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Operator: Good afternoon, and welcome to the Silvaco's Fourth Quarter Fiscal Year 2025 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chris Zegarelli, Chief Financial Officer for Silvaco. Please proceed. Chris Zegarelli: Thank you. Joining me on the call today is Wally Rhines, Silvaco's CEO and Director. As a reminder, a press release highlighting the company's results, along with supplemental financial results are available on our IR site at investors.silvaco.com. An archived replay of the call will be available on this website for a limited time after the call. Please note that during this call, management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward-looking statements for purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. It is important to also note that the company undertakes no obligation to update such statements, except as required by law. The company cautions you to consider risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release and on this conference call. The Risk Factors section in Silvaco's annual report on Form 10-K for the year-ended 12/31/2024, and the most recent Form 10-Q filing with the Securities and Exchange Commission provide descriptions of these risks. With that, I'd like to turn the call over to our CEO, Wally Rhines. Wally? Walden Rhines: Thanks, Chris. Good afternoon, and thank you all for joining the call. I'm pleased with our performance in the fourth quarter of 2025. We're executing our turnaround plan faster than anticipated, which can be seen clearly in the numbers. For Q4, we delivered bookings at the high end of the guided range, revenue and gross margin above the high end and non-GAAP operating expenses at the low end, all resulting in a much lower operating loss than expected in the quarter. Our Q1 guide is strong as well. I'm proud of the team for delivering such strong results and positioning us for a faster-than-expected recovery in the business. Chris will walk you through the details later in the call. But now I'll turn to discussing our progress toward the return of the business to a strong predictable growth. I'd like to start with big news on the AI front. We reached an important milestone in Q4 ahead of our prior expectations. During the quarter, a second customer adopted our AI-driven solution for manufacturing process development known as FTCO. This win with a customer in Asia and is outside of our Memory segment. We believe that this win confirms the clear customer value of our AI solution beyond memory and points to significant opportunities ahead. This AI bundle delivered above-average bookings and revenue, reflecting the high value placed on our unique set of AI capabilities. It's very encouraging to see adoption of our AI solutions faster than expected. In our total TCAD business in Q4, we saw a 70% sequential increase in bookings to $9.2 million and a 34% sequential increase in revenue to $8.7 million, driven by adoption of FTCO by a new customer. We continue to enhance this AI-driven process development platform with new and upgraded features that put more AI features in front of more design and manufacturing engineers to slash their development times, save money and enable first-time right silicon. We believe that the transition to more AI-enabled sales will be a long-term tailwind to the business. After a soft 2025, we also expect the pace of TCAD contract renewals to accelerate in 2026. These trends support our expectation that the TCAD business will grow sequentially in Q1 and will grow for the full year 2026 as well. In Q4, we also saw a meaningful inflection in the semiconductor IP business. We delivered record IP revenue and bookings of over $5 million in the quarter, driven by our first full quarter of Mixel revenue post-acquisition. Mixel's industry-leading MIPI PHY IP continues to have a strong following globally, led by its reputation for unparalleled quality. We're building on that reputation by leveraging the entirety of the Silvaco sales force to drive more growth in Mixel products. We're also broadening our offerings from custom solutions to production-ready or PRO Pro products. Our Pro portfolio is silicon proven in 9 different foundries and 12 different manufacturing nodes. Mixel IP has proven to enable up to 35% reduction in die area and up to 50% reduction in leakage power. The MIPI PHY market is over $300 million per year, and we still have a relatively modest share. We're positioned for steady growth in this area as we ramp MIPI Pro products, which serve the largest part of the market. Outside of Mixel, Andy Wright, Head of Silvaco's IP business, has done a great job of increasing our internal capacity for foundational IP elements such as memory compilers and standard cells. As we look to the latter part of 2026 and into 2027, we see considerable opportunity to grow these areas given our increase in efficiency. Our IP business continues to be positioned as our fastest grower in 2026 and is already almost 30% of our business as we exit 2025. We expect to continue to deliver steady growth in IP sales across interface and foundational IP elements as well as our acceleration in MIPI. This is a story to watch in 2026. Now turning to EDA. We saw a significant decline in our Q4 bookings and revenue after all-time records in Q3. Bookings for Q4 came in at just under $4 million with revenue of $4.4 million. Here, we continue to focus on shifting priority to a handful of core products that we believe can deliver significant growth. One of these focus areas is Jivaro, which continues to see relatively strong customer interest and has a strong pipeline for new business potential. Jivaro has been adopted by leading companies as it accelerates post-layout SPICE simulations by up to 10x with sign-off accuracy. Jivaro and the other core EDA products are well positioned for growth as we focus development, sales and field application resources on core growth drivers. We expect stability in EDA in the short term and then a return to growth as these new priorities deliver results later in the year. Underlying this improved business performance are the series of restructuring steps that we put in place almost from day 1. We drove targeted reductions in support groups as well as in product areas to enable the teams to focus on core growth drivers. We also challenged product and support teams to limit direct customer support work done by business unit R&D staff so that they could focus more on product development. This change alone has had the benefit of simultaneously improving our gross margins while increasing R&D capacity. We also put in place leading AI tools to accelerate our software development. We're continuing to drive other process improvements to continue improving our ability to plan, drive and execute the business. These changes have been widely embraced across the company, and I look forward to seeing how they continue to accelerate our execution and to delight our customers. And while I'm proud of the team for the significant progress we made in the quarter, I want to reiterate that we still have a lot of work in front of us. In the coming quarters, we expect to build on momentum from the fourth quarter. For example, we'll continue to deliver significant growth in our IP business. We can already see evidence of this improvement in a strengthening pipeline, which we expect to convert into strong revenue in 2026. We also see good growth in TCAD as renewals grow and interest continues to increase around our AI solutions. For EDA, we'll see benefit from our restructuring activities later in the year as we focus on key growth segments. And overall, we expect our AI-driven machine learning capability to change the way semiconductor manufacturing process development is done and to add broad capabilities for fab engineers to improve yields, throughput and failure analysis. As I said last quarter, Chris and I are firmly committed to an aggressive acceleration of Silvaco's business. We're off to a good start, but the best is yet to come. I'd now like to turn the call over to Chris, who will discuss our financial results and our outlook in more detail. Chris? Chris Zegarelli: Thanks, Wally. Good afternoon, everyone. In Q4, we delivered $18.3 million in bookings near the high end of our guided range. Strength in the quarter came from IP products and our TCAD solutions. IP delivered more bookings in Q4 than it did in the entire year of 2024. IP bookings grew almost 5x sequentially as Mixel started to meaningfully contribute to the business. TCAD bookings were also particularly strong, up 70% to $9.2 million with the close of another AI-driven process development win with a large OEM in Asia. Strong bookings helped propel revenue to $18.3 million in the quarter, above the high end of the guided range. TCAD and IP revenue grew strongly in the quarter, up 34% and almost 3x, respectively. IP strength was driven by Mixel, while TCAD strength was driven by our latest FTCO win. EDA, on the other hand, saw a significant sequential decline after setting records in Q3. 65% of revenue in the quarter came from license revenue and the remaining 35% from maintenance and service. From a geographic perspective, we saw the most growth in Q4 from the APAC region, which spiked to 57% of total revenue in the quarter. APAC strength was driven by FTCO. Looking down the P&L, GAAP gross margin in Q4 was 83.3% and non-GAAP gross margin was 85.6%. Gross margin increased roughly 5 full points sequentially and came in well ahead of guidance. As part of our restructuring activities, Wally and I set clear expectations for the field application teams to prioritize customer support, while R&D teams focused primarily on product development. We also drove some reductions in these areas as well. Taken together, these changes resulted in much faster-than-expected improvement in our gross margin. We believe this trend is sustainable. GAAP operating expenses were down almost 8% sequentially to $22 million. Non-GAAP operating expenses were down 5% sequentially to $16.7 million, below the midpoint of the guided range. This result is more meaningful than it may appear. We think about total spending as the combination of cost of sales and operating expenses. In our business, the majority of cost of sales is the cost of our colleagues supporting customers. From this perspective, our total non-GAAP spending, which combines both cost of sales and operating expenses, trended from $21.3 million in Q3 to $19.3 million in Q4, a sequential decrease of just over 9%. Our guidance indicates that this trend continues in Q1 with a similar level of sequential reduction in total spending. We expect further reductions in Q2. These reductions are ahead of our expectations and reinforce our commitment to driving the business to profitability. We indicated on our last call that we were committed to reducing annualized non-GAAP operating expenses by at least $15 million annually. We now believe that we will deliver $20 million in gross annualized non-GAAP spending reductions. Our guiding principle remains the same. We intend to turn the business profitable at flat revenue. Achieving this goal will create a strong foundation for future profitable growth. GAAP operating loss improved quarter-over-quarter to a $6.8 million loss. Non-GAAP operating loss was just over $1 million, well ahead of Q3 and ahead of expectations. GAAP net loss in the quarter was $7.2 million and GAAP EPS was a $0.24 loss. Non-GAAP net loss in the quarter was $0.8 million and non-GAAP EPS was a $0.03 loss. Next, turning to the balance sheet and cash flow. Cash and marketable securities at quarter end was $18.3 million, including $8.3 million of restricted cash due to the Nangate settlement. Given that we have executed cost reductions ahead of prior expectations and given strength in bookings and revenue, our underlying burn rate net of onetime items has declined significantly in Q1. We expect that the $10 million of unrestricted cash on the balance sheet as of year-end will support operations as we drive to positive operating cash flow later in the year. We expect to approach operating cash flow breakeven in Q2 and to see positive operating cash flow in Q3. Now turning to guidance. For Q1 2026, we expect bookings of between $15 million and $19 million, revenue of between $15 million and $19 million, non-GAAP gross margin of around 85% and non-GAAP operating expenses of $14.5 million to $16.5 million. In closing, we believe that with improved financial discipline and a focus on key growth opportunities, we will set the stage for profitable growth going forward. We would also note that the non-GAAP operating profitability is within the high end of the guided range for Q1, which is ahead of our prior expectations. And with that, operator, we will now take questions. Operator: [Operator Instructions] Our first question will be coming from the line of Craig Ellis of B. Riley Securities. Craig Ellis: Congratulations on the strong execution team. Wally, I wanted to start one -- that's a fairly high-level question for you. When you came in, you outlined a number of growth priorities, and it seems like we're off on the right foot as we close out 4Q and 1Q. Can you just go into more detail on where you're happy with the business' execution and on the 2 or 3 things you really want to see the business execute on as we go through the first half of this year? Walden Rhines: Sure, Craig. I'd be glad to. And it's true. I've now been here for over 5 months. And I now have a much better perspective on where the opportunities lie, where the weaknesses are and where we need to move ahead. I think the first thing of note, of course, was that we needed more financial flexibility. And so the cost reduction program has been executed well. It's always difficult, but I think morale has improved greatly. And now after the majority of it is over, people are back to work and thinking about new opportunities. The survey of all of the product lines was -- became more detailed as I -- this last quarter, met with customers, traveled the world, Asia, Europe. I spent time with our Mixel employees in Egypt. I spent time in India with new customers. I've come to the conclusion that we have an incredible long-term opportunity driven by artificial intelligence and the whole change that's underway in how process development is done and how wafer fabs engineers and product engineers optimize their processes, optimize their manufacturing, sign defects, look for yield problems. And that, I think, builds well on the core manufacturing capability of Silvaco and provides the long-term growth engine. The thing that I was particularly pleased by, though, was in the short term, such strength in IP, driven, as Chris indicated, by the strength of the Mixel business, but also the rest of the IP product line as Andy Wright has brought in new disciplines, made it more efficient, greatly increased our capacity and the great marriage that came by joining a well-seasoned significant sales force with a negligible sales force at Mixel has produced a very promising outlook for very rapid growth for the IP business in the year ahead. EDA, while it is down, has selected good opportunities. Jivaro is a category killer and is, in fact, a sign-off tool, at least one major company and then at a slew of other very leading semiconductor companies. And it's one of a handful of EDA products that can provide not only the strength of contract renewals going forward, but some potential for growth. But it's going to be a stabilization issue in the short term and then growth in the longer term. So summarizing, great long-term opportunity in the evolution of TCAD to the next generation of AI-driven process development, great-looking short-term IP business driven by Mixel, but complemented by the efficiencies in the existing business and a good stable base of key targeted products in EDA, which although they won't grow in the short term, they provide the strong renewal base of revenue, and it makes me very glad that I joined Silvaco. Craig Ellis: That's really helpful, Wally. Chris, I'll direct a follow-up to you. And it's in part a clarification and then in part a question. The clarification for the nice Asia foundry FTCO deal. Did that fully rev rec in the first quarter? Or is that a multi-quarter rev rec? And can you provide any color there? And then the second part of the question, love the incremental expense the team is able to achieve going from $15 million to $20 million. Can you give us some color on where you're realizing that incremental $5 million in savings? Chris Zegarelli: Yes, Craig, happy to do it. So from a rev rec perspective, on the FTCO win, it was not all recognized in Q4. So a significant amount of it was recognized. The rest of it will run over the term of the contract. And as you saw, good momentum in FTCO leads to good numbers in TCAD, good strong growth sequentially. And as Wally was indicating, we're seeing incremental interest there, a good pipeline on FTCO, a lot to be excited about as we look at new FTCO opportunities through this year and beyond. In terms of cost savings, I think we laid it out last call that, obviously, we were incrementally more focused on support organizations, for example, for reductions, but we also did look across the organization to streamline, reset some org structures, for example, and extract some value. I think for me, Craig, and I pointed it out in the prepared remarks, but I want to emphasize it here, some of our spending does go through cost of sales. So one of the reasons why you saw gross margin perform so well in the quarter and why we think it's sustainable at these levels is that we were able to have the product teams really focus on product development and have most of the customer support work being done by the field application engineers. And that just leads to a much more cost-effective view on cost of sales. And it also increases capacity on the R&D side where the team can focus more on engineering those new exciting AI-driven products that Wally was alluding to. So I think it was broad-based, a little bit more on the support side. We have been streamlining. We do think some more cost does come out into Q2. So I can already confidently say there will be a sequential decline again in Q2, and that's where profitability will be within our grasp after delivering some pretty good numbers here in Q4, and I think a pretty good guide for Q1. Craig Ellis: Good numbers indeed. Operator: And our next question will be coming from the line of Kevin Garrigan of Jefferies. Kevin Garrigan: Wally and Chris, let me echo my congrats on the results and all the progress. Wally, previously, you mentioned the adoption process of FTCO was always kind of a gating factor. Your second FTCO customer was faster than you expected. So are you able to kind of speed up the adoption process? Or what was the driver of the faster-than-expected adoption? And can that translate to other engagements? Walden Rhines: I think the -- our efficiency at closing and ramping FTCO customers is going to continuously increase. The initial engagements were very upfront service-oriented, a lot of bringing the customer online. This particular one was based both on the vision they could see ahead as well as some initial purchases to get things going. And I think in the future, the message is becoming better honed. Our field sales organization is able to communicate the value and the pipeline is increasing for the number of customers. So I think I would expect that the time it takes to go from initial engagement to real revenue is going to decrease as we move forward and as people see what the benefits are for applying AI to the next generation of processes. Kevin Garrigan: Okay. Perfect. And then, Chris, can you just kind of give us any color on how we should think about bookings by segment in Q1? Should we expect it to be more kind of TCAD-driven and SIP versus EDA? Chris Zegarelli: That's a good guess, and I would agree with that we're seeing continued strength in TCAD sequentially in Q1. So that's a very strong story. IP after delivering really good numbers in Q4, it's in the same range, maybe down a slight tick. And EDA feels flattish sequentially. So yes, a good TCAD uplift in Q1. Kevin Garrigan: Congrats again on all the results. Operator: And our next question will be coming from the line of Robert Mertens of TD Cowen. Robert Mertens: This is Robert on for Krish. Maybe just to go back to the FTCO product, just how you're thinking about the new customers ramp through the year and your older customer, if you expect any acceleration of orders in calendar year '26 or more of the upside could be a '27 story? Walden Rhines: Yes. Well, if you want me to take that, I guess you're talking to Chris first. But the way the pipeline is shaping up, we expect it to be a 2026 story. It's -- we have enough additional customers in the queue -- and I'd point out that there are 2 elements to this TCAD growth sector. One is the people who are traditional TCAD users. And we have a strong renewal contract -- strong queue of contract renewals that provide growth in the base business. The FTCO is really a different thing. It's how you ship and develop processes in a totally different way. It doesn't really head on compete with our traditional TCAD business. It's really a different business. And as more and more people are realizing that, then it's not something where we have much direct competition with customers. It's just a case of selling the value of moving to a new paradigm for process development. And we're just being helped along a great deal by all the NVIDIA publicity and the people talking about tools, Anthropic, OpenAI and so on where everyone is looking and saying, how is my world going to change. And the people who've done TCAD or use TCAD to develop and optimize their processes in the past are asking that question. And so we just need to be there with an answer that they can act upon quickly, and it seems to be going very well. Operator: And our next question will be coming from the line of Christian Schwab of Craig-Hallum Capital Group. Christian Schwab: Solid results. I just have one quick question. Can you give us an idea of what you're anticipating either percentage-wise or dollar-wise in growth from the Mixel acquisition in '25 versus '26? Chris Zegarelli: I can take that. Yes, absolutely. Feel free to add more color, if you'd like. I mean, as you saw sequentially from Q3 to Q4 from a booking standpoint, IP grew $4 million sequentially. A good piece of that was from Mixel. And if you just annualize that quarterly performance, you can get a sense of what that business is doing, call it, approaching double digits. And then as Wally said, there's the PRO or Pro products and there's increased efficiency within the team and leveraging of the sales force. So we think growth comes from there, but that gives you a sense of the baseline of where they're coming from and how we do see that growing sequentially into this year and more momentum probably in the second half is what I'd say as we lay the groundwork for really supporting those Pro products that we just recently announced. Christian Schwab: Go ahead, Wally. Walden Rhines: And thanks for that growth. Between that and strong TCAD year, we really expect to deliver double-digit revenue growth in the current calendar year. Christian Schwab: Great. That was going to be my next question. No other questions. Operator: [Operator Instructions] Our next question will be coming from the line of Denis Pyatchanin of Needham & Company. Denis Pyatchanin: So my first question is basically about your 3 segments. So performance-wise, what do you think we can expect from all of these in 2026? Do you think you could provide some sort of color that's either quantitative or qualitative in nature in terms of which ones would do better than the other? Walden Rhines: Okay. As we indicated in the summary, the really large percentage growth will come in IP. But the core business of TCAD continues, will be strong. It's a profitable growing business. And so it's -- while not the fastest grower in the coming year, it will grow just as Chris indicated. The third is we will grow less had a record growth this past year, and that's EDA. So we expect it to simply be stable, a good part of the business, having strong renewals, but the growth of individual products will be slower. So fastest growth, IP, second fastest, TCAD and the new FTCO, which is almost a totally different business from TCAD and then IP third. I'm sorry, EDA. Yes. Denis Pyatchanin: No, that's great. And then so for my second question, you mentioned that you're going to be doing like an incremental $5 million in annualized OpEx reduction. Can you tell us what is this additional source of savings that you found? Walden Rhines: Chris? Chris Zegarelli: Yes. No, I can speak to that. I mean we were always executing this broad streamlining and cost reduction effort within the company. Last call, we said at least $15 million. But as we've been working through the synergies, we found some good opportunities in SG&A, for example, to really streamline and kind of focus the team and activities. And we've also found some opportunities in selected businesses as well. I think for me, this is all part of the broader strategy of getting the business profitable at flat revenue. You can see with the reductions in OpEx in Q4, which was faster than expected, a continuation into Q1, and it will continue into Q2. This is just showing that move towards profitability. And then as we hit the growth drivers that Wally was alluding to, there's a lot of profitable growth that comes from that kind of upside once we kind of get that firm foundation in place. So expect some incremental reductions to go from here. As Wally indicated, most of it has already been executed. There is a little bit more to go, and that's kind of what you see in the coming quarters in terms of sequential reduction. Operator: And I am showing no further questions. I would now like to turn the call back to Wally for closing remarks. Walden Rhines: Well, we thank you all for joining us today. It's been a great quarter for us, and our outlook is strong and getting very exciting here. So we look forward to talking to you again in the near future. And thank you again for joining us today. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to the SentinelOne, Inc. Q4 FY 2026 Earnings Conference Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now turn the call over to Saad Nazir, Head of Investor Relations. Saad Nazir: Good afternoon, everyone, and welcome to SentinelOne, Inc.'s earnings call for the fiscal year ended 01/31/2026. With us today are Tomer Weingarten, CEO, and Barry Paget, Interim CFO. Our press release and an earnings presentation were issued earlier today and are posted on the Investor Relations section of our website. This call and accompanying slides are being broadcast live via webcast, and a replay will be available on our website after the call. Before we begin, I would like to remind you that during today's call, we will be making forward-looking statements about financial performance and future events, including our guidance for the fiscal first quarter and full fiscal year 2027, as well as long-term financial targets. We caution you that such statements reflect our best judgment based on what is currently known to us, and that our actual results or events could differ materially. Please refer to the documents we file from time to time with the SEC, in particular, our quarterly reports on Form 10-Q and our annual report on Form 10-K. These documents contain and identify important risk factors and other information that may cause our actual results to differ materially from those contained in our forward-looking statements. Any forward-looking statements made during this call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons why actual results may differ materially from those anticipated, even if new information becomes available in the future. During this call, we will discuss non-GAAP financial measures, and all comparisons made are year over year unless otherwise noted. