drive sustainable growth. Since I joined as CEO, I've spent considerable time engaging with customers, partners and employees. What became clear is the life science industry is undergoing a fundamental shift. Drug development remains inefficient, nearly 90% of candidates that succeed in animal models ultimately fail in human trials. Researchers, regulators and biopharma customers -- companies are increasingly embracing new approach methodologies or NAMS to improve translational relevance. Harvard Bioscience is uniquely positioned to bridge this gap. We're evolving from a traditional life science tools provider into a leading enabler of translational science, connecting in vivo and in vitro research and helping customers generate more predictive human relevant data earlier in the development cycle. This represents an evolution for a company's products into the $10 billion translational science market. To capitalize on this opportunity, we are focused on executing against our 4 priorities. First, leading the translational science bridge. We are strengthening our position at the intersection of preclinical and organoid-based research. Our gold standard telemetry capabilities provide a natural extension into organoids and 3D biology platforms; second, accelerating high-margin innovation. Our new product innovation or NPI pipeline is centered on scalable, differentiated platforms such as SoHo telemetry, BTX for bioproduction, Mesh MEA and Incub8. These platforms modernize preclinical and translational workflows and reinforce our evolution into a platform-based technology provider. Third, expanding consumables and recurring revenue. Today, approximately 55% of revenue is recurring. We are intentionally prioritizing higher-margin consumables, service and software to improve revenue visibility, increase gross margins and create a more durable and predictable business model. This mix shift is already contributing to margin expansion as evidenced by our Q4 performance and our outlook for 2026. And fourth, operational excellence and disciplined growth. Finally, we remain laser-focused on cost discipline and operational efficiency. The manufacturing consolidation and refinancing enabled us to improve profitability, fund innovation and continued deleveraging over time. Looking ahead, we are introducing full year guidance for 2026 that forecast low single-digit growth in revenue and high single-digit growth in adjusted EBITDA, which will be driven by higher-margin NPI growth as we focus on the translational science market. We continue to monitor NIH funding timing and global macro conditions. We believe our cost structure and diversified geographic footprint put us in a position to manage volatility. 2025 was a strategic reset and 2026 will be a year of top and bottom line growth. With a technically deep global team, a refreshed board, improved financial flexibility and a focused translational science strategy, Harvard Bioscience is well positioned to create long-term shareholder value. I want to thank our employees for their dedication, our customers for their trust and our shareholders for their continued support. With that, I'll turn the call over to Mark to review the financial results and outlook in more detail. Mark Frost: Thank you, John. I'll start my comments with our fourth quarter 2025 financial results. The details of which can be found in our Form 10-K, which we expect to be filed within the next 24 hours and in the earnings presentation that we posted to our IR site. Starting on Slide 4 of the presentation. Revenue was $23.7 million, just above the midpoint of our $22.5 million to $24.5 million guidance and below the $24.6 million we reported in the fourth quarter of 2024. The government shutdown of 43 days impacted our ability to overachieve within the quarter. Gross margin of 59.7% was at the high end of our 58% to 60% guidance range and is up 260 basis points from 57.1% in the fourth quarter of 2024. This is the highest gross margin we recorded over the last 7 quarters. We continue to improve our gross margin returns based on cost actions we took at the end of 2024 and in 2025 as well. As well As the increasing benefit we are receiving from higher-margin NPI revenue. Operating income of $1.7 million was up from flat last year, and adjusted operating income of $3.3 million was up from $2.5 million last year. The improvement in GAAP and adjusted operating income was primarily from cost reductions in manufacturing and SG&A. Now adjusted EBITDA was up 27% year-over-year to $3.8 million in the fourth quarter driven by cost reductions, including decreased costs related to manufacturing and SG&A headcount as well as expense management. Now moving to Slide 5 for full year results. Revenue of $86.6 million was down from $94.1 million, primarily from the impact of tariffs and the delayed NIH funding. Tariff impact started to subside later in the year while NIH funding delays continued to impact timing of some orders, in particular, our preclinical telemetry products. Gross margin of 57.7% was down from 58.2% last year due to lower revenue in 2025, but a larger margin impact was partially offset by our cost actions in manufacturing. Operating income of negative $48.6 million was down from negative $6.2 million last year, adjusted operating income of $6.2 million was up from $5.3 million last year. The GAAP difference stems from the goodwill impairment we took earlier in the year and the improvement in adjusted operating income was due to cost reductions improved expense management and favorable mix of higher-margin products. Now adjusted EBITDA increased 12.5% to $8.1 million from $7.2 million in 2024, as mentioned, due to cost reductions, improved expense management and strong execution throughout the year. Now looking at Slide 6, I will outline the revenue results for the quarter and year by product family and region. Overall revenues in the fourth quarter were up 15% sequentially and down 3% year-over-year. Full year revenue was down 8% year-over-year. Geographically, quarter 4 revenues in the Americas were down 2%, year-over-year, driven by lower pharma sales for preclinical and lower academic sales in CMT. Full year revenues in the Americas were down 7% year-over-year, driven primarily by academic sales. In Europe, quarter 4 revenues were down 12% year-over-year due to lower academic sales. Full year revenues in Europe were down 6% year-over-year due to distribution and academic sales. And in China and the Asia Pacific, Quarter 4 revenues were up 10% year-over-year, thanks to growth in preclinical distribution. Full year revenues in China and Asia Pacific were down to lower distribution revenue. And I'll now move to Slide 7 to discuss further financial metrics. GAAP EPS in quarter 4 was negative $0.06 compared to flat last year and quarter 4 adjusted EPS was flat compared to $0.06 last year. As I've mentioned in the past, the differences between GAAP EPS and adjusted EPS are typically the impact of stock compensation, amortization and depreciation. These differences between net loss and adjusted EBITDA are highlighted in the reconciliation tables on Slide 10 and are all noncash items. For the full year, GAAP loss per share was $1.28 compared to negative $0.28 in 2024. Adjusted loss per share was negative $0.02 compared to adjusted earnings per share of $0.03 in 2024. The majority of the higher GAAP loss was from the goodwill charge we took in the first quarter. Now cash flow from operations ended the year at $6.7 million, up from $1.4 million at the end of 2024. The significant improvement in the year is due to disciplined working capital management improved operating income and our efforts on payroll tax refunds. Net debt is down $1.8 million from last year to $31.4 million reflecting payments made on our prior syndicated debt facility as well as additional liquidity we gained as part of the new agreement. Now as John discussed in the fourth quarter, we were pleased to announce the completion of our debt refinancing with a structured deal. The deal completed repayment of our prior credit facility, extended the maturity of our debt and enhance our financial flexibility as we work to position the company for growth, including reducing our debt service in the first 2 years by $3 million. Full details on the deal can be found in our December 17 press release and accompanying SEC filing. Now another significant accomplishment during 2025 was the successful remediation of material weaknesses in the one significant deficiency. This is another step in building the foundation of a healthier business. I'll now move to Slide 9 to discuss our outlook for the first quarter and full year 2026. Now first, a few call-outs. We are introducing full year guidance as we are taking a more long-term oriented view of the business and helping us manage our broader expectations as we go through the year. We are also introducing adjusted EBITDA guidance on both a quarterly and a full year basis. This is a key metric for us and is one that we believe helps demonstrate our core operating performance. This metric is also linked to a key covenant in our recently structured debt agreement that we thought would be helpful for investors to have visibility. We were reporting GAAP and adjusted gross margin in 2026 due to the restructuring impact from our manufacturing consolidation. Now lastly, with the expected growth in the business in 2026, we have reinstated bonuses and merit-based compensation for our employees, which was suspended in 2025 due to macro headwind impacts. This reinstatement will have an impact on our year-over-year adjusted EBITDA comparison, which is already built into our full year guidance. We appreciate our employees and all their hard work as they have supported us through a difficult time for the business. With that, let's dive into the outlook. In the first quarter, we expect revenue between $20 million and $22 million, adjusted gross margin between 57% and 59% and adjusted EBITDA between $1 million and $2.2 million. I would note that Q1 of last year only saw minimal impact from NIH challenges. For the full year 2026, we expect revenue growth of 2% to 4%, gross margin of 58% to 60% and adjusted EBITDA growth of 6% to 10%. Additional color is we expect revenue to ramp throughout the year on a year-over-year percentage basis, supported by stronger NPI revenue. Now to sum up the performance, we're pleased with the fourth quarter and believe the improvements we've made to date with our operational efficiency sets us up well for the future with streamlined costs and a focus on high-margin products in an emerging market. We expect to realize increased profitability going forward, and we're proud to have been able to demonstrate a glimpse of that in the year where macro conditions were challenging. Lastly, I'm excited to have been appointed CFO on a permanent basis and look forward to continuing to work with John, the Harvard Bioscience team, our board, engaging further with our customers and investors. To that point, we will be attending the KeyBanc Healthcare Forum next week and I look forward to seeing some of you there. I'll now turn the call back to our operator to take questions. Operator? Operator: [Operator Instructions] Our first question comes from Paul Knight with KeyBanc Capital Markets. Paul Knight: Regarding the NIH, that was finally approved February 3 or so. How quickly do you think that approval turns into a better academic environment for you? John Duke: Yes, Paul, thanks for the question. As you could imagine, it would love for it to turn into a better academic environment in 1 day. We have, as you know, about 20 salespeople in North America who call on biopharma as well as academic customers. And from what we have heard is there was a lot of grant submissions, which were waiting to be approved. And we expect to start to see a positive impact both towards the end of Q1 as well as going into Q2. Paul Knight: And NIH is what about 40% of the company now? . Mark Frost: No, I'll clarify. It is about -- NIH revenue is about 20% of our U.S. revenue, Paul. And one point I'll just build on John's point is we are a build-to-order business. So we're starting to see improvement in orders, but in order to get the revenue, it actually needs to come in, in the first half of the quarter. So most of the benefit will start seeing probably in second quarter from the NIH release. Paul Knight: Yes. Okay. And then I know BTX and Mesh MEA or some of your key products. Could you talk about your growth there? And specifically, what's your expected growth for these focused businesses in 2026. John Duke: Yes. So you are correct. They are a key part of our NPI, and we expect both of them to grow in double digits this year. Paul Knight: Okay. And then that schedule, is there a quarterly paydown you're targeting? Or what do you want to do? . John Duke: A quarterly pay down. Could you clarify, Paul? Paul Knight: Pay down your debt this year? Or are you... Mark Frost: Yes. No, the structure of the deck was structured in a couple of ways. One, to allow us flexibility that there's no amortization in the first 2 years of the deal. We also, Paul, have the ability to convert term loan A to an ABL, which will give us likely a lower interest rate and more flexibility. And then the Term Loan C is structure that potentially could be converted to equity, which will reduce -- which would deleverage us in the future. Operator: Our next question comes from Bruce Jackson with StoneX. Bruce Jackson: We got a nice pop in the Asia Pac revenue this quarter. I was wondering if -- and you've had some issues in the past with Asia Pac. Is this the sign of a turnaround? Can you tell us a little bit about what your expectations are for 2026? Mark Frost: Yes. It's a good question, Bruce. You're well aware last year when the tariffs hit, the China business ground to a halt. And we started to definitely see improvement. And those orders came in and were filled in, in the fourth quarter. So we had a fair amount of catch-up, not fully. So our expectation is we will get back to a normal cadence in Asia, notwithstanding, obviously, if there's further news on the tariff front that changes that situation, Bruce. . Bruce Jackson: Okay. Got it. And then last quarter, you spoke about a backlog. Have you seen any changes in that during the fourth quarter? Mark Frost: Yes. We actually ended up the year, Bruce, with the highest backlog we've had in over 2 years, and we've continued to maintain that. So yes, we're pretty positive of where we are on our backlog. Bruce Jackson: Okay. And then last question around the pharmaceutical biotech CRO side of the business. How would you characterize that business? We've been hearing that, for example, some of the large cap pharma companies are kind of back to normal while some of the smaller biotech type companies are not due to the uncertainty around the pharmaceutical reimbursement. Where are you seeing the demand right now for your products on the pharmaceutical drug development side of the business? John Duke: So Bruce, thanks for asking that. year-to-date, we are seeing that portion of the market, the pharma and biotech, that business is up. And we expect that to continue which clearly factored into our guidance for the year. Operator: I'm showing no further questions. This does conclude the question-and-answer session, and you may now disconnect. Everyone, have a great day.
Katie Wilson: Hi, everyone, and welcome to Funko's 2025 Fourth Quarter Financial Results Conference Call. I'm Katie Wilson, and I'm here at the Funko store in Hollywood. With me are Josh Simon, our Chief Executive Officer; and Yves Le Pendeven, our Chief Financial Officer. Welcome, guys. Josh Simon: Hello. Katie Wilson: Josh, I have heard this is one of your favorite places in Los Angeles. Josh Simon: It is. Yes, I've been on the job for about 6 months now. I think I've spent the majority of my time in this store. They actually gave me a key to the store earlier this week, so I can come and go even after hours. But what I love about being here is it really embodies the strength and how much fun the Funko brand is. You kind of see around us here from an IP standpoint, KPop Demon Hunters, Mickey Mouse, Michael Jordan in the background. I come here over the weekends. And there's people from all over the world, all ages, all demographics, and it's really fun watching them kind of discover their favorite fandom or IP. And so we thought it would be a fun new way to do the earnings call from here today. Katie Wilson: So how have your first 6 months been? Josh Simon: Well, see, we're just getting back from the Toy Fair circuit. So London Toy Fair, Nuremberg, New York Toy Fair. I've been going to these toy fairs for a while in various capacities. And I can say, definitely, I felt more energy around the Funko brand than I have in a bit. It was really fun to meet with our licensors and retailers. In Q4, we also had a great presence at New York Comic Con. So I had a great chance to meet with a lot of our fans and YouTubers. And so the energy was great. And we're seeing that energy translate into momentum on the business side. In Q4, our net sales were better than expected, profitability at the higher end expectations. And I know Yves will dive into that detail here in a little bit. Katie Wilson: And I'm guessing some of that was driven by this guy, Derpy, right behind me. Josh Simon: One of my favorites, near and dear to my heart, obviously, KPop Demon Hunters. And look, what's great about that one is I think it really demonstrates one of our superpowers, which is how quickly we're able to move in creating these really great collectibles. I think it was about 4 months from ideation and design to getting into fans and consumers' hands in Q4. We also won the Viral Hit of the Year award from Toy Book, which is a really coveted awards program. So that was great. There were plenty of other really fun ways that we came to life in Q4 as well. It was the final season of Stranger Things sadly, but the Duffers were on the Tonight show with Jimmy Fallon, and they actually reenacted the season and the series finale using only Funko Pop. So that was really fun to see. We launched Pop! Yourself in Europe, which is the experience where you can create a custom Funko Pop of you or a loved one. And we rolled out Bitty Pop! into Walmart. Bitty Pop! is this great example of how we're able to continue to add dimensions to the iconic Funko Pop silhouette. It rolled out in all Walmart doors in Q4. It was incremental placement in the toy aisle. It was incremental placement at impulse and out of aisle, and it really helped to drive some strong sales in Q4 as well. Katie Wilson: So during the last earnings call, you talked about the make culture Pop strategy. I believe you mentioned culture, creativity and commerce. How is that going so far? Josh Simon: Well, if you remembered those -- the 3 Cs, then so far, so good. It's going great. Look, our -- the idea is that how do we participate in all of those moments that are shaping culture. Really, the goal is to become the preeminent brand for turning pop culture into collectibles and also turning those collectibles we create into culture and cultural moments. So let's start with culture. I've said it a few times here. But really, that means just being at the center of the moments that fans are talking about like while it's actually happening. KPop Demon Hunters is a great example of that. But we do it pretty broadly. We have great relationships with licensors all over the world, pretty much a portfolio of about 900 actively managed licenses at the moment. But in addition to that, there's still a ton of whitespace that we could get after. Sports is one that's a little bit more nascent for us, but we launched a really great new partnership with Topps and Fanatics. We're part of the new MLB Super Pack with trading cards and blind Bitty Pop! products. That rolled out in Walmart, Target, GameStop, sporting goods stores like DICK'S. So just sort of one example in sports. But even in these massive fandoms, I think there's plenty more opportunity for us. Katie Wilson: And speaking of sports, by the way, did I see Funko in a Super Bowl commercial? Josh Simon: You did. You did. It was surprising for all of us. I mean I sat down with my family to watch the Super Bowl. And in one of those first commercial breaks, like on comes this really great spot from the NFL that's sort of celebrating the intergenerational love of football and like in an opening frame, in a young kids bedroom, there's a shelf filled with NFL Funko pops. So that was really great to see. In that sports space, though, I mentioned there continues to be more opportunities in Miami, Inter Miami, the football or soccer club there, if you're here in the U.S., is opening up a brand-new stadium, Miami Freedom Park in a couple of weeks on April 2. We have a presence in their flagship store. It's a Funko and Loungefly shop-in-shop with exclusive products and also a really great unique Pop! Yourself experience that you could only do there in the stadium. And in addition to these sports moments, Q4 was also really great from an entertainment perspective. We had Zootopia 2 from Disney, which was a great movie and a massive hit. Wicked: For Good and Evil also a great film for us. And other areas that we're expanding into as well, I think the -- I'm sure Yves is a huge fan of this, but the world of romantasy and BookTok, if I'm not mistaken. We just -- we dropped a little teaser video for The Cruel Prince, which is a really popular book on TikTok. It generated like 1 million views within a couple of days. And so that's an area you'll see us expanding into more. Obviously, anime has been huge for us. There are big titles that everyone has heard of like One Piece, which we continue to do well in. And then newer titles like Dandadan, which was a top seller for us at Walmart in Q4 and continued growth in video games as well, a great franchise, Mouse: P.I that was also strong for us in Q4. Katie Wilson: And how are you participating in those surprise moments that pop up? Josh Simon: I mean a lot of it is through speed, as I mentioned earlier, related to KPop Demon Hunters, but we have a new program called Hyper Strike. The idea behind that is like how can we design, manufacture and get products and collectibles into our fans' hands in a matter of days or weeks. So we'll be rolling that out in a more commercial way later this year, but we started experimenting with it in Q4. We were doing a lot of like one-on-one characters for celebrities and friends of Funko. One thing we tried to kind of experiment with is like the insane world of the sort of like online videos, user-generated content meme culture that come up. So there's a great guy named Jason Gyamfi. He's known as the quarter zip guy. It was one of these like crazy viral trends in Q4. We decided let's make a video of Jason and his Matcha and just send it to him as a gift. And his reaction was great. I think we have a little clip of it to show. [Presentation] Katie Wilson: Yes. And it's really exciting because this is a new type of product we're offering. Josh Simon: It is. And one example of a new type of product we're offering because that second C creativity is really about how we take these pop culture moments and then translate them into physical form in some way. So obviously, Bitty Pop!, I talked a little bit about as a new example of a product that's been around for a couple of years, and we're really seeing some strong growth there. It capitalizes on what people love about Funko Pop. We've sold 1 billion units of pops over the years. It's this really iconic silhouette. And so there's more dimensions of Pop! and some net new products that we're working on to drive additional growth. The thing that's great about that iconic silhouette is starting to think about how we can reach fans and tell stories in new ways. And so we recently announced a partnership with an incredible production company called Rideback, really great storytellers. I think they're experts at creating worlds from products. They produce the LEGO movies. They produced the live action, Lilo & Stitch. Really, really excited to work with them. We're developing some new ideas with them from big feature and animated series ideas in addition to a really interesting unique AI-based animation toolkit they have called Spuree that will allow us to create some content much faster and bring new and iconic forms of storytelling to Funko fans everywhere. Katie Wilson: You also mentioned commerce as a part of Make Culture POP!. I have a guess that this store is a part of that. Are you expanding how you think about commerce? And is that happening around the world? Josh Simon: Yes. We really have fans all over the world, and we want to make sure that we're showing up wherever our fans shop. As we like to say, turning shelves into stages, this store is obviously a best expression of how we're able to do that. But there's a ton of other opportunity in the U.S. from a retail standpoint and outside of the U.S. Europe, which has been our primary driver outside of the U.S. for a number of years now is really strong. At the end of the year, we are actually the second largest collectible brand by market share right after Pok mon, which was great. From January '25 to January '26, our sales were up 20% in the EU. That was basically about double the market growth there according to Circana Retail Tracker. And similar to what we've been able to sort of grow in Europe, the next idea is how do we do that in Latin America and Asia. So as part of that, we just created a new role for a guy named Andy Oddie, who is our long-time Chief Commercial Officer. He has 40 years of really great experience in the toy and collectible space building businesses. He's our new Chief International Officer. He's going to be focused on growth in Asia and Latin America. And I think his dedicated focus is really going to help us to get traction there. And the opportunity is big for 2 reasons. I mean you think of China, Japan, Korea. China and Japan are the second and third largest toy markets outside of the U.S. So there's a lot of incremental business growth we know we can get in those countries. But the other great thing is like so many cultural trends now globally are being influenced by Asia. So obviously, anime has always been a really big fandom for us, largely coming from Japan. We've seen a huge growth in all things, K-Culture, Korean beauty, K-Pop, Korean food. So I think our business opportunity to grow there is strong and then the cultural influence that I think will provide a halo of growth all over the world as we develop more relationships with licensors and creators in that region, I think, will also be pretty massive for us. Katie Wilson: Turning to you, Yves. Could you say a little bit more about the financial results? Yves Le Pendeven: Sure. Happy to. This is an earnings call after all. So let's get to the numbers. So for the fourth quarter, our net sales were $273 million. We were pleased to finish the year on a high note. We had guided to Q4 being up modestly over Q3. We were actually up 9%, so better than we expected. And by the way, there's more details, including these slides that are posted on our IR website. For gross margin, we were at 41%, and that was again slightly higher than guidance. And by the way, with the exception of the second quarter in 2025, we've now been above 40% for the last 7 of the last 8 quarters. So really pleased with that trend. Our SG&A expenses were $91 million, and that was down 12% from Q4 of last year. And finally, adjusted EBITDA was $23 million, which again was at the high end of our expectations. Katie Wilson: How is the financial outlook for 2026? Yves Le Pendeven: So for 2026, we expect net sales to be up modestly year-over-year, but a substantial improvement in profitability. So specifically, we're guiding to net sales being flat to up 3% compared with 2025 and our adjusted EBITDA between $70 million and $80 million. So let me give you a little bit more color on that. For sales, we expect our Funko core product lines to be up high single digits year-over-year, but that's offset by Loungefly down double digits, and that's primarily due to the SKU cuts that we implemented last year. Josh Simon: And one thing that I'll jump in and add about Loungefly is that we are really excited about what the growth potential for that business could be. I think there's a really unique way to own this space of wearable storytelling as we like to call it. We know there's a really passionate fan base there for the product. So as a result of that, we just put in place our first-ever GM for the Loungefly business, Jessica Kong. She's a lot of really great experience across lifestyle brands and experiential. We think she'll be really great for the business. She's about a month in. We're already pretty far along in building the strategy and plans to get that brand and business back to growth, and we'll share more details about that in the next quarter. Yves Le Pendeven: Thanks, Josh. So back to our guidance. For gross margin, we expect 41% to 43% for 2026. And that increase over the recent trend is really driven by the renewal of some key licensing agreements with our major studio partners, which will result in lower minimum guaranteed royalties. As far as tariff assumptions, we're assuming that tariff rates remain around 15% for the remainder of the year. And in terms of refunds, we're exploring all avenues, and we'll update our guidance when we have more information later this year. So finally, with regard to adjusted EBITDA, we expect a substantial improvement. That really is driven by actions that we've already taken. That includes all of the tariff mitigation strategies that we implemented last year, including price adjustments and cost reductions annualizing, the renewal of the licensing contracts that I mentioned. And finally, just beginning to see traction on some of our growth initiatives, primarily in the Funko product lines, including Bitty Pop! and Pop! Yourself, which we launched in Europe last quarter. Katie Wilson: Josh, how do you see 2026 shaping up? Josh Simon: We're all really excited for 2026. I think it's probably the strongest entertainment slate that I've seen in the last 4 or 5 years. From a film standpoint, we've got Mandalorian and Grogu, Toy Story 5, Moana Live action, all -- tons of great things for Disney. Supergirl from DC, Masters of the Universe, Minions 3, Spider-Man: Brand New Day, Avengers: Doomsday at the end of the year. This week, Netflix's live action series of One Piece just debuted, Season 2 of One Piece, which is always huge for us. Then obviously, in the sports world, it's a World Cup year. We have the England, U.S. and French teams. I mentioned we just signed this new deal with McLaren, some new product launches that we have coming up that I'm just going to tease for a little bit now. But really, when you take a step back and look at what's driving the toy industry right now, there's 3 trends. It's coming from growth in collectibles, growth in licensed IP and growth in kidult. Those are all areas that sort of squarely are in the Funko wheelhouse. And so it's really just about us executing this year. Katie Wilson: Well, with that, we'll turn to our questions here. And the first question is coming in from Stephen Laszczyk of Goldman Sachs. Please describe the shape of the flat to plus 3% guidance past Q1. Should it be pretty consistent throughout the year? And what gets you to the top versus low end of that guide? Yves Le Pendeven: Sure. I'll take that one. Yes, it should actually be pretty consistent throughout the year. This is not a hockey stick plan where we depend on having a huge second half of the year. We actually expect Q2 to comp up a little bit over last year that was pretty disrupted by the tariff impact when those were first announced and then also pretty steady growth throughout Q3 and Q4 as well. Katie Wilson: To what extent does Funko view original content creation as a growth driver? How much does the company plan to invest in original content? And how does AI play into this strategy? Josh Simon: I mean, look, I'd say as a growth driver, I think it can be a serious growth driver in the long term. I mean obviously, our entire business is driven by entertainment content and IP. And so I think as we explore more dimensions of storytelling through the Funko universe, I think over time, assuming those things are hits and people love it and watch it, we think it can actually drive growth, but it's going to take time to develop, produce and sort of get that content out to audiences. Look, I think we're seeing the same trends everyone is from an AI standpoint in storytelling. We really believe in the power of people to tell great stories, our design teams and creative teams internally to craft these great characters. So far, it's been a great tool for efficiency and letting our teams focus more on the creative work than the busy work. And then I think from a capital standpoint, I mean, look, we're looking to partner with the same exact partners who we already work with on the licensor side, some of the biggest studios around the world to help us develop and create these elements of content, movies, TV, et cetera. So from our standpoint, we're looking to rely on their expertise on the storytelling side and the partnership side and shouldn't