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results, other than with respect to our non-GAAP financial outlook, is provided in today's press release and in our earnings presentation. These non-GAAP measures are not intended to be a substitute for our GAAP results. Our financial outlook excludes stock-based compensation expense, employer payroll tax on employee stock transactions, amortization expense of acquired intangible assets, acquisition-related compensation costs, restructuring charges, gains on strategic investments, impacts of the previously announced Italian tax settlement, and income tax provision which cannot be determined at this time and are therefore not reconciled in today's press release. And with that, let me turn the call over to Tomer Weingarten, CEO of SentinelOne, Inc. Tomer Weingarten: Good afternoon, everyone, and thank you for joining our fourth quarter earnings call. Fiscal 2026 was a landmark year for SentinelOne, Inc. We achieved a $1 billion revenue scale, growing 22% year over year, and delivered full-year operating profitability, a significant milestone towards profitable growth. In Q4, our total ARR grew 22%, driven by strong new logo acquisition and expansion with existing customers. We delivered $64 million in net new ARR in Q4, a company record. This marks our third consecutive quarter exceeding ARR expectations, showing execution consistency and positive growth. We drove about half of our new business to new logos, showing a balanced split between new logo acquisition and expansion within our existing customer base. We are gaining traction in the most critical domains of cybersecurity—both AI for security and security for AI. We are helping organizations advance their digital transformations securely and intelligently. SentinelOne, Inc. offers the only cybersecurity platform that delivers disunifications—truly. AI represents a significant TAM expansion and a long-term tailwind for our business. From early on, AI-native security has been foundational to our platform architecture. This early advantage positions us to emerge as the category winner in the AI era across more than a $100 billion market opportunity. We have established SentinelOne, Inc. as a clear technology leader in cybersecurity. Our relentless focus on delivering AI-powered innovations that truly unify security, data, and automation has positioned us at the forefront of the industry. As we enter the new fiscal year, we are accelerating our path towards achieving the Rule of 40 driven by durable growth and higher profitability. Now, let us dive deeper into the details of our quarterly performance. We are winning new logos and expanding our footprint across diverse platform categories. Enterprises are choosing the Singularity Platform for unified AI-native security that provides a single pane of glass and seamless workflow. We firmly believe that cybersecurity should not be complicated. Beyond the Singularity Platform's best-in-class efficacy, its intuitive design and operational simplicity are driving stronger customer adoption. Today, our unified platform spans seven core solution categories, delivering more than 40 different modules designed to solve the most complex use cases, all while providing end-to-end autonomous cybersecurity. In fiscal 2026, our non-endpoint solutions surpassed half of our total annual bookings, a clear testament to the diversity and customer outcomes of the Singularity Platform. Customers are increasingly consolidating on our platform. In fiscal 2026, the percentage of our enterprise customers using three or more solutions increased to 65% versus 39% a year ago. Enterprises using four or more solutions more than doubled to 42% versus 19% a year ago. And enterprises using five or more solutions increased to 22%, versus 9% a year ago. And for many of the enterprise logos we are adding, this is just the beginning of a long-term expansion journey. In Q4, our cross-platform adoption drove a record ARR per customer, signifying solid momentum contributions from our AI, Data, Cloud, Wayfinder, and Endpoint solutions. Customers of all sizes, especially large enterprises, are increasingly recognizing Singularity's architectural advantage. Our Q4 performance clearly demonstrates this momentum. We drove sequentially higher win rates across every market segment, anchored by accelerating gains in the enterprise. Let us look at an enterprise win that exemplifies this. Internet security giant Cloudflare, a company securing about 40% of all human-originated internet traffic, moved to SentinelOne, Inc. in less than 24 hours, completely uninterrupted. After a rigorous POC, they selected SentinelOne, Inc. to replace our closest competitor as their security platform of choice, citing our superior technology and ease of use as the deciding factors. This seven-figure deal included endpoint security, Purple, and our Wayfinder Elite services. This is a clear testament to our technological edge and the platform value we deliver. Next, looking at our key growth drivers, Purple is becoming the bedrock of modern security operations, empowering teams to respond faster, accelerate detection, and automate investigations. The trajectory of Purple adoption continues to outpace our internal expectations, hitting a record attach rate of over 50% on licenses sold in Q4. According to IDC's independent study, Purple users experienced 55% faster threat remediation, a 60% lower likelihood of major incidents, and an impressive 338% return on investment over just three years. We are seeing strong Purple uptake across both new logos and existing customers. Many of our Purple AI customers are expanding their usage, signifying future growth potential and the value it delivers. For AI security, we are benefiting from the accelerating enterprise demand for secure adoption of AI models, agentic workflows, and employee AI usage. In Q4, ARR from Prompt Security more than doubled sequentially. In addition to existing customer upsells, we have started winning standalone AI security deals with Fortune 500 companies. Moreover, we are beginning to win AI security deals from customers of our direct competitors, creating a new strategic entry point to expand our market share and footprint. There are no serious scalable alternatives to Prompt Security in the market, and customers need to adopt AI now. For example, in the past quarter, a Fortune 100 financial services company deployed nearly 100,000 licenses for AI security and governance. Prompt is helping solve complex AI governance and compliance challenges for customers across our industry. In another example, a multinational retail giant deployed Prompt Security to eliminate a visibility black hole surrounding unmonitored employee AI usage. They chose SentinelOne, Inc. for quick deployment, visibility, and real-time AI security, all while satisfying strict European GDPR requirements. We also launched Closed Security, the industry's first open-source security suite to secure emerging autonomous agents like OpenClaw and others. For Data solutions, we surpassed $130 million in ARR with growth accelerating sequentially. We are seeing rising demand for our AI SIEM as it delivers deeper visibility, real-time detection, and autonomous response, all with far more efficient unit economics than legacy alternatives. In Q4, we also launched our new AI-native Data Security Posture Management solution, or DSPM, to help customers secure their data and AI workloads. Furthermore, with Observo.ai, we now own the data pipeline that powers modern security operations. The market is clearly recognizing this value. We were just named SIEM Innovation of the Year in the Cybersecurity Breakthrough Awards. We have now fully integrated Observo.ai's data pipeline solution into the Singularity Platform. This creates a truly comprehensive data architecture, natively unifying petabyte-scale ingestion, data pipeline, orchestration, and hyperautomation into a single seamless experience. For Data solutions, we signed a multi-year infrastructure partnership with a global hyperscaler. As part of our expanding alliance, SentinelOne, Inc.'s threat intelligence data now pairs with this company's native threat intelligence services. This shared telemetry model powers our own joint offerings and establishes a highly strategic growth vector for our Data business. In addition to taking share from legacy incumbents, our platform is now beginning to serve as the foundational data layer for the world's largest technology innovators. For Cloud security, we are seeing strong expansion, especially with our best-of-breed runtime workload capabilities covering both on-prem and cloud environments. In Q4, our Cloud security solution surpassed $160 million in ARR. As cloud environments expand and AI workloads multiply, the need for robust security is increasing. We are meeting this demand by delivering comprehensive cloud-native detection and response that scales with our customers' infrastructure, simplifying their operations and elevating defenses with our unified platform. For Endpoint, we achieved double-digit ARR growth in Q4. We continue to outgrow the broader market by delivering the most autonomous endpoint security solution available, combining industry-leading efficacy, performance, and user experience. Nearly half of the existing Endpoint sector is still using legacy antivirus solutions. We see this as a clear opportunity for continued market share gains. Our leadership in AI-native security is attracting the most advanced technology innovators in the world. In Q4, one of the top frontier labs selected the Singularity Platform to secure mission-critical infrastructure in the development of its flagship models. This win underscores that the architects of the AI frontier recognize SentinelOne, Inc. as the definitive security layer for the future of intelligence. In the era of AI, securing highly restricted on-prem environments, where true sovereignty is of paramount importance, is becoming one of the most strategic growth opportunities. While our competitors have no ability to secure these environments, we saw triple-digit booking growth in the quarter, signifying an emerging growth vector for us. We have the distinct advantage of delivering fully autonomous, high-velocity AI protection both in the cloud and on-prem. This differentiation was clear in our recent win with one of the largest postal operators globally. The customer signed a five-year commitment to secure their vast network with SentinelOne, Inc. Our ability to deliver specialized on-prem security at scale, while meeting the most rigorous government standards, was the deciding factor. In addition, we are seeing strong enterprise interest in Wayfinder Threat Services, which crossed $100 million in ARR in Q4. As enterprises race to adopt generative AI, they often lack the blueprint to do so safely. Wayfinder fills that gap by serving as both an implementation arm and a managed supervision layer for AI cybersecurity. Our Wayfinder AI-augmented services deliver immediate time to value by deploying in under 15 minutes and resolving 99% of threats without any customer action required. Trust is a big factor. We believe that expert human oversight is the way forward to build customer trust when adopting new autonomous technologies. Wayfinder embodies this vision by pairing our AI-native platform with elite AI security experts. As expected, SentinelOne, Inc. Flex is proving to be a highly effective model for broader platform adoption. By simplifying the purchasing process, Flex is driving larger deal sizes, multi-solution deployments, and extended commitments. Flex simplifies the path for large-scale platform adoption and secures long-term, high-value partnerships. For a platform consolidation win, we secured an eight-figure TCV deal with an iconic global logistics company that standardized on the Singularity Platform for unified AI security. To protect their highly distributed and critical infrastructure, this enterprise consolidated multiple competing vendors on the Singularity Platform. SentinelOne, Inc. was the clear choice to modernize their operations and securely implement AI. Alongside industry-leading efficacy, the Singularity Platform's intuitive design, unified interface, and ease of use are key differentiators that are driving strong platform adoption. We are delivering the only single-plane platform on the market capable of being deployed anywhere, which stands in stark contrast to our next-gen peers. Large enterprises, especially leading innovators, are recognizing this—in many cases, securing millions of assets in a single deployment. Our continued upmarket trajectory is driving larger deal sizes and steady retention rates. Landing these premier enterprise logos at scale provides us with a significant, highly durable runway to drive strong growth for years to come. Today, we proudly secure nearly one-fifth of the Fortune 500 and hundreds of Global 2000 enterprises. Our expanding customer base now includes some of the most sophisticated and iconic companies on the planet, alongside highly regulated, mission-critical infrastructure—from the pioneers building today's frontier AI models to the global category leaders in semiconductors, automotive, aviation, finance, and smartphone giants the world relies on. In the partner ecosystem, we continue to expand and deepen our engagements. Our partners are a force multiplier, helping expand our reach and scale. We are seeing strong traction driven by increasing platform adoption across AI, Data, Cloud, and broader platform solutions. We are increasingly winning at the top end of the market, highlighted by an eight-figure strategic partner win in Q4. This deal provides access to our entire Singularity Platform through a flexible deployment schedule. In addition, we are strategically scaling our mid-market adoption by driving operational leverage for our partners. Our success across the managed security ecosystem is a clear testament to this strategy. In fiscal 2026, we achieved over 60% ACV growth with our top 20 MSSP partners and over 75% ACV growth with our top 10 MSSP partners. These partners are rapidly expanding beyond the endpoint. They are adopting our AI, Data, Cloud, and broader platform solutions. Our MSP partners are standardizing on SentinelOne, Inc. Our unique platform architecture delivers the multi-tenancy and remote management capabilities that drive real operational leverage and technology differentiation. This technology advantage translates directly into a dominant competitive position for SentinelOne, Inc. in the managed security ecosystem. We are also deepening collaboration with hyperscalers by integrating our technology and platform across their cloud marketplaces and AI services. Together, these alliances are enhancing our market presence and positioning SentinelOne, Inc. as a trusted partner for enterprises worldwide. In the public sector, we achieved FedRAMP authorization at the High impact level, and this opens more public sector opportunities for us in both Federal and SLED environments. Let us shift gears to the broader industry dynamics and why SentinelOne, Inc. is a distinguished beneficiary for the AI era. There has been a lot of debate about the impact of AI on traditional SaaS business models. While some of these concerns are justified, especially if you are selling an antiquated platform built upon a legacy code base, modern security operations remain mission critical. Cybersecurity is an imperative for safe adoption and usage of AI, is a significant tailwind for SentinelOne, Inc., and we are already seeing AI security as the fastest growth category for us today. We are the builders enabling secure AI adoption for builders. Our enterprise success clearly validates this. Our platform and AI models are forged from real-time proprietary threat intelligence data at petabyte scale that is gathered across tens of thousands of organizations and tens of millions of assets globally. That scale, intellectual property, and depth of data—combined with human insights—are a unique competitive moat. The reality is that cybersecurity is paramount in the age of AI. The market needs reflect this reality. Gartner recently highlighted that AI security is the fastest-growing segment in cybersecurity, expanding over 70%. Security and trust remain the single biggest barrier to enterprise AI adoption in the United States and globally. At SentinelOne, Inc., we are helping organizations move from basic AI systems to true autonomous agentic action with trust and safety embedded as our guiding principles. We are putting defenders firmly in control of the AI boom, delivering the platform, tools, strategies, and services they need to build, secure, and benefit from AI. We are delivering an end-to-end AI-native platform that seamlessly delivers security for data, infrastructure, and runtime as a single unified system. We actively partner with, invest in, and protect the pioneers building today's frontier AI models. Grounded in this ecosystem, we are pushing into the frontier of autonomous agentic security, where AI does not only assist humans, but also independently detects and stops complex threats in real time. Reflecting upon the past year, we delivered strong growth and margin improvement while driving innovations that are shaping the future of cybersecurity. At increasing scale and durable top-line growth, we are continuously refining our operating model to be well positioned for the opportunities ahead. We remain laser-focused on our most efficient go-to-market channels while unlocking structural productivity gains by integrating AI throughout our business. We have always operated with a builder mindset. Looking ahead, we are establishing a stronger SentinelOne, Inc. that is well positioned to lead in an AI-first security landscape while creating long-term value for our customers, partners, and shareholders. Before I turn the call over to Barry, I am pleased to welcome Sonalee Parekh to our leadership team. Sonalee is joining SentinelOne, Inc. as our new Chief Financial Officer. She brings more than 25 years of experience across public software and technology companies. Sonalee has a proven track record of scaling high-growth software platforms, driving financial discipline, and overseeing multi-product strategies. That is an ideal fit to lead the next phase of SentinelOne, Inc.'s financial strategy—delivering growth and profitability. I look forward to our partnership. I would also like to thank Barry for his leadership and steady hand as Interim CFO. He has been a trusted partner, ensuring a seamless transition and leading our finance function. In closing, I want to take a moment to acknowledge the contributions of all Sentinels—their relentless focus, dedication, and execution drive our success. And thanks to all our customers, partners, and shareholders for their continued support. Our mission to be a force for good remains as important as ever, in ensuring AI is also a force for good. Thank you again for joining us today. With that, I will hand it over to our Interim CFO, Barry Paget. Barry Paget: Thank you, Tomer, and thanks, everyone, for joining us today. Let us review the details for Q4, the full fiscal year 2026, and our guidance for Q1 and fiscal year 2027. As a reminder, all comparisons are year over year, and financial measures discussed here are non-GAAP unless otherwise noted. Fiscal year 2026 was a transformational year for SentinelOne, Inc., highlighted by two major financial milestones. Firstly, we scaled the business past $1 billion in revenue, growing 22% year over year. Secondly, we achieved full-year operating profitability, driving a 600-plus basis point year-over-year improvement to expand our operating margin to 3.5%. Let us review the financial performance of our fourth quarter. In Q4, our revenue grew 20% year over year to $271 million. International markets grew 30% and represented 40% of total revenue, reflecting strong international demand and a growing global footprint. In Q4, our total ARR grew 22%, and we added a record $64 million in net new ARR, which exceeded our expectations. These results were driven by a balanced split between new logo acquisition and platform adoption by existing customers. As we continue our strategic shift upmarket, our ARR per customer reached a new company record. We are seeing strong momentum at the top end of the market, as our cohort of customers with ARR of $1 million or more grew 20% year over year to 153 customers in Q4. Additionally, customers with ARR of $100,000 or more grew 18% to 1,667. Furthermore, retention rates across our large customers remain strong, underscoring the mission-critical nature of the Singularity Platform. For customers with $100,000 or more in ARR, our gross retention rate was 96% in Q4, and our dollar-based net retention rate for these customers was 109%, driven by these large organizations continuing to adopt the broader platform and consuming multiple products from us. Overall, we are maintaining a balanced split between new logo acquisition and existing customer expansion. Given our scale and relative market share, this focus allows us to increase our market share with significant future expansion potential. Turning to margins, we maintained a solid gross margin profile in Q4 at 78%, highlighting healthy platform unit economics and scale efficiencies. In Q4, our operating margin was 6%, representing an improvement of 450 basis points year over year. We also achieved a net income margin of 9% in the quarter. On a trailing 12-month basis, we delivered a free cash flow margin of 5% and successfully delivered our second full year of positive free cash flow. This is an important milestone that underscores our path towards sustained profitable growth. We ended the year with a robust balance sheet, including $770 million in cash, cash equivalents, and investments, and, most importantly, no debt. Given our strong balance sheet and confidence in our long-term trajectory, we opportunistically repurchased 6.5 million shares this quarter, bringing the total shares repurchased to 12.2 million in fiscal year 2026. We will continue to employ a balanced capital allocation strategy, prioritizing organic investments while returning capital to shareholders. Turning to our guidance for Q1 and fiscal year 2027, as we enter our next chapter of scale and profitability, we are enhancing our guidance framework. In addition to our revenue and operating income outlook, we are providing guidance for earnings per share and some helpful modeling assumptions. We believe this enhanced framework offers a more comprehensive view of the company's earnings growth and cash generation. For the full fiscal year 2027, we expect revenue to be between $1.195 billion and $1.205 billion, representing 20% year-over-year growth at the midpoint. For Q1, we expect revenue to be between $276 million and $278 million, representing 21% year-over-year growth at the midpoint. Our fiscal year 2027 revenue outlook also implies a year-over-year improvement in net new ARR. Overall, our outlook is supported by a solid pipeline, strategic partnership opportunities, and rising contributions from our emerging solutions, including AI, Data, Cloud, Wayfinder, and others. At the same time, we continue to monitor the evolving macroeconomic environment and geopolitical uncertainties, which can still influence deal timing and sales cycles across the industry. Turning to our profitability metrics, for fiscal 2027, we expect operating income to be between $110 million and $120 million, representing an operating margin of 10% at the midpoint. For Q1, we expect operating income to be between $4 million and $6 million, representing an operating margin of 2% at the midpoint. Our strong operating income outlook is driven by increasing operational efficiencies with scale and with cost discipline. We are accelerating toward the Rule of 40, mainly led by sustained top-line growth and improving profitability. For fiscal year 2027, we expect fully diluted earnings per share to be between $0.32 and $0.38 per share, representing $0.35 at the midpoint. And for Q1, we expect earnings per share to be between $0.01 and $0.02. We expect a non-GAAP tax rate of approximately 17% for fiscal year 2027. We expect our weighted average diluted share count to be approximately 345 million for Q1 and 352 million for the full year. Adjusting for the scheduled tax settlement payments of $40 million in fiscal year 2027 disclosed in our January 8-Ks, we expect our adjusted full-year free cash flow margin to closely track our operating margin outlook for fiscal 2027. For Q1, we expect adjusted free cash flow margins to be in the low teens, reflecting our standard historical seasonality and strong underlying cash generation. Taking a step back, our technology leadership and competitive position remain strong. We are scaling the business while consistently driving strong operating leverage. Our investment approach strikes a disciplined balance between capturing long-term growth opportunities and maintaining a responsible, profitable financial profile. This strategy is foundational to scaling SentinelOne, Inc. into a multibillion-dollar, highly profitable business. Before closing, I would like to welcome Sonalee as our new CFO. Her expertise scaling global businesses is a great fit for us. Over the coming weeks, I will be working closely with Sonalee and our seasoned finance team to ensure a seamless handoff. In summary, we are very well positioned at the intersection of AI, Data, and cybersecurity, leading the industry into the next era of autonomous security. Security is no longer just a safeguard; it is the strategic enabler of AI innovation. With a strong financial foundation, a highly differentiated platform, and a vast market opportunity, we remain firmly committed to maximizing our business potential. Thank you all for joining us today. We will now take your questions. Operator, please open up the line. Operator: Thank you. At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please accept, unmute your audio, and ask your question. As a reminder, we are allowing analysts one question today. We will wait one moment to allow the queue to form. Our first question comes from Brian Essex at JPMorgan. Please go ahead with your question. Brian Essex: Hi, good afternoon, and thank you for taking the question. Maybe for Tomer, I would love to understand some of the dynamics around the growth that you have had this quarter, particularly in light of the lower sales and marketing growth. What percentage of the deals were partner-led or partner-influenced, and what are the plans for hiring and product and expectations for productivity as you move through fiscal 2027? Tomer Weingarten: Thanks for the question, Brian. We delivered record fourth-quarter net new ARR, 6% year-over-year growth, and probably the strongest sequential growth we have had in the last 24 months. It really demonstrates more than anything execution consistency and solid demand pretty much across the board. I would say that there was not any big change between our business with partners and our business with end customers. We are doing larger deals, and I think that is probably reflected. Flex is taking, I think, a more pronounced part of our overall bookings. So, all in all, I would say the dynamic is one that we have seen throughout the quarters and throughout the year. As we look into next year, when we review how we want to focus, I think we are pretty clear that we are on a quest to optimize. I do not think you are going to see us grow headcount in a significant way, and it will imply that sales productivity, which is reflected in the margin guide, is going to get better. We are clear on our continued upmarket trajectory. We are clear on the need and the desire to do more with our partner base. We are clear about the potential in our partner base. You can see some of the figures with our growth with our MSP partners—top 10 partners growing 75% year over year. Obviously, there is a lot of potential both in our partner base and with our move upmarket. So, all in all, we plan to do much of the same this year in an improved manner with an optimized sales force. Operator: Our next question comes from John Stephen DiFucci at Guggenheim. Please go ahead with your question. John Stephen DiFucci: Thank you. Since Brian asked about top line, I am going to ask about the bottom line. It is just a little confusing. Like, this quarter, and in the first quarter, profit margins are a little lower than I think people were looking for—at least we were. But for the year, they look great. So if you could just explain that a little bit, maybe Barry, again, just so we understand what is happening in the model. Barry Paget: Yeah, John. On the free cash flow side, we feel pretty comfortable on the cash collection. We have seen meaningful improvement over the past few years. That being said, it can be a little lumpy just in terms of larger deals and when they fall into a particular quarter. And as those larger deals roll out maybe over months and quarters as opposed to days, like smaller deals. Operator: Our next question comes from Meta Marshall at Morgan Stanley. Go ahead with your question. Meta Marshall: Great, thanks. I just wanted to ask—clearly, a lot of success selling with the 65% of customers having three or more solutions. How do you, in combination with maybe NRR ticking down a hair, think about the ability to continue to add new or get further adoption of new products into the base? Thanks. Tomer Weingarten: Absolutely. We definitely think that this is a source for additional growth for us. We are very stable on the NRR front. I think the biggest thing I would call out there is that, for us, it means that we are doing more new logo business, which is exactly what we want to see, and we have executed that strategy for the last few years. It is not going to change this year. So we are really driving those in tandem. And what you can see is that not only are we creating more and more adoption within our customer base, even with that, our customer base is still relatively underpenetrated. We have tremendous capabilities. Our platform is incredibly broad. That just means that for a lot of these new logos that we are just starting the journey with, the expansion opportunity is really in the future. Which is great, which really means that we can land and onboard new customers, and then, with time, we will see more and more from the customer base. That is exactly the dynamic we want to see. That is exactly what is reflected in these results. Operator: Our next question comes from Nasr Islam at Deutsche Bank, on for Brad Zelnick. Please go ahead with your question. Nasr Islam: Hi, this is Nasr Islam on for Brad Zelnick. Thank you for taking the question. We have heard from you, Tomer, and your peers in recent quarters about the importance of Endpoint security, especially in the GenAI era. Can you provide an update on how Endpoint progressed in the quarter and any changes in the competitive landscape that you are seeing, if any? Tomer Weingarten: Of course. Endpoint still remains a strong growth driver for us. We grew double digit, and that is non-trivial in the market today. We are still gaining share in Endpoint, and there is still a lot to go after in terms of incumbent providers. It is clear that the best control point right now for GenAI is actually attached to those same endpoints. So when you look at us selling AI security, I think the success we are seeing there is tied to our ability to deploy that within minutes, sometimes on those exact same endpoints—whether our agent is already there or not. Our ability to continue and expand our Endpoint footprint is what makes our AI security product incredibly successful. So, all in all, not only are you gaining the best and the most complete telemetry from the endpoint today, it is also becoming one of the only true control points to regulate what employees, what the workforce, is doing with generative AI—block it, sanitize it, make sure there is no data leakage, put the right guardrails—and that is exactly what we are doing with our AI security platform and with Prompt Security specifically. Operator: Next question comes from Shrenik Kothari at Baird. Please go ahead with your question. Shrenik Kothari: Yeah, thanks for taking my question. So, Tomer, you brought in Sonalee. As she steps in, what are the top, say, three priorities you have explicitly asked her to focus on first? And then, just related to, kind of financially, how should investors think about the next phase of the model under her? Thanks a lot. Tomer Weingarten: Of course. Thank you for the question. We are incredibly excited to welcome her. Her focus is going to be durable growth and acceleration in our go-to-market. I think what we are seeing right now is growing demand for our platform with multiple avenues for growth. We have talked about AI security growing triple digit. We have talked about on-prem, which is a new revenue vector for us, now growing triple digit as well, and infrastructure deals that are also growing triple digit. So, obviously, her job is going to be to balance that with continuing to improve and hone in on our entire go-to-market and sales and marketing spend and expense. There is no surprise here that as we look into next year and the coming year, the landscape is changing in terms of what customers are looking for. And it is very clear that we have some of the most unique solutions right now for some of the most urgent problems in the market. So, as we look at this year, it is a lot about realigning a lot of our resources to go after these opportunities. As we improve our business, you can see some of that already reflected in our operating margin. This is the trajectory we are on. We are accelerating our path to even better profitability. We are optimizing on cash flow. I think these are the things that we will collectively be focused on. Operator: Our next question comes from Patrick Edwin Colville at Scotiabank. Please go ahead with your question. Patrick Edwin Colville: Thank you so much. And, Tomer, let me ask this one to you. Nice reacceleration in new ARR this quarter. You gave us the sort of breadcrumb that you expect a year-on-year improvement in new ARR in fiscal 2027. So, two parts, if I may. One is, can you unpack that last bit a little bit more to provide any more color? And then, what would be the driver of that? Is it kind of core Endpoint—to your point earlier that there is this renaissance in spend on Endpoint—or is it that plus these emerging products and the multiple tailwinds coming together in fiscal 2027? Tomer Weingarten: Yes. Let me try and unpack that. Obviously, that is exactly what we want to see. We want to improve net new ARR. You have seen a little bit of that in Q4, but that is what we are looking at for this coming year. On top of that, we are also starting to see a seasonality change. We are moving from this 40/60 first-half/second-half dynamic we have had in the past couple of years more to roughly 50/50. So that means that the first half of the year is very solid, and that has positive impact on growth for the year for both revenue and ARR. These are some of the dynamics that we are seeing there. Some of it is coming from Endpoint. I would not call it the full renaissance, to be honest, but there is definitely more traction in Endpoint. I think if you are seeing some of our businesses crossing the $100 million ARR mark and still accelerating in a pretty significant way, those are our sources of added revenue growth and added ARR growth. So, all in all, we believe that an improved net new ARR is a good starting point for us in our revenue guide. Operator: Our next question comes from Richard Poland at Wells Fargo. Please go ahead with your question. Richard Poland: Hey, thanks for taking my question. I guess, just on the gross margin side, I noticed that gross margin ticked down a little bit in the quarter, but I think it was maybe a touch better than expectations. As we look forward to next year, could we see that start to stabilize or tick up, or is there anything underlying there that we should think about? Tomer Weingarten: Yes, of course. I would say our gross margins are incredibly stable. They are also best in industry, so they are incredibly high. We put it exactly at the high end of our range of our long-term targets. So, all in all, we feel like they are stable. They are going to continue to be stable. We do not forecast any change in that. Operator: Our next question comes from Michael Joseph Cikos at Needham. Please go ahead with your question. Michael Joseph Cikos: Thanks for taking the question here. Tomer, if I could come back to the prepared comments and the opening script. Great to hear about the seven-figure deal over at Cloudflare displacing your next closest competitor. Can you discuss that a little bit more as far as how Cloudflare came to you, how the deal came together—again, just given their positioning in the software ecosystem, they are thought of as being pretty market leading? I would love to get some more color there. Thank you. Tomer Weingarten: Of course. It is a combination of the set of capabilities that we have today that—through the prepared remarks—we tried outlining how unique the capabilities that we have today are, especially at scale. So when customers are looking to add and prepare themselves for adopting more generative AI and more AI agents, the most advanced ones really need these capabilities now. They cannot buy off a demo. They cannot buy off something with a roadmap. They need something tangible that works today and works at scale and is proven. And that is exactly what Prompt Security and Purple AI bring to bear. These are already fully deployed, fully scalable products that are covering right now millions of devices and assets globally. So that drives a lot of demand from customers of all competitors. And in the case of Cloudflare, I think efficacy was a big deal, the ease of deployment, coverage for systems of all operating systems—these were some of the key things that they wanted to find. I think they also wanted a like-minded partner that can move fast with them in AI. And, as you pointed out, despite them being a leading partner for some of our competitors, they have chosen the best technology that they could. And doing this at a scale where you need to be completely flawless in your transition to create no interruption, I think that was also a very impressive feat by both teams, and I think that punctuates the win. Operator: Our next question comes from Shaul Eyal at TD Cowen. Please go ahead with your question. Shaul Eyal: Thank you. Good afternoon, everybody. Tomer or Barry, can you talk to us about the sources of operating leverage and margin for fiscal 2027, as we think about double digit for the year? Tomer Weingarten: Sure. Barry Paget: Happy to share here. A couple of things that we are super focused on. Firstly, really sharpening the focus on the highest-yielding go-to-market opportunities. You heard Tomer talk about some of the product lines and some of the businesses that are rapidly growing for us—some of them in the triple digits—making sure that we are investing behind those and giving them the oxygen they need. And then, secondly, not necessarily germane just to us, but integrating AI throughout our business and our business operations. We are seeing meaningful productivity gains across the board—everything from engineering and development to how we serve customers to how we just run the internal organism itself. Tomer Weingarten: I would just add to that. You have seen us through the past couple of years also taking pretty hard decisions on what not to invest in and what to potentially deprecate and prune away. I think these are the decisions we are going to continue to make. You have seen us do that with a couple of product lines last year. We do not expect the exact same thing this year, but we are definitely honing in on more areas where we see higher yield. So I think it is not farfetched to see us narrowing our focus, at least in go to market, on not only the most yielding but the most important parts of our platform—what is the most important right now for customers. So, all in all, we have not grown our headcount. We have not inflated our ranks in the past couple of years. That is definitely not going to happen this year. We are finding more and more ways to become more productive with AI. It is already happening. A meaningful amount of the code we generate today is generated with AI. That has tremendous impact on us. We are a big R&D shop. We are a big innovation hub. That means that we can build more with less, we can take products to market faster, we can iterate and get better outcomes to customers. All of those are going to help us also drive benefits to the bottom line as well. Operator: Our next question comes from Roger Foley Boyd at UBS. Please go ahead with your question. Roger Foley Boyd: Great, thanks for the question. Tomer, it looked like it was a pretty strong quarter overall for new customer acquisition. You noted, I think, half of new business came from new customers. And against that, you had a 50% attach rate of Purple. Any directional color on what that attach rate looks like with new customers, and to what extent are you finding that Purple is driving these new customer wins and really influencing your win rates in areas like Endpoint? Thanks. Tomer Weingarten: Of course. First of all, it is pretty balanced. We are seeing the uptake both from existing customers and new customers. I think we mentioned a couple of earnings calls ago that we created a new bundle, and we took our Complete bundle and made it a Complete AI bundle, basically adding in some of the Purple AI capability. That is creating a nice differentiator for us in the mass market. So that is driving some of that attach. But, at the end of the day, it is really clear—when you can create 60% faster outcomes, when you can have 300% plus return on investment, it becomes almost a no-brainer. If you are using one of these things, you are actually saving money, and the economics are favorable for customers. That is the main driver behind the Purple uptake. We are also— as I have said in the past—continuously adding more capabilities to the Purple suite. We are adding more and more agentic capabilities that are completely integrated into the platform. We do not require customers to buy another product or to deploy something else or to build their own agent, or we just give them a studio. We are giving them complete integrated AI capabilities they can turn on with one click of a button. That seamlessness—that user experience—is resonating in the market. Operator: Our next question comes from Joseph Anthony Gallo at Jefferies. Please go ahead with your question. Joseph Anthony Gallo: Hey, thanks for the question. It was great to see the $130 million in Data ARR. Can you talk through the sustainability of growth in that business? And then, Tomer, regarding SIEM, how do you think that market evolves in an LLM-based world? Does it become more or less important? Is there any risk of disruption? Thank you. Tomer Weingarten: Thank you for the question. Our Data business is going to go only one way, which is up. That is terabytes and terabytes and petabytes of data that we are seeing down our pipeline. There is a very familiar dynamic in the data space where the initial land is just a piece of customers' overall data needs, and as they onboard our data lake, it is the starting point for them into how much more they can put into it over the years. We are starting to see those expansion opportunities pop up. We are absolutely seeing more and more demand for our data lake capability. Specifically for SIEM—and I think there is a small nuance here—SIEM, you can think about it as its front end for security operations that you put on top of the data lake. I would say that certain customers still want that front end. They want those capabilities. At the same time, what we are seeing more and more is that when we apply some of our Purple suite agentic operations directly on the data—directly on the ingested data—now with Observo integrated into it, the ability to ingest data in real time and apply LLMs that are on the backbone of Purple AI to then orchestrate autonomous operation, to us that is the future of where cybersecurity is going to go. And I am saying the future, but it is also happening right now for certain customers. So I think it is really a question of what models you are going to support for customers. Some customers are going to want more controls, more dashboards, more of that legacy experience—I would call that the SIEM experience. Other customers are much more focused on automation, on embedding LLMs and agentic workflows into their data ingestion as close as possible to the point of ingestion, and that, to us, is almost a new model for cybersecurity that maybe, in the course of the next few years, is going to make SIEM something that is less mandatory than it is today. But right now, what we see in the market is both approaches, and we are doing what customers are asking us to do. Operator: Our next question comes from Eric Heath at KeyBanc. Please go ahead with your question. Eric Heath: Hey, thanks for taking the question here, and nice finish to the year. Maybe Barry or Tomer, could you speak to the linearity in the quarter that you saw, given that the DSOs were a little bit higher than they have been—revenue being in line with your guidance? Thanks. Tomer Weingarten: Yep. I think the revenue beat for us, the entire year, was very minimal beats, I would say. Q4 was a little bit more back-end loaded. I think you see that as well reflected. As Barry mentioned, some of the collections came a bit later than we wanted, but nothing too dramatic. I think that is the full extent of the dynamic that we have seen. Otherwise, the other thing—obviously, when you are not getting these collections in time—it is going to show up a bit later. So you should expect something a bit more healthy maybe in Q2. And I think, again, I called out the changing seasonality for us, so that is another dynamic that is going to be at play. It is probably going to look a bit different for us this year in a very positive way, I should say. So these are the fullest dynamics that we are seeing. Operator: Our next question comes from Adam Tindle at Raymond James. Please go ahead with your question. Adam Tindle: Okay, thank you. I just wanted to continue on that last comment there, Tomer, on net new ARR and seasonality. I think you said earlier 50/50 for first half/second half. And if I am doing the math right for the full year, you are probably going to be somewhere in the neighborhood of $200 million of net new ARR—correct me if I am wrong there. But I think that would imply $100 million or so in the first half, which would be very strong, I think up over 20%. I know it is important with Sonalee coming on, and, under prior CFOs, we had early stumbles in terms of relative to expectations and numbers and just wanting to avoid that. You talked on the call about gaining credibility, which you are certainly doing as you are executing. So I wanted to give this a forum to flush out those net new ARR comments so we do not get too far ahead of ourselves for the first half as Sonalee comes on. Thanks. Tomer Weingarten: Of course. Good questions overall. I would say, first, I think you are not wrong on the net new ARR number—probably a slight improvement over that. And I think the seasonality is just what we have line of sight to right now and just a very solid start for the year. Once we are able to transact earlier in the year, you can do the math of what that means for the rest of the year, and that is what we are seeing. That is what is happening. So we are just calling it out. And, as I mentioned, it is just a good starting point for us. We are starting to maintain that consistency, and I think that should persist. We do not see a reason why it would not. Operator: Our next question comes from Jonathan Frank Ho at William Blair. Please go ahead with your question. Jonathan Frank Ho: Hi. I wanted to dig a little bit into Wayfinder, and could you give us a sense of what some of these enhancements like human-plus-AI capabilities and Intel—how does that allow you to reimagine modern MDR solutions? Thank you. Tomer Weingarten: Thank you. Great question. I think that is exactly it. It is really clear that the role of MDR is shifting. If MDR, in past years, was really manual human work to sift through alerts, with the increased automation and autonomous action of our platform, our MDR analysts and overall service are graduating to be more of a supervision layer, and that is helping us not only scale, but also achieve much better outcomes for customers. And I think, more than anything, it is really clear that we all need to still establish a level of trust when we talk about autonomous agents. Obviously, the margin of error is quite big with some of what these autonomous agents are doing. So, for us, a good way to control that and a good way to make sure that agents always stay within their guardrails—that all autonomous action and critical action are always happening with human supervision—is attaching services like Wayfinder to monitor these agentic actions that are happening, and we are doing so in a highly scalable way. Once again, that is something that resonates with customers. Right now, with us, they can onboard agentic workflows and have humans regulate that, and that is a big thing. We are not just offering them a piece of technology. We are offering them complete managed supervision of their security stack. Operator: Our next question comes from Ittai Kidron at Oppenheimer & Co. Please go ahead with your question. Ittai Kidron: Hey, guys. For me, maybe one for you, Tomer, and one for you, Barry. Tomer, on your side, you clearly have a very broad portfolio at this point, and it is nice to see the traction there. Can you talk about how the comp plan for quotas for salespeople is changing because of that, and what are you incentivizing, and how do you get salespeople focused on the right thing? And then for you, Barry, with your initial guide for fiscal 2027 and going back to the previous questions, in what way are you more conservative, or in what way is your guidance philosophy right now for 2027 different from the exercise you went through in 2026? Tomer Weingarten: Thank you for the questions. Comp plans have not changed in a dramatic way. I just want to remind everybody that we always had this component that we called emerging products, and we are just changing what we put in that basket of emerging products, and we like the behavior that we are seeing. We also see some natural affinity to what customers are asking for, and we are making sure that we are aligning that basket of emerging products to reflect what is happening right now in the market and what we believe are the best products that are the best fit to what customers are trying to solve right now. You are not going to be surprised that you find things there like AI security. You are not going to be surprised that Data is still there. So, obviously, that is a great tool for us—has been and will continue to be—to drive people in the right direction and where the market is currently showing the most demand. Barry Paget: And just to your question on guidance overall, I think this is the right starting point for the year. We are really comfortable with the guide. If you look at the things that are supporting it, it is a few things: solid pipeline, strategic partnership opportunities, and we have been talking a lot about the rising contribution of our emerging solutions—AI, Data, Cloud, Wayfinder, others. So we feel like we are at the right spot. Operator: We have no further questions at this time. We will turn the call back over to Tomer Weingarten for closing remarks. Tomer Weingarten: Thank you all for joining us today, and talk to you next quarter.