be a significant capital investment from us. Katie Wilson: Does Funko need to use any of its extended credit agreement in 2026? Or will the company continue to pay down debt like they did in Q4? Yves Le Pendeven: So the answer is no, we don't expect to need to do any additional borrowing. We're managing right now on our operating cash flows and expect to continue to do so. We make regular quarterly principal and interest payments on the debt, and we plan potentially later in this year and certainly early next year to make some incremental debt paydowns like we did in Q4. Katie Wilson: Eric Wold of Texas Capital asks, can you break out the POS trends and inventory restocking domestically versus Europe? And if you saw any noticeable trends positive or negative as the quarter progressed? What about so far during Q1? Yves Le Pendeven: Yes, great question. We did see a continuation of the trend that we spoke about in Q3. We continue to see great double-digit growth in POS sales in Europe. And in the U.S., we actually saw an improving trend throughout Q4 to a positive comp year-over-year. And actually, we've seen that trend continue into Q1. From a retailer inventory point of view, we watch that obviously very closely from the larger partners that report that information to us. And I think it's in a healthy place right now and restocking is kind of going as we'd expect. Yes. Katie Wilson: Within the 2026 guidance, what would you highlight as the key initiatives to both drive top line results and margin versus 2025? Josh Simon: I guess I'll start, and from a top line standpoint, I mean, obviously, I just -- I talked about the content slate. That's a huge driver of top line growth this year. Bitty Pop! is another example of that. A lot of the broader initiatives that I mentioned, we'll start to seed into this year. So international growth, some of the new products, those are things that we'll see, but you'll really start to see us drive incremental growth from that sort of further into the future. There's also some fun new initiatives that we have this year, too. We talked about World Cup. We have a fun lineup that's going to launch later this year, celebrating America's 250th. I mentioned the Pop Mystery products that are launching later this year. So all of those things will start to add up. But I think primarily like the strength we've seen in Bitty, the strength we've seen in the entertainment slate should drive a lot of the top line growth. And you want to take the margin...? Yves Le Pendeven: Yes, sure. From a margin perspective, I spoke about some of the main drivers already. The good news is we're forecasting to have a better margin than we've ever had. And those -- that's largely driven by things that are in our control, such as the price adjustments that we made last year and the renewal of some of our major licensing contracts. Now as we kind of go through the rest of the year, there will probably be puts and takes. I'm hoping for some favorable trends within the tariff world. Currently, we're paying 10% -- the newly announced 10% tariff rates that may go up to 15%. Unsure what that might be later on in the year. On the other hand, we're also monitoring the situation right now in terms of oil prices and potential impact to shipping costs. So there are a few unknowns. But for the most part, we feel confident about maintaining that level of gross margin. Katie Wilson: Keegan Cox of D.A. Davidson asks, can you quantify the tariff impact you experienced in 2025? And what incremental pressure you expect in the first half of 2026? Yves Le Pendeven: Sure. So in 2025, our total tariffs and duties were close to $40 million and about half of that was related to the IEEPA tariffs, so the ones that were recently struck down. Katie Wilson: And for the first time, we've also invited investor questions from our investor base. So the first one is to what extent has Funko signed new or expanded IP partnerships ahead of the relatively strong film slate in 2026? Josh Simon: Well, look, I think as it relates to the film slate itself, the good news is last year, we renewed licenses with all of the major studios around the world. Disney, which is inclusive of Lucasfilm; Pixar; Marvel; Netflix; Paramount Universal. We really value those relationships. We spend a lot of time with those partners. So from a '26 slate standpoint, I think we're in pretty great shape there. I mentioned some of the World Cup teams that we signed licensing deals with. I think for us, like the -- kind of talking about some of the white space earlier, for me, the focus is really thinking about what are those net new kind of white space incremental areas where we don't currently operate. So I'd say the world of creators is a huge example of that. We appointed a new Board member, Reed Duchscher, who represents some of the biggest creators in the world who everyone is familiar with on Twitch and YouTube and TikTok. He's been a really invaluable adviser and looking to tap into his expertise and guidance as we embark more in that space. Katie Wilson: Coming in from an investor in South Africa. The whole of South Africa would love it if you would make Funko pops of the Springboks Rugby team. Josh Simon: Interesting. Well, let's see, I don't want to let South Africa down. So we will look into it. But it's funny, it's a great question. I can't expound a lot on Rugby, which I apologize to any fans out there, but I respect the sport. But it's a great question. I think it definitely, I think, showcases both the opportunity that exists in sports and also just kind of the global extent of our fandom. So fun to hear a question from an investor in South Africa. But we will look into it. Katie Wilson: Well, that does wrap up our questions. Josh, any final words? Josh Simon: Well, I just want to thank you for hosting and being here today. Thank everyone for watching. Excited to be back in May with our next earnings call and continue to share our progress across the business.
Operator: Greetings. Welcome to Gambling.com Group Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the call over to your host, Peter McGough, Senior VP of Investor Relations and Capital Markets. Please go ahead. Peter McGough: Hello, everyone, and welcome to gambling.com Group's Fourth Quarter 2025 Results Call. I am Peter McGough, Senior VP of Investor Relations and Capital Markets, and I'm joined by Charles Gillespie, Gambling.com Group's Co-Founder and Chief Executive Officer; Kevin McCrystle, Co-Founder and Chief Operating Officer; and Elias Mark, Chief Financial Officer. This call is being webcast live through the Investor Relations section of our website at gambling.com/corporate/investors and the downloadable version of the presentation is available there as well. A webcast replay will be available on the website after the conclusion of this call. You may also contact Investor Relations support by e-mailing investors@gdcgroup.com. I would like to remind you that the information contained in this conference call, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. Some important factors that could cause such differences are discussed in the Risk Factors section of the Gambling.com Group's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update forward-looking statements to reflect actual results changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. During the call, there will also be a discussion of non-IFRS financial measures A description of these non-IFRS financial measures was included in the press release issued earlier this morning, and reconciliations of these non-IFRS financial measures to their most directly comparable IFRS measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab of our website. I'll now call -- turn the call over to Charles. Charles Gillespie: Good morning, and thank you for joining our fourth quarter 2025 conference call. We generated record fourth quarter revenue of $46.2 million, up 31% year-over-year adjusted EBITDA rose 5% year-over-year to $15.5 million. Our Sports Data Services business grew 29% sequentially and 440% year-on-year in the fourth quarter to $11.8 million and accounted for 26% of total revenue, the highest percentage yet, grew 15% sequentially from the third quarter and 4% year-over-year. While the previously discussed challenges with search rankings persisted in the fourth quarter, this was offset by growth in revenue, not dependent on organic search referrals, which exceeded revenue from SEO-related sources for the first time. We have scaled non-SEO marketing revenue quickly in the second half of 2025 and continue to expect increasing revenue from these channels going forward. This strategy has made marketing revenue more diversified and less volatile at the price of somewhat lower margins. For the full year, revenue and adjusted EBITDA were up 30% and 19%, respectively, and we produced $36.3 million in adjusted free cash flow. Looking ahead to 2026, we expect revenue to be in the range of $170 million to $180 million and adjusted EBITDA to be in a range of $50 million to $80 million -- sorry, $50 million to $58 million. This represents modest top line growth, but a year-on-year decrease in adjusted EBITDA. Behind these headline numbers are two different businesses. We have a thriving high-growth sports data services business, which will grow revenue in the high teens and see margin expansion. We also have our marketing business where it is no secret that revenue from SEO has been under pressure. Given the dramatic changes to the media and digital landscape, as a result of the rise of artificial intelligence, we are actively reinventing our marketing business to build a more intimate relationship with our end users. This will involve scaling our CRM platform, offering more interactive and gamified content and expanding our engaged social media audience. Even while we are reinventing the marketing business this year, it will continue to generate significant cash flow. Despite recent challenges and perceptions, this is still a very valuable, very profitable business and even considering margin compression from our traffic diversification strategy. We are encouraged by the return to year-over-year growth in the fourth quarter despite the pressures that continue to impact SEO revenue. The market expectations for the future of this business are plainly not accurate. Non-SEO revenue continues to scale ahead of expectations as evidenced by our cost of sales growth for the fourth quarter. Q4 is the first quarter where more than half of our revenue came from sources not dependent on SEO. As we continue to diversify our increased focus on e-mail, social media, paid and partnership channels will contribute more revenue as we move through 2026. We also continue to make progress in scaling our CRM activities to engage and cross-sell our customer base. The final and perhaps most interesting piece of our transformation strategy for the marketing business, is the new product we expect to launch this spring. While I would love to share more details about this project today, we are not going to share any further information for competitive reasons until the launch. Our annual themes for the past several years have all been AI related and our team is early adopters and fully embracing the power of these new tools available to them including 24/7 Agentic workflows. While the advances in artificial intelligence over the last several years have been incredible, the acceleration in tools like Claude code since January has been breathtaking. We continue to prioritize leveraging AI tools to increase our execution velocity across all teams and functions within the group. Turning to our exciting sports data services business. Enterprise Data Solutions will continue to be the fastest-growing part as we further grow our customer base, rapidly expand our product offering and ramp up the offering in new geographies around the world. As a rising challenger in the sports data services space, we are highly valued by our diversified group of customers, growing quickly, and our team is executing at a higher velocity than our peers in terms of product creation, innovation and delivery. Given our pace of execution, I expect us to continue to take meaningful market share. With the rapid evolution of prediction markets, the potential customer base for our sports and odds data services is expanding quickly. We have established ourselves as early as one of the most interesting sources of data on prediction market exchanges and have already made great inroads to selling our odds data to both retail and institutional clients who are trading on these exchanges as well as helping service the exchanges themselves with both data and marketing. There has been some concern that regulated sports books are losing market share to protection markets and that has resulted in a negative sentiment, which seems to have been applied more broadly. To be clear, Gambling.com Group is a net beneficiary of the emergence of this new category as it is expanding our TAM, both on data and marketing. While marketing revenue from prediction markets is still small, we have an obvious opportunity to scale up in this category and help consumers navigate all of their new options. We see a great opportunity to expand our data and trading solutions business by servicing more exchanges, liquidity providers, financial institutions and funds of all styles as prediction markets continue to evolve beyond sports, and more and more players look to be involved. OpticOdds is our brand for enterprise data solutions, and it already has great penetration with U.S. operators. We remain less well known outside the U.S. but are working rapidly to adapt our services to the needs of operators across the many attractive markets, particularly in Europe, where we operate. In order to better service global operators, we are expanding our coverage deeper and wider to 25 stores and 5,000 leagues and tournaments. The two main levers for growth, we are focusing on for 2026 are servicing operators in Europe with better coverage within existing products and selling additional new and innovative products to our U.S. clients such as AI-driven pricing and real-time settlement. Beyond Europe and the U.S., there is no shortage of additional growth opportunities to target in due time. Our solutions are not inhibited by legacy architecture as we already have what we consider to be the state-of-the-art technology for odds data, odds related risk management and bet settlement among other current offerings. We will introduce exciting new platform and product enhancements this year for enterprise customers that will further position OpticOdds as the leading end-to-end data solution for global sportsbook operators. On the consumer side of our sports data business, OddsJam, we will be adding functionality for our subscribers in both prediction markets and [ Sportsbooks ]. Over the course of the year, we will introduce product enhancements for consumers active on prediction markets, including real-time recommendations from Pro traders and arbitrage solutions that offer risk-free bets to help better find value across our industry-leading breadth of markets. For consumers active on [ Sportsbooks ], new enhancements will include a simplified Sharp money tool and a low-cost introductory plan that helps educate the player and then allows us to upsell them into a higher cost plan. I think this gives you a good sense of the focus we are placing on our sports data services business, to be the key driver of our growth and increasingly the driver of shareholder value for [ GAM ] going forward. As reported in December, we have fixed the contingent consideration from the acquisition which enabled us to restructure our internal team to be better focused on source data services. With the earnout payment amounts fixed, we are now able to better align our teams to leverage the strengths of the talented team at OddsJam and OpticOdds to better support RotoWire, the third pillar of our sports data services business, which continues to have substantial growth opportunities with the right product and marketing optimizations. With that, let me turn the call over to Elias for his review of the fourth quarter and full year financial details and more details on our guidance for 2026. Elias Mark: Thank you, Charles. Fourth quarter revenue grew 31% year-over-year to a Q4 record of $46.2 million and full year revenues rose 30% to $165 million. Data revenue grew 440% to $11.8 million in the fourth quarter and subscription revenue was 26% of total revenue, inclusive of revenue share arrangements in our marketing business recurring revenue was 47% of total fourth quarter revenue. For the full year 2026, data revenue grew 392% in GAAP terms and 27% on a pro forma basis to $41.1 million. As previously highlighted, our marketing business has been impacted by low quality search results in the gaming space. Such dynamics still remain volatile as the trend improvements we saw in November have not carried through more recently. As a result, [ NDCs ] of 98,000 were down 32% year-over-year. Despite that impact, marketing revenue rose 4% year-on-year as our traffic diversification efforts picked up speed in the quarter, and we generated a majority of revenue from sources other than organic sale referrals for the first time. Gross profit increased 19% year-over-year to $39.3 million. Cost of sales of $6.9 million compares to cost of sales of $2.2 million in the year ago period, primarily reflecting costs associated with our traffic diversification strategy for the marketing business. Gross profit margin was 85% compared to 94% in the year ago period. Operating expenses adjusted for acquisition and restructuring-related expenses and noncash fair value movements and impairment charges for the quarter grew 32% to $26.9 million. This growth is primarily associated with added head count from the acquisitions in 2025 and higher marketing costs associated with diversification in the marketing business. Headcount outside of the acquired businesses were flat year-over-year. Noncash fair value movements in the quarter of $18.5 million related to the previously announced early termination of the Odds Holdings earnout period. As a result, we will not incur any future fair value movements related to Odds Holdings. Noncash impairment charges of $14 million related to changes in future cash flow expectations from websites targeting the [ Finnish ] market following recent regulatory changes. Adjusted EBITDA was $15.5 million and the adjusted EBITDA margin was 33% compared to $14.7 million and 42% in the year ago period. The lower margin reflects the higher cost of sales and marketing expenses associated with our diversification strategy. Adjusted net income of $12.2 million and adjusted net income per share of $0.30 for the fourth quarter were flat compared to the year ago period despite the impact of increased interest expense. Adjusted free cash flow in the fourth quarter was NOK 7.5 million, reflecting adverse working capital movements from timing differences. For the full year, adjusted free cash flow was $36.3 million and that included tax payments of a one-off nature of $5.6 million related to IP tranches. During the fourth quarter, we drew down $38 million on our credit facility revolver. We paid deferred consideration of $33.6 million related to Odds Holdings, and we've repaid $2.8 million on our term loan. As of December 31, we had total cash of $15.8 million and $123.6 million of borrowings outstanding and $32.5 million of undrawn facilities on our Wells Fargo credit [ facility ]. We continue to produce strong free cash flow that will allow us to both delever and continue to invest in our organic growth initiatives. During the fourth quarter, we repurchased 110,000 shares. In total, for 2025, we repurchased 672,000 shares for a total consideration of $5.6 million. and we continue to have $14.4 million remaining with our share buyback authorization. We continue to invest in product development and diversification strategies that we believe will power growth in coming years. while prioritizing cost control and leveraging AI in our work processes to drive efficiency gains via automation. This morning, we introduced our 2026 full year guidance for revenue to be in the range of $170 million to $180 million. And adjusted EBITDA to be in a range of $50 million to $58 million. We expect revenue growth to reflect continued strong growth in data services driven by Forest Data enterprise services. Our revenue and EBITDA expectations are negatively affected by continued poor organic search dynamics and regulatory headwinds. In the U.K. for a higher-than-expected increase in gaming duty impact player values and volume. And in Europe, where new regulations in Finland will curtail performance marketing. The adjusted EBITDA margin indicated by this guidance, around 30% for the full year is expected to be lower in the first half of the year and higher in the second half of the year. This reflects the continued investments that we're making to diversify our marketing business. The investments in our sports data services product enhancements and the investments needed for the development and rollout for our new products that we plan to launch and for which we expect only marginal revenue contributions for this year. Operator, we will now open the floor for questions. Operator: [Operator Instructions] Our first question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Ryan Sigdahl: Sticking on kind of the guidance to end Elias, it's U.K. tax increases going to effect in April. Thoughts on the market on what you're seeing. I guess, the thought is what we're hearing as Tier 2, Tier 3 operators kind of the long tail might get squeezed out of the market. That's typically a better opportunity for you guys relative to the big top heavy ones. So curious, I guess, how you've pivoted your strategy or plan to pivot your strategy, really the nuances within the U.K.? And then kind of last point on that, if you're willing to break out kind of the challenges in rank order within the guidance in your performance marketing from the U.K. versus Finland versus Google and search. Charles Gillespie: Ryan. We've got Kevin here, the Group COO, who's probably best positioned to give you some color on the U.K. market. Kevin McCrystle: Ryan, nice to finally be on this call. we are starting to see the impact and have seen the impact of the U.K. market changes. It's a mix of a few different things. There will be some brands that leave the market. But overall, there's really -- there's like hundreds of brands in the market. So some leave, it's still a very robust market. We've always done well with the challenger brands, which there will still be enough of the market going forward. Our strategies in the market will still persist and work really well. We think, if anything, it will be more of an opportunity for us if some competitors do decide to exit the market as well. There's potentially some opportunity for pricing to go down a little bit, but these traffic struggles that we've seen a little bit have also impacted the operators, and there are some brands that we expect actually may need to increase pricing, though the macro forces will force it down for some of the top brands in the market as well. Ryan Sigdahl: Maybe, Elias, if you can comment on the guidance and kind of rank order of challenges within that. And then I do have a follow-up. Elias Mark: Yes, sure. So if we look at the change in our internal outlook, this is entirely due to two factors affecting the marketing business, as we said. And what has really changed since our November call, if these new regulatory headwinds in the U.K. and Finland. But we have also -- what we've also seen is that some of the positive trends that we referenced in -- at the end of October and beginning of November has not carried through. So there is continued search for utility. It's hard to pinpoint an exact term the impact of each of these because there is an element of correlation, but what has materially changed in the macro environment since we last reported is the regulatory headwinds in the U.K. and Finland that we already see impact us. Ryan Sigdahl: Helpful. Second question... Elias Mark: I can just add that was not changed in our outlook is sports data services where we continue to expect a very healthy high teens growth driven by the acceleration on the enterprise side. Ryan Sigdahl: Good segue. That's my second question is on OpticOdds specifically the data services. Curious where you're seeing the most success and where you expect to see the most success in '26 in your guidance, if that's upselling. You mentioned more sports expanding the platform and seemingly upselling your existing customers there? Or is it land and expand with new customers, whether that's prediction markets or other geographies? And then kind of also on OpticOdds I just curious the company's mindset to guarantee an earn out early based on an EBITDA figure for 2026. Kevin McCrystle: Ryan, Kevin here again. I can take that. This is obviously an exciting area of our business. Growth is -- a lot of our growth will be driven by optical or enterprise product in the sports fee services space. For that, we have around 300 active customers on recurring long-term contracts, and there's about 100 new clients in the pipeline. Importantly, 70% of which are international. In 2025, revenue per client was up 50%, and we onboarded 29 new clients in Q4 alone. Going forward, there's a focus on both increasing revenue per client and converting that sales pipeline to add more customers. We do have a handful of revenue share deals and these can be materially more lucrative than fixed fees, which is a clear area of focus going forward. Prediction markets are also important here. They've unleashed a Cambrian explosion of entrepreneurial activity with new faces from traditional tech and finance now entering the space and we are supporting all manner of market participants with high-quality data. The prediction market data in the OpticOdds API comes pre-mapped to existing betting markets. Beyond optic though, just sticking on prediction markets for a second there, prediction markets are also an opportunity for consumer product innovation on OddsJam. In terms of the ending the earn-out, we did want to fix the remaining contingent consideration. But beyond that, it really offers a great opportunity to allow better alignment between OpticOdds, OpticOdds and the rest of our group, notably RotoWire, which we're already seeing on some good results from. Operator: Our next question comes from the line of Jeffrey Stantial with Stifel. Jeffrey Stantial: Maybe starting off on Elias' answer just before on guidance. So it sounds like the main delta is relative to how you laid it out back in November is primarily regulation and then a little bit of the Google search rankings not improving the way that you expected. I guess maybe we'll stick with Kevin for this one. Can you talk about more sort of the AI sort of headwinds? What have you been seeing in real time over the last few months in terms of LLMs taking share or Google AI [ summer ] is taking share? Just sort of how has that evolved over the last few months because it seemed to be sort of left out when talking about potential guidance headwinds or at least revisions relative to the prior? Kevin McCrystle: Yes. I think you need to kind of take two lenses on that. Our referrals from LLM are up substantially quarter-over-quarter, and that's something we expect to see going forward. So that's a positive trend. On a macro lens, it doesn't appear yet that that's eating at Google at the moment. The issues we're seeing are more so with Google itself. And as we noted, that November ranking rebound has not quite persisted. With Google, there's two core challenges. One is offshore spam. This is particularly in international markets, this channelization issue due to kind of overly burdensome regulations. And two, negative SEO attacks, which is something we haven't really discussed before. These are both unique to online gambling with search they seem to monitor it a bit less than some others, and there's very aggressive competitors. Spammers continue to win a cat and mouse game with Google and Google has been slow to react to the current wave. Historically, they were very quick to react, Hence, our guidance on short-term recovery. They may have taken their eye off the ball with some of their focus on other endeavors besides search but negative SEOs when competitors use third parties to manufacture signals that degrade sites overall authority and we've been getting those attacks. It's difficult to identify who's sponsoring them. Google is still incentivized to fix this. It's a search quality issue for their end users after all. So we do expect change to come, but it hasn't happened yet. Charles Gillespie: Jeff, just to add, I think an interesting way to frame this is to look at the second order effects of AI, right? Like everybody looks at Google, and thanks AI LLM, so nobody is using Google Search anymore. That's totally not true. You just look at the Google results and the search revenue results, Google Search is working better than it's ever worked. But with this new AI world, the spammers are able to put out more span that's higher quality than ever by using AI and Google itself is, of course, very focused on its own AI future and thus not policing the search results in the same -- with the same vigor that they used to from our perspective. So it is AI related but not in the way that people assume. Jeffrey Stantial: That's a really interesting point for info initial color. Kevin, maybe turning more to sort of capital allocation and strategy. It looks like your stock is now trading about on my math 4x your trailing 12-month free cash flow, which to us really seems quite remarkable and grounded more narrative than any sort of reality. Recognize that you can't talk specifics or get [indiscernible] book. Charles, I'm just curious like internally, what is the dialogue around sort of strategic optionality if you do see the market continue to dislocate seemingly entirely on narrative? Charles Gillespie: Yes look, we -- I think the short-term priority is to use our cash to delever somewhat there's plenty of upside to our 2026 guidance if a few things fall in place, so we could find ourselves in a position where we are generating margins, which are closer to the historical margins in which case buyback to be back on the table. Obviously, at the current level buybacks are incredibly attractive, but we want to delever before we really focus on buybacks. So we have a buyback program in place, and we will I'd love to be in a position this year to use that. Longer term, I think we need to evaluate all of our options. But plan A at this point is to make the stock work. We're here. We're a listed company in the United States. We do have a great business. We're caught up in a lot of the same narrative challenges as other companies at the moment. But we're still here, and we plan to make it work. Operator: Our next question comes from the line of Barry Jonas with Truist Securities. Barry Jonas: Charles, I'm curious to get your thoughts on the [ Genius Legends ] deal and if you see any implications for, I guess, how you think about your strategy? Charles Gillespie: Barry, look, Legend is one of the great online gambling affiliate businesses. It's a very direct comp to our marketing business. I've known the founder at [ Kisber ] for many years, and I take my hat off to them on a very impressive transaction with [ Genius ], and we wish them all very well going forward. A lot of former [ Legend ] staff work again and vice versa. All in gambling affiliate world is quite small. Their strongest asset is definitely [ covers.com ], which, of course, is a great site. We went up against them to acquire it many years ago. And unfortunately got outbid, but there is vastly more to [ Legend ] than just [ covers.com ]. They operate a long list of assets in a variety of markets around the world. The transaction certainly highlights the synergies between sports data and marketing assets. I'm pursuing the same strategy as [ Mark lock ], but in reverse. We started with marketing, and we see sports data services as extremely interesting. A lot of revenue there. And potential advantages to come at it with fresh technology without having tied ourselves up with very large contractual obligations to leagues with official data agreement. So we think sports services is obviously our future, and that's that we've made. We're just kind of doing it in the opposite order. Otherwise, competition is great, and we look forward to being what [ Genius ] will do with [ Legend ]. Barry Jonas: Sounds great. And then just as a follow-up, Charles, I would love to get your high-level thoughts on the potential for new [ iGaming ] legalization from here? And I guess with that, is [ Maine or Alberta ] embedded in the guidance to any degree? [ Maine ] is tiny, and they're just going to have a couple of operators. So that's completely immaterial. The non-Ontario Canada is a gray market where a lot of people are already active. So [ Alberta ] will be helpful because it will -- it looks like it will be a dynamic market, multiple operators similar to Ontario. So that's positive because you'll have more marketing dollars going into it, but it's not