Operator: Good evening. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Surf Air Mobility Inc. Fourth Quarter and Full Year 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now pass the call over to Sam Levenson. Please go ahead. Sam Levenson: Thank you, operator, and good afternoon, everyone. Welcome to Surf Air Mobility Inc.'s fourth quarter 2025 earnings call. I am joined today by Deanna White, Chief Executive Officer, and Oliver W. Reeves, Chief Financial Officer. Our earnings release can be found on the SEC EDGAR website and on our Surf Air Mobility Inc. Investor Relations page at investors.surfair.com. During this call, we will discuss our outlook and expectations for future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or other similar statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and in our periodic reports filed with the SEC. During today's call, we will present both GAAP and non-GAAP measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the earnings release we issued earlier today posted on the Surf Air Mobility Inc. Investor Relations website and in our filings with the SEC. I will now turn the call over to Surf Air Mobility Inc.'s CEO, Deanna White. Deanna? Deanna White: Thank you, Sam, and thank you everyone for joining us. At the beginning of 2025, we were in the midst of transforming our company financially, operationally, and strategically. The investments we made in our key priorities were straightforward. Strengthen the core business by improving reliability and profitability in our airline operations, recalibrate the on-demand charter business, and develop our Surf OS software. We delivered against that plan, demonstrating successful execution against our strategies. I think that is best exemplified by having now met or exceeded our revenue and adjusted EBITDA guidance for eight consecutive quarters. Today, we are no longer resetting. We are pivoting to growth. We are backing that ambition by increasing 2026 revenue guidance by 20% to 30% compared to the prior year, underscoring our platform opportunity and our conviction in delivering it. This revenue guidance does not include the early stages of electric aircraft deployment as we expect our recently announced partnership with Beta Technologies to contribute to revenue growth and operating efficiencies in 2027. In 2025, we raised over $100 million in equity to substantially reduce our overall cost of capital and lower our net debt. This strengthened financial position gives us the flexibility to move beyond stabilization and toward growth. Today, we operate a regional airline and on-demand charter business, safely, reliably, and efficiently, and have been building a digital infrastructure equipped with AI-enabled software tools powered by Palantir. These efforts provide the foundation for our business platform ambition that will enable the next generation of advanced air mobility. To set the stage, aviation is entering a structural inflection point. Electrified aircraft nearing commercial readiness and AI-enabled software will soon shift both the economics and operating requirements of flying. These converging technologies will stimulate massive new demand. But the industry remains severely fragmented, with operators, brokers, owners, and manufacturers still relying on disconnected technology solutions that are unprepared to manage the greater operational and regulatory complexity, intensifying the challenges further. Success in this next phase of aviation will be shaped not by individual airlines or OEMs as in the past, but by a platform that integrates the ecosystem and increases alignment across it. Like all effective platforms, Surf Air Mobility Inc. intends to benefit from dynamics between supply and demand, where improved access, reliability, and economics on one side make participation increasingly attractive on the other. Surf Air Mobility Inc.'s platform, enabled by a digital powered by Palantir, makes participation in the next generation of aviation simpler, safer, and more economically attractive over time for everyone. We see a world where OEMs will introduce aircraft through our platform. Operators will run fleets on Surf OS. Pilots will build careers within the network. Passengers will manage their travel with a trusted brand. Regulators will rely on the platform's transparency and controls. And capital will flow through its infrastructure. While assets and operations remain distributed, the coordination standards and market dynamics will be governed centrally through the platform. Our platform strategy is built on our strengths today: a nationwide commuter network of short-haul routes ready to showcase adoption of electric aircraft; a cohort of over 400-plus operator relationships developed within our on-demand charter business; proprietary Palantir-powered software built on live operations; partnerships with leading electric aircraft manufacturers, including Beta Technologies and Elektra, to bring new electric aircraft into service. We believe this combination of assets is singular in this industry and defines our platform advantage. In our airline operations, 2025 marked a dramatic step change in operational performance. We made meaningful improvements in controllable completion rates and on-time departures and arrival metrics, each reaching all-time highs since becoming a public company. These gains reflect better execution from our incredibly talented team along with increased digitalization of key processes across the airline. I would like to thank the team for their contribution to this milestone, which would not have been possible without their dedication to operational excellence. As a result, we achieved our guidance of profitability in our airline operations for the full year of 2025, defined as positive adjusted EBITDA. In our on-demand charter business, we focus not only on growth, but also margin expansion. We achieved both. Revenue increased while we saw incremental improvement to flight margins compared to the prior year. The combination of better sourcing discipline, a mix shift to longer haul trips with larger aircraft, and the adoption of our Surf OS technology helped us recalibrate the business. It is within our on-demand charter business that we expect to see the clearest near-term benefits of our platform becoming operationalized. We already saw this business expand meaningfully in 2025, especially in the second half of the year as our Surf OS tools helped us improve aircraft sourcing and broker productivity. We integrated two charter supply deals into our platform, giving us better economics and more control over aircraft inventory, while guaranteeing distribution for our operating partner. In 2025, we launched two new strategic initiatives in our on-demand charter business. The first, Powered by SURF On Demand, our tech-enabled program that equips independent third-party brokers with Broker OS and expands our on-demand charter team Salesforce. And the second, SURF On Demand Cargo, which expands our product offering into an additional segment of the aviation market. These programs began generating profitable revenue in 2025 and represent early proof points of our platform strategy in action. Surf OS remains a significant investment priority for us. Throughout 2025, we continued working with Palantir to power the core of Surf OS and integrate it across more parts of our organization. We launched crew and aircraft scheduling tools, integrated our maintenance management system, enhanced mobile applications for pilots, and adopted CRM capabilities for our on-demand charter team. These tools are actively used within our business every day. At the same time, we continue to validate Surf OS with external operators and brokers and secured multiple letters of intent for future adoption of our software products. To this end, we remain on track to begin commercializing Surf OS in 2026. The goal is to provide tools that improve efficiency, transparency, and asset utilization in a fragmented market that connects the ecosystem onto a shared digital infrastructure. Our Hawaii operation and strategic partnerships are central to this next phase, and we are placing particular emphasis on that market as a proving ground for our platform in practice. The interisland network provides a practical environment to introduce electric aircraft technologies responsibly. With short flight distances, a concentrated geography, strong community engagement, and meaningful passenger volume, Hawaii is our strategic anchor market to demonstrate the impact of the transition to electric aircraft. We have increased our investment in Hawaii operating under the brand Localei Airlines and have committed to investing over $22 million into our Hawaii infrastructure with new planes entering service in 2026, updated lounges, and improved processes. We strengthened leadership locally, improved operational reliability, and aligned our fleet network for long-term operational stability. This strategic commitment to Hawaii is further shown by the work we are doing in partnership with Beta Technologies. This week, we secured a strategic partnership with Beta Technologies, to be the first operator to launch commercial electric aircraft passenger flights in Hawaii. As part of the strategic partnership, Surf Air Mobility Inc. will combine its operating expertise, existing passenger demand, and established airport infrastructure with Beta's market-leading electric aircraft and charging capabilities. We have placed a firm fleet order for 25 Beta electric aircraft with an option for 75 more. The order allows for delivery slots to be satisfied across Beta Technologies' product portfolio, from cargo or passenger CTOL aircraft to VTOL variants, perfect for our existing commuter network and on-demand charter business. The order allows aircraft to be operated by us, leased to individual owners that manage their aircraft with Surf Air Mobility Inc., or operated by our on-demand charter partners, all stakeholders within our platform. We anticipate that the improved unit economics of Beta electric aircraft will lead to increased profitability in our scheduled service and on-demand charter businesses over time. We have entered into another agreement with Beta Technologies that designates our planned maintenance, repair, and overhaul facility, once certified, as the exclusive factory-authorized service center for Beta electric aircraft in Hawaii with the ability to extend to other launch regions. Our ambition to become the leading MRO for electric aircraft create a new and growing revenue stream for the company. Moreover, Beta Technologies has selected us as the launch operator for their passenger aircraft. Beta Technologies and Surf Air Mobility Inc. will co-market Beta electric aircraft and Surf Air Mobility Inc.'s operating software capabilities to other third-party Beta aircraft customers. We aim to leverage this agreement to provide Beta Technologies customers with operational and aircraft management services across multiple mission profiles, including high-frequency short-haul scheduled passenger service, regional cargo operations, and on-demand charter flights. These announcements are concrete examples of the progress we are making toward implementing the industry's platform solution and will directly support the early commercial deployment and broader market adoption of electric aircraft. Our broader electrification strategy has been to work with best-in-class aircraft manufacturers to achieve first mover advantage. Our partnership with Beta Technologies illustrates this approach, and we are working toward introducing Beta's aircraft into commercial service beginning this year. We believe that Hawaii, where we hold an early advantage, will be one of the first meaningful proof points in the United States and believe Beta Technologies has the aircraft to make it happen. These deliberate steps are designed to reduce risk, increase operational readiness, and position us to be the premier operator electric aircraft. The Beta aircraft order is expected to enable deployment of electric aircraft in our network before our previously expected timeline of 2027. At the same time, we continue to believe there is a strong use case for an electric Caravan, particular in markets we fly today, such as Hawaii. We believe the most efficient allocation of capital is to focus on providing software to support the development of electric aircraft. We continue to be in discussions with multiple partners across the value chain to advance the electric Caravan program utilizing the work we have accomplished and assets we have created. However, to be clear, we no longer intend to invest $50 million to $100 million for the Caravan electrification program. To summarize, what I have just described is Surf Air Mobility Inc. turning back to growth mode in 2026. I have laid out our vision showing how our strategic initiatives and areas of strength will increasingly work in tandem as a unified platform. The outlook for this next year includes more partnerships, more electric aircraft collaborations, more supply agreements, and more integration and broader rollout of our Surf OS technology across the ecosystem. Over time, we will align the key stakeholders around our platform, coordinate more of the operational financial transactions, and capturing an expanding share of the industry's activity. We enter 2026 in a stronger position than at any point in our recent history, seeking to enable an industry at the beginning of structural expansion, and we are intensely focused on turning that position into tangible value for our customers, our partners, and our investors. With that, I will turn the call over to Oliver to discuss our fourth quarter and full year 2025 results and our 2026 guidance. Oliver W. Reeves: Thank you, Deanna. In my remarks today, I will discuss the results of our fourth quarter and fiscal year ended 12/31/2025 and our outlook for the first quarter and fiscal year ending 12/31/2026. To begin, here are some annual 2025 highlights. First, we achieved full year profitability in our airline operations, defined as positive adjusted EBITDA. This milestone was reached by driving operational improvements, reducing maintenance complexity, and enhancing overall cost efficiency. We invested in leadership talent at all levels of the organization with aviation expertise that achieved significant results. Second, we successfully recalibrated our on-demand charter business model, improving flight margins year over year. We accomplished these achievements through improved sourcing, the introduction of new charter products, and an increase in long-haul flying with larger aircraft. In 2025, we completed the full internal deployment of BrokerOS, resulting in improved efficiencies and cost savings. In the fourth quarter, we launched two new programs: Powered by SURF On Demand, which expands the company's sales force by providing Broker OS to independent third-party brokers, and SURF On Demand Cargo, which expands our product strategy within the aviation market. Third, for our Surf OS initiative, we extended our partnership with Palantir by announcing a five-year exclusive agreement to develop software solutions for Part 135 stakeholders, coupled with a teaming agreement to pursue larger enterprise opportunities. Finally, we optimized our capital structure, raising debt and equity to both invest in our business and strengthen our balance sheet. As a result, net debt decreased 47%, from $139 million at 12/31/2024 to $74 million at 12/31/2025. This decrease in net debt also benefited from the conversion of $48 million convertible notes, inclusive of interest. Now let me turn more specifically to the fourth quarter and full year results. Revenue and adjusted EBITDA for the fourth quarter met our guidance range. This is the eighth consecutive quarter in which the company either met or exceeded guidance, demonstrating continued and deliberate execution against our transformation plan. For the fourth quarter 2025, revenue of $26.4 million was within our guidance range of $25.5 million to $27.5 million, a 9% decrease sequentially from the third quarter driven by a 16% decrease in scheduled service revenue resulting from the exit of unprofitable routes, partially offset by an 8% increase in on-demand charter revenue. On a year-over-year basis, fourth quarter revenue decreased 6% driven by a 19% decrease in scheduled service revenue partially offset by a 36% increase in on-demand charter revenue. Full year 2025 revenue of $106.6 million met our previously raised guidance of revenue exceeding $105 million, an 11% decrease when compared with full year 2024 revenue, driven by a 15% decrease in scheduled service revenue partially offset by a 3% increase in on-demand charter revenue. The drivers of both the sequential and year-over-year decreases in fourth quarter and full year revenue were the continued exit of unprofitable routes, partially offset by improved operational metrics in our scheduled service operations, with controllable completion factors for Q4 2025 improving to 98% compared to 96% for Q3 2025 and 89% for Q4 2024; an increase in on-demand charter revenue driven by a shift in mix to larger aircraft and international flights; and the positive impact of our BrokerOS software and broker productivity. Our adjusted EBITDA loss, just under $8 million for the fourth quarter 2025, was within our guidance range of $8 million to $6.5 million. Compared with the fourth quarter 2024, adjusted EBITDA loss improved by 19%, the result of our continued focus on cost management. Adjusted EBITDA loss compared to the same quarter in 2024 increased by approximately $1.1 million due to a slightly higher mix of corporate-level costs. Full year 2025 adjusted EBITDA loss of $41.7 million was a 5% improvement over the 2024 adjusted EBITDA loss of $44.1 million. This reduction in adjusted EBITDA loss year over year reflects the exits of unprofitable routes, the benefits of our significant operational improvements, and the positive impact of improved on-demand charter margins. Airline operations were profitable, defined as positive adjusted EBITDA, in line with our full year guidance. Our controllable completion factor increased to 98% in 2025, from 89% in 2024. Over the same period, on-time departures improved to 72% from 62%, and on-time arrivals improved to 81% from 74%. Improvements in these key operating metrics represent a tangible return on capital deployed to address prior operating challenges. Looking forward, we are entering 2026 with strong momentum. Surf Air Mobility Inc. is positioned to lead and enable aviation's next structural transformation. 2026 marks our transition from operator to platform and the start of the expansion phase of our transformation plan. Now let me turn to the discussion of our outlook for 2026. 2026 marks the beginning of our return to growth. As Deanna mentioned earlier, the outlook for 2026 includes more partnerships, more electric aircraft collaborations, more supply agreements, and more internal integration and a broader commercial rollout of our Surf OS technology. For the full year 2026, we anticipate revenue to be in the range of $128 million to $138 million and adjusted EBITDA loss to be within a range of $40 million to $50 million. Our revenue guidance range of 20% to 30% year-over-year revenue growth for fiscal year 2026 contemplates accelerating growth in our on-demand charter business and partial-year revenue contribution for Surf OS. Because of these dynamics, revenue growth will be heavily weighted to the back half of 2026. Our 2026 adjusted EBITDA loss guidance reflects significant investments in strategic initiatives, including the continued development and commercial rollout of Surf OS, partially offset by the continued efforts to improve the profitability of our scheduled service and on-demand charter business. Despite these investments, we expect our adjusted EBITDA loss and margins to improve each quarter on a comparable year-over-year basis driven by revenue growth and a continued focus on cost management. For the first quarter 2026, we anticipate revenue to be in the range of $24 million to $26 million and adjusted EBITDA loss to be within a range of $15.5 million and $13.5 million. Revenue guidance for the first quarter 2026 does not reflect any revenue contribution for Surf OS. The increase in adjusted EBITDA loss reflects our investment in strategic initiatives and the continued development and upcoming commercial rollout of Surf OS. Now let me turn the call back to Deanna for some brief closing thoughts. Deanna White: 2025 marked the year we transformed our company operationally, financially, and strategically. Today, we are a respected short-haul flight provider serving regional commuters, on-demand charter customers, and cargo services. We are transitioning from an airline-first operating model to a platform-centric business spanning regional, private, and advanced air mobility. We spent a decade building a commuter airline and on-demand charter business known for safety, reliability, and customer service. Meanwhile, numerous companies have invested billions over the same decade in electric aircraft now reaching final certification stages. The aviation industry is entering an inflection point as electric aircraft mission built for short-haul flying and AI-enabled software shift operating requirements, efficiencies, and economics. Success will not be shaped by individual airlines or OEMs, but by platforms that integrate the ecosystem. 2026 represents a pivotal year for Surf Air Mobility Inc. Our long-term ambition to become the platform that enables the next generation of flight is at our doorstep. We believe that our Surf OS software represents sustainable competitive advantage that will anchor our platform and position us at the center of the transforming industry. Having privileged access to a larger and more diverse array of knowledge flows better positions us to shape these flows. When you are in the center of flows, small moves smartly made can set very big things in motion. With that, let me turn it over to the operator for the Q&A portion of the call. Operator? Operator: Thank you. And at this time, I would like to remind everyone, in order to ask a question, press star and then the number one on your telephone keypad. We will now open for questions. Our first question comes from the line of Amit Dayal with H.C. Wainwright. Your line is open. Amit Dayal: Thank you. Good afternoon, everyone. I appreciate you taking my questions. Congrats on all the progress, guys. With respect to the Surf OS spend and commercial rollout, could you clarify what is being spent on the software development, product development, and what is being potentially spent on just building the sales pipeline? Deanna White: Sure. Thanks, Amit, and thanks for participating and giving us a question and the interest you have in our company. You know, Surf OS remains a significant investment priority for us. We have an operating model in which we are now evolving to execute a go-to-market strategy. We first are starting with our Broker OS product. We spoke about how our on-demand team has launched that through a Powered by Surf OS program in which we equip independent third-party brokers with the tech-enabled software tool of Broker OS. We have seen that be very effective. We are already seeing that have profitable revenue when it was launched last year, and we are commercializing that further and growing that. It is going to be a big contributor of our on-demand business this year and is supporting why we guided to a higher revenue target for 2026. Now we are also still working with 17 operators to a closed beta, and we are evolving how that go-to-market strategy will work using their feedback, not just on the tool, but how we could potentially commercialize that. Thirdly, we are targeting the enterprise clients with enterprise solutions. That leverages the five-year teaming agreement that we have with Palantir to develop solutions for enterprise customers with them within the Part 135 industry. We have exclusivity there. And we also intend to monetize the Surf OS tools that we already are using ourselves to enterprise clients and also develop customized tools for them. We are currently in discussions with various potential clients including not just operators, but also OEMs within the industry. The bulk of the revenues that we are going to get this year from commercializing Surf OS is going to occur in the second half of the year. We are deliberately using a very deliberate, thoughtful go-to-market strategy on Surf OS, making sure that our products meet the requirements of the industry and our clients, and hope to see in the future years that segment of our business truly take off and grow. Amit Dayal: Thank you, Deanna. And then, with respect to the Beta partnership, is any of that going to come through in 2026? Or are these aircraft purchases, etc., happening in periods like 2027 and beyond? Just any clarity on how the electric aircraft are going to be incorporated into your fleet and timelines for these developments? Deanna White: Sure. The Beta aircraft order is very unique. We have the ability to satisfy the deliveries across their entire product portfolio, which includes cargo, passenger, a CTOL variant, and then a VTOL variant. The CTOL variant is the one that they can certify the soonest. It is the one they are going to be using in the EIPP program. Certification timeline is obviously the biggest hurdle, and the FAA EIPP program that they just announced selections this week is going to expedite the certification process for those who were selected. Beta is a great partner. They actually were selected in seven of the eight applications. The benefits of that is they will be able to certify the aircraft a lot quicker, even potentially up to a year sooner. We cannot take deliveries and put them into full commercial service until the aircraft is certified. But we have plans to start with the CTOL cargo and move to the passenger variant. And the CTOL can use existing regional airports. It does not require the vertiport infrastructure, and so we will be able to launch a commercial service sooner. We also intend, even though our company's application in Hawaii with Beta was not selected for the EIPP program, we still intend with Beta in 2026 to do demo flights, to start a trial of the cargo version of the CTOL, to begin doing that in 2026 in anticipation of the certification of that aircraft first. And we, on the airline operations side, will actually begin with cargo services that will generate revenue and then move to passenger, using the CTOL and then later the VTOL once it is certified. Amit Dayal: Thank you, Deanna. Just one more on the Beta side. I do not know if you can share this at this point, but any color on the improvement in economics from the Beta aircraft versus these legacy aircraft? Could you share any details on how adopting the Beta electric aircraft can improve economics for Surf Air Mobility Inc.? Deanna White: Sure. We anticipate that there will be 30% more improvement in operating costs. Where that will come from is two areas: fuel and also maintenance. Right now, what is going on in the world with fuel and the higher fuel prices, these electric aircraft will provide us mitigating that risk in the future when we have them. But incidentally, we today run our business on the Caravan, which is one of the most fuel-efficient, much more fuel-efficient than a jet or even a commercial airline operator. Our fuel costs are a lot smaller a percentage of our total revenue than a large commercial airline or a jet. So we are very fortunate that we are able to have an entire fleet of Caravans that are very fuel efficient. We also will benefit from the maintenance. Interestingly enough, on an annual basis, a traditional Caravan has to be taken down for routine inspections 24 days out of the calendar year, and the new electric Beta aircraft will only have to be taken out of service for two days for maintenance in a year. That improved productivity to be able to have those planes in the air flying and generating revenue is also a big benefit to us for our future business and our operating profits. Amit Dayal: Got it. And just maybe one for Oliver. Maybe at the end of 2026, how will the balance sheet look like? Any sense of where cash and debt levels could be post your investments in Salesforce and other initiatives? Oliver W. Reeves: Yeah. You know, it is very difficult for me to comment on that. But here is what I will say. As we mentioned in our earnings release and our remarks this afternoon, we are truly pivoting back to growth, and that is why we have guidance within, you know, up 20% to 30% compared to last year. And our guidance of our EBITDA loss of $50 million to $40 million reflects significant investments that we have announced such as the investment in Hawaii, for example, and a very small part of our investments are actually—so they truly do flow through that number. We believe these investments will generate significant ROI, and it will create shareholder value. With regard to the recent announcement that we made around Beta, we intend to utilize the strong relationships that we have with lessors, something we have been building over time, to get those leased. So we do not expect a lot of impact from that. And obviously, as Deanna just mentioned, they will significantly improve our profitability. So we will continue to opportunistically look to refine our balance sheet over time to address these potential investments that we need to make as market conditions allow, to accelerate our growth plans. Amit Dayal: Thank you, Oliver. That is all I have, guys. Appreciate it. Operator: And our next question comes from the line of David Joseph Storms with Stonegate. Your line is open. David Joseph Storms: Good evening, everyone, and thanks for taking my questions. Wanted to start with airline operations. Great to see that it was full-year positive on an adjusted