going to make a material difference. In the states, we've got our eyes on Virginia. They -- it looked like they might legislate this year. Now it's looking like next year. Massachusetts in Illinois have bills alive for [ iGaming ]. New York [ iGaming ] seems slightly more likely than it did previously. I understand that some of the union opposition has been addressed, and they're not fighting it as hard. That would obviously be a big one and would be material. Operator: Our next question comes from the line of David Katz with Jefferies. David Katz: Charles, you mentioned earlier the version of a new product for marketing that is not discussable for competitive reasons, which is completely understandable. But maybe just talking around it a little bit on the degree to which you're rolling that out is impacting the EBITDA guidance for this year? And what the variability in that impact, if there is any, might be, but not for it, would EBITDA be up and if we could put any specificity around that. That would be helpful. Charles Gillespie: Yes. Thanks for not trying to get me to reveal the GC details, David. Yes, Elias, do you want to quantify a high level what that looks like? Elias Mark: Yes. I mean we have included both CapEx and OpEx related to this new product. It's not of the magnitude that you would have otherwise led to adjusted EBITDA growth, but it's certainly added OpEx and CapEx. That's included with very limited revenue assumptions. Charles Gillespie: Couple of millions sort of thing. David Katz: Understood. And if we think about what its revenue benefit is presumably, there is some revenue for it in the guide for this year. Maybe, again, just talking around it a bit how you see like what you think this product will do for you. Just so we can help think about including that in your multiple, which I think my colleagues address pretty well before? Charles Gillespie: Yes. It's going to produce not a lot of revenue this year, call it $1 million, just round numbers to keep it simple. The story is really going to be about 2027 and 2028. It is incredibly strategic for us. It solves a couple of key objectives for us. It built -- helps us build that much closer relationship with our end users. It leverages the power of our marketing business. it's clever. And I think everyone's going to like it, and that's part of the reason why we're keeping the cards close to the vest at this point. But yes, it will really start to make a difference in '27 and '28. This year is getting it live, laying the groundwork, putting the rails in place and then the real benefits will come next year. But it's something that we can use our marketing business to grow, and we can -- and it will also have substantial benefits that flow back into the marketing business. It's going to take the marketing business, it's going to completely change the narrative on the marketing business. Operator: Our next question comes from the line of Mike Hickey with StoneX Group. Michael Hickey: Just a couple of questions. Charles, you mentioned that there was a path to upside, I guess there's always a path to upside but you seemed excited versus your '26 guide. So what are the catalysts, I guess, that are most identifiable to you to drive upside to numbers in '26? Charles Gillespie: Definitely SEO improving whenever we have kind of a challenging SEO environment, we make forecast end up being too pessimistic. And when SEO is flying, we end up being too optimistic. But Sports Data Services definitely has a real potential to outperform non-SEO also has real potential to outperform. A lot of the stuff we're doing, including the new product I just talked about with David, these are new initiatives, right? So when we forecast this stuff, we got to be conservative, right? We're not going to just put a forecast on the table, which is too aggressive for something which is fundamentally relatively new inside the business. But our non-SEO initiatives are obviously succeeding. That's been driven more revenue in Q4 than SEO for the first time. There's certainly potential for that outperform. You've got CRM, which is scaling up paid media, which is scaling up. We've got quite a few levers which could result in outperformance. But we are also very conscious of putting out numbers that we can hit even if none of those things outperform. Michael Hickey: Do you feel like in this environment, you did a couple of extra layers of conservatism on your [ '26 ] spot. I know it's second half weighted, but just given the volatility, the challenges in the Surat, do you feel like you sort of kitchen sink this a bit. Charles Gillespie: That's the idea, Mike. We want to be pretty conservative. Michael Hickey: Yes. All right. Last question, obviously, a lot to digest in '26, a lot of change in the industry and in your company. Charles, Kevin, when you look longer term, the best you can, thinking sort of '27, '28. Can you just sort of give us the vision that you see the growth opportunity? And also how M&A could eventually fit back into the picture as you look to sort of develop and grow your data business, which has been a role of exception and shining star here. Charles Gillespie: Yes. If you look at '27 and '28, marketing is going to return to growth. That narrative is going to change. It's going to become a more interesting business just in terms of the pure numbers and the and the story as a result of all of the different things we're doing to the marketing business the clear path for growth for Sports Data Services, obviously also means that that's going to continue to grow faster than marketing. So that's 26% of group revenue in Q4. That will keep ticking higher. But we do expect to grow revenue in the marketing business as well. So it's not going to -- or a services isn't going to it's not going to be 50% of group revenue anytime soon. But when you look at '27, '28 in we see these businesses thriving being AI-enabled and highly efficient. And it's one thing to make a business AI proof that something else to make it a major beneficiary of AI, right? And if you look at our sort data services business, it's not SaaS. It's fundamentally a data, which is not easy to get your hands on. Our customers could use quad code and try to create similar software to get their hands on that data. But the reality is, is we spend an enormous amount of money on compute just to aggregate that data. And some of that data only comes because of [ GAN's ] very long relationship with major operators in the industry. So it's not economical or logical for any of our clients to try to do that themselves. So it's a perfectly defensible business in a world that's AI first and data quality, unique data sets in the world of AI or where the value is going to accrue. Kevin McCrystle: If you also look a little bit longer term, AI, using AI internally and kind of all the things we do will help us execute at a higher velocity generally and will mean that over the kind of long-term we don't expect significant cost increase overall across the business. And so those costs can stay stable as revenue continues to grow, which will, in the long run, improve margins. Operator: Our next question comes from the line of Chad Beynon with Macquarie. Chad Beynon: We just returned from a very well-attended annual [ iGaming ] conference, and it seems like prediction market certainly overtook the preponderance of conversations and sessions. And I know there were a few there that actually believe predictions could be bigger than sports betting in a few years. Not sure if that's hyperbole or if there's really data supporting that. But given the difficult legal situation and definition going on? How are you guys thinking about just investing time, money more into predictions if some of these views end up being true in a few years? Charles Gillespie: Chad, the more people I talked to in the industry and the smartest people I talked to you in the industry are the most comfortable with the future of prediction markets from a legal perspective. It does feel like that that's not going away. I mean, I think it will ultimately go to the Supreme Court. But I think the case from the [ CFTC ] that this is well within their mandate is going to survive. I think the end user interest and the public interest in this is also the genie's out of the bottle. It's very clear that there is demand for this and people like the product. So I think it's here to stay. When this category first came out, I was like, "Oh, this is betting exchanges from the U.K. ", and that fairs an okay business, but it's not -- it didn't kind of fulfill its ultimate promise that everyone in the industry thought it would. You could also apply the metaphor for poker, right? It's poker boomed until the sharks ate all the fish. So -- are those -- what lessons can we learn from that? And are they applicable here to prediction markets? And my first gut instinct was they are applicable. But as we've gotten deeper into this, and I've seen so many start-ups and entrepreneurs and people thinking critically about it. And it really is where the energy is at the moment. It feels like in the industry. So I think I don't think those lessons from poker and European betting exchanges are directly applicable. And I it's a distinctly American products, Americans grow up, trading stocks, thinking about the stock market, buying and selling. That is not the same outside the U.S. So there's some specifically American characteristics to it, which I think will give it a bright future. Chad Beynon: And then just thinking about maybe the SEO part of the business or maybe even including the non-SEO. CPAs versus rev share, I know there was discussions in prior quarters that this mix could change, and that could impact the near-term financials how did this change in '25? And then as we think about '26, do you think there should be any adjustment in terms of those proportions for the marketing business? Charles Gillespie: Chad. Yes, we did see our percentage of rev share go up on the marketing business. Overall -- for the overall group, rev share was around 25% of revenue, which is up from historical levels, a lot of historical basis from online casinos, which you can do rev share, but it's not necessarily more lucrative than revenue share does tend to work better for sports betting. And as we do more in sports betting revenue share makes sense, we are increasingly putting more users through revenue share deals. They do take longer to play out, though, to get the full lifetime value. You're not going to see in month 1, a CPA is much more valuable. And in month 6, the CPA is probably still more valuable. So it takes a little longer to see that play out. In the U.S. market, we have been moving more to revenue share. That's done okay, but we see pockets overall, where it's worked really well. And we have really complex machine learning that optimizes our ad tech to kind of figure out the right deal for the right market to push to users. And we don't necessarily have a strategic view that we'd rather move to revenue share, though, obviously, that's great. We do want to maximize the value per user. And so that's how we think about it. Operator: Our next question comes from the line of Clark Lampen with BTIG. William Lampen: I think I have a couple for Elias here. I guess, in light of the shift in strategic priorities, which you guys have talked about already in the importance of the subscription and OddsJam businesses on a go-forward basis, I wanted to see if it's possible for you guys to help us think about how much of the 2026 EBITDA that you're forecasting at this stage is a function of those businesses? I think our sense is that, that revenue stream has a 40% to 50% margin profile, curious if that's accurate, I guess, for question one. And then question two, when we think about, I guess, sort of compounding this or feeding into the decision to sort of shift focus and priorities right now, the delta between the SEO and non-SEO businesses? I know you mentioned that this is going to be a drag in the first half of the year. Is it possible to give us a sense for how different as a result of traffic acquisition costs, the margin profile of those operations are. Elias Mark: Yes. So it's -- we don't break out segments to EBITDA. But the way we think about it internally is about contribution margin. If we look at our sports data, this has a higher contribution margin on a run rate basis. The contribution margins are well over 50%, and they are expanding as revenue scales faster and costs in contrast, the contribution from our marketing business, still high, but it's sub 50%, and it has been declining as a result of our strategy of channel diversification. But it's as Charles said, before it continues to, and it will continue to produce very healthy cash flows even with a little bit of margin contraction. Kevin McCrystle: Clark, Kevin here. SEO has very high margins. So almost any other channel is going to have slightly lower margins than that. We've been investing heavily into non-SEO channels. We've seen e-mail, social LLM referrals, all up between 50% and 500% in Q4 versus Q3, just to give a little perspective on that. But there's a mix of margin across channels. And additionally, there is some upfront investment, specifically around content and product and at times, access to various communities. But we do see that margin improving on nonovertime specifically related to the CRM activity. The CRM really ties together all the channels. creates a new growth flywheel from consistent customer engagement, and that is pretty much all margin CRM. So as we kind of engage more users get them into our funnel, over time, that's an opportunity to improve margins. Elias Mark: And that's also just finished at -- that's also why we are guiding towards a slightly lower margin in H1 than we are it takes a little bit of time to scale and as we scale the incremental margins from these new channels improved. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Gillespie for any final comments. Charles Gillespie: Thanks, everybody, for joining us today. We look forward to another year of growth, and we look forward to updating everyone on our Q1 results in May. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Welcome, ladies and gentlemen, and thank you for your patience. You have joined Xunlei's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that this conference is being recorded. I would now like to turn the call over to the host, Investor Relations Manager, Ms. Luhan Tang. Please go ahead. Luhan Tang: Good morning, everyone, and thank you for joining Xunlei's Q4 and Fiscal Year 2025 Earnings Conference Call. With me today are Jinbo Li, Chairman and CEO; Eric Zhou, CFO; and Lee Li, Vice President of Finance. Our IR website has our earnings press release, a supplement our prepared remarks during the call. Today's agenda includes our prepared opening remarks from Chairman and CEO, Mr. Jinbo Li on Q4 operational highlights; followed by CFO, Eric Zhou's presentation of financial results, details of Q4 and the fiscal year before we open up the floor to your questions in the Q&A session. Please note that this call is recorded and can be replaced on our Investor Relations website at ir.xunlei.com. Before we get started, I would like to take this opportunity to remind you that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are based on our management's current expectations under existing market conditions that are subject to risks and uncertainties that are difficult to predict, which may cause actual results to differ materially from those maintained in the forward-looking statements. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results. Xunlei assumes no obligations to update any forward-looking statements, except as required under abdicate laws. This call will be using both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to comparable GAAP measures can be found in our earnings press release. Please note that all numbers are in the U.S. dollars unless otherwise stated. Now the following is prepared statements by Mr. Jinbo Li, Chairman and CEO of Xunlei Limited. Good morning, and good evening, everyone. Thank you all for joining us today. we're extremely pleased to wrap up 2025 with exceptional fourth quarter and full year operating results, which not only met, but exceeded our expectations and demonstrated the strong momentum of our strategic transformation. 2025 has been a year of remarkable growth, strategic refinement and value creation that marked by robust performance across all core business segments, successful strategic transactions and significant progress in optimizing our business portfolio. A key milestone of our success for the year is the consistent double-digit growth across our major business lines, a testament to the effectiveness of our ecosystem-driven strategy, our focus on core competencies and our ability to adapt to evolving market dynamics. Now I'd like to share with you detailed insight about our operations in Q4 2025 and full fiscal year, which underscore the strength of our business model and success of our strategic initiatives. First, our subscription business continues to serve as a stable core asset and reliable growth driver for the company, demonstrating strong resilience and growth momentum. In the fourth quarter, we generated $42.1 million in subscription revenue, representing a solid 22.4% year-over-year increase. For the full year 2025, subscription revenue reached $154.8 million, up 15.8% from 2024. This sustained growth is underpinned by 2 key pillars: First, our deeply integrated business ecosystem continue to deliver value as the high proportion of paying subscribers opting for our premium subscription business, which integrates Internet browsing, high-speed downloading tools, expansive storage and value-added features to enhance user engagement and retention. And second, our strategic alliance with leading mobile manufacturers and platform partners expanded our user reach, enabling us to tap into a new user group and drive organic growth. Moving forward, we will continue to integrate advanced features, optimize our product experience and expand our market presence to drive further growth in our subscription business. Next, our cloud computing business achieved a turnaround and delivered significant growth in 2025. In Q4, cloud computing revenue was $46.1 million representing an increase of 102.7% year-over-year. For the full year, cloud computing revenues reached $137.4 million, up 31.4% from 2024. This growth was driven by the increased demand for our cost-effective solutions. As you might learn from our announcement last week, we realigned and strengthened our strategic focus and sold 50% of our stake in OneThing, the operating entity of our cloud computing business. We believe that the equity divestiture will support business optimization and leverage our partners' expertise to advance OneThing's edge computing and CDN services. Meanwhile, Xunlei will reallocate its resources to core growth drivers, subscription and overseas live streaming, while retaining a minority stake in OneThing to capture future upside, if any. We believe that the transaction will have no significant negative impact on our core operations, cash flows or profitability. And instead, it may improve our capital efficiency and strategic clarity in the long run. Our live streaming and other Internet value-added services has emerged as a key growth engine, delivering rapid growth in 2025. In Q4, this segment generated $55.1 million in revenue, representing a 102.8% year-over-year increase. For the full year, live streaming and other IVAS revenues reached $170.2 million, a remarkable 97.5% increase from 2024. This exceptional growth validates our strategic pivot in late 2023 to exit low-margin volatile domestic market and focus on high-growth emerging regions such as Southeast Asia and the Middle East and North Africa. By leveraging our strength in product refinements, user engagement and monetization, we have achieved significant growth in our overseas audio live streaming business. Additionally, the integration of Hupu, which we acquired in 2025, generated synergies to our business, with Hupu contributing to our advertising revenue through its vibrant and highly engaged community, Reviewing our overall financial performance for 2025. We delivered substantial results across the board. Total revenues for Q4 2025 reached $143.3 million, a 17% year-over-year increase, reflecting the strong growth of all our core business segments. For the full year 2025, total revenue hit $462.4 million, representing a 42.5% increase from 2024. This robust revenue growth is a clear indication of the success of our strategic transformation, which has focused on strengthening core businesses, optimizing product portfolio and exploring high-growth opportunities. Additionally, our investment in Arashi Vision has generated significant unrealized capital gains and may further enhance our financial strength and capital flexibility. To conclude, 2025 has been a transformative year for Xunlei, marked by strong financial performance, successful strategic transactions and significant progress in our core businesses. We have demonstrated our ability to adapt to market changes, optimize our portfolio and drive growth through strategic focus and innovation. With our clear strategic direction, strong business momentum and enhanced captive flexibility, we believe we are well positioned to capitalize on market opportunities and deliver sustained growth in 2026 and beyond. And we remain committed to create long-term value for our shareholders. With that, I will now pass the call over to Eric. Eric will give a detailed review of our Q4 and fiscal year financial results. Eric Zhou: Thank you, Luhan. Thank you all for participating in Xunlei's conference for today. I will now walk you through our financial results for the fourth quarter and the full fiscal year of 2025. . Let's begin with the fourth quarter of 2025 results. Total revenues for the fourth quarter were $143.3 million. This represents an increase of 17% compared to the same period last year. This growth was primarily driven by higher revenue from our cloud computing and live streaming businesses. Looking at our revenue streams in more details. Revenues from subscriptions reached at $42.1 million, up 22.4% year-over-year. This increase was mainly due to higher demand for our subscription services. Revenues from and other were $55.1 million, up 102.8% year-over-year. This significant growth was driven by the expansion of audio live streaming business as well as growth in our advertising business, largely resulting from our acquisition of Hupu. Revenues from cloud computing were $46.1 million, up 102.7% year-over-year. This increase was due to greater demand for our major -- from our major customers for cloud computing services. Moving to costs and profitability. Cost of revenues were $80.8 million, representing 56.4% of our total revenues. This compares to $40.4 million or 47.9% of total revenues in the same period of 2024. The increase was mainly due to higher revenue sharing costs for live streaming business and increased bandwidth costs associated with higher demand for our cloud computing services. Gross profit for the quarter was $61.7 million, an increase of 41.5% year-over-year. Gross profit margin was 43% compared to 51.7% in the fourth quarter of 2024. While gross profit dollars increased driven by our subscription and overseas audio live streaming business, the margin decreased. This was primarily because a larger portion of our revenue now comes from our overseas audio live streaming and cloud computing business, which carries lower gross profit margins, while the proportion of revenues from our higher-margin subscription business decreased. Turning to operating expenses. expenses were $21.9 million or 15.3% of total revenues, up from $18.7 million last year. The increase was primarily due to higher labor costs. Sales and marketing expenses were $23.2 million or 16.4% of total revenues, up from $12.5 million. This was driven by the expansion of marketing campaigns for our subscription and overseas audio live streaming business. G&A expenses were $12.4 million or 8.6% of total revenues compared to $12.1 million last year. The slight increase was due to higher legal expenses during the quarter. As a result, operating income was $4.7 million, which is a significant improvement from an operating loss of $20.5 million in the same period of last year. The turnaround was primarily due to the absence of a goodwill impairment charge of approximately $20.7 million that were incurred in the fourth quarter of last year. Net loss for the quarter was $228.9 million compared to a net loss of $9.9 million in the same period last year. The increase in net loss was primarily due to other losses net, which totaled $232.6 million. This compares to other income of $1.5 million last year. The change was mainly due to a decrease in the fair value of our long-term investment in Russia-Beijing following its IPO in June 2025. On a non-GAAP basis, which excludes the impact of share-based competition and certain other items, net income for the fourth quarter was $4.8 million compared to $11.3 million in the same period of 2024. Diluted loss per ADS was $3.64 compared to a loss of $0.16 in the fourth quarter of 2024. Non-GAAP diluted earnings per ADS were $0.08 compared to $0.18 in the same period last year. Turning to our balance sheet. As of December 30, 2025, we had cash, cash equivalents and short-term investments of $305.4 million. This compares to $284.1 million as of September 30, 2025. The increase was mainly due to the net cash inflow from operating activities and an increase in proceeds from bank borrowings. Now let's move to our full year 2025 financial results. For the full year, total revenues were $462.4 million, an increase of 42.5% compared to the previous year. This growth was attributable to revenue increase across all of our major business segments. Breaking down the full year results subscription revenues were $154.8 million, up 15.8% year-over-year driven by increased demand. Revenues from live streaming and other IVAS were $117.2 million, an increase of 97.5% year-over-year primarily due to the growth of our overseas audio live streaming business and advertising business following the Hupu acquisition. Cloud computing revenues were $137.4 million, up 31.4% year-over-year due to increased demand for our services. Cost of revenues for the year were $242.9 million, representing 52.5% of total revenues. This compares to $155.6 million or 48% of our total revenues in 2024. The increase was mainly due to higher demand for car computing services and increased revenue sharing costs from the expansion of overseas audio live streaming business. Gross profit for the year was $217.5 million, an increase of 29.8%. Gross profit margin was 47% compared to 51.7% in the previous year. The increase in gross profit dollars was driven by our subscription and large streaming businesses, partially offset by a decrease in gross profit from cloud computing. The margin declined similar to the quarter reflects a shift in revenue mix towards our lower-margin oversea audio live streaming and cloud computing businesses. Looking at full year operating expenses, expenses were $18 million or 17.3% of our total revenues, up from $71.6 million last year, primarily due to higher labor costs. Sales and marketing expenses were $86.3 million or 18.7% of total revenues, up significantly from $44.8 million. This was driven by expense marketing campaigns for our subscription and live streaming businesses as well as higher labor costs. G&A expenses were $44.9 million or 9.7% of total revenues compared to $45.8 million last year. Operating income for the year was $6.6 million, a significant improvement from an operating loss of $15.7 million in 2024. This was primarily due to the increase in gross profit and the absence of the onetime goodwill impairment we recorded at the end of 2024. Net income for the year was approximately $1.05 billion compared to $0.7 million in the previous year. This large increase was primarily driven by higher gross profit and other income during the year. On a non-GAAP basis, net income was $18.5 million in 2025 compared to $23.9 million in 2024. Diluted GAAP earnings per ADS were $16.56 compared to $0.02 in the previous year. Non-GAAP diluted earnings per ADS were $0.30 compared to $0.38 in the previous year. Our year end cash position remains strong. As of December 31, 2025, we had cash, cash equivalents and short-term investments of $305.2 million compared to $287.5 million at the end of 2024. The increase was mainly due to net cash inflow from operating activities and proceeds from bank borrowings, partially offset by the payment of the acquisition of Hupu. Finally, a quick update on our share buybacks. As of December 31, 2025, we had spent approximately $1 million to repurchase about 435,000 ADAs during 2025. Since the inception program on June 4, 2024, we have spent a total of about $6.5 million on share buybacks. This concludes our prepared remarks for today. Operator, we are now ready to open the line for the questions. Operator: [Operator Instructions]. And now we're going to take our first question, and it comes for an of [ Dante ] from [indiscernible] Retail Investor. Unknown Analyst: [Foreign Language] Luhan Tang: The investor asks what our for the cash consideration obtained from the transaction? Jinbo Li: [Foreign Language] Luhan Tang: [Interpreted] So Jinbo Li answering, we're going to use the cash consideration for the development of the company's core businesses. specifically including the R&D in technology as well as the integration of upgrades for our products. For example, the cloud acceleration and overseas audio live streaming businesses. Besides that, we also will use the money on the market expansion and brand promotion aimed at increasing the market share of our products and at the same time, optimize the company's operating capital structure and enhance overall operational liquidity. Thank you. Unknown Analyst: [Foreign Language] Luhan Tang: So he's asking if the Cloud related quality to Xunlei and why you are selling the stake to them? Jinbo Li: [Foreign Language] Luhan Tang: [Interpreted] So to answer this question, Mr. Jinbo Li says, so Kingsoft Cloud is not the only one option that we were looking for. In the past 2 years, we have been looking for the buyers and we did a lot of market research, and we finally decided to choose a Kingsoft software cloud for the 2 reasons. One is it has the maximum return for Xunlei. And the second reason is because Kingsoft Cloud has advantage in the cloud infrastructure and the cloud technology R&D and industry solutions. So they will offer support for OneThing business development and the contribution to the enhancement for the OneThing's market competitiveness and operating performance in the future. Operator: [Operator Instructions] Luhan, please be advised we have another line to asking the question. And if you don't mind, please can you announce these participants? Luhan Tang: Sure. [Foreign Language]. Please go ahead to ask your question. Operator: My apologies, this person just put his name in Mandarin, so therefore, I cannot even pronounce his name. Luhan Tang: Yes. I try to speak Mandarin to her, I guess. [Foreign Language] Operator: My apologies, dear participants with e-mail if you would like to ask a question, please a question. My apologies, there are no questions from these lines. [Operator Instructions]. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks. My apologies, now we have another question to come through. Would you like to take it? Jinbo Li: Yes, please. Operator: And the question comes from the line of [ Jeff Shang ] from [ Stonehill ] Capital Management. Unknown Analyst: I just wanted to quickly ask Mr. Jinbo Li, what is the company's plan and the Board's plan with the ArachiVision stake once the lockup expires? And how should shareholders think about potential shareholder return and the size of potential shareholder return? Luhan Tang: [Foreign Language] Jinbo Li: [Foreign Language] Luhan Tang: [Interpreted] So Mr. Jinbo Li answered the first question about how we -- after this invest, how are we going to allocate the funds. He said we intend to allocate the funds towards the R&D of emerging technologies and also the exploration for the new business initiatives and may create the initiatives that create significant value for the company. At the same time, we will also assess all the physical options to reward shareholders. We will determine the the pace of divesting from based on the company's business solvent and also the capital market condition at the time. We'll have a lot of options to choose from. So please stay tuned for the disclosure during that time. He actually answered the question about the return. He said we will please stay tuned for the further disclosure during the time. Operator: [Operator Instructions] And now we're going to take another question, and the question comes from line of [ Fujitsu Sihon ]. Luhan Tang: We cannot hear you. Operator: There is no answer from this line. Dear speakers, there are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks. Eric Zhou: Okay, operator. We conclude prepared remarks for the conference call. And we are -- I think that's all for today. And for any callers, if you have any questions feel free to contact us. Okay now we can close the conference. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Ladies and gentlemen, good day, and welcome to Full Truck Alliance's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mao Mao, Head of Investor Relations. Please go ahead. Mao Mao: Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the company's future performance, which are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and discussion. . The general discussion of the risk factors that could affect FTA's business and financial results is included in certain filings of the company with the SEC. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purpose only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. Joining update on the call from FTA finish management are Mr. Hui Zhang, our Founder, Chairman and CEO; and Mr. Simon Tai, our Chief Financing and Investment Officer. We will open the call to questions following a brief of the opening remarks from Mr. Zhang. As a reminder, this conference is being recorded. In addition, a webcast replay of this call will be available on FTA's Investor Relations website at ir.fulltruckalliance.com. I will now turn the call over to our Founder, Chairman and CEO, Mr. Zhang. Please go ahead, sir. Hui Zhang: [Foreign Language] Mao Mao: [Interpreted] Hello, everyone. Thank you for joining us today for our fourth quarter and fiscal year 2025 earnings conference call. In the fourth quarter of 2025, amid a complex market environment, we continue to energize our ecosystem by elevating user experience and strengthening protection mechanisms for both shippers and truckers driving solid business growth across the board. Total fulfilled orders reached 63.9 million for the quarter representing a year-over-year increase of 12.3% and full year total fulfilled orders reached 236 million, up 19.8% year-over-year. Notably, full year orders fulfilled for cold chain logistics grew by nearly 30% year-over-year. Hui Zhang: [Foreign Language] Mao Mao: [Interpreted] In terms of operational performance, key metrics across all business lines improved steadily in the fourth quarter. On the shipper side, our targeted user acquisition strategy and refined membership system gained momentum. Average monthly active shippers reached 3.28 million in the fourth quarter and 3.14 million for the full year 2025 marking year-over-year increases of 11.6% and 18.6%, respectively, demonstrating parallel improvements in both shipper base and user stickiness. For truck users, we continue to optimize the trucker credit rating system and protection mechanisms, maintaining the 12-months rolling active trucker space at a high level and the next month retention rate for truckers who responded to orders above 85%, further strengthening the overall reliability and quality of our truckers network. Our AI-powered heavy truck feed delivered by Giga AI is now operating commercially in the express delivery and fast freight factors. We also piloted AI assistant capabilities for shippers to further enhance fulfillment efficiency during the quarter. Moving forward, we will continue to accelerate the integration of AI technologies and applications across our transactions and fulfillment processes. Hui Zhang: [Foreign Language] Mao Mao: [Interpreted] Now turning to our financial performance. We remain focused on enhancing operating efficiency to strengthen profitability Net revenues reached RMB 12.49 billion for full year 2025 million, up 11.1% year-over-year. Furthermore, our revenue mix continued to improve with transaction service revenues of RMB 5.32 billion for the full year, growing by 38.2% year-over-year. On the bottom line, we achieved a net income of RMB 4.46 billion for the full year, up 42.8% year-over-year. On a non-GAAP basis, adjusted net income reached RMB 4.79 billion for the full year, up 19.3% year-over-year, underscoring our high-quality profitability and increasing economies of scale. Hui Zhang: [Foreign Language] Mao Mao: [Interpreted] Looking ahead, Full Truck Alliance will consistently elevate user experience for both shippers and truckers and fully integrate AI across the logistics value chain, creating greater value for the industry while delivering long-term returns to shareholders and users. Thank you all once again. That concludes our opening remarks. We would now like to open the call to Q&A. Operator, please go ahead. Operator: [Operator Instructions] Today's first question comes from Ronald Keung with Goldman Sachs. Ronald Keung: [Foreign Language] So looking back at 2025, then the company faced a number of external challenges and also made several strategic adjustments. So as we look into 2026, what -- can you share your overall strategic power. Chong Cai: [Foreign Language] Mao Mao: [Interpreted] 2025 was a year marked by both external challenges and proactive transformation for our business -- during the year, we made significant progress in strengthening platform governance, improving operational efficiency and further optimizing our user structure and monetization quality -- at the same time, we steadily advanced our strategic initiatives in areas such as autonomous driving and overseas markets. Throughout the year, we focused on enhancing the user experience and returning to our core principle of being truly user-centric. Our goal is to build a platform that both shippers and truckers can trust. While some of these investments may not yield immediate measurable returns, we firmly believe that both healthy balanced music ecosystem will serve as a foundation for our large sustainable growth. That kind of ecosystem value is something that I think we can reflect. Ronald Keung: [Foreign Language] Mao Mao: [Interpreted] As we move into 2026, we will focus on advancing high-quality growth and intelligent transformation across 3 areas. First, we are shifting our focus from skill-driven growth to a model that balances both scale and quality. While scale remains important for long-term sustainable development. Our priority is to foster a mutually beneficial relationship between this and the platform. we are raising ecosystem standards to ensure more complete and standardized transactions greater protection for freight payment and higher user satisfaction. With the first phase of our ecosystem governance initiatives now largely complete, most fake accounts and low-quality orders have been cleared from the platform. As a result, the platform is operating on a much healthier footing giving us the confidence to further strengthen fulfillment quality and support more sustainable growth going forward. Building on this foundation, we are also continuing to improve the credit rating mechanisms for both shippers and truckers, for example, through systems such as shipper rating scores and trucker behavior scores, we are gradually establishing a more robust 2-sided evaluation framework. This helps regulate user behavior at the source, curb noncompliant connections while also incentivizing high-quality users, ultimately creating a more virtuous cycle between shipper fulfillment efficiency and trucker earnings. Ronald Keung: [Foreign Language] Mao Mao: [Interpreted] Second, we are evolving from an information matching platform into an AI-driven intelligent infrastructure -- over the years, we have accumulated a large volume of authentic transaction data and build a highly active user base. which together provided a strong foundation for this transformation. Going forward, we will further leverage these strengths to advance grade our AI capabilities across key areas, including matching efficiency, credit assessment and dynamic pricing. In doing so, we aim to extend our platform's value beyond simply connecting supply and demand and enabling a more intelligent and efficient transaction process. . Chong Cai: [Foreign Language] Mao Mao: [Interpreted] Third, while maintaining steady growth in our core business, we are laying the ground for additional growth drivers. We remain confident in the profitability of our mature business. Building on this foundation, we are advancing initiatives in areas suggest overseas expansion and autonomous driving in a disciplined manner to support our growth over the next 3 to 5 years. Operator: And our next question today comes from Eddy Wang at Morgan Stanley. Eddy Wang: [Foreign Language] I have 2 questions related to AI. The first 1 is that the AI technology is advancing rapidly and the rise of the AI agent is gaining significant attention how might this trend affect freight matching platforms such as FTA? And how do you plan to respond to the potential disruption that or agents could bring to the traditional platform model. And the second question is, can management share how AI is being applied across the company? And what's the key developments in the fourth quarter? And what is your plan for the... Chong Cai: Thank you, Eddy. This is Simon here. I'll take over from ours. There has been a lot of discussion around the AI topic recently. We have been closely monitoring and evaluating applications. Let me start with our fourth -- we see AI not as a threat to our business, but that's to enhance our capabilities. For the road freight industry in which FDA operates, the emergence of AITs can significantly lower the barriers for shippers to find available carrier capacity, reduce manual costs in the matching process and improve both matching accuracy and fulfillment rates. These changes will meaningfully improve efficiency across the entire industry. We believe this transformation will create significant opportunities for us to capture additional market shares as transactions migrate from highly fragmented offline markets, including ad hoc and relationship-based trucking networks onto our platform. In our view, AI presents more opportunities than challenges for our platform for AI models to deliver meaningful results in the highly long standardized freight matching market. They must rely on large volumes of authentic, high-frequency closed loop transaction data. This includes data such as quotes completed transactions, cancellations, fulfillment records, dispute resolutions, credit behaviors and verified logistics address database. These data sets are the results of many years of operational experience and data accumulation on our platform. Let's take pricing as example first. In long-haul freight market, competitive real-time freight rates are not publicly available. The effective transaction price for each route and time period is influenced by multiple factors, including capacity availability, backhaul demand, trucker preferences and delivery time requirements. These dynamic pricing signals can only be formed and validated within the real transaction network. On our platform, truckers must complete real name registration and facial verification before logging into our app and accessing shipment information. Negotiations between shippers and truckers are conducted through our in-app messaging tools and protected communication channels. While external AI tools, if there's any, let the basic data set to perform accurate pricing. Second, in the long-haul freight matching business, where fulfillment standards are high-end operational processes are complex, transactions involving far more than simply matching information. The capability to execute this SKU is critical. While external AI tools may help a shipper quickly obtain a price quote or even contact several truckers automatically moving our shipment from posting to final delivery requires much more than prices. Effective fulfillment depends on robust platform services and dispatch capabilities, including understanding which truckers are reliable on specific routes, their likelihood of cancellation, how trucking capacity fluctuates during different time periods and maintaining a complete operational assistance from other placement to settlement to protect the interest of both shippers and truckers. In addition, long-haul freight operations frequently involve exceptions and nonstandard situations. These may include specific vehicle requirements, trucks, equipment with gates or refrigeration units. Last mile delivery address -- last-minute delivery address changes adjustments to cargo volume, highway closure and damage disputes after delivery, handling this situation requires well-established platform rules to determine responsibilities extensive historical data to assess reliability and responsive dispatch network capable of quickly arranging alternatives when disruptions occur. These are not capabilities that a stand-alone generative AI model can deliver on its own. They are built on years of operational experience and data accumulation and are precisely where our core competitive advantage lies. In addition, our platform connects a large number of shippers and truckers and through years of operation has formed a stable transaction network and credit system. Truckers and shippers not only rely on the platform to obtain orders and capacity but also depend on the platform for credit evaluation fulfillment protection, dispute resolution and dispute resolution mechanisms. This long-term accumulation of trust and ecosystem relationships is something that a stand-alone AI agent application would find difficult to replicate. Given these structural characteristics, we believe that as AI technology continues to mature, our competitive advantages will become even more pronounced. The reason is very straightforward. The more capable AI becomes, the more it depends on real transaction data and the stronger the resulting network effects. We're actively integrating AI capabilities across multiple aspects of our platform, including matching, dispatching, pricing, risk management and customer service. As mention becomes more efficient fulfillment become more reliable and exceptional handling becomes faster and more effective. Both truckers and shippers will naturally prefer to transact on our platform. This, in turn, leads to continued data accumulation and ongoing model improvement, which further strengthens our network effects and the moat around our platform. Overall, we are very optimistic about the industry transformation and the opportunities brought by the AI era, and we are fully prepared to embrace the opportunities and challenges that come with this technological shift. For us, AI represents a capability upgrade rather than a disruption to our business model. We will leverage AI capabilities to capture the broader industry opportunities it creates making our platform more efficient and improving the user experience for both shippers and truckers. At the same time, these capabilities will further strengthen our network effects, thereby reinforcing our long-term competitive advantage in the road freight market. To address your second question on our plan for AI for 2026. Yes. As I discussed earlier on the -- on our view on AI, let me walk through the progress we made over the past quarter and our plan onwards. During the fourth quarter, our AI initiatives progress from the experimental phase to broader deployment. We're currently building an AI agent framework that covers key scenarios across our platform, including shippers, dispatch operations and customer service gradually embedding AI capabilities throughout the entire transaction workflow. Starting with the user side, our focus from shippers is simplified shipping shipment posting an automated dispatch. In the fourth quarter, we launched an AI-empowered assistant that enables shippers to submit shipping requests through a simple voice input via a floating entry point in the app. The AI can then handle the entire workflow, including freight listing, trucker screening, price negotiation and order matching significantly streamlining what previously required multiple manual steps. This capability is particularly beneficial for direct shippers as it lowers the barriers to posting shipments and improved shipping efficiency helping the platform better attract and retain SME shippers. This solution also supports vcom-based shipment posting as well as API integration delivering meaningful efficiency improvements for enterprise customers that require system integration. Our pilot results so far demonstrate the effectiveness of our AI-powered dispatch system. First, AI-driven dispatch has attracted a large number of valid trucker bids, reflecting that more accurate matching is increasing truckers' willingness to accept orders. And second, the vast majority of completed transactions are now processed entirely through automated workflows and the need for manual intervention continues to decline. Compared to traditional freight listing, AI-driven dispatch is delivering superior outcomes in both transaction efficiency and fulfillment rates. In short, the AI assistant is helping shippers reduce the time required to find truckers and helping truckers improve order pickup efficiency and enhancing overall matching quality across the platform. Internally, AI has been integrated into our customer service operations, significantly improving response times and processing efficiency while also enhancing overall service stability. Looking ahead to 2026, AI will continue to serve as a core technology foundation for improving efficiency and enhancing user experience across FTA platform. As our models continue to evolve and data advantages deepen, we expect AI to unlock additional value in areas such as matching efficiency and operational cost optimization becoming an increasingly important driver of our medium long-term growth. Thank you. Operator: And our next question comes from Brian Gong at Citi. Brian Gong: [Foreign Language] I will translate it myself. With respect to the capital allocation, how does management prioritize among investments in core business growth, new initiatives and the shareholder returns. Thank you. Chong Cai: Thank you, Brian. Our approach to capital allocation is guided by a very clear principle and that is to delivering sustainable returns to shareholders while maintaining healthy growth in our core business. We remain firmly committed to this objective and committed to creating long-term value for our shareholders. In 2025, we continue to deliver our commitment to returning value to shareholders through both dividends and share repurchases. Over the course of the year, we distributed approximately USD 200 million in cash dividend under our semiannual dividend policy. In addition, we continue to implement our share repurchase program to further optimize our capital structure. Since the beginning of 2025, we have repurchased approximately USD 52.4 million worth of our shares, demonstrating management's confidence in the company's long-term value. . In addition, in January 2026, we announced a medium- to long-term shareholder return plan. For 2026, we plan to return approximately USD 400 million to shareholders and today, we also announced a dividend of approximately USD 87.5 million for the first quarter. To support the shareholder return commitments, we must continue to strengthen our core business while identifying new growth drivers to sustain strong cash generation. As you know, long-term freight matching remains our primary source of cash flow and profitability and forms the foundation for our long-term competitive advantage. Looking ahead, we will continue to invest in user acquisition, technology upgrades, product innovations and ecosystem development to support a steady and sustainable growth of our core business. With respect to strategic investments in new initiatives, including overseas expansion and autonomous driving, we emphasize a disciplined approach characterized by controlled pacing, manageable cash outflows and measurable milestones. We will not pursue high-risk asset heavy expansion Instead, we will advance these initiatives in a measured manner with the evaluation of expected returns and progress at each stage. These investments are intended to build long-term growth capacity and further strengthen our competitive moat rather than pursuing short-term scale. Overall, we believe that the core business growth, investment in new initiatives and shareholder returns are not mutually exclusive objectives. We will strive to maintain a dynamic balance between growth and shareholder returns while preserving strategic flexibility. Operator: And our next question today comes from Thomas Chong at Jefferies. Thomas Chong: [Foreign Language] We have seen the fulfilled orders grew by 12.3% year-on-year in Q4 and both ways is slowing down. Was this mainly driven by the ecosystem governance initiatives? How long do we expect this impact to last? And what is our outlook for order volume in 2026. Chong Cai: Thomas, that's a very good question. Let me first clarify the reasons behind the slowdown in order volume growth during the fourth quarter. The slowdown was primarily driven by the ecosystem governance initiatives, we proactively implemented on platform rather than any significant change in underlying freight demand. This round of ecosystem governance primarily focused on 3 areas. First, we addressed misclassified carpooling orders where Full Truck shipments were posted as less-than-truckload orders. which can compromise transportation safety and fulfillment experience. And second, we strengthened rename verification requirements for both truckers and shippers which resulted in the removal of a number of fake or noncompliant accounts. Thirdly, we implemented a systematic measures to curb freight with selling and other irregular transaction activities. These issues had accumulated over time, and we were beginning to -- and we're beginning to affect the platform -- and fulfillment liability. Therefore, we believe it was both necessary and time to address -- through focus governance work. These government measures primarily affected low-quality orders with limited monetization potential. During the initial phase of the governance initiatives, some of the misclassified car pooling orders have shifted back to the full load product -- full truckload product while others have temporarily moved to offline channels. We view this as a normal structural adjustment. From a revenue perspective, these orders historically contributed only a small portion of the platform's revenue. And in fact, transaction service revenue, as you can see, still grew by nearly 3% year-over-year in the fourth quarter, which clearly demonstrate that the ecosystem governance has not affected the platform's core monetization capability. Based on the results achieved so far, the governance initiatives have delivered meaningful improvements, for example, the resale and trading of trucker accounts on third-party platforms have been nearly eliminated, and the trucker vehicle verification rate is now close to 100%. In addition, freight reselling activities in January decreased significantly compared with the end of third quarter and customer complaint rates have continued to decline. At the same time, trucker engagement has remained stable with the rolling 12-month active trucker base, maintaining at a high level and the next month's retention rate for truckers responding to others exceeding 85%. The principal measures under the round of governance have been largely completed, and the main impacts have been fully reflected. Real name verification has been fully implemented freight reselling is now managed under a normalized framework and misclassified car pooling orders have been structurally addressed through product rules. As we move to 2026, our focus will shift from targeted governance campaigns to continuous optimization. We will leverage credit scoring and algorithm model to safeguard the long-term health of the ecosystem and placing greater emphasis on balancing growth pace and operational quality. In the near term, we do not expect to carry out another large-scale governance campaign. Based on our operating data so far into the year in 2026, sequential order growth has already shown clear signs of recovery. Looking ahead to the full year as the impact of governance initiatives continue to diminish, the share of direct shippers continue to increase and matching efficiency further improves, we remain cautiously optimistic about steady order growth on our platform in 2026. Thank you. Operator: Our next question comes from Ritchie Sun at HSBC. Ritchie Sun: [Foreign Language] My first question is about the fulfillment rates. So how did the fulfillment rate perform in fourth quarter? And what is the outlook for this metric. And secondly, in terms of the commission revenue growth is nearly a 30% year-on-year growth in fourth quarter despite slower order growth. So what were the key drivers behind this? And what is the outlook for this set metric going forward? Chong Cai: Thank you, Ritchie, for your question. fulfillment rate. In the fourth quarter, the overall fulfillment rate reached 42.7%, representing a year-over-year increase of more than 5 percentage points, and it also set a new record. Notably, the average fulfillment rate for the mid- and low frequency direct shippers approach 65%. This is a key metric we monitor closely. And as this segment represents a higher quality source of freight demand. Several factors drove the improvement in the fulfillment rate. First, we implemented systematic optimization to our cancellation policy. Historically, arbitrary cancellations by both truckers and shippers weighted heavily on fulfillment rate. In the fourth quarter, we introduced 2 key measures. We increased the cost of unjustified cancellations by imposing behavioral restrictions on users with frequent cancellations. And we also upgraded our credit scoring system. The evaluation framework shifted from a primary focus on transaction frequency to a more holistic assessment of behavior quality with greater emphasis on fulfillment rate user ratings and complaint rates. These adjustments are designed to encourage more consistent and responsible transaction behavior among both truckers and shippers. Secondly, the continued improvement in our user mix also contributed to the higher fulfillment rate. In the fourth quarter, fulfillment orders from direct shippers accounted for 55% of total fulfilled orders up from the previous quarter. And direct shippers generally have higher expectation for fulfillment reliability and a stronger commitment to execute so the increase in your share directly supported the improvement in the platform's overall fulfillment performance. Thirdly, ongoing product enhancement also contributed to the improvement. In the fourth quarter, we continue to iterate on the new freight zone and introduce a secondary confirmation step for shipment posting, which improved fulfillment rates for newly listed shipments. At the same time, upgrade to our matching algorithm and more refined operations significantly accelerated truckers' response times, supporting a steady increase in transaction conversion rates. Looking ahead, as our credit scoring system, continues to improve, the base of direct shippers expand and low-quality freight listings are further phased out. We expect fulfillment performance to maintain a steady upward trend. This will not only enhance the user experience, but also support further monetization of the platform. Regarding your second question on commission revenue growth. In the first -- in the fourth quarter, transaction service revenue reached approximately RMB 1.49 billion. That's a year-over-year increase of around 28%. Despite the moderation in order volume growth, revenue maintained a relatively strong growth momentum primarily driven by 2 factors. The first driver was the continued increase in commission penetration. In the fourth quarter, commission penetration rate reached 88.6%, up roughly 6 percentage points year-over-year. The number of cities covered by the transaction covered by the commission model reached 273 effectively achieving nationwide coverage across major freight markets. This improvement reflects the platform's continued progress in identifying high-quality freight demand, ensuring fulfillment reliability and enhancing merchant efficiency, enabling the commission model to be applied to a broader range of orders. The second driver was the improvement in monetization per order. Q4 average monetization per order reached RMB 26.3 million, this reflects the effectiveness of our refined tiered operating strategy by offering differentiated services tailored to different shipper segments, we improved monetization efficiency and overall profitability while safeguarding the interest of truckers. Looking ahead, we remain confident in the continued growth of our transaction service revenue. There's room to further optimize both commission penetration and monetization per order. At the same time, continued enhancement of our trucker membership program will help ensure a stable supply of high-quality trust transportation capacity and further strengthening the foundation for transaction service revenue growth. Going forward, we will continue to refine our commission structure and operational strategies without compromising user experience to support more stable and sustainable long-term growth in this particular revenue stream. Thank you. Operator: And our next question comes from Wenjie Zhang with CICC. . Wenjie Zhang: [Foreign Language] I'll translate for myself. My question is about Credit Solutions business within value-added services. I wonder what's related to the progress of this business. Chong Cai: Thank you. In the fourth quarter, amid an evolving regulatory environment, we continue to advance our credit solutions with a focus on compliance, risk management and business model transformation and maintain a steady pace of development. As of the end of the fourth quarter, we completed the transition to interest rates of 26% or below for both existing and newly issued loans, reflecting our proactive alignment with regulatory guidance and commitment to compliance. While this adjustment created some short-term pressure on revenue, we believe it will support a more robust and sustainable financial services framework over the long term and lay a stronger foundation for our future growth. In terms of asset quality, our overall risk exposure remains manageable. Since mid-last year, regulatory changes across the credit industry have led to fluctuations in credit risk and our credit business has also been affected. . In the fourth quarter, the 90-day delinquency ratio reached 2.9%. In response, we proactively tightened our risk management measures by raising credit approval thresholds for both new and existing users and implementing earlier interventions through model optimization and a more tiered risk control framework. As a result, our outstanding loan balance remains at a healthy level, and the overall risk exposure is well contained. Looking ahead, while some volatility may persist in the coming months, we expect asset quality to gradually improve with the overall NPL ratio stabilizing and beginning to decline in the second half of this year. In terms of our business model, we are proactively transitioning towards a more asset-light approach. We have established partnerships with multiple banks and financial institutions and are increasingly originating loans through guarantee backed and facilitation models. This approach allows us to significantly reduce the use of our own capital while maintaining service coverage and improving capital efficiency and better managing risk exposure. As a result, we are building a more balanced and sustainable risk return profile for our credit business. And overall, we will continue to prioritize compliance, maintain disciplined risk management and support our core business through our credit operations. Going forward, we will balance growth and risk while further improving asset quality and expanding penetrations across operational scenarios. This will help ensure that our Credit Solutions business develops in a more sustainable manner as the regulatory environment continues to evolve. Thank you. Operator: And our next question comes from Yuan Liao with CITICS. Yuan Liao: [Foreign Language] Management share us what progress have you met in your overseas business so far. And so what are the trends for your city expansion and your strategic priorities for 2026. And is there any time line for your monetization of your overseas business? Chong Cai: Thank you. Our overseas business is an important part of our mid- to long-term growth. We're building our international operations under the Q move brand, and we are currently in the model validation and capability replication stage. In terms of our market selection logic, the emerging markets, we're targeting share key trails large road freight volumes, low level of digitalization, highly fragmented truckers and the shipper base, large information gaps and high reliance on traditional broker models. This is very much like China over a decade ago. And much like China over a decade ago when we first started our business. . This makes our domestic experience and capability is highly transferable allowing us to replicate our model in those markets with minimal learning curves. We are pursuing a asset-light and localized approach advancing investments gradually as we validate the business model and team capabilities, leveraging our technology and operational know-how to drive platform rollouts. QMove is already integrating fragmented local trucking capacity in select markets and steadily building user network on both the trucker and shipper side. The priority for 2026 remains deepening our presence in existing markets while expanding into new ones in a disciplined manner. We will first focus on boosting network density and user engagement in established countries while gradually advancing city expansions in markets that are operationally ready and steadily broadening the platform's reach. We maintain a pragmatic flexible attitude toward regarding the pace of the monetization emerging market, digital freight platforms typically progress to user acquisition, network formation and efficiency improvement before reaching stable commercialization. With timing varying by market, our priority is to grow the platform network and expand our user base sustainably rather than simply pursue early monetization at the expense of long-term growth. And in summary, we remain confident the long-term growth potential of these emerging markets whose digital transformation is expected to follow a path very similar to China's road logistics industry. We'll continue expanding overseas in a disciplined, steady manner and gradually move towards commercialization as the operating model matures. Thank you. Operator: Thank you. And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments. Mao Mao: Thank you once again for joining us today. If you have any further questions, please feel free to contact FTA directly or reach out to TPG. Our contact information for IR in both China and the U.S. can be found in today's press release. Have a great day.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Vivid Seats Fourth Quarter 2025 Earnings Webcast and Conference Call. [Operator Instructions]. I would now like to introduce your host for today's presentation, [ Mr. Austin Arnett ]. Sir, please begin. Unknown Executive: Good morning, and welcome to the Vivid Seat's Fourth Quarter 2025 Earnings Call. I'm Austin Arnett, Vivid Seat's General Counsel. I'm joined today by Larry Fey, Chief Executive Officer; and Joe Thomas, Chief Financial Officer. By now, everyone should have access to the earnings press release we issued earlier this morning. The release as well as supplemental earnings slides are available on our Investor Relations website at investors.vividseats.com. Today's call will include forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including those discussed in our earnings release, our annual report on Form 10-K and our other filings with the SEC. Today's call will also include references to adjusted EBITDA and net debt, which are non-GAAP financial measures that provide useful information to investors. To the extent reasonably available, A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures can be found in our earnings release and supplemental earnings slides. And now I'll turn the call over to Larry. Lawrence Fey: Good morning, everyone, and thank you for joining us today. I'm excited to share what we are working on as we chart a refreshed course for Vivid Seats in 2026 and beyond. We believe we have the right team and the right strategy to drive innovation, thought leadership and profitable growth in the coming quarters and years. I'd like to begin with an update on our leadership team. Austin Arnett who provided opening remarks for this call was named General Counsel in December. Austin previously led our corporate legal team after prior roles at Latham & Watkins and McDonald's. Austin steps into the GC role with extensive legal expertise and substantial familiarity with our business. I'd also like to introduce Joe Thomas, our new Chief Financial Officer. Joe, who joined us in January is an accomplished executive with a strong track record of driving financial discipline through data-driven decisions while supporting long-term growth initiatives. I'm excited to join forces with both of them as we embark on this new chapter for Vivid Seats. I'd also like to thank Ted Pikes, who served as our interim CFO during this transition. Ted's deep institutional knowledge and steady hand were critical during a pivotal period for the company. I'm grateful for his continued partnership as our Chief Accounting Officer. With our new team in place, we have refined our long-term strategy and have quickly begun executing against it. Our strategy builds and expands upon visits foundational strength, our leading technology our unique data, a relentless focus on efficiency and an increasingly compelling and differentiated value proposition to customers. I will spend a few minutes touching on our efforts across each of these foundational elements. Starting with our technology and product, we are redoubling our focus on product innovation and efficiency and expect this to benefit our results as we move through 2026. Across both our web and app properties, we are bringing a renewed focus on our core customer funnel to ensure a seamless user experience. Beyond this foundational focus, we are continuing to innovate in an increasingly AI world. In 2023, Vivid Seats became the first company in the live events industry to launch a live events plug-in for open AI's ChatGPT. That early partnership underscored our commitment to innovating at the intersection of technology and live entertainment. Building on that foundation, we recently introduced a dedicated Vivid Seats app within ChatGPT, further advancing our AI-driven shopping capabilities. This new app is designed to capture real-time consumer intent and transform event discovery by making it more personalized, intuitive and efficient while reinforcing our position as a leader, shaping the future of how fans discover and access live events. This launch is an example of our continuous efforts to evolve our platform in a highly dynamic environment. Our path forward will combine innovation with a disciplined focus on efficiency. As previously announced, we significantly expanded our cost reduction program increasing our initial fixed cost savings target from $25 million to $60 million. We have now achieved our increased target of $60 million of annualized savings with reductions in spanning marketing, G&A and stock-based compensation. These savings position us to reinvest selectively in growth initiatives such as our enhanced app value proposition while improving our operating leverage as we return to growth. We also executed our corporate simplification early in the fourth quarter, which included the termination of our tax receivable agreement and the collapse of our dual-class share structure. This meaningfully reduces complexity, improves transparency and generates both immediate and long-term financial benefits. Taken together, our cost reduction program and corporate simplification are creating a more efficient, agile organization that can invest strategically for growth, while maintaining financial discipline. Moving to the compelling and differentiated value proposition we present to customers. Vivid Seats is the most rewarding ticket company. We are centering the Vivid Seats message and experience around that simple but powerful fact. No one rewards fans more than we do. We're sharpening our messaging to highlight how Vivid Seats delivers more value at every step of the journey from rewarding prices to a seamless, stress-free shopping experience to tangible rewards that deepen loyalty over time. By delivering the most rewarding experience in ticketing, we seek to build long-term relationships with our customers and our app ecosystem. App users return more frequently, convert at higher rates and rely less on paid performance marketing channels. We believe the combination of our rewards program and our lowest price guarantee represents the most compelling value proposition in ticketing. We are seeing encouraging trends as we pursue this strategy. App GOV is up over 20% year-over-year through the first 2 months of 2026. Since launching our enhanced app value proposition during Q3 of last year, we have seen app share of GOV increase by more than 500 basis points. We also remain confident that information transparency will only increase as AI continues to reshape how consumers discover and evaluate offerings across the Internet. We believe we are well positioned to benefit as AI-guided consumers increasingly gravitate towards platforms that are delivering the most value to consumers. While we are early in our execution journey, the trends we are seeing thus far in Q1 indicate we are making substantial progress and that our strategy is gaining traction. Accordingly, we are reaffirming our 2026 outlook. We continue to expect marketplace GOV in the range of $2.2 billion to $2.6 billion and adjusted EBITDA in the range of $30 million to $40 million. In addition, we are providing Q1 2026 guidance of $570 million to $620 million of GOV, $8 million to $10 million of adjusted EBITDA and a cash balance of $125 million to $135 million. Turning to the fourth quarter. While our results were challenging, they were largely in line with what we anticipated as we work through a transitional period for the business. As we shared last quarter, a softer Q4 industry backdrop, private label declines and ongoing execution of our strategic realignment were expected to pressure results. While these pressures played out as expected, we were encouraged by emerging momentum across our own properties. In particular, our app performance remained a bright spot, reflecting the impact of our ongoing product investments and enhanced value proposition. The trends we are seeing thus far in the first quarter confirm the actions taken by this new team are translating to tangible progress. These indicators reinforce our belief that the path forward we have put in place is the right one. and that the investments we are making will enable us to return to growth in the second half of 2026 and deliver sustainable, profitable growth for many years to come. With that, I'll turn it over to Joe to walk through our fourth quarter financial results and outlook in more detail. Joseph Thomas: Thank you, Larry, and good morning, everyone. I'm excited to join Vivid Seats and help shape the company's next phase of growth. The business is a strong foundation and significant opportunity. I look forward to working closely with Larry and the leadership team to deliver long-term value. Turning to the results. In Q4 2025, we generated $581 million of marketplace GOV compared with $994 million in the prior year period. Q4 2025 total marketplace orders were down 32% year-over-year with average order size down to $329 from $380 in Q4 2024. According to our SkyBox data, industry volumes were down double digits in Q4, primarily due to less content on sales and a difficult world series comparison, which pressured results when combined with the loss of a large private label customer that occurred in early Q3 2025. Q4 2025 revenues were $127 million, compared to prior year revenues of $200 million. Our Q4 2025 marketplace take rate was 16.8%, up slightly from 16.6% in Q4 2024. We expect our near-term take rates to stay in the 16% range. Adjusted EBITDA for the quarter was $1 million, reflecting the impact of lower volume and negative operating leverage. Importantly, we achieved our annualized cost reduction target of $60 million during the quarter. While we saw a partial benefit from these efforts in Q4 2025, we anticipate full benefit starting in Q1 2026 and with a more agile cost structure, allowing for improved operating leverage moving forward. We ended the fourth quarter with $103 million of cash and $390 million of debt resulting in net debt of $287 million. As a reminder, the fourth quarter brings seasonally lower working capital flow with that flood reduction accounting for a majority of our cash outflows in the quarter. Q1 2026 is seasonally stronger in terms of cash inflow, which supports our guidance for a cash balance range of $125 million to $135 million by the end of Q1 2026. We expect Q1 2026 marketplace GOV in the range of $570 million to $620 million. This GOV level is consistent with Q4 2025 and despite the fourth quarter traditionally being the strongest volume quarter of the year, which reflects sequential improvement in share. We expect Q1 2026 adjusted EBITDA in the range of $8 million to $10 million. This represents a substantial improvement relative to Q4 2025 EBITDA and reflects consistent volumes, improved unit economics and the full impact of our cost reduction efforts. For fiscal year 2026, we continue to expect marketplace GOB in the range of $2.2 billion to $2.6 billion and adjusted EBITDA in the range of $30 million to $40 million. This outlook reflects an expectation of modest industry growth and continued competitive pressures, but also benefits from our cost reduction program and strategic investments and an enhanced customer value proposition. Back to you, Larry. Lawrence Fey: In closing, the positive trends we are seeing in the first quarter support our belief that we are now on the right path. We are seeing encouraging progress across numerous leading indicators. Pointing to a return to volumetric growth across the business outside of private label. We are particularly excited about the app trajectory and believe the combination of a return to growth, a streamlined cost structure and more efficient tax profile positions us to deliver growing profitability and cash flow as we execute our strategy. We are confident that visits foundational advantages our leading technology, unique data, best-in-class efficiency and the differentiated customer value proposition remains. And with disciplined execution, will support our return to profitable growth. With that, operator, please open the call for questions. Operator: [Operator Instructions]. Our first question or comment comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group. Ryan Sigdahl: Welcome, Joe. Larry, I want to start, you've dealt with unfavorable competitive dynamics for the better part of 2 years now. We've heard from that may appear that they plan to focus more on customer acquisition efficiency in 2026, nice change, a fairly big change, I guess, in statement versus the user acquisition Blitz Creek, that they've been going under. I guess curious if you've seen any of that and then how you think about the competitive dynamics heading into 2026 or as we start and how you plan to balance your customer acquisition efficiency versus the value proposition, the app, direct traffic, et cetera, et cetera? Lawrence Fey: Yes. Thanks, Ryan. In terms of competitive landscape and competitive intensity, I think we have seen a degree of moderation, particularly as it relates to some of the peak intensity from StubHub in particular. I think others in the space continue to be pretty aggressive, and I think there continues to be a meaningful priority placed on GOV and volume across a number of our competitors relative to fundamental unit economics and profitability. But I think we continue to see that over time economics play out, financial realities ultimately win. And so I think we will stay the course that we've been on for the last couple of years where -- there is certainly inherent tension between volume and profitability, but we're going to stay true to our unit economics. And in particular, the focus on the app ecosystem, the focus on the app value proposition is trying to enhance our lifetime value which enables you -- if you know you are keeping people in your ecosystem longer with a longer relationship with more repeat rates, you can still solve your unit economic question while being more aggressive on the customer acquisition front. So we think we can try to accomplish both, right, stay true to our unit economic frameworks and enable ourselves to drive better volumetric performance as we continue to execute against that. Ryan Sigdahl: Very good. Then just you mentioned ChatGPT plug-in in '23. Your main competitor press released, I guess, a relationship and partnership with ChatGPT a few months ago. So I guess curious kind of how you fit with your competitive set within there. I think you also have perplexity that you didn't mention, but just talk broadly speaking about LLM if you're willing to quantify kind of the percentage of whether it's customers or GMV or anything there, that would be helpful. Lawrence Fey: Yes. AI, as you can imagine, top of mind an incredibly dynamic space. We haven't yet seen consumer behavior in our space reflects the height, right? It's still a pretty small percentage, very small percentage, probably 1% is the best estimate I would put out there for what we're seeing in terms of direct traffic through the AI channel today. That said, I think we are fundamentally of the belief that this is a one-way street where AI will have more, not less impact and that there are fundamental unlocks that AI can bring for the benefit of consumers in our space, the benefit of consumers across e-commerce with better information transparency. And so we've been in a space where, for many years, being at the top of a search was critical to driving customer awareness and you could charge in many instances, premium pricing to facilitate that. So it hasn't changed yet, but we are making the bet that there will be evolution there where customers will be better able to surface differentiated value propositions over time, better able to research and compare. We do think there's still a place in ticketing where the seat you're in, the angle of your view, the size of the stadium there's a lot of deeply personal preferences. So the desire to do detailed shopping, detailed comparisons in an app, we think will be a longer-term home for a lot of customers, but AI at the top of the funnel when people are researching their options, understanding the choices out there we think will be meaningfully disruptive over the coming quarters. Operator: Our next question comment comes from the line of Cameron Mansson-Perrone from Morgan Stanley. Cameron Mansson-Perrone: One follow-up on the industry trends. Just curious, there's a competitive dynamic, but then there's also been some potentially favorable dynamics happening as well. Wondering if you've seen any benefit or seen anything in the marketplace in conjunction with the changes that Ticketmaster has made around its resale platform and activity. And then as we look forward to 2026, wondering what -- how you guys are framing your thinking about the World Cup and any expectations around participating in that resale activity this summer. Lawrence Fey: Yes. Thanks, Cameron. On the industry front, Q4, not a great quarter. We saw it down double digits I think we mentioned tough MLP comp, but in particular, concert on sales were down dramatically year-over-year. Those on sales picked back up in Q1, whether that was just normal variation in timing or something reflective of some other planning or considerations on the Ticketmaster side, not clear to us. We haven't seen any meaningful impact beyond that in terms of Ticketmaster's overall posture level of aggressiveness in the space. So I'd say those kind of rumored changes or adjustments not to a degree that we could say we've seen, felt or can measure, but we'll continue to keep an eye on it. for broader industry overall, the last time when we gave guidance, we had pointed to expectations of flat over the year. I think with the Q1 on sales, we continue to feel equally as good, if not a little bit better with World Cup volumes equally as good, if not a little bit better. So I think stable to slight growth in the industry is our new estimate. And as we look at the World Cup, I think if you think of the benchmarks or the goalpost -- goalpost as a typical A-List tour would be 1% of GOV for the year. Taylor Swift be the other side of that, that's ever mid- to high single digits as a percentage of I think World Cup is an event will end up somewhere in between. Where in between will be, I think, dictated by do you have great matchups, does the U.S. play Mexico and the semifinals. So that would be a dream. But we think it will be substantial, a couple of hundred basis points of GOVs our best guess. Operator: Our next question comment comes from the line of Dan Kurnos from Benchmark. Daniel Kurnos: Great. Thanks. Good morning. Welcome, Joe. For -- I guess, Larry, just as we think about your customer acquisition strategy around app, I know we've talked about it a little bit, but I don't know if you want to take a second to kind of maybe flesh out obviously, without giving away any trade secrets, how you're thinking about driving incremental traffic beyond just pointing to the value prop? Like are you thinking about different marketing channels, you thinking about better more efficient ways to kind of get people to understand the message there? And then I have a follow-up for you. Lawrence Fey: Yes. I think the last thing you said, having people clearly understand the value prop is a critical threshold element where if we don't do that successfully, we have no reason to believe people will come back more often. We'll build a lifetime relationship. So we're mid-flight on it, but you should see continued improvements in the journey as an app customer. So your onboarding experience. How do we build that initial report if you make it feel like a win-win where you're providing us your information, and we're providing you something of value and return to kick off on the right foot. Well-situated messaging to drive home not only the everyday pricing, but this idea of ongoing rewards, ongoing benefits for loyalty and repeat purchasers, such that if you are a customer who has intentions of going to multiple live events per year for presumably decades to come, you can get peace of mind that you've completed your research, right? You'll do the research and depth, you'll compare the pricing, you'll validate the claims and once that validation is complete, you can with peace of mind buy from us. I think the second dimension beyond making sure that once you arrive at the app, it's very clear what we're doing and why we are making claims about our value proposition. We have a very large database of people who have purchased from us over the years. And so really thoughtfully targeting and messaging that database of folks continuing to use growing AI capabilities to have personalized messages that could resonate right message at the right time. I think that's the second major dimension. And then over time, I think we'll continue to explore complementary marketing channels that are outside of that core paid search funnel, right, whether it's social or other adjacencies. There continues to be an opportunity there, but it has been a relatively long-term play to build that awareness. And so that will be a steady as she goes element. Daniel Kurnos: Got it. That's super helpful. And then I'll just ask if you care to opine on -- I know we've already had sort of the competitive question, but clearly, while you guys aren't in primary, we've had movement from DOJ and live now, and there's always knock-on effects to the competitors that are maybe hybrid or trying to get in there. Into that space, you guys have tested the waters in primary and small doses in the past. Just curious if how you think about regulatory either from that perspective or the bulk seller stuff might just impact overall industry dynamics, consolidation, just anything that you would like to opine on how you think kind of the broader group adjusts to some of the regulatory stuff. Lawrence Fey: Yes. I mean, we've certainly been through the term sheet. I think devil in the details is probably the operative phrase here. So we'll wait for more to come out and probably premature for us to comment in too much depth given the lack of detail on some pretty important provisions in the term sheet. From everything we've seen, I can't see anything that would be deemed or even considered potentially adverse to our position in the marketplace. And at least from our position, I don't see a lot that will change anything meaningfully. But put the [indiscernible] for devil in the details, and we'll see if there's more to it. Operator: Our next question comment comes from the line of Maria Ripps from Canaccord. Maria Ripps: Welcome, Joe. First, I just wanted to follow up on your within. Can you maybe just talk about sort of the type of consumer that you're attracting within ChatGPT and sort of conversion rate? And then do you maintain sort of the customer profile or customer data after that initial engagement? Lawrence Fey: Yes. Thanks, Maria. I think the ChatGPT app is a good example of you need to play in traffic while this world situates itself. As it sits today, finding apps in the LOM journey requires someone who's looking for the app or you need to come in with a targeted search and seek out, whether it's ours or a competitor's app and that open up a different use case, but I don't think it's gone mainstream. I don't think most people have unlocked how to access apps within the LLM journey. And so as a result, what you do see is folks who come through LLM and folks who come through that app convert at structurally higher rates. What is probably too early to tell. Is that because you have a selection bias or the folks who are doing that are the most intent thoughtful tech savvy users and thus you're just revealing that their intent versus tool is fundamentally changing their behavior journey. So we're looking at all the data with eager anticipation. But I don't think we have clear answers yet on that. separately to the broader question on customer personalization, the more interactions you have with someone, right, where you can see if they're logging in, in Chicago, and they're searching cubs tickets. And then 6 months later, they search their tickets, you can start to create a profile of a Chicago-based sports fan and make sure that they see content aligned with those sports preferences and you perhaps deemphasize comedy shows, if they've never shown any interest and over time, figuring out ways to round out that profile, right? There's numerous sources that I think we're increasingly focused on capturing more customer information to create a more bespoke experience. And one of the exciting elements over the intermediate term that we think AI offers aside from the top of the funnel, as you ingest more of this customer information, how do you create a fundamentally better experience for your users. And at the core of that, I think is thoughtful personalization built around a growing dataset. Maria Ripps: Got it. That's very helpful. And then can you maybe give us a little bit more color on what you're seeing on the supply side in concert sort of this year? And to what extent that's a factor for sort of improving trends and returning to growth in the second half of the year? Lawrence Fey: Yes. Yes. Pretty nice lineup of on sales that has come out in Q1. BTS was -- is probably the highest profile of those, but steady stream of meaningful artists coming out in January and February, Harry Styles, Noah Khan, et cetera, which was welcome because the Q4 lineup was underwhelming. When you sum up Q4 and Q1, and we've seen this before where timing moves a little bit between the quarters. It was a solid concert lineup. And so I think maybe consistent with what we've heard Auto Live Nation, where they continue to point to steady growth perhaps double digits for them across their global footprint, but still continued growth in North America on the lower end of that range. I think everything we've seen from the supply side continues to support that perspective. And we had a little bit of hesitation based on how Q4 industry trends were shaping up, and it's been refreshing to see Q1 strengthen from there. Operator: Our next question comment comes from the line of Thomas Forte from Maxim Group. Thomas Forte: So I also want to welcome Joe to the call. One question, one follow-up. Can you talk about your ability to capitalize record recurring sporting events that are not always held on an annual basis, including World Cup, Olympics and World Baseball Classic, in particular, when this type of event is in 1 of your geographies, how confident are you in your ability to get a similar share of GOV as in other sports, baseball, football, et cetera? Lawrence Fey: Yes. Thanks, Tom. Those intermittent sporting events. They're really interesting hybrid because as a general statement, if you were to look at sports versus our concert and theater customer journey, sports. If you're a Cubs fan, you're a Cub's fan, right? You're going to a Cub's game this year, you're probably going to Cub's next year, you'll probably go in the year after that. Same with baseball, football, pick your sport a preference. And so the proclivity for repeat is just higher on sports, whereas concerts are more episodic. Even if you're a lifelong die hard Taylor Swift fan. She's in town once every 5 years, right? And maybe you're going to take it one time and you're not a town the next time so you see our once in a lifetime, right, once every 10 years. And the interest in Taylor Swift may or may not map to Sabrina Carpenter or Pop Star X. And so it's a different relationship, right? It's a bit more intermittent on all things concert comedy theater relative to that more continuous sports relationship. And these intermittent events kind of straddle those. It's pretty hard to say like what on any individual customer basis, their soccer preferences or their World Cup preferences in particular, would be. And whatever we learn about them, it's probably not going to be that valuable going forward as what is going to be 30 years before we get the World Cup here again. But we can leverage folks who are MLSs are soccer fans and target those folks in a thoughtful way. But we actually see the nits of World Cup folks who it ends up being more new customers than you would see in a typical sports league because there is that intermittent element. But less so than concerts because you do have that stable base of sports fans who knows where they want to come and buy a ticket from. Thomas Forte: And then for a follow-up, can you give your thoughts on cash conversion and free cash flow generation for full year '26? Lawrence Fey: Yes. I appreciate that question. So our major cash obligations or CapEx, interest expense and taxes. The sum of those, we think, will fall between $35 million and $40 million. And so a majority of that amount would be our net interest expense. Our CapEx and cap software we think will be in the $15-ish million range. And then post tax simplification, taxes will be quite a bit lower to low single-digit millions. And thus, we need $35 million to $40 million of EBITDA before considering working capital to be cash flow neutral to generative. And then I think as we've demonstrated in spades this past few quarters, if you are growing GOV, working capital can be a source of cash, the inverse is also true. So as we project a return to growth, which we're feeling quite good about as we approach the second half of the year on a year-over-year basis and equally good earlier in the year on a sequential basis. Within working capital shift to being a source of cash and thus, we expect to be modestly but cash generative in 2026. Thank you. Operator: Our next question comes from the line of Andrew Marok from Raymond James. Andrew Marok: One on the comps. I know you called out a difficult world series. This year as a headwind. I guess as we're looking forward into the 2026 trajectory, how are the 2025 championships and maybe special events and sports playing out from a comp perspective as we look into the model? Lawrence Fey: Yes. Great question, Andrew. I think if we were to just go through the calendar, we've already seen some benefit when you had the, call it, up down up in the Super Bowl. So 2024 sort of peak experience with Vegas 2025 with the kind of repeat participants in New Orleans was been underwhelming, much stronger performance, Super Bowl in 2026. As we look at the rest of the year, I'd say there's nothing daunting. I'd say, it ranges from, call it, slightly below -- slightly above average matchups. NCAA tournament was relatively strong last year. We'll see how that goes in the next few weeks. Nothing I would say of note in terms of NDA or NHL I love that Oklahoma City has 47 traffics over the next couple of years, except for the fact that Oklahoma City is not the most dynamic market from a secondary standpoint. So we'll see if anyone topples them on the MBA side. And MLB was off of the peak Yankees Dodgers levels, but Yankee Blueray wasn't bad. So I'd say that was still above average last year. So the MLB comp is probably the most daunting of the remaining major championships coming through the rest of the year. Operator: Our next question comment comes from the line of Benjamin Black from Deutsche Bank. Unknown Analyst: This is Jeff on for Ben. Can you just talk a little bit about the puts and takes to getting to the high and the low end of your guidance, particularly in GLD, would you need to see the competitive dynamics kind of continue to soften from here? Or could you get to the high end with just better performance from events in the industry? Lawrence Fey: Yes, it's a great question. Our presumption is that we can get to the high end of our GOV and EBITDA range. through our own execution. So steady performance from industry volumes consistent with current competitive intensity and continued delivery of a pipeline of product enhancements that we're really excited about that we think will start coming out over the next couple of months and have a meaningful portion of the year to benefit in terms of the back half contribution. And if we deliver in those enhancements flow through as expected. That's the path to the top end of the range. cure if there's better industry volume and/or a further shift in competitive landscape that would make it easier and/or create a path to outperforming. Unknown Analyst: Understood. Got it. And then maybe just one quick follow-up on sort of the app share growth in the gains. You talked about the increase in the FPD. Is that more driven by bringing new customers to the app? Or is it sort of just increasing the velocity or the repeat purchases of existing customers already using the app. Lawrence Fey: I'm happy to say yes to that. So it is across both dimensions, we are seeing app sessions increasing year-over-year. We are seeing app repeat rates increased double digits when we're looking at our cohort subsequent to these changes. And one of the things we talk about a lot over here that when you're playing a longer game with trying to build lifetime relationships to drive long-term repeat, the toughest day of that journey is the first day because you feel all the pain on the enhanced value proposition. We haven't given folks an opportunity to come back and repeat. So we feel like we started the snowball down the hill, and now as we move through subsequent quarters and years, that benefit will compound. And we're seeing all the underlying -- we talk about leading indicators that are flash and positive. That's a perfect example. These repeat rates, the growing size of the cohort and the growing proclivity to repeat within them. are the types of leading indicators that if you could stack over time, become a really powerful trend. Operator: Next question or comment comes from the line of Ralph Schackart from William Blair. Ralph Schackart: Larry, you talked about sort of entering Q2 with a refined strategy. Maybe talk about, I guess, maybe your top 1 or 2 key priorities or adjustments to that strategy? I know you talked about the APRA new focus, I'm not sure if that's [indiscernible] two of them. But just maybe if you could sort of highlight or underscore what those are in progress to date and kind of how that progresses through 2026. That would be great. Lawrence Fey: Yes. Thanks, Ralph. I think as you noted, parts of the strategy were starting to be rolled out back half of last year, executed throughout Q4 and will continue. And so the efficiency, the cost reduction program was the starting point of that, reinvesting some of those savings into the structurally enhanced at value proposition was a part of that. I think when you look at what incrementally we're pursuing, I think there's a refreshed focus on the core customer journey, where you need -- when someone has decided that they want to attend an event, a relentless focus on making that journey as quick, efficient and pleasurable as possible for the customer. Don't distract them with superfluous information, but make sure all of the relevant information is in front of them, make sure every step of the journey works efficiently, you aren't introducing undue friction. And that's been an area where I think we were pursuing a lot of different paths and distracting a little bit. So ultimately, that will manifest in, I think, an enhanced conversion profile, particularly on our web journey. We're very excited about that. I won't go into too much detail on this. I think there's some enhancements to our private label philosophy and approach that we're working on that get that business line returning to growth as we lap the tough comps starting in Q3. They're a little more operational in nature. But if I were to say it in a word, getting back to being operationally elite, it's the core focus in addition to the cost efficiency and the app value proposition, each which has their own sub elements where we'll continue to build on the early gains and wins. Operator: I'm showing no additional questions in the queue at this time. Ladies and gentlemen, this concludes today's program. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.