EBITDA basis. In order for that to become maybe operating-level positive, what will that take? Is that volume growth? Is there more room here to exit unprofitable routes? Are there cost takeouts? Maybe just how does that look? Deanna White: Thanks, Dave. Thank you for interest in our company. We see the continued adding of technology from our Surf OS platform that will provide additional offer optimization for our benefits and reducing our costs in that business. We continue to sustain the high levels of operational efficiency that we developed, the team developed with all their hard work and their transformation from the prior year. But really, technology and the insertion of the technology and the tools that we are making are really going to do a lot in the near term. And in the future, the adoption of electric aircraft are going to be the biggest thing with 30% operating margins improving in the use of that business. I previously, in the original beginning part of the thing, I talked about also in the airlines operations additional markets that we are going to be going in. We are going to go into the cargo market using these Beta aircraft and we are also going to be the factory authorized MRO in the aircraft space. The Beta aircraft agreement allows for us to first be their exclusive factory authorized center for them in Hawaii with the opportunity in future launch areas. And we have a goal to become, in addition, to become a premier MRO for the electric aircraft that are all coming to fruition in the near future. And so that will be another opportunity for us to have additional revenue streams and additional profitability in airline operations. David Joseph Storms: That is great color. I appreciate that. Maybe sticking with the Beta partnership, you mentioned in your prepared remarks that you have the optionality to move with them to, say, move geographies, etc. I know Hawaii is kind of a unique situation and serves as a great testing ground. But thinking beyond Hawaii, what seems like the logical next steps for geographic expansion? Deanna White: So we do not necessarily want to share what our geographical expansion targets are. It is a competitive advantage to know what we are doing there. But there are a lot of pieces of our current network that we operate where we can easily adopt the electric aircraft from this order, not just in our scheduled passengers, but also in a cargo service. Obviously, we already have an existing network you can more quickly adopt these aircraft into as opposed to standing up something from scratch in a new targeted market. But we do also have new targeted markets that we do not operate in today that we intend to use these aircraft for. You know, an interesting thing, our company has flown the past decade millions of passengers, millions of miles. We have done the short-haul routes that all this new technology in electric aircraft needs to have. And so you can more quickly and efficiently adopt electric aircraft when you already have a network to place the aircraft in. So we are really excited about the Beta partnership, the order, and what it means for us to be a leader in adopting within our network and within the industry. David Joseph Storms: That is a very fair answer. Please do not let me ask you to give away your Krabby Patty sauce there. Turning to maybe the SURF On Demand, would love to get your thoughts about maybe any early signs of adoption there? Are you seeing it take a similar trajectory as your previous launches? Just maybe anything else you are seeing there, early returns-wise, I know it is still early. Deanna White: So are you talking about early launch of our Powered by On Demand program? So that program, similar to, like, Compass used in the real estate market, that platform allows independent brokers to join that program and get the tech-enabled Broker OS software that helps them more efficiently and quickly close business transactions in the on-demand market. So they can obviously create volume a lot quicker. We have already seen, when that was launched in December, already seen the big uptick. We have a pipeline of independent third-party brokers that are already in the pipeline to join that program. We have them apply, and then we train them up in that program. So we are really excited about all the uptick we have had in that. And as I said, we have increased our 2026 guidance significantly, 20% to 30% on the revenue line, because of what we see as the big potential in that program and the big potential on the supply side to grow that business. David Joseph Storms: That is great. I appreciate all the commentary, and good luck in next quarter. Operator: And our next question comes from the line of Austin Moeller with Canaccord. Your line is open. Austin Moeller: Hi, good afternoon. So when timing-wise should we think about Broker OS, Surf OS, being able to generate revenues both from new covered customers and from the demo customers? Deanna White: Thanks, Austin. Thanks for your interest in our company. We plan to have that in 2026. We have publicly said we are commercializing Surf OS products in 2026, but we intend to see more of the revenue in the second half. The revenue is going to be coming from Broker OS. It is already happening. We have Broker OS live within our Powered by SURF On Demand program in which they are using that tool, and as they signed up for that, the third-party brokers signed up for that program, and they are already generating revenue in our on-demand business with that. We also plan to use the information, like I said, from the enterprise side of the business with our partnering of Palantir. We are in business discussions with various stakeholders in the industry, OEMs and large operators, to either have them use the tool we use every day in our business or to develop customized tools for them. We see a big opportunity to enter into or close a deal like that this year. And we are really excited about the partnership we have with Palantir and the ability to do that. Austin Moeller: Okay. And then just on the Beta partnership, given your statement that you no longer plan to invest the $50 million to $100 million in the Caravan electrification project, I guess the plan here is to continue looking for a JV partner to capitalize that project and, otherwise, move forward with using the CX300 and the Alia 250 to do cargo and passenger transport. Deanna White: I will have our cofounder, Sudhin Shahani, who manages these strategic initiatives, take that one. Sudhin Shahani: Hi, Austin. Yeah, to answer your question directly, on the Caravan, we do intend to continue to pursue partnership opportunities. We are in talks with a number of people in the supply chain. As Deanna stated, we do not intend to fund it ourselves. But we do believe we have assets that we have created there in real value, and we do see a place for an electrified Caravan at some point in the future. So we are going to continue to explore that. Austin Moeller: Okay. Great. I will pass it back there. Thank you. Operator: And there are no further questions at this time. I will now turn the call back to the Surf Air Mobility Inc. executive team. Deanna White: Thank you. We are now going to take some inbound questions. They were either submitted via our Say application or via email. The first question, we have shifted from our in-house electrification part to partnerships. How should investors think about long-term economic ownership in that model? So, I will turn that question over to Sudhin. Sudhin Shahani: Thanks, Deanna. So to clarify, our electrification strategy as prior stated was really to make money in two ways. One, from the operating efficiencies generated by electrified aircraft, and the other by providing electric services to other operators, both hardware and software based. Our recently announced partnership with Beta solves for the first and actually improves upon the first; given the amount of capital that Beta has put into developing a clean sheet design aircraft, we are in a position to realize greater operating efficiencies leveraging that aircraft and maintain a first mover advantage. From the services side, we have made a conscious decision to allocate capital towards the initiatives where we intend to continue to provide this type of software services that we originally intended to under the electrification program, but benefit on the hardware side from partners like Beta. Also to recap, we do still continue to believe we have assets of value in the Caravan program and are continuing to explore ways to monetize those. Deanna White: Thanks, Sudhin. The next question is, what are the remaining technical hurdles before the first commercial flight of an electrified aircraft can take place? So the speed of certification is the largest hurdle to do that. The FAA saw that and created the EIPP program to help OEMs certify quicker, and that is a great step toward and addresses some of those challenges. I find it super exciting that the FAA this week picked Beta for seven of the eight applications. We really picked a really good horse to do a partnership and announce that with this year. We just announced that partnership. The EIPP program will allow an operator who is participating in those trials to certify their aircraft as much as one year sooner. And so their participation, Beta's participation, will benefit us because we will be able to take the aircraft that we just ordered earlier than thought since they are going to be able to participate in the EIPP program. And even though our application with Hawaii and Beta was not one of the ones selected, we plan with the state of Hawaii, other partners, and Beta to launch demonstration flights in 2026 to deploy electric aircraft to prepare our network in Hawaii to accept the first aircraft from that order that are placed. What is the expected timeline for Surf Air Mobility Inc. to reach sustainable profitability and which revenue segments—regional air operations, electrification, or software platform—can drive the majority of that profitability? So today, our revenue comes primarily from our regional airline operations, and we are happy to say that it is profitable today. And we will continue that profitability in 2026. With the introduction of the new electric aircraft that we will be getting with Beta, we plan to use those to launch new routes in the future. And that will improve the profitability in this business because of the operating of electric aircraft that I spoke about as far as fuel and maintenance. Additionally, that business is going to create additional revenue through an OEM and a cargo business. And those businesses, we plan to launch using the Beta partnership and the Beta aircraft order. In 2026, the majority of our growth in revenue will be coming from our on-demand charter business. We will be growing revenues and margins, and that will happen due to the use of technology we have been talking about in our Powered by SURF On Demand program and additional supplier contracts and agreements that we have with our wholesale suppliers. On the Surf OS side, we are taking a deliberate approach to how we commercialize that in 2026 with much higher growth coming in a future year as software makes up a greater portion of our revenue. In later years, the profitability of our business will increase due to software's higher margins. Next question is, are there active discussions with OEMs and eVTOL manufacturers to integrate Surf OS as a native aircraft operating platform. The answer to that is yes. We are actively in discussions with stakeholders within the aviation community. Particularly, for enterprise customers, we are using the Palantir teaming agreement that we have for exclusivity in the Part 135 world to develop software solutions for these large enterprise customers, like an OEM, like a large operator, or like a large broker. As we progress through those discussions, we will provide updates on our progress and make any announcements when final agreements are closed. Lastly, the question is, how quickly is the on-demand charter segment growing? And what percent of revenue could it represent over the next two years? Our on-demand charter business is our fastest growing part of our business. It is the primary contributor to our raised revenue guidance. We are achieving that through the deployment of our software technology and our new programs like our Broker OS Powered by SURF On Demand program. We see real opportunities also in the future to deploy the electric not only in our scheduled service, but in our on-demand platform. The Beta aircraft agreement allows us to take the deliveries either on our certificate and operate them in either a scheduled service or on demand. We can also lease them to an individual owner as long as they are managed by us on our platform and on our certificate. And we can also provide them to other operators. You know, we do have relationships with over 400-plus operators currently in our on-demand business, and we can also use that. So we will be able to expand our revenue and our market over time. The on-demand business is going to be our clearest near-term benefit of operationalizing our Surf OS technologies, and we are really excited about what that is going to do to us this year. Before we close the call, I would like to mention that we are participating in the Roth 38th Annual Growth Stock Conference on March 23–24. We look forward to meeting with institutional investors there. So please contact your Roth sales representative to schedule a meeting with us. To end this call, I would like to thank all of you for joining, and we look forward to reporting our Q1 results in early May. Thank you. Operator: Ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the KinderCare Learning Companies, Inc. fourth quarter 2025 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Thursday, March 12, 2026. I would now like to turn the conference over to Ms. Olivia Kirrer, Vice President of Investor Relations. Please go ahead. Olivia Kirrer: Thank you, and good evening, everyone. Welcome to KinderCare Learning Companies, Inc.'s fourth quarter and full fiscal year 2025 earnings call. Joining me from the company are Chief Executive Officer Tom Wyatt and Chief Financial Officer Tony Amandi. Following Tom and Tony’s comments today, we will have a question-and-answer session. During this call, we will be discussing non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our earnings release, which is posted on our Investor Relations website at investors.kindercare.com under the Financials tab. Finally, a reminder that certain statements made today may be forward-looking statements. These statements are made based upon management’s current expectations and beliefs concerning future events impacting the company and involve a number of uncertainties and risks, which are explained in detail in the Risk Factors section of our most recent Annual Report on Form 10-K and other filings with the SEC. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. The actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward-looking statements. All forward-looking statements are made as of today, and except as required by law, KinderCare Learning Companies, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. I will now turn the call over to Chief Executive Officer Tom Wyatt. Tom Wyatt: Thanks, Olivia. Hi, everyone. I am pleased to be joining you today in my first earnings call since returning as CEO in December. It is wonderful being back at the helm of KinderCare Learning Companies, Inc. and leading this talented team. This company’s purpose has been a significant part of my life for a long time. In these first few months back, they have been productive. The work we have begun to redirect our company back to the type of growth I oversaw for twelve years is gratifying, and I am looking forward to sharing more with you today. Let me start with this. Our recent performance has not been where we expected it to be, and that responsibility is ours. In some areas, we fell short of the consistency and execution that families expect when they choose KinderCare Learning Companies, Inc. That perspective, along with the time I have been spending in our centers, with our field teams, with clients, and many of you, has reinforced where we are executing well and where we need to improve. We must move with greater urgency, act more decisively, evolve how we operate, and strengthen accountability across the organization. Beyond our immediate business activities, I have spent time with lawmakers at both the federal and state levels, and I am encouraged by the strong bipartisan support we are seeing for the child care sector overall. I also continue to receive feedback from public policy officials about KinderCare Learning Companies, Inc.’s industry leadership. I am proud that we continue to support working families in our centers while advocating for policies that strengthen access to quality, affordable child care. That commitment is reflected in our culture, as KinderCare Learning Companies, Inc. was once again named one of Gallup’s Exceptional Workplaces for the tenth consecutive year. It is our educators and teams who bring our culture to life every day. Their unwavering dedication has been the cornerstone of our success as they build confidence in children and families across the United States, even in years that test our resilience. Last year was one of those years, as KinderCare Learning Companies, Inc. delivered a mixed performance in the fourth quarter and overall throughout 2025. Concerns about inflation and the broader economy and declining consumer confidence magnified affordability concerns for some of our customers, creating a challenging environment. Confusion around federal and state grants further tested the child care sector, although continued bipartisan support for child care underscores the long-term importance of access to quality child care. The economic and policy landscape will continue to evolve, as it has over our nearly sixty years in business, but our commitment to serving working families remains at the core of who we are. With that context, let me turn to our results. Overall, we finished 2025 slightly better than at the end of Q3. Including an extra week in the fourth quarter this year, revenue was $688 million, up 6% from last year. Adjusted EBITDA in Q4 was $68 million. Adjusted earnings per share was $0.12, and same-center occupancy was 64.5%, down 340 basis points from last year. Tony will walk you through the extra week impacts during his remarks. While 2025 presented some areas of pressure, we made progress across our brands during the year. KinderCare Learning Companies, Inc., which accounted for 88% of our total revenue, continues to be the core driver of our overall performance. Our top quintile centers felt some of the headwinds during the year, while performance in our lowest quintile showed encouraging improvement. Much of that progress reflects the work underway in our Opportunity Region, which is a focus group of centers in our fourth and fifth quintiles receiving individualized leadership support to help unlock their growth potential. At the same time, we continue to expand the portfolio through new center openings and acquisitions, including expanding into Idaho and extending our high-quality classrooms to more families and communities. In a market that remains highly fragmented and where the three largest providers make up less than 5% of the total market, our national network gives us a unique ability to responsibly expand access to high-quality child care over time. Our Champions before-and-after school brand continued to drive purposeful growth through an aggressive pace of new site openings and contributed 8% to total revenue in 2025. Our newest brand, Crème Schools, contributed 4% to total revenue during the year. In 2025, we executed a focused reset of the brand, refined its positioning, and strengthened operational and program consistency while opening two new schools. Early indicators this year are encouraging, and we are intent on building from that progress. We expanded our B2B partnerships in 2025, providing flexible child care solutions to more working families while opening six new on-sites—the most in a single year for our company—and bringing our total to 77 employer-sponsored centers. During the year, we opened new sites for government clients in Maricopa and Montgomery Counties, for energy sector employees at Halliburton, and most recently for health care professionals at UNC Health Johnston. As we deepen relationships with more than a thousand employers, we see continued opportunity for steady organic growth in our B2B business. Overall, we continue to build on the capabilities in our brands that have long defined KinderCare Learning Companies, Inc. when we operate at our best. But this is not about looking backward; it is about moving forward with urgency, reaffirming the important role we play in supporting working families across the country. How we ended 2025 is how we began this year. We are approaching this year with a clear understanding of what needs to be improved. This year is about raising the standard of execution across the business. That means improving how our centers operate, aligning spending with our highest priorities, and taking deliberate portfolio actions among underperforming centers when needed, while continuing to grow responsibly through new center openings and acquisitions. To reinforce that focus, we changed our short-term incentive plan so incentive compensation is more directly tied to the financial and operational outcomes we expect to deliver. Going forward, all employees eligible for a performance bonus will share responsibility for achieving our growth targets. For the KinderCare Learning Companies, Inc. brand, we are increasing marketing investments and expanding proven operational practices from our Opportunity Region. The path ahead for this brand reflects what we know and what we have learned, which will drive the next phase of our growth in our centers. What will be different begins with clarity about who we are and the experience families expect when they choose KinderCare Learning Companies, Inc. From there, it is about reaching new families, deepening engagement with those already enrolled, and ensuring that we continue to earn their confidence every day—from their first inquiry to the day their child graduates into kindergarten. To help navigate this path, we have simplified some of our management priorities, as Michael Canavan, President of KinderCare Learning Companies, Inc., who previously led the brand through a period of sustained growth, has shifted from overseeing multiple areas of the business to a single focus on driving only KinderCare Learning Companies, Inc. Crème Schools underperformed our expectations last year as we implemented significant brand repositioning. With that work behind us, Crème is now focused on translating those efforts into sustained enrollment growth through the refreshed curriculum we recently announced and targeted enrollment initiatives. Champions is set for another year of strong new site openings, alongside an increased emphasis on growing site-level enrollment. Across our B2B business, tuition benefit is as strong as ever, supported by our national network of centers that allows employees to access care at locations convenient to them. We are going to continue building on this momentum by expanding employer relationships, deepening client advocacy, and improving utilization to drive stronger partnerships and long-term growth. At our best, KinderCare Learning Companies, Inc. is defined by strong leadership in our centers and sites, high standards in our classrooms, a differentiated educational experience, deep engagement with families, and the strength of our national network. Our expectations for this year reflect enrollment trends coming into the new year and the actions underway to strengthen execution and center-level performance. We expect this year to come with its own challenges. We will meet those challenges by building greater consistency across the business, addressing areas that have underperformed, and working hard to reinvigorate our enrollment trajectory. Tony will go over our 2026 outlook in detail. I am encouraged by the progress we are making, the opportunities ahead, and the dedication of our people. Our enduring commitment to families is what differentiates KinderCare Learning Companies, Inc. within our industry. I look forward to the impact we will continue to make together. If there is one message I want to leave you with today, it is this. We understand where KinderCare Learning Companies, Inc. needs to improve, and we are taking action. That work starts with growing enrollment, improving how our centers and sites perform each day, and making decisive portfolio adjustments when needed. Results are going to take some time, but we are excited to do what it takes, and the work has already begun. I will now turn the call over to Tony to walk through the financial results and guidance in more detail. Tony Amandi: Thank you, Tom. Starting with a review of the fourth quarter, revenue was $688 million, up 6% year over year, primarily reflecting the incremental $45 million contribution from the fifty-third week. On a comparable basis, revenue is essentially flat year over year. Tuition contributed 2% growth in our centers, and Champions delivered double-digit expansion, while lower center enrollment offset those gains. Enrollment trends in the quarter were consistent with our expectation exiting the third quarter. At the center level, we saw the same dynamics. Same-center revenue increased 6% to $618 million, driven by the extra week, tuition increases, and incremental contribution of new centers entering the same-center pool, partially offset by lower overall enrollment. Same-center occupancy for the quarter was 64.5%, approximately 340 basis points below the prior year, in line with our revised guidance. Champions generated $60 million of revenue in Q4, up 12% year over year, approximately $0.8 million of which was from the extra week. The performance was supported by incremental site additions during the year and continued client growth. In total, we added 128 net new sites compared to last year and finished with over 1,150 sites. Champions and our broader B2B initiatives continue to diversify our portfolio and complement our community-based centers. We see them as important long-term growth drivers. During the quarter, we expanded our B2B footprint with a new KinderCare Learning Companies, Inc. for Employers on-site opening, completing a record year of employer-sponsored site growth. We also made progress across our other growth drivers. In addition to the on-site center, we opened six new community centers and added six centers through acquisition during the quarter. Alongside these growth priorities, we also closed seven centers in Q4 as part of our regular portfolio management activities. Due primarily to a non-cash goodwill impairment charge recorded during the quarter, we reported a net loss of $177 million in Q4. The impairment was precipitated by market-based valuation inputs rather than changes in operating cash flows. It had no impact to our liquidity, debt covenants, or ability to generate cash. Adjusted EBITDA totaled $68 million for the quarter, which includes approximately $12 million from the additional week, and was helped by some incremental labor savings during the holiday period. Adjusted EPS was $0.12, up $0.03 from the prior year. SG&A to revenue was 10.7%, down compared to the prior year, which included some elevated IPO-related costs. We are now starting to lap additional ongoing public company costs and will begin to have more normalized comps in the coming quarters as we remain focused on disciplined cost management and operational efficiency. Interest expense declined significantly year over year, reflecting debt repayment and repricing actions completed following the IPO. These actions have lowered our structural financing costs and position us with a stronger and more resilient capital structure as we enter 2026. Looking at the full year, including the fifty-third week, revenue increased 2.6% to $2.73 billion. Adjusted EBITDA increased just under 1% to $300 million. Adjusted EPS was $0.70, up from $0.40 in 2024. Same-center revenue increased 2.5% to $2.49 billion, reflecting tuition increases, centers entering the same-center base, and the extra week in the year, partially offset by lower enrollment. For our long-term growth levers, tuition growth for the year was 2.2%. This reflected lower-than-usual increases in subsidy reimbursement rates along with the underwhelming performance at Crème. Same-center occupancy declined 200 basis points for the year to 67.8% as the early softness we experienced last year persisted through the back-to-school season and into year-end. We ended the fourth quarter at 64.5%, which forms a starting point for 2026. As many of you are aware, we group our centers in quintiles by EBITDA in order to better evaluate performance during the year. Centers in our top three quintiles continue to hold a high average occupancy of almost 79%. Additionally, in 2025, as in 2024, about 60% of our centers were over 70% occupied. Champions and B2B initiatives contributed about 1% to revenue growth. We opened 14 new centers during the year, which contributed 20 basis points to revenue growth. We also acquired 26 tuck-ins during the year, which contributed about 60 basis points. The revenue contribution from new and acquired centers, including new on-sites, for the year was $23.5 million. Cash consideration for the 26 acquisitions was $23 million and was funded completely out of the $110 million in free cash flow generated over the year. Partially offsetting our center growth were 19 closures, which came out to about a 1% impact to overall revenue growth. The primary drivers of the income statement were consistent with what we saw in the fourth quarter. SG&A was more in line with our ongoing run rate compared to 2024, and interest expense declined substantially over the year following the balance sheet actions taken post-IPO. For the full year, we reported a net loss of $113 million, largely attributable to the non-cash impairment recorded in the fourth quarter. Adjusted EBITDA margin for the year was 11%. While enrollment softness created top-line pressure throughout the year, disciplined expense management helped preserve overall margin performance and better align our cost structure with our current enrollment trends. Adjusted net income increased to $83 million from $39 million in 2024. We ended the year with net debt to adjusted EBITDA of 2.6x, at the lower end of our targeted range of 2.5x to 3.0x, which we believe provides a stable and resilient financial foundation. While enrollment remains below prior-year levels, the operational discipline implemented through 2025, particularly in our Opportunity Region, positions us to operate with greater consistency and control. Looking forward to 2026, our outlook is informed by the enrollment patterns exiting last year and our initial read on first-quarter performance. We expect revenue of $2.70 billion to $2.75 billion for the full year, as compared to $2.69 billion on a fifty-two-week basis in 2025. As the Q4 trends have carried over into the new year, lower enrollment in our largest brand is weighing on our top line, offsetting benefits from tuition increases that began taking effect in early January. The enrollment outlook is driven by year-over-year challenges overall in both private pay and subsidy enrollments. We expect enrollment to improve gradually as we move towards our summer out period, although we do not expect that growth rate to surpass the rate we saw in the first half last year, given our current trends. Therefore, our full-year expectations reflect regular seasonality from a lower starting base, as the actions we have taken to stabilize occupancy and improve performance have an opportunity to drive comparable enrollment and occupancy improvements in the second half. Tom Wyatt: We will continue to maintain a healthy spread between tuition and wages. Tony Amandi: Adjusted EBITDA is expected to be $210 million to $230 million this year, down from $288 million for the comparable fifty-two-week period, driven mostly by lower occupancy, a reduction in grants versus 2025, and increased marketing investment aimed at driving our top-funnel activity for targeted centers. Consequently, we are projecting adjusted EPS to be $0.10 to $0.20, down from $0.62 for the comparable fifty-two weeks in 2025. Our full-year guide assumes tuition to drive approximately 3% of revenue growth and be fully offset by a 3% decline in same-center occupancy. Our other growth lever assumptions are expected to continue with their growth trajectories: Champions and B2B contributing about 1%, and new center openings and acquisitions contributing approximately 0.5% to revenue growth each. Additionally, we expect revenue growth to be impacted by about 1% for the 15 to 20 closures, which normally act as an offset each year. Our guide does not assume any closures beyond that, although we will likely take additional targeted actions where appropriate. We expect free cash flow to be between $35 million and $40 million and CapEx to run about 5% of revenue for the year, with most of that CapEx directed towards growth. For modeling, you can assume our effective tax rate to be around 27%. We do not plan on regularly providing quarterly guidance. However, since we are so close to quarter end, additional color will be helpful. For the first quarter, we expect revenue to be in the range of $664 million to $674 million, adjusted EBITDA to be between $45 million to $48 million, and adjusted EPS to be about breakeven. These expectations are underpinned by the drivers we have outlined for you already, as a lower base and enrollment trends carry over from the second half of last year and create an unfavorable comp versus the first quarter last year. Enrollment remains below prior-year levels; our outlook reflects the starting point. Actions taken last year and those underway now are intended to position the business to exit the year on a better trajectory. Our priorities for 2026 are clear: stabilize occupancy, improve performance in lower-performing centers, and take decisive portfolio actions where needed, while maintaining financial discipline. We will now open for questions. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then the number two. Our first question comes from the line of George Tong from Goldman Sachs. Your line is open. George Tong: Hi, thanks. Good afternoon. You are guiding to 8% EBITDA margins in 2026 at the midpoint. That is a pretty significant drop from 11% in 2025. Can you elaborate on some of the key factors causing this sharp drop in margins? Tony Amandi: Yes, of course. Hey, George. The first thing I would start with from your 11% is the extra $12 million we had in the fifty-third week. That is not going to duplicate, and that fifty-third week is always a lot more profitable given the time of the year. From there, the big callout is really all about those FTEs. Obviously, the top line is impacting us, but as we have that lower occupancy expectation, that is the biggest thing that we are deleveraging, and that is impacting all the way down to margins. The other callout I made was grants. We knew in 2025 that that was going to be the peak of the year, and it turned out that way, as the states were reacting to their funds rolling off. We saw that in the back half of last year and expect it to stabilize back to normal pre-COVID levels this year as well. But it is all about FTEs in KinderCare Learning Companies, Inc., really, and that is the biggest impact on margin. George Tong: Got it. That is helpful. And I know that you mentioned goals at the beginning to move with more urgency, to act with decisiveness, to strengthen accountability. Can you talk at a high level about what your top priorities are to achieve those initiatives for the upcoming year? Tom Wyatt: Yes. George, this is Tom. It is good to talk to you. We have done a number of things. Let me start with, we feel really good about the business we have in the at-work space. That business is growing for us. It saw that in 2025, and it is on plan this year as well. We feel the same way about Champions. Champions had a great year last year. They are on track to have a great year this year, a double-digit increase as well. So this is all focused on KinderCare Learning Companies, Inc., and it is all focused, as Tony just mentioned, on enrollment. What I would tell you we have done is we have taken Michael Canavan, who is the President of KinderCare Learning Companies, Inc., who was also managing other businesses for us in 2024 and 2025, and we moved Michael back to just KinderCare Learning Companies, Inc. When Michael joined me back in 2012–2013, he was totally responsible for KinderCare Learning Companies, Inc., and he led the growth that we had during those years. That is number one. We want to put Michael back in charge. Michael will not have any distractions from KinderCare Learning Companies, Inc., and will work on enrollment. The second thing we did is we cleared the distractions of the center directors, which were many. When I got back to the company, there were a number of activities going on in the centers that were distracting, and we have taken those out. We have actually seen already some improvement from that in activities including enrollment. We feel better about the role of the center director, making them the center director they want to be, and that is introducing KinderCare Learning Companies, Inc. to more families and more children. The third is that we added significant investment in paid search for the first half of this year, and we are contemplating doing the same thing in the second half. We are seeing trajectories there we have not seen in a while. We actually have an increase in the number of inquiries year over year, which is positive and feels good to us, and that is something that we are going to continue to build upon. The last thing I would tell you is that we changed our incentive compensation program. It has always had growth as a part of it, but we made it literally 100% focused on growth—on profitable FTE growth—for all aspects of anyone that is in an incentive program. Those are the key components. The big ones are Michael, paid search already showing signs of life, and clearing the distractions. We are allowing our center directors to be center directors, and they have not been for about a year and a half. George Tong: Very helpful. Thank you. Tom Wyatt: You bet. Operator: Our next question is from Andrew Steinerman from J.P. Morgan. Your line is open. Andrew Steinerman: Hi, Tony. You moved a little quick for me on the prepared remarks. Could you just give us, for the quarter just reported, the M&A revenue contribution? And then, within the context of the full-year guide on occupancy being down, and obviously you cannot really do anything at the immediate front because that is kind of where we are going into the year, my question is sort of the pacing throughout the year. For example, by the time we get to September enrollments, is there an expectation that occupancy could be flat by then or by the end of the year? Just to get a sense of the pacing of the year. Tony Amandi: You bet, Andrew. Revenue from acquired centers was $6.2 million in the fourth quarter, totaling $14.9 million for the full year from our acquired centers. Let me give you a little commentary on just how the year trends, and then Tom, if you want to add anything on where we could go. Our guide at this point, at our 3% down on FTEs, assumes a curve that is, for the most part, similar to last year and what we have seen historically—really primarily last year and a little bit of the back half of 2024. What do I mean by that? We will continue to grow incrementally, and we have been even this year, from week two all the way to about week twenty, towards May. We will grow incrementally every week up until that point, where May is usually our high point. At that point, we call it summer’s out, and that is an inflection point for us. We will lose a handful of families to different summer decisions, and we also get a lot more incoming families from some of their summer decisions. That is a big inflection point that we are building into now with our marketing and outreach with our families as early as right now. That is an inflection point to start to hopefully add some more students at that point. We will hold those students over the summer, and then back to school is obviously the big one—another big inflection point. The current guide assumes pretty consistent performance to last year, but both those inflection points give us the ability to break those curves. Tom Wyatt: I would like to add this. Number one, I do not accept that curve, just to be honest with you. Call me optimistic, but when I came to this company in 2012, the company had experienced thirteen quarters in a row of negative top and bottom line. I joined in February 2012, and in July that year, we went positive, and we stayed positive up to and including COVID. So this opportunity for us to change the trajectory of this business is significant. By offering our center directors the opportunity to be more focused on enrollment, adding paid search—which we did not do back in 2012; we just did it organically—and bringing Michael back into the fold as the leader he was back then are significant. We are being thoughtful with using the curve from 2025, but I will be very disappointed if we stay with that. Andrew Steinerman: Okay. Thanks, Tom. Operator: The next question is from Jeffrey Meuler from Baird. Your line is open. Jeffrey Meuler: Thanks. I guess it is going to be a similar question to what I asked last quarter, but maybe, Tom, in the context of just comparing how you view the industry structurally today to when you joined in 2012. KinderCare Learning Companies, Inc. is not the only player in the market that has had tougher enrollment trends over the last year, and we are always trying to sort through to what extent that is cyclical and to what extent that is structural and to what extent execution plays a role. I would just love your views on the structural health of the industry or what has evolved either since you last joined or since you last stepped out of the CEO seat. Thanks. Tom Wyatt: Happy to. When I joined in 2012, the business was, as it had been for decades, growing at a moderate rate of 1% to 3% a year in occupancy and in FTEs naturally. It was only after the pandemic that we saw this pressure on growth. As far as the industry is concerned, the strong, scaled larger providers are staying strong, although they are obviously challenged by enrollment and occupancy. The issue I see now that the pandemic-related ARPA monies and the like are gone, we are starting to see a contraction of the mom-and-pops and smaller providers. Quite frankly, we are seeing that even in the opportunities that are offered up to us to purchase. I believe you are going to see this year—and we have had a firm like Parthenon do some work for us because I believe you are going to see—a contraction of smaller players in 2026. Larger providers will continue to scale and continue to find ways to potentially gain share. I gave you an example. If you look at the top three players in this business—us in the number-one slot, Learning Care Group number two, and Bright Horizons—you look at all three of those, they barely come to 5% of the entire share of market of early childhood education. We are at like 1.8% to 1.9%. It baffles me that with aggressive approaches to marketing, to quality, to allowing our center directors to be high-quality providers of relationships, the effort they are making, the tours they are taking, the time they are giving families, I feel like we will continue to grow. I think there will be a few of us that emerge in 2026 doing just that. I do not think the entire market is going to grow in 2026. I think we are going to see more of what we saw in 2025 because of the economy and the instability in our environment. But I do believe the opportunity for some of us to get in another lane, make an effort at what we are doing, and put more emphasis on growth—we will get there. It is my opinion. Jeffrey Meuler: And then I think you said twice in your prepared remarks that you fell short of the consistency that families expect. My prior understanding was the challenges were more on demand or inquiry conversion, but existing family retention was good. Maybe go into more detail on what you meant by falling short of the consistency families expect, and was that directed at existing families and retention, or was that more on inquiry conversion? Tom Wyatt: Our retention, I am pretty happy with. It has been stable and actually grown a tiny bit. Where I was speaking specifically is that we did not allow our center directors to be center directors. They were bombarded with a number of things that really distracted them from the core effort of what they do, and that is taking care of families, being in the classroom, recruiting great teachers, and creating the environment they have. They were not able to do the tours—and do them in the quality way that they have done in the past—because they were busy. They were distracted. The opportunity for us to give them back the time to do a high-quality tour, to be in the classroom, to empower their teachers, to do all of that, is what we do well, and we are getting back to that. Jeffrey Meuler: Okay. Thank you. Tom Wyatt: You bet. Operator: Our next question is from Manav Patnaik from Barclays. Your line is open. Ronan Kennedy: Hi. Good afternoon. This is Ronan Kennedy on for Manav. Thank you for taking my questions. You spoke of bipartisan support, but also acknowledged confusion around the federal and state grants further testing the child care sector. There have been headlines early in the first quarter and throughout—whether it is HHS “defend the spend” or some headlines on a state-level budget cut standpoint, whether it is administrative throttling or reimbursement rates. Can you talk about those dynamics and the impacts for first quarter and what is contemplated in the guide? Tom Wyatt: Happy to. In the first ninety days—I have only been here ninety days—but in those first ninety days, I have been to Washington and visited with senators and congressmen and women, basically defending our approach to CCDBG and our integrity around that. Minnesota was a curveball, and it happened right at the December-into-January period. The second or third week, six CEOs and I flew to D.C. to ensure the government officials that we were not the problem; we were the solution. Candidly, they agreed with us, and we have worked with them to be sure that they are looking at things and setting up the right corrective actions to weed out any possible fraud that might occur in that part of our business. We met with the head of that, Alex—forgive me, I do not remember his last name—a great guy who works for HHS and literally is the top player in that arena. He feels very good about where the major providers are and has no intentions of freezing any funds or slowing any funds down. In the first quarter, we will see no impact to that, and we do not see an impact to it this year. A week after we were in Washington, they actually raised the block grant $85 million—about 1%. Not a lot, but a lot better than freezing the funds, and it was good to see bipartisan support increasing the CCDBG block grant. I also spent time in February in Colorado, and I will be spending time next week in Massachusetts. I will visit with the governors and lieutenant governors and also the heads of education in both states. I have done this all my career. I want to be sure they realize the emphasis and impact that we have on hardworking families and the development that we have on children. We are taking a very strong offensive stance to that. I have a meeting in May with eight of the top CEOs in the country to have a strategic session with them as well. All of that to say, I feel good about the block grant. I feel good about subsidy in total. We do not see any interruptions to it. We have had some manipulations in state funding—some states allocated more, some less—but for us, being in 41 states, we may see an interruption of a couple of dollars in one state, but we pick them up in another. All in all, it is something we have to be all over. We have a staff of a few hundred that administer the subsidy disbursements in our company, and that is a competitive advantage we have in that space. Ronan Kennedy: Thank you very much. Appreciate the insights there. If I may, I will shift gears. You referenced being willing to take deliberate portfolio actions among the underperforming centers. I do not think the guidance contemplates that—it was referred to as a possibility—but can you help us understand that decision framework? Is there a level of occupancy, margin, or trajectory that would trigger a center-specific targeted initiative for improvement or potential exit? And what could the total impacts of those be for 2026, please? Tony Amandi: Yes. Look, in the guide, we have been doing 15 to 20 per year the last few years, and you all know that, so we built that into our guide for this year. One of the things that Tom has asked myself and others as he has been here is to do another hard look at all of our centers and revalidate that all of our centers are the ones that are going to take us through 2026 and into 2027 as we get all the FTEs back across this fleet. We are frankly in the middle of taking a hard look at all of our centers. The things you are talking about are the ones that are important—demographics, occupancy, engagement, and their trends. We are taking a hard look at that now so that we can look ourselves in the mirror and ensure we have the right centers going forward, and that is likely going to be a higher number than 15 to 20. We are just not at the point now where we can give you that number because we do not have it yet, but we are working through it. Tom Wyatt: I will just add one comment. I am an ex-retailer, and you know that when you have a multisite business, you are always evaluating all your centers. You are building some, you are closing some, and you are redecorating some others. All of that is what we do. I came back with a heightened awareness of that and wanted to be sure that we were as current as we could be, given the enrollment trends of the last year to year and a half, and just be sure that we were where we needed to be. Ronan Kennedy: Thank you very much. Appreciate it. Operator: Our next question is from Toni Kaplan from Morgan Stanley. Your line is open. Toni Kaplan: Thanks so much. I was hoping that you could delve a little bit more into the enrollment issues. It has been asked in a couple of different ways, but how much of it do you think is market-driven versus self-inflicted? What could drive the enrollment better or worse than the down three in the guide? And the specific things that you are doing to try to stem the decline here? I know you talked about personnel and paid search and incentive comp changes, but any very specific things that you are doing to try to drive enrollment and what you see as the real core issues on the enrollment side? Tom Wyatt: Happy to, Toni. I will start with something we have not yet. We have had solid success in our Opportunity Region in 2025, and I can tell you that 2026 is still performing above where it was before, and we are very excited about that. We have taken many of the best practices out of the Opportunity Region, and we have implemented those in all of our centers for 2026. Other than that, there are macro situations—inflation, the economy in general, the instability of our country right now, even the work environment. People are still figuring that out. All of those have been noise in the aspects of enrollment. But for us, enrollment has been self-inflicted for the most part—not totally, but for the most part. When I look at the amount of activities going on in the center that do not pertain to enrollment, it has been significant. I believe that when we get our centers and our center directors back to focusing on introducing KinderCare Learning Companies, Inc. to more families, being a part of the community in a bigger way, and doing the things they need to do to create interest and enthusiasm, we will do much better. On top of that, please do not take anything away from the paid search. We have spent millions of dollars there that we have not spent in the past, and it is showing increases in the number of inquiries we get—not only the number, but also the quality of inquiries. They are coming to us, and in real time being spoken to. I mentioned earlier about the distractions. If someone inquires to KinderCare Learning Companies, Inc., they are likely looking at other centers too. If we do not get back to them quickly, they may make a decision based on somebody else’s proactivity. Our centers today now have the time and the focus to go after those inquiries as quickly as possible. Getting Michael back into that—he is an operations guru—and having him at the centers ensuring focus on these things, reliving what he accomplished in years past, I believe will make it all come together. The fact that we started the year communicating that growth is priority one, including the change in our compensation program for the whole company, are the right signals to send, and I hope they will bear fruit. Toni Kaplan: Great. And thank you for the update on the quintiles chart. I noticed that the top four quintiles deteriorated a little bit year over year, and the fifth got better. When you think about those top four, are you concerned that those are going down? What is the right level there? And when you think about the quintiles, are there different problems in the first quintile versus the third, or would you generally put quintiles one to four in the same bucket, suffering from the same trends? Tom Wyatt: I would say the top quintile is our highest-quality centers. They have the most stability, the highest family engagement, and the highest employee engagement, and it goes down from there. Each has individual challenges, but for the most part, the reason those higher-quintile centers were down goes back to the distraction of the center director, in my opinion. They did not have the opportunity to do what they needed to do, and they were highly occupied to begin with. The opportunity to take the Opportunity Region’s best practices to those other quintiles will help them. That, along with paid search and clearing the decks for the center directors to be center directors, is going to help those grow. I am not at all concerned about those quintiles going forward. We have poured the marketing toward them, and that is where we are going to go. Toni Kaplan: Thank you. Operator: Our next question is from