Operator: Welcome to Sleep Number's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Thursday, March 12, 2026. This conference call will be available on the company's website, ir.sleepnember.com. Please refer to today's news release to access the replay. On today's call, we have Linda Findley, President and CEO; and Amy O'Keefe, Chief Financial Officer of Sleep Number. Before handing the call over to the company, we will review the safe harbor statement. The primary purpose of this call is to discuss the results of the fiscal period ending on January 3, 2026. Commentary and responses to questions may include certain forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties outlined in the company's earnings news release and discussed in some detail in the annual report on Form 10-K and other periodic filings with the SEC. The company's actual future results may vary materially. In addition, any forward-looking statements represent the company's views only as of today and should not be relied upon as representing its views as any subsequent date. The company specifically disclaims any obligation to update these statements. Please also refer to the company's news release and SEC filings for a reconciliation of certain non-GAAP financial measures and supplemental financial information included in the news release or that may be discussed on this call. I will now turn the call over to Linda Finley, Sleep Number's CEO. Linda Findley: Thank you, Rob, and good morning, everyone. Before I begin, I want to welcome Amy O'Keefe, our new CFO. After an extensive search, she joined us in December and brings with her decades of experience leading operational and financial transformations across public and private companies. Her focus has been on streamlining our business operations and strengthening our capital structure to support our turnaround strategy. You'll hear more from her shortly. In today's call, I will cover 3 things. First, how we're executing on our strategy, both for growth and cost cutting; second, why we believe that our new marketing and product strategies are working; and third, what we're doing to manage liquidity and the capital structure. First, on delivering our strategy. 2025 was a pivotal year for Sleep Number as our ReShape team drove big turnaround changes at every level of the company. from retail and corporate operations to marketing strategy and the rapid development of our new product line. Importantly, we delivered on the guidance we provided in our last call. Full year net sales were $1.41 billion, in line with our guidance despite reduced marketing spend and lower traffic throughout the year. Adjusted EBITDA was $78 million, exceeding our guidance of $70 million. Our use of cash for 2025 was $18 million compared to the $50 million guidance. For the full year pro forma adjusted EBITDA margin was approximately 9%, and Amy will discuss how we plan to improve margins further in 2026. The long-term benefit to adjusted EBITDA margin comes from 2 places. First, the renewed growth from our product line redesign; and second, the significant cost savings we have already done and will continue to do this year. We radically reset the business by lowering our fixed cost structure and built a leaner, more nimble organization. We removed more than $185 million of annualized costs and have identified another $50 million of annualized fixed costs that we are executing on now. We are still in full turnaround mode, and our progress in 2025 doesn't change the fact that we still have hurdles to clear in 2026. We saw the same pressures as the rest of the industry in January and early February from severe weather and macroeconomic impacts. We had 236 stores that were closed for at least 1 day in the month of January, and therefore, sales at the start of the year were significantly down. We adjusted our marketing spend and strategy to lean in when things improved, and we have seen sequential improvement into February and March, driven mostly by our product launch. That brings us to our next point about why we believe our product and marketing strategies are working and will carry us through the next phase of the turnaround. We launched our first new bed and a new adjustable base in January and the response from customers has been fantastic. The Comfort mode mattress priced under $1,600 gives us access to a new group of customers while maintaining personalized comfort as the core of the experience. As of the end of February, sales are 3.5x what we expected and nearly twice all the sales of all 3 C Series beds that this bed replaces. In addition, we are seeing very strong attach rates for adjustable bases and bedding. The success of the first Comfort bed is an important indicator for the rest of the portfolio we announced this morning as it's built off the same principles and the same value proposition. We listened to both current and prospective customers and built a product line that addresses their most critical needs of comfort, durability and value. We also refer to the core of what only Sleep Number can offer, personalized comfort, adjustability, smart technology and temperature benefits, the only bed in the industry that bed owners can fully control whenever they want. It's comfort that shift with you night after night. With 4 new beds available in-store and online starting March 23, Sleep Number beds will now reach a broader set of consumers in the premium category. We are leveraging years of innovation and experience servicing luxury materials, features, comfort, temperature management and adjustability at better price points than ever before. This enabled us to build more value per dollar in each bed, protecting our margins while also achieving a lower price point for today's premium customer. In addition to these innovative new beds, we are also making it easier to find the right bed for you by simplifying the buying experience in store and online. With this launch, we are reducing our core lineup from 12 mattresses to 7 organized into 3 clear collections. First, Comfort mode is our new entry point to the brand. It delivers personalized comfort and temperature management controlled without an app, all at an accessible price. In January, we launched the 10-inch comfort mode bed, and now we're adding an 11-inch model called Comfort mode Luxe with 3-zone comfort layer and advanced temperature materials starting at just $2,099 for. Second, the Comfort next line, starting at $2,999 for a queen is our biggest innovation in the launch with 3 all-new beds, including 2 that feature our new Tribrid design. We are the first company to combine foam, advanced temperature materials and microcoils on top of air adjustability to deliver improved comfort, pressure release and durability with personalized comfort we are known for. These exceptionally luxurious beds will be the start of our smart technology in our portfolio and we'll track and improve your fleet at incredibly competitive price points. Third, we have our climate collection starting at $5,499 for Queen and it includes our existing Climate Cool and Climate 360 beds that differentiate with true active temperature management. This category represents the ultimate and luxurious comfort. When combined with the base, it remains the only line of mattresses on the market that offers personalized firmness, smart technology, adjustability and active temperature control, all in one bed. In fact, our temperature programs on Climate 360 result in up to 52 more minutes of restful sleep per night. But the new product alone isn't what gives us confidence. The marketing changes we have made are substantial. As I've said before, we can do more with the dollars we spend, and that is happening. First, we rebuilt our marketing foundation and modernized how we identify and attract customers. As a result, we saw meaningful improvements throughout 2025 in our funnel metrics. Our marketing into Q4 maintained this improvement, and we're seeing accelerated year-over-year improvement in cost per acquisition so far in 2026. Second, we also started refreshing our creative and messaging last year in social and digital channels. We also recently launched our first new commercial in more than 2 years with a dedicated comfort mode spot where recent performance has now surpassed our prior campaign and current competitive benchmarks. The combination of this work is showing up in our annual brand tracker that we completed in January just before we announced our partnership with Travis Kelce. Despite overall pressure in the industry, we saw significant increases in every aspect of Sleep Number's brand. Brand consideration among premium shoppers grew 10% and achieved the highest consideration in the premium category. We also saw the highest levels in 6 years of critical consideration drivers, including value, quality, aspirational fit, comfort and individualized comfort. Now it's up to us to build on that success and turn that brand strength into sales growth. The marketing changes are still underway, and you will continue to see new creative, new strategies and our partnership with Travis Kelce comes to life. Finally, let's talk about liquidity and capital structure. It isn't news to anyone that we need to fix our capital structure. I knew that when I joined the business less than a year ago, and it remains our top priority. Three things hit us particularly hard in the end of 2025 and beginning of 2026. The industry-wide softness we already spoke about, our work to clear out inventory as we roll out the new product line and our continued careful management of marketing spend as we lap a very high inefficient spend of Q1 last year. This puts pressure on our liquidity, and we are implementing a plan to address this. As part of that plan, we hired Guggenheim Securities to evaluate the inbound interest we have received and advise on other opportunities to refinance our credit facility as we shape Sleep Number back into a profitable growing company. Amy will talk about this in more detail. Before I turn the call over, I want to thank our team members. Delivering a product reset of this scale in just 10 months, work that typically takes more than 2 years, reflects a new level of speed, collaboration and execution across the company. Our work is focused on delivering better value for our customers, shareholders and team members and on bringing Sleep Number back to profitable growth. With that, I'll turn it over to Amy. Amy O'Keefe: Thank you, Linda, and good morning. I joined Sleep Number in mid-December because I view it as a company whose intrinsic value far exceeds its market capitalization. While Sleep Number is in the midst of a turnaround, the value of its underlying assets is undeniable, leading brand recognition, differentiated product and the tens of billions of hours of sleep data that validate the benefit our beds have on the quality of your sleep. We have a lot of work ahead of us, but fortunately for me, Linda and the team have already done a significant amount of the hard work to put the company on a path to profitable growth. One, rightsizing the cost structure to a lower revenue base by executing on $185 million of annualized cost reductions with line of sight to an incremental $50 million to be executed in 2026. Two, executing in record speed for Sleep Number on a completely new line of products that Linda described, which we are launching on March 23; and three, modernizing our marketing engine with new leadership, new creative, new channel-specific media strategies and a new partnership with Travis Kelce to strengthen the brand and drive top line growth. This is a pivotal time for the company, and I'm excited to partner with Linda and add my deep turnaround experience to unlock value for our shareholders. I want to thank the team for their very warm welcome and efforts to get me up to speed quickly. Now let's get into Q4 results, which were better than expected. Net sales were $347 million in Q4 or 8% below the same period in the prior year. As a reminder, fiscal year '25 benefited from a 53rd week, which favorably impacted year-over-year results by approximately 660 basis points. Notably, the performance trend across the year improved sequentially, while the number of stores decreased by 40, exiting the year with 600 stores. And as Linda noted, the impact of our improved marketing offense continues to drive efficiencies. Gross profit margin was 55.6% in the quarter, a 430 basis point decline versus the prior year, primarily driven by a $9.6 million nonrecurring inventory obsolescence charge associated with our new product launch and the impact of unit deleverage and higher tariffs. Excluding the impact of the inventory charge, adjusted gross profit margin was 58.4%. Operating expenses in the quarter were $197 million, down 9% year-over-year, excluding restructuring and other nonrecurring costs. The reduction was driven by ongoing cost savings initiatives to rightsize the fixed cost base and lower variable selling expenses. Media investments were comparable to the fourth quarter of the prior year despite a 53rd fiscal week. Adjusted EBITDA was $19 million, down $7 million versus the same period last year. For the full year, net sales were $1.41 billion, consistent with our expectations, but down 16% versus the prior year. Full year gross margin was 59%, and down 60 basis points year-over-year and aligned with the guidance of 60% that we shared last quarter when excluding the impact of the fourth quarter inventory charge. Operating expenses for the full year were $824 million, a $136 million reduction from the prior year, excluding restructuring and other nonrecurring costs. On an annualized basis, we've executed approximately $185 million of cost savings initiatives, which gives us an estimated $50 million tailwind as we head into 2026. As Linda mentioned, 2025 adjusted EBITDA was $78 million, exceeding our most recent outlook of $70 million. Importantly, for the full year, pro forma adjusted EBITDA margin was approximately 9%, a 200 basis point improvement versus the prior year. Turning to the balance sheet and cash flow. We ended the year in full compliance with our credit agreement and debt covenants. Total liquidity, including cash and revolver capacity, was $58 million at year-end, well above the amended $30 million covenant floor. Full year free cash flow was a use of $18 million. which was just over $30 million favorable to expectations. However, it was unfavorable by $21 million compared to the prior year, primarily due to top line pressure and nonrecurring cash restructuring costs. Capital expenditures of $14 million were down $9 million compared to the prior year. Looking ahead to 2026, as Linda mentioned, January demand was soft versus last year and our internal expectations. As we planned, the media investment in January was down significantly year-over-year and reallocated to after the launch of our new products when the return on investment is likely to be much higher. Moving into February, we saw a sequential improvement in performance during the President's Day event as we launched Comfort mode. Not only were we pleased with Comfort mode sales performance, but gross margin is well above our legacy opening price point beds. This provides another proof point that we can regain competitive positioning in the premium opening price point as we planned. We're excited to launch the rest of our product line in late March. Given the magnitude of the change that we are executing in 2026 as part of our turnaround plan, we will not be providing guidance today. However, I will provide some indications of our performance expectations for the balance of the year. I will also note that we are planning cautiously to ensure that our cost base and our liquidity planning are set appropriately as revenue ramps sequentially over the balance of the year. While we expect Q1 net sales to decline in the high teens because of the softness we saw at the beginning of the year with the full impact of the new product launch in the second quarter, along with an increase in year-over-year media spend, we expect a significant improvement in year-over-year revenue performance in Q2. We further expect double-digit sales growth in the second half with the full benefit of, one, new products, two, new creative assets, and three, marketing reach with our new strategic partner, Travis Kelce. As a result of cost savings initiatives and the expected ARU improvement from new products, adjusted EBITDA for the full year is expected to increase in the high teens to mid-20s percent range year-over-year, and we expect free cash flow to be positive. Lastly, but importantly, and as Linda mentioned, while we are seeing improvement in the business, the softness from the start of the year and the clearance of our existing products have put pressure on our liquidity and covenants. We are actively implementing a plan to address this as further detailed in our Form 10-K and have engaged an advisory bank, Guggenheim Securities, to help us. We will continue to monitor our liquidity position and covenant compliance and we'll work with our advisers to address our credit facility and evaluate inbound interest and other opportunities to improve the company's liquidity, balance sheet and financial flexibility. With that, I will turn it to the operator for Q&A. Operator: [Operator Instructions] Your first question today comes from the line of Dan Silverstein from UBS. Daniel Silverstein: Congrats on the announcement of the product launch. First question is just on that. So with the new product launches, what were the main pain points you were trying to address? And then the Comfort mode product replaced its predecessor at a higher margin. How will this new announcement today, how will these new beds reset the impact on ASPs, cost per bed and margins going forward? Linda Findley: Sure. Yes. So I'll start on both of those, and then I'll have Amy jump in as well. So first of all, thanks very much for the congratulations and the questions. So pain points, first of all, was going back to exactly what we talked about before, customers right now, when you think about the people who are most interested in the premium category, we really wanted to expand our audience to be able to serve our existing customer base and then broaden into younger demographics and additional demographics that would want access to the benefits of a Sleep Number bed. So we focused on comfort, value and durability in everything that we built. But one of the advantages that we have is all of the investments that Sleep Number has made in innovation over the years really came to pay off in this particular product line where we were able to take incredibly luxurious materials, temperature management materials and other new innovations around comfort, including foam and our new micro coils that we're putting into 2 of our new beds, to really say we're going to take luxury materials and bring them to a much more accessible premium price point. So what this allows us to do is both more directly addressed comfort and improve sleep from our past innovation history in a better price point for our customers. And there's a much clearer step-up strategy too now. So there's the beds that don't require an app that allow people to experience the brand for the first time. And then you can move into some of our smart technology and our other beds that we're rolling out today or introducing today. In that concept, we built these beds for manufacturability. And one of the challenges you've heard us say in the past is that in order to really maintain our margin, we were kind of selling up the line. We have some incredible beds, and we still have our climate series beds that we mentioned today. they are doing extremely well. But we wanted to make every bed in the line the same margin and a strong margin profile in order to make sure that our sales team could really sell the best bed for whoever the customer is and not have to worry about the impact to the margin profile. So our comfort mode bed is as margin accretive as our climate 360 beds and that allows us to serve the customer more clearly, more directly and also protect our margins at the same time. So sort of 2 -- double answers there to your questions, but we are really excited about this launch, not only for what it means for customers, but what it does mean for our margin profile. Any thing you want to add, Amy? Amy O'Keefe: And I'll just jump in on gross margin. We are expecting, as I mentioned, a sequential increase in ARU as these products transition out and the legacy products are discontinued. The exciting part for a finance person is that gross margin, if I just look at the comfort mode bed compared -- and this is just the one SKU that we've already launched, which is performing, as Linda mentioned, well above our expectations, 3.5x the plan. The best part of that for me is the gross margin. If I just look at that compared to the 2 beds in the C Series that it's replacing, it's a 10 percentage point gross margin improvement compared to the prior year. So it's really exciting not only for early indications of the performance but also the margin profile of the business. Daniel Silverstein: Very, very helpful. And just one quick follow-up. Could you just touch on the major sources of the $50 million of additional savings you think you can drive this year? And will there be any further clearance activity as we nudge up to March 23? Amy O'Keefe: Sure. And so last year, the Linda and the team, as we mentioned, took a significant amount of cost out of the business. annualized basis, it was $185 million. And I think those were, forgive the term, but sort of blunt force, right, the team needed to move fast in order to protect our liquidity position. I think over the last several months, a quarter or more, we have been looking, I think, more surgically at where opportunity remains to take costs out of the business. And at a super high level on the incremental annualized $50 million, there's a lot of logistics, delivery, last mile labor model resets, and we're still taking a look at our corporate overhead structure. And so I think those things -- those are the big activities in the $50 million. Linda Findley: And importantly, just to add to that, all of the $50 million has already been identified, we're already executing on it, and it is all fixed costs. Amy O'Keefe: Yes, all fixed costs. Operator: Your next question comes from the line of Bobby Griffin from Raymond James. Robert Griffin: Congrats on the first product launch there. I guess, first for me, I think the release or maybe the prepared remarks called out March 23 as the date, but like what's the phasing as we look at getting these 6 new beds now that you talked about on the floors and kind of across the portfolio, how is that phasing work throughout the year? And if you can, just give us a date that you feel the floors will be largely set, the stores will look as you want them to be? . Linda Findley: So I'll jump in on that. First of all, the all 4 -- so we launched 1 bed earlier this year. That was the comfort mode, the first bed that we launched. There are 4 new beds plus the base -- sorry, we launched the first new bed and base in January. There are 4 new beds and a new base that are all going to be available for purchase starting on March 23. Those are the ones that we announced today. And that completes the product reset, plus, of course, the existing climate series that we have Climate 360, Climate Cool that are already obviously on floor. So all the beds will be available for purchase starting on March 23, and we will start setting floors on March 23. So we will start with our first highest volume stores and most of the stores will be set by mid-April. Then we'll have a few more stores that might roll out into May. But for the most part, the key stores will be -- will all be set by mid-April. Robert Griffin: Okay. So basically, Floor will be in good shape for the Memorial Day holiday. That's what I was getting at. Linda Findley: Absolutely. That is exactly what we're planning for. Yes. Robert Griffin: Okay. That's very encouraging. And I guess, just on -- I understand the dynamics around not wanting to give the guide. But just one clarification, Amy, and then maybe a little help. But the EBITDA number that -- the growth that you're referencing, that's versus the reported number in '25, not the pro forma number. Amy O'Keefe: That's correct. That's correct. Of the $78 million adjusted EBITDA base mid-20s percent range improvement. Robert Griffin: Yes. Okay. Perfect. And then if that comes to fruition and you guys are able to deliver that, would that translate into positive free cash flow for the year, I understand this business typically has really good cash flow metrics, but it would? . Amy O'Keefe: Absolutely. Operator: Your next question comes from the line of Peter Keith from Piper Sandler. Unknown Analyst: This is Sarah on for Peter. First, just on marketing spend, given the meaningful reductions in 2025, how are you guys thinking about investment in '26? Should we expect those marketing dollars to start trending back up particularly as the new product lineup rolls out? Or is current on kind of sufficient to drive demand? Linda Findley: Right. So as we spoke about before, what we're actually doing in 2026 compared to 2025 is you'll see marketing held flat as total spend in 2026 over 2025. But what that means in reality because 2025 had very high spend in Q1, much lower spend in Q2 and Q3 and then moderated sort of relatively flat spend in Q4. That was the shape of the curve in 2025, someone compared it to a square root at one point. So when you look at 2026, what we're actually doing is evening that spend out across the entire year. So you don't have any peaks and valleys of spend that can create inefficiencies and so what that means in reality is Q1 is actually down because, again, Q1 spend last year was extremely high before I joined the business. So Q1 spend is slightly down. Q2, 3 and 4 will be up year-over-year relative to last year because of the fact that we're evening out the spend. So you are going to see increased spending, as Amy mentioned, in line with our full rollout of the products. Amy O'Keefe: And the only thing I'd add is that Q2 is up higher than -- the back half by quarter is roughly flat, but the flip flop is really between Q1 and Q2. Unknown Analyst: Yes. Okay. Very helpful. And then just a quick follow-up on the clearance of existing products. Was that primarily greater markdown than expected? And then did you say that was expected to be a headwind once with those newer products and on the reduction? Amy O'Keefe: Sorry, are you finished with your question? Unknown Analyst: Yes. Amy O'Keefe: Got you. We are going to see unquestionably some margin pressure in Q1. So this new product rollout is monumental compared to other product launches in the company's history. I mean, I think we say we haven't seen such significant change in a decade and so with a hard stop, and we definitely didn't want to do a rolling change of these products because we wanted to get the revenue ramp and the margin benefits as early as we possibly could. So we're definitely going to be taking some discounting and hits to margin in Q1 because of the hard stop and the softness that we talked about in January and February, we had a little bit more inventory hangover than we would have liked, and we're working through that in the month of March. Linda Findley: Yes. The only thing I would add to that is it was -- you were asking if it was expected, and we did expect to do some clearance work. So I think that's fairly standard in a launch of this magnitude. One of the things that we are excited about with what we've seen from the launch of Comfort mode is this -- it outsold 3.5x our plan, but it's also out selling all 3 of the beds it replaces by 2x. So you get leverage with volume as well. And that's a big part of what we're thinking about long term is, of course, the volume play and how we can increase leverage that way, too. So there's trade-offs in everything that we're looking at that this was expected. Operator: And as we have no further questions, ladies and gentlemen, this will conclude today's question-and-answer session. I'd now like to turn the conference back over to Linda for any closing remarks. Linda Findley: Thank you very much for your time today. We're excited for our customers to experience our new product lineup later this month, and we remain very focused on the key elements of our turnaround strategies as we actively address our capital structure. . I look forward to updating you on our continued progress in the coming months. As always, if you have any questions, please contact us directly. Operator: This concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Hello, and welcome to the TIC Solutions Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Andrew Shen, Director of Investor Relations. Thank you. You may begin. Andrew Shen: Thank you, operator. Good morning, everyone, and thank you for joining the call. Joining me this morning is Tal Pizzey, our Chief Executive Officer; Ben Heraud, our President and Chief Operating Officer; Kristin Schultes, our Chief Financial Officer; and Robbie Franklin, Executive Chairman. As disclosed in our earnings release, we would like to acknowledge the planned leadership transition we announced this morning. Ben Heraud has been appointed Chief Executive Officer effective March 31, 2026, succeeding Tal Pizzey. Tal will continue to serve on our Board of Directors and act as an adviser to Ben through and following the transition to ensure continuity. We will provide additional context during our prepared remarks. I would now like to remind you that certain statements in the company's earnings press release and on this call are forward-looking statements that are based on expectations, intentions and projections regarding the company's future performance, anticipated events or trends and other measures that are not historical facts. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. In our press release and filings with the SEC, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, March 12, 2026, and we undertake no obligation to update any forward-looking statements we may make except as required by law. As a reminder, we have posted a presentation detailing our fourth quarter financial performance on the Investor Relations page of our website @ticsolutions.com. Our comments today will also include non-GAAP financial measures and other key operating metrics. The required reconciliations of non-GAAP financial metrics can be found in our press release and in our presentation. For the purpose of this call, we refer to our segments as Inspection and Mitigation, or I&M, Consulting Engineering or CE, and Geospatial or GEO. Any reference to combined results reflects a non-GAAP combined view of legacy Acuren and legacy NV5 for comparability. More details on the calculations of the combined results are included in the presentation. Let me outline the flow of today's prepared remarks. Tal will provide opening comments. Ben will review our operating priorities and segment performance. Kristin will cover our financial results, integration progress and our 2026 outlook. Robbie will conclude with strategic priorities and capital allocation. It's now my pleasure to turn the call over to Tal. Talman Pizzey: Thank you, Andrew. Good morning, everyone. This morning, we announced the planned leadership transition that has been contemplated as part of our broader succession planning process. After nearly 4 decades with the business, including serving as Chief Executive Officer, I will be transitioning from the CEO role as I prepare for retirement. I will continue to serve on the Board and act as an adviser to Ben and his team to ensure a seamless transition. Since joining Acuren in 1987, it has been a privilege to help build this organization. We entered the public markets and completed the combination with NV5 create TIC Solutions a $2 billion revenue company. Ben has been deeply involved in shaping the combined operating model since the NV5 combination closed in August. He understands the platform, the culture and the priorities ahead. I have full confidence in his leadership as the company moves into this next chapter. With that, I will turn the call over to Ben. Benjamin Heraud: Thank you, Tal. I'm excited to step into the CEO role on March 31 and to build on the strong foundation we have established across both legacy organizations. Since joining TIC Solutions in August, my priority has been sharpening our commercial execution across the platform. That starts with aligning leadership around clear growth priorities, strengthening account management processes and accelerating cross-segment collaboration. We are driving greater consistency and pricing and utilization. Before joining TIC Solutions, I served as CEO of NV5 and previously as COO. I joined NV5 through the acquisition of Energenz, a business I co-founded and spent more than a decade building and scaling engineering and commissioning operations across global markets. That experience in building commercial teams, improving operating rigor and driving prudent capital allocation informs how I approach this next chapter. 2025 marked an important step change for TIC Solutions. We completed the combination, rebranded and established a scale TIC, Engineering and Geospatial platform positioned for the next phase of growth. On a combined basis, in 2025, we grew revenue approximately 4% to $2.1 billion, representing our highest combined full year revenue. We delivered approximately $312 million of adjusted EBITDA and 14.8% adjusted EBITDA margin for the full year. We now operate at meaningful scale with a diversified end market mix and a recurring revenue base anchored in compliance and essential services that positions us well for durable growth. We have an incredible opportunity ahead to expand margins and compound earnings through focused execution of our strategy. And as we move into 2026, our priorities are clear. First, we will accelerate organic growth across the platform with a particular focus on cross-selling and deeper client engagement across our segments. We see a meaningful opportunity to expand share of wallet with key infrastructure, industrial, utilities, data center and government clients by leveraging our combined capabilities. Second, we are focused on strengthening organizational alignment and cultural cohesion across TIC, so we retain our great talent and deploy our resources and capital to the highest return opportunities. Finally, we'll drive margin expansion through prudent cost management, service mix improvement and utilization improvements as we scale. We're beginning to see tangible cross-selling traction across the platform. For example, we're in late-stage negotiations on a multiyear bridge infrastructure engagement. The scope brings together drone-based LiDAR mapping and modeling, engineering oversight and design review, both access and inspection capabilities, allowing the client to execute a long-term inspection and maintenance solution. This is a good example of how we can serve as a multidisciplined provider across the asset life cycle, which we believe is a differentiator in the market. In this example, we expect opportunities to expand and scope over time, including additional inspection work and analytics services. This project is emblematic of the sizable market opportunity ahead for this integrated offering. Our revenue base remains anchored in recurring and repeat compliance-driven inspection, Engineering and Geospatial activity. We believe the diversified nature of our portfolio provides enhanced stability and performance greater flexibility and capital allocation. Diving into segment performance, CE continued to perform well. Activity in data centers, infrastructure, engineering, building planning and design and specialty services such as the development of digital twins remains healthy. Results were supported by ongoing infrastructure investment and grid hardening and modernization programs. These programs are typically embedded within multiyear capital plans rather than short cycle activity. Data center revenue increased meaningfully year-over-year, reaching nearly $70 million in 2025, more than doubling versus the prior year. We continue to see strong momentum with line of sight to nearly $100 million of data center revenue supported by contracted backlog and programmatic client engagements. Within data centers, our work expands building systems design commissioning and power-related scopes, including mechanical, electrical, bioprotection, substation, peer review and digital modeling services. Our mix reflects a broader life cycle position. We support hyperscale and colocation clients from early stage engineering and design through commissioning and operational optimization, increasing scope density per site and supporting repeat deployment across multiphase campus relationships. We also recently secured a U.S.-based I&M engagement within the data center vertical, extending our inspection capabilities into the mission-critical space. The scope involves radiographic testing of critical mechanical systems. The engagement demonstrates the applicability of our advanced NDT capabilities within the data center ecosystem. We continue to deepen relationships with global hyperscale clients and as we expand service rep within existing accounts, we expect to continue gaining market share. GEO delivered steady growth and strong margins, supported by utility demand, healthy fleet utilization and increasing contribution from analytics and software services. During the quarter, the federal funding lapse slowed certain procurement and approval processes, which affected timing of work in select programs. The impact was limited to award and approval pacing, and there were no material cancellations. We expect execution timing and visibility to improve as we progress through the year. In February, we announced GEO Agent, our proprietary AI-enabled geospatial platform, and we expect to begin rolling it out to clients in the coming weeks. GEO Agent is designed to integrate with clients' existing systems record and over time, it should improve processing efficiency, automate key workflows and enable higher-value analytics. We expect it to support faster delivery times and incremental analytics services over time while operating within client environments and established workflows. Year-end backlog within CE and GEO was $1.07 billion, up about 10% from approximately $970 million last year. In I&M, Lower volumes were concentrated in the Gulf Coast, primarily due to LNG construction timing and slower chemical activity, along with a few site losses amid elevated competition. Competitive intensity in the region remained elevated during 2025, and we stayed disciplined on pricing while tightening account coverage and improving staffing and resource deployment. LNG-related demand has increased globally and we believe the impact in our second half results reflect timing between major construction phases rather than demand deterioration. We have strengthened regional leadership in the Gulf Coast and made targeted leadership additions with an inspection of litigation to drive operating consistency, commercial focus and improved resource deployment. We remain focused on margin quality, and we continue to pursue work that meets our margin thresholds. We maintain pricing integrity even when competitors were more aggressive, and we will not trade long-term economics for short-term volume. Our embedded run and maintain programs and call-out activity grew in the year. This recurring and repeat revenue base provides meaningful visibility and resiliency across cycles. This growth was offset by declines in the timing and scale of outages and capital projects. To strengthen execution we refined the I&M operating model during the quarter by reorganizing the segment into economically meaningful operating regions with clear P&L ownership. We also streamlined support function and improved indirect cost management to reduce duplication and improve coordination. We are tightening utilization management, asset deployment and cost oversight. On the commercial side, we are reinforcing structured account and pipeline management discipline across our largest customers with compensation frameworks aligned to growth and renewal performance. Collectively, these actions are intended to improve execution consistency and support margin progression in 2026. We plan to host an Investor Day in May to outline our longer-term growth strategy, margin trajectory and capital allocation framework, including additional detail on our updated I&M operating framework. Across TIC Solutions, this quarter's performance reinforces the benefits of scale and diversification in our business. We believe that this positions the company for continued growth and margin progression. And with that, I'll turn the call over to Kristin to review the financial details for the full year and fourth quarter 2025, provide an update on integration and offer context for our 2026 outlook. Kristin Schultes: Thank you, Ben, and congratulations. Good morning, everyone. On a combined basis, full year revenue grew 4.4% on a constant currency basis or 3.6% as reported to $2.1 billion after FX headwinds in the year. Full year combined adjusted gross profit was $794 million, with adjusted gross margin of 37.6%, up 14 basis points. In I&M, revenue was approximately $1.1 billion for 2025, roughly flat for the year with growth in industrial, midstream, wind and automotive, offset by localized softness in the Gulf Coast. I&M full year adjusted gross margin was 27.8% compared to 28.5% in the prior year. On a combined basis, CE revenue was $714 million, up roughly 8% against 2024, lifted by infrastructure and data center tailwinds. CE's full year adjusted gross margin was 47.0% and up 150 basis points against 45.5% in the prior year driven by data center growth and real estate transaction work. On a combined basis, Geospatial revenue was $298 million, up roughly 6% against 2024, driven by strong commercial demand as well as broadening analytics and software sales. Geospatial's full year adjusted gross margin was 51.5% compared to 53.6% in the prior year, driven by mix and utilization. Now shifting to our fourth quarter results. Total revenue was $508 million, reflecting a full quarter of NV5 contribution. On a combined basis, this was roughly flat year-over-year, with growth in CE and GEO offset by I&M. Adjusted gross profit for the quarter was $197 million, up 8% from the combined $183 million. Adjusted gross margin was 38.8%, up 277 basis points from the combined margin of 36.0% in the prior year period. This performance represented margin expansion on a dollar and percentage basis across all 3 segments. In I&M, revenue was $258 million in the fourth quarter, down 2% driven by lower outage and capital project spending. Adjusted gross margin was 28.2% for the quarter compared to 26.1% in the prior year period. The over 200 basis point margin improvement reflects favorable mix, including higher call-out activity as well as improved execution. On a combined basis, CE contributed fourth quarter revenue of $181 million, up 2%. CE's adjusted gross margin was 46.9% in the quarter up 150 basis points against 45.4% in the prior year period, driven by infrastructure and data center tailwinds. On a combined basis, GEO contributed fourth quarter revenue of $70 million, up 2%, with growth impacted due to the federal funding lapse. GEO's adjusted gross margin of 57.2% in the quarter improved against 50.0% in the prior year period, reflecting favorable project mix and strong operational execution. The margin improvement in each of our 3 segments in the quarter demonstrates real momentum as we start 2026. Adjusted SG&A for the quarter was $124 million or 24.4% of revenue reflecting the inclusion of NV5 operations, which carry a higher SG&A ratio. In the near term, we are attacking the elevated SG&A levels through the announced integration program as well as our commercial excellence initiatives. Adjusted EBITDA for the fourth quarter was $76.4 million, representing an adjusted EBITDA margin of 15.0% compared to $40.7 million in the prior year period. The full year combined adjusted EBITDA was $312 million, representing an adjusted EBITDA margin of 14.8%. We improved cash conversion during the year, supported by lower DSO and tire working capital management. Operating cash flow as reported for the year was $95 million, reflecting only a partial year contribution from NV5. Capital expenditures for the full year totaled $34 million or 2.2% of revenue. On a combined basis, CapEx was $56 million or 2.7% of revenue reflecting our low capital intensity and asset-light business. Moving now to an overview of our balance sheet and capital resources. As of year-end, we had total liquidity of $551 million, including approximately $440 million of cash and cash equivalents and $111 million of available capacity under our revolving credit facility. Total term loan debt was approximately $1.6 billion. Our balance sheet is in a solid position, and we remain focused on generating free cash flow to achieve our long-term net leverage ratio target of below 3x. In October, we completed a $250 million private placement of 20.8 million shares of common stock and prefunded warrants to an existing shareholder. The transaction strengthened our balance sheet and provided additional flexibility to fund growth opportunities and to deleverage. Turning to integration. We transitioned to the execution phase of the integration program toward the end of the fourth quarter. We remain on track to execute on the $25 million of cost synergies that we've committed to delivering. We anticipate roughly half of the annualized cost savings to be realized during 2026. And we expect to reach full synergy run rate by mid-2027. To ensure disciplined execution, our integration management office has clear ownership across key functional work streams with defined milestones to track delivery and cost capture while ensuring operational stability. We are also focused on communication, incentive alignment and cultural integration as we bring the organizations together. Now turning to our outlook. For the full year 2026, we expect revenue in the range of $2.15 billion to $2.25 billion and adjusted EBITDA in the range of $330 million to $355 million. At the midpoint, this implies approximately 4% revenue growth over our 2025 combined baseline of $2.1 billion. Meaningful year-over-year growth in adjusted EBITDA is expected to be driven by commercial focus and partial realization of our cost synergies, along with the operating model refinements and I&M that Ben discussed earlier. By segment, on a combined basis, we expect growth in CE and GEO to outpace growth in I&M for the full year. Please note that our 2026 adjusted EBITDA guidance reflects an $8 million investment related to compensation alignment actions at NV5. Specifically, we made a decision to reclassify the short-term incentive program at NV5 from stock-based compensation to cash compensation, which all else equal, reduces adjusted EBITDA beginning in 2026, thus impacting our guidance framework. This important change reflects an integrated market-based compensation structure at TIC. We are excited to announce this to our team, and we believe this will help retain and attract top talent as we continue to grow. We expect typical seasonality in 2026, consistent with the combined profile of our business. First quarter adjusted EBITDA typically represents roughly 15% to 18% of full year EBITDA. In line with historical patterns. The first quarter is generally the lightest quarter of the year, and we expect activity levels and margins to improve with performance weighted towards the second and third quarters. As you think about the first quarter, based on what we see today and our internal planning assumptions, we imply revenue in the range of $470 million to $485 million and adjusted EBITDA of $55 million to $60 million. From a cash flow perspective, we expect healthy free cash flow conversion from adjusted EBITDA. In 2026, we expect net interest expense of $95 million to $105 million, cash taxes in the range of $20 million to $30 million and capital expenditures between $60 million to $70 million. We also expect working capital to be a modest use of cash as we see growth this year. Taken together, these items frame our expected free cash flow generation for 2026. We are excited to be filing our first 10-K as a combined company. I want to thank our teams across the organization for the care, commitment and TIC first mindset that they've demonstrated through this period of change. Many leaders within our businesses have taken on additional responsibilities to move this forward and the integration momentum and progress we've made reflects the pride and ownership our teams bring to the table every day. With that, I'll turn the call over to Robbie to discuss our long-term strategy and capital allocation priorities. Robert Franklin: Good morning, and thank you, Kristin. I also want to thank our investors for your continued engagement and support. Before I outline our strategic priorities, I want to reiterate the Board's confidence in Ben's leadership and thank Tal for his decades of service. With integration underway, TIC Solutions is a unified platform with meaningful scale across inspection, engineering and geospatial analytics. Our revenue base is anchored in nondiscretionary maintenance, regulatory compliance, utility programs and long-cycle investment across critical industries. We support our clients from planning and design through commissioning, maintenance, compliance and asset optimization. Our team combined field data collection with design, analysis and digital capabilities that enhance reliability and reduce operational risk. Our capital allocation framework is disciplined. We will prioritize deleveraging towards our long-term target, reinvest organically in the highest return areas of our business and pursue selective tuck-ins and larger acquisitions that enhance capability, geography or technical depth at attractive returns. This week, our Board authorized a $200 million share repurchase program, which we may use opportunistically based on market conditions. With scale, diverse end markets and resilient revenue characteristics, we believe TIC Solutions is positioned to compound earnings and cash flow over time. 2026 is a critical year for TIC Solutions. We are laser-focused on execution and delivering on the targets we have shared with the investor community. We are encouraged by our early results to start the year and have confidence in our team's ability to drive top and bottom line growth. And with that, I'll turn the call back to Ben for -- to close our prepared remarks. Benjamin Heraud: Thank you, Robbie. As we close, I want to frame where we are going. 2025 was a pivotal year for TIC Solutions. We successfully brought together 2 scaled organizations, strengthened the balance sheet and advanced integration while continuing to deliver for our clients without disruption. The structural tailwinds in our markets remain intact, including infrastructure reinvestment, grid modernization, increasing technical and regulatory complexity and the continued expansion of mission-critical facilities. As we move into 2026, we are focused on accelerating growth by increasing share of wallet, expanding cross-selling across our segments and scaling our account coverage, while strengthening how we work together and reinforcing a common culture. That focus supports continued margin progression and cash generation while maintaining balance sheet strength, which will ultimately drive shareholder returns. I want to take a moment to recognize our teammates across TIC Solutions, they've handled a period of significant change with discipline and focus while staying committed to delivering for our clients every day. Thank you. With that, operator, we're ready to open the line for questions. Operator: [Operator Instructions] Our first questions come from the line of Chris Moore with CJS Securities. Unknown Analyst: This is Will on for Chris. Can you talk a little bit more about the integration process in a little more detail? Are there specific milestones you're looking to reach in 2026? Kristin Schultes: Yes. Thank you for the question. I will tell you that we are -- I am extremely proud of the team and the momentum that we have so far, a high degree of confidence in our ability to execute on this. Right now, I would tell you that some of our focus areas have been around communications and culture, which is incredibly important, especially during leadership transitions. We're working through compensation studies and alignment and choosing system implementation partners. So if you think about our commitment of $25 million of savings and capturing half of that this year, think about that as roughly 60% headcount and the rest non-headcount. And the team is meeting weekly on individual milestones and on track, we're ahead of schedule. Unknown Analyst: That's super helpful. And then on the top line, can you talk more about the biggest potential synergies and go-to-market strategies? And what are you hearing from customers? Is there any cross-selling opportunities that you're seeing that you weren't thinking about initially? Benjamin Heraud: Yes. Thanks, we touched on it on the call, but we have some really exciting developments and opportunities that are coming through the cross-selling program. Been really pleased with how the segments have been coming together and exploring ideas with their clients. We have a lot of white space between the businesses that create opportunity. But just pointing to that recent win and inspection mitigation within the data center space, that's really exciting, that's completely new to inspection of mitigation. So to be able to get that exposure to that market where we're seeing a lot of tailwinds is exciting. And then on the infrastructure side of things, we're able to really service the full life cycle of any kind of asset now with our capabilities from planning and design, consulting and engineering through I&M, it's driving opportunity for us to service our clients in new ways. So we're seeing a lot of upside. It does take time to get these wins in play. We're going to put these ideas in front of our clients and give it to a contract, but very pleased with the progress that we're seeing so far. Operator: Our next questions come from the line of Brian Biros with Thompson Research Group. Unknown Analyst: This is Chris calling in for Brian. A couple of questions on end markets. It seems fair to say that some of the smaller exposure categories are the fastest-growing. In your release and prepared comments, you called out significant organic growth in data centers, and we know that aerospace is another fast-growing end market. Both of these, of course, are higher-margin businesses. Where do you think these businesses could be in the next 12 to 24 months? And could they represent a double-digit percentage of sales? Benjamin Heraud: Yes. I mean in terms of organic growth, we sort of we've doubled the data center business over the last 12 months, and we're continuing to see -- be on track for continued significant growth. Related to that is power delivery and the the demand that data centers are putting on the grid. We're very, very well positioned to exploit that also with our technical capabilities in that space, along with infrastructure and general and the demand that we're seeing there. So some good end markets. Data centers will continue to grow and outpace certain parts of the business, especially as we layer in new services and increase our revenue per megawatt. Kristin Schultes: Chris, I would just add that we're really excited about with the combination of the businesses is the more diversified platform. And really, we see all of our end markets is having tailwinds. So yes, there are pockets of outsized or outpaced growth. But in general, we're really optimistic about all of our end markets. Benjamin Heraud: Yes, probably a good indicator of that. The backlog being up 10% year-on-year. Unknown Analyst: Yes. Fantastic. And then can you talk a little bit about your expectations on the inspection side for the energy and oil end markets? I know they can be somewhat lumpy quarter-to-quarter with the chemical market pressure and how oil and gas is performing, but how should we think about that end market into 2026. Benjamin Heraud: Yes. I mean we have good visibility on the business. A very large percentage of it is planned outages and run and maintain year-on-year as we look at the number of sites that we're working on, that's similar. And in a lot of cases, the contracts have a longer time line. So we have good visibility there. Operator: Our next questions come from the line of Tomo Sano with JPMorgan. Tomohiko Sano: Could you talk about the EBITDA margins in the latest 2026 guidance. IC is lower than what was indicated in your prior outlook given the considerations of the stock comp to cash comp, I get that, but what other reasons for this more vicious margin outlook compared to what you guided 3 months ago, please? Kristin Schultes: Yes. Thank you. So you're spot on the previous range was 15.5% to 16.5% and have been adjusted by the stock compensation investment that we've decided to make. We think this is best for the business in the long term and really drive the integration of the team and provides market-based compensation for our team. So we feel that that's the right decision from there. And from there, we've given a nice framework for our 2026 guidance, both on revenue and adjusted EBITDA on a consolidated basis. Demonstrating dementing growth on the top line as well as margin expansion coming from improved execution across all 3 segments as well as the planned cost synergy realization. Tomohiko Sano: And follow up on CEO transitions. Could you elaborate on the timing and the rationale for this transition? And should we expect any changes in strategies or execution, please? Robert Franklin: It's Robbie. The transition sort of contemplated from the onset, when we bought Acuren helping the business for a very long time, and we wanted to create an environment where he could execute and really have its fingerprints on what the combined TIC Solutions entity would look like. And we also -- we had Ben who was already CEO of NV5, new the business, but we wanted to give him sort of the period to learn about Acuren and sort of the inspection side of the business. So in terms of timing, we feel like this is sort of the right transition time as we build. As we build sort of this unified culture. So pretty consistent with sort of our original thinking. And the Board and the entire team is very supportive of sort of this path. Operator: Our next questions come from the line of Alex Rago with Texas Capital. Unknown Analyst: Thank you very much. More broadly, can you address the current situation in the Middle East and the rise in oil prices and how that could impact your business or some of your customers' decisions? Benjamin Heraud: Yes. So the Middle East is a relatively small piece of our business, around 1%. So it's relatively immaterial, like now the impacts that we're seeing are minimal on the business there. As far as the price of oil and the impact on the business, we could see some additional work around pipelines. It's good for our oil sands business. And the refinery side of the business is relatively stable. So I mentioned earlier the good line of sight that we have with the run and maintain business. And right now, the outlook looks good. Unknown Analyst: Very helpful. And then as it relates to revenue guidance, which just kind of 2% to 7% growth rate, can you talk about the primary variables that could cause this to be either kind of closer to the high end or the low end? Kristin Schultes: Yes. So from a 2026 perspective on the top line, I would tell you we have a high degree of confidence in this and it was a very thoughtful approach that we did to the budgeting process this year down to the division level and a bottoms-up approach. And given the tailwinds we have in our business, we feel very confident in our ability to deliver against that. Operator: Our next questions come from the line of Harold Antor with Jefferies. Harold Antor: This is Harold Antor on for Stephanie Moore. So a quick question. Just on the pricing front, could you remind us what pricing rack historically, how it trended in the quarter? Just give me we're more disciplined and what, as you focus on the margin profile we want to walk away from some businesses. And then I guess, do you see that you guys are better positioned to be more aggressive on pricing, just given you provide the full suite of products and services today versus mostly competitors we can't compete on our phone. Benjamin Heraud: Yes. So we mentioned some of the work that we've done around the organization of our inspection and mitigation business in the U.S. that has offered us an opportunity to be more competitive on our pricing and go after more of the work in that space. A lot of the work that we price is more on a value proposition, fixed fee kind of work and we continue to see good momentum there. I would also just point back to the backlog being up 10% and the sales being very positive through the first part of this year already. And yes, just -- I mean, you mentioned the mix of work. And if we think of this opportunity to work through the life cycle of an asset, we are very sticky with our clients -- we have very strong relationships and our ability to work through the entire life cycle of an asset keeps us very sticky with those assets and clients. Kristin Schultes: And Harold, on the pricing, I think also I would just remind you to point back to our Q4 results, gross margin dollars and percentages were up across all 3 of our segments. We feel really good about that heading into 2026. And if you combine that with some of the operational initiatives under Ben's leadership, high confidence. Harold Antor: Yes. And then just to piggyback on an earlier question, Ben, I think you highlighted that you see a line of sight of $100 million in data center revenue. Just wanted to get a sense, is that a '27 event? Is that a '28 event? Or is that just -- is that a longer-term event? Just wanted to get a sense of the timing on that. Benjamin Heraud: It's '26 line of sight. So we have a very strong backlog, particularly to that, and we have multiyear programs, some extremely resource constrained area of the business where we have very strong relationships with the hyperscalers. So we see over the next 12 months line of sight to those numbers. Harold Antor: And then I could squeeze in 1 more just on capital allocation that you guys focused did the buyback. So should we be thinking more of the capital being deployed and buy backs? Or do you expect to do a little bit more on tuck-in side, any organic growth implementation investments that you could provide a little bit more color, that would be great. And that's all for me. Benjamin Heraud: So on capital allocation, we have a robust tuck-in line that we're going to continue to execute on. But we thought, as a Board, it was prudent have the flexibility to have a buyback program in place given where market conditions are. And frankly, there's no better acquisition than your own stock at the right levels. So we have a very opportunistic view on how we approach ,but there is no question we're continuing with in pipeline because it creates a more robust a more robust operating profile and allows us to new geographies and new service lines, which are critical to sort of our investment thesis. Kristin Schultes: Harold, I would just add that on our -- on the tuck-in side that Robbie mentioned, I'm really proud of the team's ability to continue maintaining focus on the broader integration with the merger, but also remain focused on the importance of the small tuck-in strategy that we have that's been largely successful for us. So we completed 3 small tuck-ins during the quarter and the combined business together at 12% for the full year, and that's across all 3 segments. So we're excited to continue that into the New Year. Operator: [Operator Instructions] We have reached the end of our question-and-answer session. I would now like to hand the call back over to Ben Heraud for any closing comments. Benjamin Heraud: Thank you all for your questions. I just wanted to reemphasize our strategic priorities to drive shareholder value. One, we need to accelerate our organic growth, and we will. Two, we're going to strengthen our organizational alignment and cultural cohesion. And three, drive margin expansion. Finally, I want to thank our investors for their continued support and partnership. We look forward to updating you on our next quarter. Thank you all, and have a good day. Operator: Thank you, ladies and gentlemen. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Good morning, ladies and gentlemen. Welcome to Village Farms International's Fourth Quarter and Year-End 2025 Financial Results Conference Call. This morning, Village Farms issued a news release reporting its financial results for the fourth quarter and year ended December 31, 2025. That news release, along with the company's financial statements are available on the company's website at villagefarms.com under the Investors heading. Please note that today's call is being broadcast live over the Internet and will be archived for replay both by telephone and via the Internet, beginning approximately 1 hour following completion of the call. Details of how to access the replays are available in today's news release. Before we begin, let me remind you that forward-looking statements may be made today during or after the formal part of this conference call. Certain material assumptions were applied in providing these statements, many of which are beyond our control. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements. A summary of these underlying assumptions, risks and uncertainties is contained in the company's various securities filings with the SEC and Canadian regulators, including its Form 10-K, MD&A for the year ended December 31, 2025, and which will be available on EDGAR and SEDAR+. These forward-looking statements are made as of today's date and except as required by applicable securities law, we undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DeGiglio. Mike DeGiglio: Thank you, Liz. Good morning, everyone, and thank you for joining us. With me today are Steve Ruffini, our Chief Financial Officer; and Gilan Lefever, our Chief Operating Officer; and Sam Gibbons, our Senior Vice President of Corporate Affairs. So I'm very excited to report our 2025 results, and I'll begin with a review of highlights for the full year and the fourth quarter. Then I'll turn the call over to Steve for a review of the financials before some last closing remarks. Our fourth quarter results again delivered strong profitability, gross margin and cash flow from operations, which contributed to record levels of performance for each of these metrics in fiscal year 2025. It was also a year that reflected the accumulation of many years of hard work and long-term strategic planning that has prepared us to capitalize on many of the catalysts that are now unlocking value for our stakeholders. Not only did we deliver record profitability and cash flow generation in 2025, but we did so with step function growth across several key metrics compared to 2024. We grew our global cannabis sales by 17% year-over-year with just a partial year of contributions from outstanding Netherlands business and international export sales increased more than sixfold as we continue to benefit from our leadership position as 1 of the world's largest EU GMP-certified cannabis operators. This resulted in consolidated and record consolidated performance, including net income from continuing operations of $21 million or $0.19 per share. a $49 million improvement compared to the prior year. Adjusted EBITDA from continuing operations of $50 million, another improvement of $48 million. and cash flow from continuing operations of $58 million, an improvement of $44 million compared to 2024. Our full year performance is a result of solid execution against our long-term plan and a strategy focused on improving margin performance, profitability and cash generation to enable additional growth investments across our platform. Those of you who follow us the longest know that we started with a crawl-walk-run approach to scaling out of cannabis business. And that's always been our view that we don't need to be first-mover advantage to build durable, defensible business models in our plant-based consumer goods. But what we do need is vision, patience, discipline and excellence in asset development operations and commercial activities, coupled with world-class people capable of leading us forward. We believe we demonstrated all of these qualities since we expanded the cannabis in 2018 and particularly in 2025. Since 2018, we've taken a methodical approach to scaling our capacity and capabilities in Canada, including early recognition of the potential power of EU GMP certification which we began pursuing nearly 6 years ago. We've now been EU GMP certified for over 4 years and international customers are increasingly seeking our products as more stringent regulations abroad -- have been restricting routes to market of other operators who can't meet our production and quality standards. The recent financial contribution from our Netherlands business are also making -- we're also making years in the making. We acquired our Netherlands license 5 years ago and have been very patient and prudent with respect to commercializing our operations and aligning our commencement of sales with the launch of the pilot program last April. We've modeled our business in an events to ensure return our investment in under a 4-year time line and our performance in 2025 clearly demonstrates Village Farms strong stewardship of capital on behalf of our shareholders, with positive net income for the year after only 3 quarters of revenue performance. And finally, our transaction this past May to privatize our legacy produce business also reflected many years of hard work and preparation, to achieve confidence that our cannabis business was ready to stand on its own and to structure transactions that enabled us to retain the attractive long-term optionality that we see for our portfolio of advanced greenhouse assets in Canada and Texas. All of these improvement important developments began unlocking value for our stakeholders in 2025 and provide more evidence of the success of our initial crawl, walk, run approach to scaling our operations. And now we believe we're ready to run as 1 of the world's largest and most respected scaled cannabis operators. Before I continue discussion on the fourth quarter, I'd like to, again, take an opportunity to acknowledge all our folks who are enabling our success. At [indiscernible] does take a village, and our people raised the bar considerably last year. Congratulations to all our team members around the world on a tremendous year. Now turning to the fourth quarter, which demonstrates our third consecutive quarter of positive consolidated net income from continuing operations, adjusted EBITDA and cash flow from operations. Operator: Please standby. Mike DeGiglio: Okay. Apologies, we lost connection. I'm not quite sure where we lost it. So I will back up a couple -- 30 seconds or so. And I apologize if I'm repeating certain things that were transmitted Talking about the Netherlands, our recent financial contribution to the Netherlands business are also many -- were many years in the making. We acquired the Netherlands license 5 years ago and have been very patient and prudent with respect to commercializing our operations and aligning our commencement of sales with the launch of our pilot program last April. We've modeled our business in Netherlands to ensure a return on our investment under a 4-year time line. and our performance in 2025 clearly demonstrates Village Farm's strong stewardship of the capital on behalf of our shareholders, with positive net income for the year after only 3 quarters. And finally, our transition this past May to privatize our legacy Produce business also reflected many years of hard work and preparation to achieve confidence that our cannabis business was ready to stand on its own and to secure a transaction that enabled us to retain the attractive long-term optionality that we see for our portfolio of advanced greenhouse assets in Canada and Texas. All of these important developments began unlocking value for our stakeholders in 2025 and provide more evidence of the success of our initial crawl walk run approach to scaling our operations. And now we believe we're ready to run as 1 of the world's largest and most respected scaled cannabis operators. Before I continue to discuss the fourth quarter, I'd like to again take an opportunity to acknowledge all our folks who are who are enabling our success. It truly does take a village and our people raised the bar considerably last year. Congratulations to all our team members around the world on a tremendous year. Now turning to the fourth quarter, which demonstrated our third consecutive quarter of positive consolidated net income from continuing operations, adjusted EBITDA and cash flow from operations and further evidence of our progress to become consistently and sustainably profitable for the long term. We saw year-over-year growth in net sales of 9%, just shy of $50 million. Net income from operations of $2.3 million, adjusted EBITDA of $8.6 million and operating cash flow of $11.4 million. Our Canadian cannabis sales once again led the way where we continue to maintain a top 5 overall market share position and as of the end of last month, continue to hold the #1 position in dry flower. Q4 sales grew 10% year-over-year, driven by a nearly 400% increase in international export sales. Retail branded sales were flat compared to Q4 last year, but with improved gross margins year-over-year, reflecting our success in shifting the business in Canada towards high-margin products throughout the course of the year. Gross margin performance in Canada, 43% was once again above our 30% to 40% target range for the fourth consecutive quarter and up meaningfully from Q4 last year. All of this translated to significant year-over-year improvements in profitability resulting in CAD 7.5 million in net income and adjusted EBITDA of CAD 14.3 million which is roughly 27% of sales and cash flow from operations increased to $21.5 million. Before I move on to discuss progress of our ongoing capacity expansion projects, I'd like to take some time to address some of the sequential variances in our fourth quarter results as compared to a record third quarter. We're thrilled to deliver record results every quarter, and frankly, we had demand from our customers to do so once again in Q4. However, near-term supply constraints are temporary holding us back -- and as some of you may be aware, the flow of cannabis in the province of British Columbia was impacted by a labor strike in Q4, which we estimate reduced our Q4 sales by approximately $2.5 million. As we noted in this morning's earnings release, our demand levels continue to meaningfully outpace our current supply capabilities. As some of you may recall, from our Q4 call last year, we entered 2025 with the leanest inventory position in more than 5 years. And for those of you who may be newer to our story, our Canadian cannabis business does experience seasonality due to variances in our growing climate throughout the course of the year. We typically experienced sequential declines in production and revenue during the fourth quarter, unless we've had new capacity come online, which tends to result in higher costs sequentially as compared to our third quarter. We also ended the fourth quarter after back-to-back quarters of record performance in which we continue to sell all the cannabis we produce. In addition to the nuances of inventory levels, seasonality and our temporary supply constraints, the nature of our international export sales has introduce an extra layer of potential variability and quarterly performance due to the timing of shipments and both the size of order flows and profitabilities of these sales. and we did have some international oils from Germany that we expected to ship in late Q4, and that got delayed to Q1. While we're operating with temporary supply constraints as we balance the increasing complex needs of our diverse customer base, importantly, -- the underlying fundamentals of our business remain very strong with continued strength of demand domestically in Canada and in our other international markets which will enable us to continue to drive profitable growth in 2026 and beyond. As we noted in this morning's earnings call, we are expecting to return to sequential growth in international exports in Q1 and continue to expect that we'll begin shipping to multiple new jurisdictions over the course of the next several months. Biomass constraints are a proverbial good problem to have in our circumstances, and it's 1 we're well down the road of addressing with ongoing capacity expansion projects. I'll now turn to some updates on these initiatives in Canada and the Netherlands. I'm pleased to report that our previously announced expansion of our Delta 2 facility remains on track and on budget. We actually began planting the first half of this expansion on March 2 and expect to start seeing early contributions of this additional capacity in late Q2. We expect to harvest an incremental 15 metric tons of production from this expansion during the remainder of this year, while we continue optional providing optimizing the second half of the expansion. Once we're operating at full capacity by mid '27, the D2 expansion will provide an incremental 40 metric tons of annual production compared to fiscal year 2025, which represents an increase of approximately 33%. In the Netherlands, our Phase 1 facility in [ Drafton ] continues to operate at full capacity with healthy growing margins even at limited scale, and we are also continuing to sell everything we produce. We are leveraging our experience in Canada to lead new product innovations and recently launched 10 new product offerings across multiple formats that are unique to this market. We are continuing to see strong pricing with participating coffee shops and believe we're well positioned to capture market share in premium product categories as our new Phase II capacity comes online. I will note that Q4 profitability in the Netherlands was impacted by increased operating expenses as we've recently been adding head count to prepare for the launch of our Phase 2 facility in Groningen which I'm pleased to report is nearing completion and also remains on time and on budget. We anticipate our first Groningen Phase II facility will be painted towards the end of this month with full capacity completion expected in Q2 as we put the finishing touches on some post-harvest and processing capabilities. The Groningen facility will ramp up to full capacity throughout the remainder of this year, at which point our total annual production capacity in the Netherlands will be approximately 10 metric tons. For comparative purposes, we had harvested just under 2 tons from Groningen fiscal year '25. Our capacity expansion products coming online in Canada and Netherlands will allow us to continue scaling profitably and increasing demand with -- and we believe the strength of our balance sheet will enable us to be opportunistic with respect to additional accretive organic and acquisitive growth investments in the future. We funded the majority of our ongoing Canadian and Netherlands expansions from cash on hand but we did recently amend and extend our Canadian credit facility with an incremental $15 million delayed draw term loan at an interest rate of just over 5%. We intend to utilize this incremental debt financing to make additional enhancements to our existing operations beginning with an incremental $3 million investment to expand our EU GMP capabilities throughout the remainder of this year. We ended the year with approximately $86 million in cash after completing a $3 million share repurchase during the fourth quarter, and we remain in an excellent position to continue creating value for shareholders and driving profitable growth in 2026 and beyond. So I'll close the call with some final thoughts on priorities for '26, but now I'll turn the call over to Steve for his review of Q4 financials. Steve? Steve Ruffini: Thanks, Mike. As a reminder, as of May 30, the majority of our legacy produce assets were privatized and are now classified as discontinued operations. Reported financial results for comparative prior periods have been adjusted accordingly. I'll start with a review of our consolidated Q4 results and a reminder that comparable performance to the fourth quarter of last year reflects the impacts of a $10.5 million noncash impairment charge during Q4 of 2024, and related to nonflower inventory purchased primarily from third parties that we determined did not meet our quality standards. Consolidated net sales increased 9% to $49.6 million, driven by growth in our Canadian cannabis segment as well as the third full quarter of contributions of recreational cannabis sales from our Phase 1 facility in the Netherlands. Net income from continuing operations improved to $2.3 million or $0.02 per share compared with a net loss of $5.7 million or $0.04 per share in Q4 of last year. Consolidated adjusted EBITDA from continuing operations was $8.6 million compared to negative $2.9 million in Q4 of last year. resulting in an adjusted EBITDA margin of 17.3% in the quarter compared with a negative 6.4% in Q4 of last year, which was driven by the noncash inventory impairment I just referenced. Our cash flow from operations improved to $11.4 million compared to $10.9 million in Q4 of last year. Turning now to our segmented results. I will start with Canadian cannabis, which I will discuss in Canadian dollars. Total net sales were $52.7 million for a 10% increase versus Q4 of last year. The year-on-year improvement was driven by the strong performance in our international medicinal exports, which increased 384% over Q4 of last year. For the year, Canadian Cannabis net sales were up 12% to a record $228 million. Canadian retail branded sales for the fourth quarter were $55.6 million, essentially flat with the fourth quarter of last year and reflects both the realignment of our product portfolio to higher-margin SKUs as well as biomass constraints. As Mike noted, our retail branded sales in Q4 were impacted by a labor strike in B.C. which we estimate negatively impacted the revenues by $2.5 million. Canadian cannabis gross margin was 43%, up from 3% in Q4 of last year, which was impacted by the inventory impairment. -- reflecting a higher proportion of higher-margin international export sales as well as our focus on higher-margin SKUs in the retail branded channel in Canada. This drove a full year gross margin of 44% and with both the fourth quarter and full year 2025 above the high end of our target range of 30% to 40%. SG&A as a percentage of sales was 22% and down from 28% last year as we continued to drive efficiencies throughout our Canadian cannabis operations. Q4 adjusted EBITDA from continuing operations for Canadian cannabis improved to $14.3 million from negative $9.1 million in Q4 of last year. resulting in an adjusted EBITDA margin of 27%. For the full year, adjusted EBITDA increased nearly $58 million to $67 million for an adjusted EBITDA margin of 29%. Q4 cash flow from operations increased $24.8 million to $21.5 million. For the full year, cash flow from operations increased $61.4 million to $77.5 million. Finally, as we do each quarter, I will point out that in Q4, we paid Canadian excise taxes on a retail branded sales of $21.5 million nearly 40% of retail branded sales and almost double our SG&A costs. I'd also like to discuss our Canadian income tax situation, which will impact our cash flow from operations in 2026. In 2025, we accrued Canadian income taxes of $16 million, which was paid as required in February 28 of this year. In prior years, we did not pay income tax due to carryover tax losses, all of which have now been utilized. I'll note that we are the only major Canadian cannabis LP positions, which is a testament to the strength of our operating capabilities and strong stewardship of capital on behalf of our shareholders and a sign of a sustainable, long-term, profitable business platform. Turning now to our recreational cannabis business in the Netherlands. Q4 saw our third full quarter of sales from our Netherlands operations. Sales were $3.3 million with adjusted EBITDA of $700,000 and which, as Mike noted, includes a sequential increase in operating expenses compared to Q3 as we began to ramp up staffing to support the launch of our Phase II facility. We continue to expect our Phase II facilities to drive a substantial increase in revenue and EBITDA performance in the Netherlands during the second half of this year. Turning now to our U.S. cannabis business. Q4 sales of $3.4 million continues to reflect the impact of various state actions and the ongoing proliferation of unregulated hemp products. Gross margin was down slightly year-over-year at 60%, resulting in a small negative adjusted EBITDA for the quarter. In our continuing produce operations, sales of $4.9 million were 21% lower than Q4 last year. reflecting the impacts of softer year-on-year pricing as well as the sales commission paid to our newly privatized produce business. In previous years, we were the exclusive sales agent for our produce as well as for others. Net loss from continuing gross operations was $1.6 million with adjusted EBITDA of negative $462,000. As a reminder, our produce operations moving forward will reflect contributions from our Delta One greenhouse as well as operating cost of our [ Monahans ] facility in Texas, which remains idle at this time. Our last tomato crop from the Delta 2 greenhouse was pulled in November to begin the conversion to cannabis. Turning to consolidated cash flows and the balance sheet. Total cash flow from operations to $11.4 million for the fourth quarter, bringing the total for the year to $58.1 million. We ended Q4 with cash of approximately $86 million which includes restricted cash of $5 million, putting us in a strong net cash position of $53 million. Our total debt at the end of Q4 was $34 million, and we remain very comfortable with our debt levels, inclusive of the incremental CAD 15 million delayed draw term loan that Mike mentioned earlier, of which we've drawn $5 million. Finally, we have been active with our share repurchase program that our Board approved at the end of September. As a reminder, the program provides the purchase of up to just under 5 million common shares or 5% of our issued and outstanding shares as of the date of the announcement. During Q4, we purchased just under 813,000 shares at an aggregate cost of $3 million. And we have continued the program activity into Q1 of 2026 with the repurchase of roughly 1.1 million shares at an aggregate cost of $3.7 million. Our management team and Board continue to believe this reflects a prudent and balanced approach to capital allocation to drive returns to our shareholders, and we expect to remain active in this regard in the near term. I will now turn the call back to Mike for some closing comments. Mike DeGiglio: Thanks, Steve. So in closing, 2025 was a watershed year for Village Farms as we steadily and successfully executed on our strategy to scale our global cannabis platform, generating not just record results but a step function transformation and profitability and cash generation. Our performance in 2025 for a new baseline as we realize the benefits of our investments in capacity to continue transition demand growth into long-term sustainable growth in earnings and cash flow, and we are continuing to benefit from multiple catalysts and unlocking value for our stakeholders. Our focus remains on execution. -- but we are looking to the remainder of this year with a growth-oriented mindset. We are investing behind our proven teams with enhancement to our operating facilities and we expect to maintain a balanced approach to capital allocation to deliver value for our shareholders. We are continuing to capitalize on the opportunity to enhance shareholder value through our ongoing share repurchase program. We're also given prudent consideration to incremental -- incremental growth, accretive organic and acquisition growth investments. Our expanding global platform, combined with our strong balance sheet, industry-leading cost of capital, an incredibly talented global team, we believe we're well positioned for continued success in 2026 and beyond. With that, Liz, we're now ready to open the call for questions. Operator: [Operator Instructions] Our first question comes from Frederico Gomes with ATB Capital Markets. Frederico Yokota Gomes: My first question is regarding your share repurchases. I guess, from a capital allocation standpoint, -- what does that tell investors in regards to how you view your current valuation and the trajectory of the business as well as the opportunities you see for maybe additional investments in the business and M&A. . Mike DeGiglio: Well, the business always comes first, but we were very confident in the cash generation that we just reported and going forward -- so we felt it's not going to -- in the amount of share repurchase that was approved by more of $10 million. It's not going to meaningfully impact running the business or any opportunities we see for both internal investment or growth. So we've taken a balanced approach. We are always concerned with shareholder value. And at the time and currently, we thought it was prudent. So we have no necessary plans at this point for more once it goes, but we'll reevaluate it as we execute going forward. Frederico Yokota Gomes: Mike. I appreciate that. And then my second question is on Germany. So we saw, I guess, a sequential decline in import volumes in Q4 for that market according to the data from there. So I think that was impacted by some issues in Portugal and maybe the quota permits. But in terms of the growth and the demand coming from that market? I mean is there -- should investors be worried about growth there? Or are you continuing to see that increasing and the important volumes there increasing for that market? Sam Gibbons: Fred, it's Sam. Thanks for the question. So you're right, the official stats are that German imports fell 4%, and Canadian imports were down 11%. And you're right that there was regulatory uncertainty, and we think that, that caused pharmacies, distributors and importers to lower their inventories. But we are seeing that those concerns have since abated and we expect to return to growth in Q1. Also notably, we had, and as Mike noted, we had some orders in that got delayed to Q1. And just to give you context, if those hadn't been pushed, our performance in Q4 in Germany would have outperformed the market performance. So just a caution that the nature of the export market means that there's going to be variability, but we are continuing to experience increasing demand as regulators in Germany have now started to apply more stringent restrictions on the quality and routes to market. And frankly, that's where our model shines. Operator: Our next question comes from Aaron Grey with Alliance Global Partners. . Aaron Grey: Very much for the questions here, and thanks for the commentary and in terms of quantifying some of the shipment order delays. I wanted to kind of carry on from that in terms of some of the capacity constraints that you touch on in some of the near-term variability we understand the appeal of prioritizing international markets for the incremental capacity that we expect to come online with the Delta 2 ramping up. But I just want to get some further contents of how you look to utilize that capacity for international versus Canada? Is it still fair to say that predominantly, most of that will be for international. And could you talk about the lens of how you're looking to maybe see Canadian market share aspirations as you might be utilizing more the incremental capacity for international? . Mike DeGiglio: Aaron, first, let me just clarify. I mean, Canada's first and foremost, that's our additional market where we're balancing all the time the demand we have from international and meeting our commitments in Canada. And I think we're doing a very good job at that, but it could have some variability month to month, but that's why we're making tremendous investments in additional capacity. And keep in mind that there's no stopping capacity in our footprint in Canada with current assets. So that's what we are measuring a lot of time. But I would not say international's priority over Canada, a bit equal. Sam Gibbons: Aaron, just a couple of things to add. We did regain our #1 flower share position in January. And we expect that to be something you'll continue to see in 2026. We had several significant restock during Q4 and new launches in Q4, which are starting to show up in Q1. And then with respect to our 3 primary brands, Pure Sunfarms brand, [indiscernible] dried flower for 12 consecutive months in 2025, and that was a sequential growth. It also -- our Fraser Valley brand grew share of dry flower consecutively between January and September, that short-term supply constraints did kick in for that brand in October, but it recovered by December. And then finally, our -- in our convenience category, we've had a very successful launch of Super Toast, Liquid diamonds, 510 Bates in Q4. and the team is constantly posting updates on the success of that basis point by basis point in market share. . Mike DeGiglio: Yes. And 1 final point is for Canada and international with current assets, we have the capability of more than doubling our 2027 forecast where I mentioned the 40 additional metric tons in 2027. Aaron Grey: Okay. And that's really helpful color in terms of how you're going to prioritize both markets there. Second question for me is kind of going back to some of the Village Farms grassroot talking about cultivation costs. I know you stopped disclosing cost per gram a while back, but it'd be great to get some color in terms of initiatives that you have to further lower the cost of production potentially leveraging innovation that exists in the broader produce segments, like I know you've spoken to in the past and then also potentially touching on expected savings from leveraging costs with the second half of Delta 2 facility coming online. . Mike DeGiglio: Well, we're not going to get into the specifics, obviously, but we continue to improve our costs. Let's just say that, and we're very pleased with continuing reduction in costs. So when I touched on my comment, you have to look at the cost really over a full year. There is some seasonality low light, higher light, so on and so forth. But on an annual basis, we continue to drive those costs lower, just like Steve mentioned, on SG&A as well. So -- in fact, I would say it's exceeding the target of cost improvement in the company today. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Mr. DeGiglio for closing remarks. . Mike DeGiglio: Okay. I want to thank everyone for joining us today. It was a great year in 2025 and we look forward that would just be a short amount of time before we be reporting our first quarter and look forward to that day in early May. Thank you, operator. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.