BMO Capital Markets. Your line is open. Ryan (for Jeff Silber): Hey. Good afternoon. This is Ryan on for Jeff. Just on the pricing algorithm, I understand the age-up methodology. It looks like you were around 2% for 2025. From the conversations with parents, what is the appetite for the 3% price increase you are layering in this year? Thank you. Tony Amandi: Of course. As a reminder, the tuition that we talk about as a company is the mix of approximately two-thirds private pay and one-third subsidy families. Our rate was actually higher than 3% last year on the private pay side, and what pulled us down was some of those states—Indiana being the big one, but a few others too—in the back half of the year where we saw additional displacement from those private pay rates with what we are getting from subsidies. So far, we are nine weeks into the year, and it has been really quiet as far as our new rates. We feel good about that. As a reminder, when we put those new rates in in January, they are for new students and age-ups, so it is not really as much of a price increase conversation. Virtually all of those families that age up are still going to be paying less than they did the prior week, even with the embedded price. The way we do that helps with those conversations and helps the families feel solid about it, and we are making sure we are living up to the value we need to give those families. Even with those price increases, they are not feeling them. We need to be able to speak to the value they are getting from us. Tom Wyatt: I appreciate it. Ryan (for Jeff Silber): And then you talked about some early wins on the selective marketing fund. How are you measuring that, and when do you expect to see some of those results come to fruition that will feed into the P&L? Tom Wyatt: The great thing about paid search—and I am sure you know this—is that you can track it all the way from inquiry to tour to actual enrollment, and we are doing every bit of that. Quite frankly, with AI, the amount of data we are gathering and capturing is phenomenal. What I was speaking to earlier was year-over-year growth in inquiries. If we have more people inquiring for KinderCare Learning Companies, Inc., and we are giving our center directors more time to generate a tour and the opportunity and conversation around enrollment, we will win. That is the approach we are taking. It starts with getting traction in the number of inquiries year over year, and that has shown up. It has shown up significantly for our smaller brands, and it has shown up in an increase in KinderCare Learning Companies, Inc. as well. That is encouraging to me. We are less than 2% share of the market in this business. If we are aggressive and increase inquiries and give center directors the opportunity to do their job, the opportunity for us to grow enrollment is there. Now it is all about execution. That is the approach we are taking. Operator: Our next question is from Josh Chan from UBS. Your line is open. Josh Chan: Hi, good afternoon. Thanks for taking my questions. Hey, Tom, if somebody asks you whether growing enrollment is tougher now than it was ten years ago, how would you agree or disagree with that? Tom Wyatt: Let me explain why I am going to say what I am going to say. Enrollment, after a family decides that they are proud of the brand, inquires about potential openings in their child’s age group, and then shows up for a tour—the actual opportunity to enroll them has not changed. We are one of the very few companies that actually show them how much KinderCare Learning Companies, Inc. costs for their child in the classroom in their community. So they come to our center knowing that. Quite frankly, this industry does not do that as a practice. We felt we should be transparent so we do not waste someone’s time. If they can afford KinderCare Learning Companies, Inc. and they want to see the actual experiences a child has in the center, please come. By doing that, we have seen better enrollment as a percent of total inquiries and tours than we saw prior to that. It is not a problem. If a family is in need and has chosen the number-one brand in the country, KinderCare Learning Companies, Inc., and then comes in to take a tour and be with our center director and spend some time in the classroom, we are pretty confident we can win that tour. Josh Chan: That makes a lot of sense. Thank you for that color. And then a financial question. If you take out the fifty-third week in 2025, then your guidance assumes slight revenue growth in 2026 but then a $60 million-plus EBITDA drop. Does that contrast surprise you? I know there is enrollment and deleverage and things like that, but that just seems like a very large contrast between the top and the bottom line. Is there a way to conceptualize that? Tony Amandi: A little bit to what I think George asked as well. The biggest driver there truly is the deleveraging you see as enrollments go down. Your basic fixed costs—rent, center directors, and some other fixed costs—you are getting no leverage off of that at all. It is harder as you drop down, especially into the sixties where we are at on average across the fleet, to make up teacher hours. You are not making up many teacher hours by dropping enrollment, and that is really falling off. That is the biggest impact. We are high single-digit millions of grant loss—around $7 million to $9 million, actually closer to $10 million—year over year, with most of that being in the first half, based on our expectations of what states are going to do to grants, which normalizes 2026 back to where it was pre-COVID, in our expectation. The other factor is increased marketing as well. That should pay off for us over time and even in 2026, but at this point we are factoring that in as more weighted towards cost than the upside we will see from it. Tom Wyatt: Okay. Josh Chan: Appreciate the color, Tony, and thank you both for the time. Operator: Are there any questions at this time? Tom Wyatt: Chloe, thank you. And everyone, thank you for your time today. We look forward to talking to you again very, very soon. Thank you so much. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and thank you for attending Hallador Energy Company's fourth quarter and full-year 2025 earnings conference call. At this time, participants are in a listen-only mode. Instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the conference over to Sean Mansouri, the company's Investor Relations Advisor for Elevate IR. Please go ahead, Sean. Sean Mansouri: Thank you, and good afternoon, everyone. We appreciate you joining us to discuss our fourth quarter and full-year 2025 results. With me today are President and CEO, Brent Bilsland, and CFO, Todd Telesz. This afternoon, we released our fourth quarter and full-year 2025 financial and operating results in a press release that is now on the Hallador Energy Company Investor Relations website. Today, we will discuss those results as well as our perspective on current market conditions and our outlook. Following prepared remarks, we will open the call to answer your questions. Before we begin, a reminder that some of our remarks today may include forward-looking statements subject to a variety of risks, uncertainties, and assumptions contained in our filings from time to time with the SEC and are also reflected in today's press release. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected. In providing these remarks, Hallador Energy Company has no obligation to publicly update or revise any forward-looking statements whether as a result of new information. Brent Bilsland: Everyone, for joining us this afternoon. Hallador Energy Company delivered strong financial performance in 2025, as we continued advancing our transformation into a vertically integrated independent power producer. For the full year, total revenue increased 16% year over year to $469,500,000. Net income improved materially to $41,900,000. Adjusted EBITDA increased approximately threefold to $56,000,000. And operating cash flow increased 23% to $81,100,000. These results reflect both improving power market conditions and the operating leverage embedded in our business model. Electric sales were the primary driver of revenue growth during the year, increasing approximately 19% to $310,700,000 compared to 2024. Coal sales also increased 8% year over year to $148,700,000 as Sunrise Coal continued to support both internal fuel needs at Merum and third-party customers. Together, these segments highlight the advantages of our integrated platform where our coal operations provide a secure, price-certain fuel supply for our generation assets while also allowing us to participate opportunistically in third-party coal markets. Operationally, our Merum power plant performed well through most of the year. In the fourth quarter, however, we experienced operational challenges which continued into Q1 and reduced availability of the units. Due to this availability issue, we now expect consolidated 2026 results to be similar to 2025. Maintaining high levels of reliability remains a top priority for our team, particularly as MISO increasingly depends on dispatchable resources during periods of peak demand, which is highest in the summer. As such, the generating units in question will receive a major maintenance outage beginning in May, which once complete, should significantly improve performance. Sunrise Coal also delivered consistent performance throughout the year. Production optimization initiatives and disciplined cost management helped improve the operating performance across the mining complex. As part of our vertically integrated platform, Sunrise Coal provides a reliable fuel foundation for our generation assets while helping optimize our overall cost structure. Across the broader marketing environment, we continue to see strong demand for reliable dispatchable generation across the MISO region. Electricity demand growth combined with the prior retirement of dispatchable assets is tightening supply conditions across the system, increasing the value of accredited capacity as utilities and load-serving entities attempt to secure reliable resources throughout the Midwest. Against that backdrop, we have made progress towards selling energy and capacity at elevated prices. We have also recently received additional competitive offers to acquire our accredited capacity for over a decade in length. We are excited by what we are seeing in the market. The company is in a strong, long accredited capacity position, which appears to be getting better with time. We hope to make more announcements on this topic very soon. These robust market conditions led us to file an application in MISO's expedited resource adequacy study, or ERAs, program. During the month of December, we were awarded one of the coveted 50 ERA slots. In conjunction with our application's acceptance, we funded approximately $14,000,000 of required refundable deposits to support the potential addition of up to 515 megawatts of natural gas generation. The ERAs program was designed to accelerate the development of new generation resources that can help address reliability needs across the MISO system. Currently, we expect MISO to complete the study of our application in the third quarter of this year. Additionally, we are in negotiations with multiple counterparties for equipment for the project. As the project develops, we plan to share more details around the cost and potential economics of the project. If successful in our development plans, we would target the plant coming online around 2029. This expansion will significantly increase our accredited generating capacity at the company, leveraging infrastructure that is already in place at our Merum site. Compared with greenfield developments, the Merum interconnection offers both speed-to-market and certain cost advantages. Turning briefly to capital allocation, we maintained a disciplined approach throughout 2025. Capital expenditures were focused primarily on planned maintenance at the Miriam facility, and operational improvements across our mining operations, along with early-stage work supporting potential generation expansion at the Merum site under the ERAs program. We currently expect capital expenditures in 2026 to increase modestly compared to 2025 levels, excluding potential ARRIS development. Looking ahead, we will continue to focus on operational reliability at Merrell, executing efficiently across our coal operations, and advancing the strategic initiatives that we believe can drive long-term growth for Hallador Energy Company. At the same time, we remain disciplined in how we approach new opportunities and will continue to focus on projects and commercial arrangements that we believe will most meaningfully enhance shareholder value for the long term. Before handing it over to Todd, I would like to briefly highlight two recent additions to our board that strengthen our leadership during the next phase of Hallador Energy Company's growth. In January, we welcomed Barbara Sugg to our board of directors following the retirement of longtime director David Hardy, whose more than three decades of service and support to Hallador Energy Company we sincerely appreciate. Barbara previously served as President and CEO of Southwest Power Pool, where she led regional reliability and wholesale market operations across a 14-state footprint. Her industry leadership across grid operations, transmission development, and resource integration will be valuable as we continue positioning our Meron facility to support growing demand for reliable capacity. Further, last week, we appointed Daniel to the board, expanding the board to seven members. Daniel brings deep expertise in natural gas generation, capital markets, and power asset transactions, having led or advised on more than $35,000,000,000 in strategic energy investments. As we pursue opportunities to expand generation at Merum, and evaluate additional assets that can scale our power platform, we believe Daniel's background in gas-fired power development and energy infrastructure optimization will provide meaningful strategic guidance for our team. With that, I will now pass the call over to our Chief Financial Officer, Todd Telesz, to take you through our financial results. Todd Telesz: Great. Thank you, Brent, and good afternoon, everyone. I will add my thanks for joining us today. Jumping right into our fourth quarter results, electric sales for the fourth quarter increased 3% to $71,600,000 compared to $69,700,000 in the prior-year period, while coal sales increased 24% to $29,100,000 for the fourth quarter compared to $23,400,000 in the prior-year period. Electric sales in the fourth quarter reflect a continued electricity demand across the MISO market and stable realized pricing, partially offset by lower generation during the period due to the previously mentioned operational challenges, unit availability impacts in Q4 2025 and Q1 2026. While the unit outages reduced dispatch for part of the fourth quarter, the plant continued to operate and serve market demand as conditions allowed. The increase in coal sales during the fourth quarter was driven primarily by higher third-party shipments to customers, reflecting continued production optimization at Sunrise Coal and our ability to supply both internal fuel requirements at Merame external market demand. On a consolidated basis, total operating revenue increased 8% to $102,400,000 for the fourth quarter compared to $94,700,000 in the prior-year period. Net loss for the fourth quarter was $200,000 compared to a net loss of $215,800,000 in the prior-year period. It is worth noting that the year-ago period loss includes an approximate $215,000,000 non-cash write-down associated with the value of our mining operations. Operating cash flow for the fourth quarter was $8,100,000 compared to $32,500,000 in the prior-year period, with the decrease primarily reflecting the cash receipt from a large prepaid energy forward sales contract that was received in Q4 2024. Adjusted EBITDA, a non-GAAP measure, is reconciled in our earnings press release issued earlier today, increased 35% to $8,400,000 for the fourth quarter compared to $6,200,000 in the prior-year period. We invested $24,900,000 in capital expenditures during 2025, compared to $13,800,000 in the year-ago period, bringing our full-year 2025 CapEx to a total of $69,200,000. This includes the approximately $14,000,000 of refundable deposits made in support of the Era's gas generation project. As Brent mentioned earlier, we expect our 2026 capital expenditures to modestly increase compared to 2025, excluding any impacts of the ARRIS project. As of 12/31/2025, our forward energy and capacity sales position was $540,000,000 compared to $571,700,000 at the end of Q3 and $685,700,000 at 12/31/2024. When combined with our third-party forward coal sales of 3 and $23,500,000 as well as intercompany sales to Merum, our total forward sales book as of 12/31/2025 was approximately $1,300,000,000. Now turning to the balance sheet. We had several material updates. In 2025, we completed a $25,000,000 prepaid energy forward sales contract with a longstanding counterparty and raised approximately $14,000,000 through our ATM, the issuance of just over 697,000 shares. In January 2026, we further strengthened our capital position through a public offering of approximately 3,200,000 shares of common stock priced at approximately $18 per share, generating roughly $57,500,000 of gross proceeds. These proceeds are expected to support general corporate purposes including potential deposits required for preserving key equipment necessary for our proposed natural gas generation expansion at Merrell. Additionally, late last week, we closed on a new credit facility led by Texas Capital Bank, who is a new relationship for us, and Old National Bank and First Financial Bank have been longstanding financial partners of Hallador Energy Company. The $120,000,000 three-year senior secured credit facilities include a $75,000,000 revolving credit facility and a $45,000,000 delayed draw term loan. The credit facilities also include a $25,000,000 accordion feature. Overall, our results reflect continued progress across the business as we strengthen our financial profile while investing in the long-term growth opportunities Brent discussed earlier. With a solidified liquidity position, a meaningful forward sales book, and a disciplined capital allocation approach, we believe Hallador Energy Company remains well positioned to support the continued development of our power platform and the strategic initiatives underway at Merrell. With that, operator, we can now open the line for questions. Operator: Thank you so much. And as a reminder, if you do have a question, simply press 11 to get in the queue and wait for your name to be announced. To remove yourself, press 11 again. One moment for our first question. It comes from the line of Jeffrey Scott Grampp with Northland Capital Markets. Please proceed. Jeffrey Scott Grampp: Afternoon, guys. Thanks for the time. With respect to, maybe this longer-term PPA opportunity, Brent, what are the main gating items to getting a deal done at this point? I know you can only say so much, but are we in the phase where we are deciding what the best offer is for the company? Is it negotiating a final pro final parties, or what is dictating timing at this point? Brent Bilsland: Look. I do not think it is going to be just one party. We have exchanged draft contracts with multiple parties. What is encouraging for us is we continue to see pricing pressure move things higher. Quite frankly, the interest level that we are seeing has dramatically increased in the last four weeks. Multiple utilities, multiple industrial users. We kind of view it as we are playing a game of musical chairs, and we own the last seat. We just keep seeing more and more people enter into the room. I know everybody is in a hurry to get something done, including me. At the same breath, this keeps getting better. We are really encouraged by what we are seeing and the level of competition that we are able to engage the counterparties in. We think we are getting much closer and are certainly encouraged by what we are seeing. I hope that excitement resonates. Jeffrey Scott Grampp: That is super helpful. I appreciate it. That is good to hear. My follow-up, I wanted to get a bit more details on the issues at Marim that you talked about. Shed a little more light on what these operational issues are, and should we be expecting this to impact performance until this planned outage in May? It sounded like there was going to be a more significant turnaround at that point to maybe address some of these issues. Thanks. Brent Bilsland: We had some equipment failures in Q4, failures in Q1, that took the plant off at different times for weeks at a time. Unfortunately, particularly in January it was during some of the better-priced weeks, so we hate to see that. The plant is running now. It has a few limitations, so it is not running at 100%, but it is running. Then we are going to roll right into an outage. This was a planned outage. It was what we call a major, so half the plant will be down for sixty days. We do that every year. There is a lot on the list for this particular unit that is going to get replaced and upgraded, and a whole lot of new parts are going on. We think that will help the reliability of the plant, and just in time for the summer season, which I would point out is the peaking season in MISO now. Summer peaks are higher than winter. Jeffrey Scott Grampp: Understood. That is really helpful details. I will turn it back. Thank you for the time. Operator: Thank you. Our next question comes from the line of Matthew Key with Texas Capital. Please proceed. Matthew Key: Hey. Good afternoon, everyone, and thanks for taking my questions. I wanted to talk about the target date of completion for the nat gas expansion. What are the big determining factors that dictate hitting or missing that target date? Does this come down to getting the long lead-time equipment in time, or are there more complications than that? Brent Bilsland: Right now, we are negotiating with multiple counterparties on whether we can secure the equipment in the right time frame, which we are finding equipment that the timing does work, and can we get that equipment at a price point that makes the project economic. At the same breath, we have limited PPAs to support the project. We are obviously in the market attempting to sign long-term PPAs. We like where that pricing has gone. You just have to line all that up. There are other players out there who are opposite of us. They have equipment and no place to go with it. We are also talking to those counterparties to say, does it make sense you bring your equipment, we will bring the interconnect, PPAs, water rights, gas rights, all of that. The thing that we are excited about is we feel that our site, our interconnect, has a speed-to-market advantage because of the EARS program, and because of the EARS program, it has a significant cost advantage over some of the other projects that we are hearing. We are hearing other projects that have to have $300,000,000 of system upgrade cost, and we just do not think our project is going to experience that. We think there is a significant advantage there. That said, the downside to the ARRIS program is it is a very quick process, and so you have to get all the elements of the deal lined up. We are working on that. Matthew Key: Mhmm. Got it. That is helpful. A quick macro one for me. It made recent news that the EPA announced the decision to ease some of the mass requirements for power plants. Could you help me quantify the impact that those changes would have on your business, if any? Or maybe the industry more broadly? Brent Bilsland: A lot of plants, including ours, are already mass compliant. That being said, there are still some ongoing costs associated with that, reporting requirements and so on. I think the Trump administration in general is trying to unwind a lot of these environmental rules one at a time. They are making their way down through the list. What is the impact of that? Overall, it makes operating a plant easier. What are the economic impacts of that? I think it probably has more to do with longevity and less to do with whether we are going to see our costs materially drop in the next quarter. Matthew Key: Got it. That is helpful. Really appreciate the time, and best of luck. Operator: Our next question comes from the line of Nicholas Giles with B. Riley Securities. Please proceed. Nicholas Giles: Great. Thank you, operator. Good afternoon, guys. My first question, I think you have previously talked about the majority of capacity being taken down in any long-term deal, but you mentioned, Brent, that economics are only getting better. Given that you are talking to multiple parties, is there a scenario where you might announce the long-term PPAs in several tranches, or should we still be expecting one kind of grand slam? Brent Bilsland: I think you will see announcements in several tranches. That is our thinking today. Certainly, we could see a customer step up and take a bigger block, but today that is where our head is at—that you will see multiple bites at the apple. Nicholas Giles: Got it. Very helpful. In terms of pricing, you said upward pressure. In the past, you have used the forward curve as an anchor and noted that pricing could come in above that. Any rough guardrails that you could point us to from a price perspective? Should we be still thinking of something above the forward curve? And if so, where do you see the forward curve today? Brent Bilsland: The forward curve is typically energy. Where we are really seeing the price improvement is for accredited capacity, and that is the revenue stream that is going, in our opinion, dramatically higher. That really is the pinch point in the industry. The reason for that is you can get energy from renewables. It is challenging to get accredited capacity from renewables. Solar panels are only rated 5% of nameplate. Windmills are only rated at 15% of nameplate, whereas coal, gas, and nukes are all rated 75% to 90% of nameplate, typically what accreditation they are awarded. What has changed: the MISO auction is roughly two weeks from today. It is going to be on the 26th. Some of the pricing outlooks that we are seeing in that are dramatically higher. We will see what that auction brings. We think that we will probably have some sales that might happen before then as well. As we get those deals across the finish line and inked, we will report it. You will get a good look at what that price is. Got it. Also, I want to correct something. I had submitted this incorrectly. Our unit is going to go on outage for sixty days, not six months, like I said. I just wanted to correct my statement. Nicholas Giles: Maybe just one more if I could. I think you mentioned that CapEx could be modestly higher excluding ARRIS developments. I just wanted to clarify. Are you saying that CapEx will be modestly above the $70,000,000 level, which included the $14,000,000, or should we exclude the $14,000,000 and start at a base of $55,000,000? I think you see what I am getting at. I am just trying to make sure it is apples to apples here. Todd Telesz: Yes, Nick. It is Todd. How are you today? I think we are looking at modestly higher than what we incurred in 2025, driven by some CapEx that was pushed out of 2025 into 2026, as well as continued investment in the ELG project. Those are probably the key drivers, and those obviously would not be excluding any incremental investments in the ARRIS project. Nicholas Giles: Got it. And what would those—last quarter the emphasis was really around the application, and now that has been accepted, deposit has been paid—what are the next developments that we should be looking out for in the context of Eris? Brent Bilsland: MISO will pick up our application and begin reviewing that soon. They have not done that just yet. Once they pick it up, I believe they will do a public notification saying that they have picked that up, and then they have ninety days to complete that study. At the end of that study, they come to us and say, this is what we think it is going to cost. We then have a certain period of time to negotiate a couple items on that list. Ultimately, it comes down to whether you are signing a generator interconnect agreement with MISO and committing to your project—we think that happens sometime later in Q3—or are you saying, no, I am going to pass because the project, we are just not going to go forward with the project. Then your options: we would probably step into the traditional queue at that point going forward. Those are the options on the table and what we think that timing looks like. Nicholas Giles: Got it. Okay. Well, Brent and Todd, I really appreciate all the detail, and best of luck. Brent Bilsland: Thank you, Nick. Operator: Thank you. And we have a question from the line of Jacob G. Sekelsky with Alliance Global Partners. Please proceed. Jacob G. Sekelsky: Hey, Brent and Todd. Thanks for taking the questions. Brent Bilsland: Good to see you, Todd Jake. Jacob G. Sekelsky: With the gas expansion coming into focus, I am wondering how you are thinking about Sunrise Coal and that operation’s position in the broader portfolio going forward. Brent Bilsland: Sunrise results have been good. They got their cost structure down last year. It performed really well. So far so good this year as well. We are happy with the Sunrise Coal division. We are looking to contract a meaningful amount of output at the Merum power plant in the near future, and that is going to require fuel. I do not see any material changes at Sunrise in the near future. We still plan to take coal at the plant. The gas plant—if you look at Merum, why is it such a good site for an expansion? Merum was originally designed to be three 500-megawatt coal-fired units, but they only built two. A lot of the power infrastructure that is necessary already exists at the site. The line takeaway capacity from that substation is like 1.2 to 1.6 gigawatts. We are only using a thousand, or one gigawatt. All we are really proposing to do is, instead of building a third coal-fired unit, the third unit will be gas units. Right now, we are proposing CTs. That is what it is in a nutshell: there is space on the line. We have property control. We have the easements in place for the gas pipeline. It is only five miles away. We have water rights. There is good gas availability, we are told, at that location. We think we have one of the better sites in the country to do such a development. That said, we still have to line up equipment, more PPAs, and such to make that project viable. That is something we negotiate every day to see if we can make all those numbers line up. Jacob G. Sekelsky: Got it. That is helpful. Building off that a bit, if I may. Are you still evaluating things on the M&A front, or do you feel your plate is full with the ARRIS project coming into focus over the next few quarters? Brent Bilsland: We always look at things. We have bid on an asset here recently. I do not think we are going to be selected for that asset. We are active. We will have to take the opportunities as they come. Jacob G. Sekelsky: That is helpful. That is all for me. Thanks again, guys. Brent Bilsland: Thank you. Thank you. This concludes our Q&A session. Operator: I will pass it back to Brent Bilsland for closing comments. Brent Bilsland: I just want to thank everybody for their continued interest in Hallador Energy Company, and stay tuned. I think, hopefully, we have exciting things to announce in the future. Thank you again. Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
Operator: Greetings, and welcome to the Vaxart, Inc. Fourth Quarter Business Update and Year End 2025 Financial Results Conference Call. A question and answer session will follow management's opening remarks. As a reminder, this conference is being recorded. I would now like to turn the webcast over to your host, Ed Berg, Senior Vice President and General Counsel. Thank you. You may begin. Good afternoon, and welcome to today's call. Ed Berg: Joining us from Vaxart, Inc. are Steven Lo, Chief Executive Officer; Dr. Sean N. Tucker, Founder and Chief Scientific Officer; Dr. James F. Cummings, Chief Medical Officer; and Jeroen Grasman, Chief Financial Officer. Before we begin, I would like to remind everyone that during this conference call, Vaxart, Inc. may make forward-looking statements, including statements about the company's financial results, financial guidance, its future business strategies and operations, and its product development and regulatory progress, including statements about its ongoing or planned clinical trials. Actual results could materially differ from those discussed in these forward-looking statements due to a number of important factors, including uncertainty inherent in the clinical development and regulatory process and other risks described in the Risk Factors section of Vaxart, Inc.'s most recently filed Annual Report on Form 10-K and other periodic reports filed with the SEC. Vaxart, Inc. undertakes no obligation to update any forward-looking statements after the date of this call. I will now turn the call over to Steven Lo. Steven? Steven Lo: Thanks, Ed, and thanks to all of you for joining us this afternoon. I will begin today's call with several business updates and will then pass the call to James and Sean for the latest program developments. Jeroen will then share an update of our fourth quarter and full year 2025 financial results, and I have a few closing comments before we open the call for your questions. Now moving to our recent operational updates, Vaxart, Inc. achieved several recent key milestones. First, we established a partnership with Dynavax for our oral COVID-19 vaccine candidate. Second, we expanded our clinical body of evidence by publishing the complete data set from the clinical study of our oral norovirus vaccine candidate in lactating mothers. And third, we continue to manage our costs, as evidenced by our entering into a lease termination agreement that will provide significant cost savings by allowing us to terminate one of our leases early. As announced in November 2025, we established a partnership with Dynavax for our oral COVID-19 vaccine candidate. At the time of the announcement, we received a $25,000,000 upfront payment and a $5,000,000 equity investment, which was at a premium to the closing price. This partnership provides significant validation of our oral vaccine platform's potential coming from a company with a proven track record in developing and commercializing innovative vaccines. It also extends our cash runway. In late December 2025, Sanofi announced its acquisition of Dynavax, a transaction that officially closed on February 10. Sanofi is a global leader in the vaccine space, and we are pleased to be moving forward with Dynavax as a Sanofi company. Over the past three months, we have established a highly productive working relationship with our collaborators, and our focus remains on executing and completing the Phase 2b trial and delivering those results. Under the terms of our agreement, we will receive an additional $50,000,000 if Dynavax elects to continue development following submission of the Phase 2b data to the FDA. We also remain eligible for up to $195,000,000 in future regulatory milestones, $425,000,000 in sales milestones, and tiered royalties in the low to mid-teens. This agreement represents a total potential value of up to $700,000,000 in license, regulatory and milestone fees, tiered royalties, and the equity investment. Previously, we discussed our commitment to managing our financial resources for maximum effect. This includes pursuing revenue-generating business development agreements, such as our partnership with Dynavax. It also includes looking for ways to reduce our operating costs without compromising our ability to realize the potential value of our pipeline programs and platform technology. Toward this end, in December 2025, we entered into a lease termination agreement with one of our landlords, which will allow us to terminate one of our leases on 05/15/2026 rather than 03/31/2029. This accelerated termination will help to reduce our operating expenses and enhance our ability to focus our financial resources on advancing our lead programs. I will now turn the call over to Dr. James F. Cummings for an update on the status of our clinical programs. James? James F. Cummings: Thanks, Steven. Thanks to everyone for joining today's call. As a reminder, we are currently conducting a Phase 2b trial of our oral COVID-19 vaccine candidate compared with an mRNA vaccine. The primary endpoint of this study is the relative efficacy of our oral pill vaccine compared with the mRNA vaccine for 12 months post-vaccination. The trial will measure efficacy for symptomatic and asymptomatic disease, systemic and mucosal immune induction, and adverse events in each cohort. Most of you are aware that this trial initially was designed to enroll 400 subjects in a sentinel cohort, designed to assess safety of our oral COVID-19 vaccine candidate, and 10,000 subjects in the KP2 cohort, with half receiving our oral candidate and half receiving an injected mRNA vaccine. We announced in October 2025 that BARDA amended the work order for this trial and is now providing funding for follow-up for the approximately 5,400 subjects enrolled in the trial prior to a stop-work order issued on behalf of BARDA in August 2025. This comprises 400 subjects in the sentinel cohort and approximately 5,000 subjects in the KP2 cohort enrolled in this trial. As COVID-19 continues to impact global health, the need for next-generation solutions remains clear. We expect to report 12-month top-line data from the 400-participant sentinel cohort early in 2026. The actual timing will be determined in collaboration with BARDA. As previously shared, we are contractually required to consult with and receive approval from BARDA regarding the timing and content of all press releases related to this trial. When announced, we expect to include data related to the primary safety endpoints in the sentinel cohort, as well as initial data on efficacy measures. It is important to remember that the 400-person sentinel cohort was established specifically to assess safety and not designed to determine efficacy. The data from the 5,000-subject KP2 cohort will provide efficacy insights, and we expect to report them late in 2026. Here again, the actual timing will be determined in collaboration with BARDA. As I have commented before, we believe the results of this trial will provide important insights into the potential of our COVID-19 candidate as well as our oral pill vaccine platform technology. The former is critical to advancing development of the COVID-19 candidate, while the latter is expected to inform development of our other pipeline assets. Our oral norovirus vaccine candidate is one of those assets. As Steven mentioned at the start of the call, we published a complete data set from the clinical study of our oral norovirus vaccine candidate in lactating mothers in January 2026 in NPJ Vaccines. The Phase 1 multi-center, randomized, double-blind, placebo-controlled, single-dose, dose-ranging study was designed to evaluate the safety, tolerability, and immunogenicity of an orally administered bivalent G11/G24 norovirus vaccine in healthy lactating women. The primary outcomes of the study were safety and reactogenicity, and breast milk and serum norovirus-specific IgA. I will briefly review the information that was provided in our 01/15/2026 press release announcing date of publication. The study enrolled 76 women 18 to 43 years of age at five sites in South Africa. Participants were randomized into high- or medium-dose vaccine or placebo. The data demonstrate that the vaccine was safe and well tolerated, and reports of mild or moderate adverse events, or AEs, were similar between the placebo group and each of the vaccine groups, and no AEs beyond grade 2 were reported. Results for serum and breast milk IgA at day 29 post-vaccination showed that serum norovirus-specific IgA rose an average of 5.6-fold in response to G11 and 4.7-fold in response to G24 in the high-dose group. Breast milk norovirus-specific IgA rose on average 4-fold in response to G11 and 6-fold in response to G24 in the high-dose group, and each of these breast milk increases was statistically significant and maintained through day 180. The passive transfer of IgA to infants was exploratory but a highly compelling outcome. The data show a consistent trend of increased G11- and G24-specific IgA in the stool from the paired infants of vaccinated women at days 29 and 60, and demonstrate a positive association between levels of IgA in maternal breast milk and infant stool, supporting the hypothesis of passive transfer of mucosal immunity. This observed transfer of antibodies suggests that the oral norovirus vaccination could enable a novel approach to confer mucosal anti-virus immunity to infants who are highly vulnerable to norovirus infection. Children under the age of five years can experience severe disease from norovirus infection, particularly in under-resourced areas. The potential to protect infants from severe norovirus-associated disease through oral vaccination of their mothers could have important public health benefits, with respect both to reducing individual morbidity and mortality as well as limiting spread of a highly contagious virus. The results of this study add to the growing body of evidence supporting the potential of our oral norovirus vaccine candidate in addressing a significant unmet public health need as currently there is no approved vaccine for norovirus. I will also remind you of an additional piece of evidence from our norovirus program that we reported in June 2025, which was the result of a Phase 1 trial to compare our second-generation vaccine constructs against the original first-generation oral vaccine to see if the new formula induced stronger immunity. As reported, the study showed that the second-generation constructs produced significantly higher antibody responses, a 141% increase for one strain and a 94% increase for the other, compared to the first-generation vaccines. These data help to advance not only our norovirus program but our oral pill vaccine platform more broadly. The technology underlying our second-generation norovirus constructs has also been incorporated into the other programs in our pipeline, and based on the results of the head-to-head study, we believe that this will increase the immunogenicity of our COVID-19, seasonal and pandemic flu, and HPV vaccine candidates. I will turn the call over to Dr. Sean N. Tucker for an update on our norovirus program, including some of our preclinical research activities. Sean? Sean N. Tucker: Thank you, James. We are building a robust body of evidence supporting the potential of our oral norovirus vaccine program, and adding to that body of data is a key part of our strategy for advancing our business development efforts around this promising asset. As we have previously discussed, we are positioned to initiate the next clinical trial of our second-generation norovirus vaccine constructs in 2026, pending a partnership or other funding. As part of our evidence generation strategy, we have been exploring how the G24 construct cross-reacts with and protects against the G217 strain of norovirus in preclinical studies. G24 typically is the predominant strain underlying the majority of norovirus infection, but there was a significant G217 outbreak in late 2024 and continuing into 2025. We have previously shown robust cross-reactivity of our COVID-19 vaccine candidates with multiple SARS-CoV-2 variants, and these preclinical studies are intended to provide insight into the potential utility of our norovirus constructs against additional norovirus strains such as G217. The ability to demonstrate this type of cross-reactivity could potentially increase utility, and consequently the value, of our norovirus vaccine program by enabling the use of our current constructs to protect against a broader spectrum of norovirus strains. We look forward to sharing the results of these studies with you later in 2026 and, if positive, we will also include them in the data package that underlies our partnership discussions around this potentially first-in-class vaccine. I will now hand the call over to Jeroen Grasman for a brief discussion of our financials. Jeroen? Jeroen Grasman: Thank you, Sean. The details of our fourth quarter and full year 2025 financial results are summarized in today's press release. Revenue for the full year 2025 was $237,300,000 compared to $28,700,000 for the full year 2024. Revenue in the full year 2025 and full year 2024 were primarily from government contracts related to the BARDA contracts awarded in June 2024, with 2025 also including revenue recognized from the Dynavax license and collaboration agreement signed in November 2025. Vaxart, Inc. ended the fourth quarter with cash, cash equivalents, and investments of $63,800,000. Based on current plans, Vaxart, Inc. expects cash runway into 2027. Vaxart, Inc. will continue to remain aggressive in seeking strategic partnerships, pursuing other non-dilutive funding options, and managing our expenses prudently in order to extend our cash runway. I will now turn the call back to Steven for closing remarks. Steven Lo: Thank you, Jeroen. And thanks again to all of you for joining us today. We remain very optimistic about the potential of our COVID-19 and norovirus oral vaccine programs to provide important public health benefits while creating value for our shareholders. Our priorities for 2026 are to execute on the data collection and analysis for the COVID-19 clinical trial and to secure a partnership or other funding that will support advancement of our norovirus program. We look forward to sharing top-line results from the 400-subject sentinel cohort of the COVID-19 trial early in 2026, and data from the 5,000-subject KP2 cohort in 2026. As we focus our business development efforts on the norovirus program, we also are continuing to explore potential licensing or partnership opportunities for our earlier-stage assets, including our seasonal and pandemic flu candidates and our HPV program. We believe that our oral pill vaccine platform has potential as a disruptive technology that could address public health challenges and emerging personal preferences regarding vaccination. We are committed to realizing the value of this platform and are pursuing a variety of approaches to achieve this goal for our shareholders and for the many people who would benefit from innovative vaccines that address unmet public and personal health needs. Before we take your questions, I would like to remind our listeners that we have a scheduled webcasted fireside chat tomorrow, Friday, March 13 at 4:30 p.m. Eastern Time. At the fireside chat, we look forward to addressing more of the frequently asked questions we have received from our stockholders. As a reminder, you can submit written questions to ir.vaxart.com. We will do our best to answer as many questions as possible at the fireside chat. Since we have the fireside chat tomorrow, we will not take written questions on the call today. Thanks, everyone, for your time today. Operator, you may open the line for questions. Operator: And with that, we will now be conducting a question-and-answer session. Our first question comes from the line of Cheng Li with Oppenheimer & Co. Please proceed with your question. Cheng Li: Thanks for taking the question, and congrats on the quarter. Maybe two from us. So first, it seems like the 400 persons cohort data, there is a slight delay. I think the timing is now already second quarter compared to prior guidance on late first quarter. So, curious if there is any color you can share on the change, and also, following question is, how to frame the expectation on the 400 personal data and read-through to the full Phase 2b data. Thank you. Steven Lo: Great. Hi, Cheng. Thanks for the two questions. Those two questions are definitely appropriate for Dr. Cummings, so James will address them. And yes, just to acknowledge, prior guidance was towards the end of first quarter, and now the guidance is early second quarter. And since James has a lot of interaction with BARDA, he can provide a little more detail on the reasons based on your question and the second question as well. James F. Cummings: Thanks, Steven. So we will be reporting the 12-month top-line data that we have for the 400-participant cohort, and that is going to include data related to the primary safety endpoints, and that is why we did that cohort. It is a safety cohort; that is why it was designed. As well as some initial data on efficacy measures. As I mentioned, that 400-person cohort is designed for safety. The data from the 5,000-person KP2 cohort will provide some efficacy insights, which we expect to report in 2026. Any of the discussions we have in terms of releasing data, analyzing data, etc., are made in conjunction with our partners at BARDA, and so they have a say as to what and when gets delivered. So, in working with them, that is why I think we see a slight change there. Over. Steven Lo: Thanks. And, James, if you want to take the second question as well in terms of, and you mentioned this during the comments as well, the potential read-through from the 400 to the approximately 5,000— James F. Cummings: Yes. So, I was trying to phrase it. The 400-person safety cohort will be, or should be, some data coming in Q2. And then the larger, robust data set for the 5,000-person KP2 cohort will give insights along with efficacy insights and safety and immunogenicity. We will have top-line data from that coming at first in, we project, Q4 of this year, with likely immunogenicity results to follow. Steven Lo: Thanks, James. Cheng, any more questions? Cheng Li: I think that is all from us. Again. Operator: Great. Steven Lo: Thanks. Thanks for calling in. Cheng Li: Thank you. Operator: And our next question comes from the line of Mayank Mamtani with B. Riley Securities. Please proceed with your question. Mayank Mamtani: Yes. Good afternoon, team. Thanks for taking our questions. So first on the COVID program, now you have multiple parties here, very serious vaccine parties here, Mala and also Sanofi change of control. I was wondering how decision points would be for next steps after you have this sentinel data into Q2 and the larger robust dataset in Q4? And also, just to confirm, you do not have any immunogenicity data as part of this 2Q update? Then I have a quick follow-up. Steven Lo: Great. Hi, Mayank. Thanks for the question. So let me address the first part, and then James can talk about what we are going to see in the sentinel 400. Just as a reminder to our listeners, the way that our agreement is set up both with BARDA and Dynavax, a Sanofi company, is that Vaxart, Inc. and BARDA are responsible for the Phase 2b part of the clinical trial. So this is basically still under our oversight. And then at the end of Phase 2, Dynavax would then have the opportunity to decide, once the end-of-Phase 2 package to the FDA is completed, whether they want to opt in or not. I think the good news is we have had, as I mentioned earlier, quite a bit of interactions with Dynavax, and that is going well. And then, of course, we have our interactions with BARDA. I will turn it over to James to comment further on that and then also on the sentinel 400. James F. Cummings: Sure. Thanks, Steven, and thanks, Mayank, for the question. So when we are looking at that preliminary top-line data, the first things we will be able to produce will be the safety overall look and then also some insights into the efficacy. The immunogenicity data is work that is done right now primarily by our partners at BARDA. It takes a little longer to execute, and so that would be following, or after, we have the initial data tranche, if you will. And that is my expectation not just for the sentinel 400, but likely for the KP2 5,000-person cohort as well. Mayank Mamtani: Understood. Thank you. Mayank Mamtani: And then on the norovirus second-gen candidate, has there been any regulatory input on the endpoint you could be looking to evaluate in this next Phase 2 study? I guess that is a Sean question. Or James question. James F. Cummings: Yes, I will take it, Mayank. So we have had discussions with the FDA. As you know, the Phase 2b study, the primary endpoint there is safety. So we will be collecting safety on that as well as immunogenicity, and moving that program forward, pending having a partner. Steven Lo: Mayank, any other comment on that? Yes, I think that is right. Not sure, Mayank, if you have a follow-up question, but as James mentioned, we have always been interacting with the FDA on our study here. Mayank Mamtani: Understood. Thank you, guys, and look forward to the early 2Q updates here. Thank you. Steven Lo: Okay. Great. Thanks for calling in. Operator: Thank you. And with that, ladies and gentlemen, that does conclude the question-and-answer session as well as today's teleconference. Thank you for your participation. You may now disconnect your lines at this time and have a wonderful rest of your day.
Operator: Greetings, and welcome to the KORU Medical Systems Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Louisa Smith, Investor Relations. Please go ahead. Louisa Smith: Thank you, operator, and good afternoon, everyone. Joining me on the call today are Linda Tharby, President and CEO of KORU Medical Systems; Tom Adams, Chief Financial Officer; and Adam Kalbermatten, Chief Commercial Officer. Earlier today, KORU released financial results for the fourth quarter and full year ended December 31, 2025. A copy of the press release is available on the company's website. I encourage listeners to have our press release in front of them, which includes our financial results and commentary on the quarter. Additionally, we will use slides to support further commentary in today's call, which are also available on the Investor Relations section of our website. During this call, we will make certain forward-looking statements regarding our business plans and other matters. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to risks and uncertainties, including those mentioned in the associated press release and our most recent filings with the SEC. We assume no obligation to update any forward-looking statements. During the call, management will also discuss certain non-GAAP financial measures. You will find additional disclosures, including reconciliations of these non-GAAP measures with comparable GAAP measures in our press release, the accompanying investor presentation and SEC filings. For the benefit of those listening to the replay, this call was held and recorded on Thursday, March 12, 2026, at approximately 4:30 p.m. Eastern Time. Since then, the company may have made additional comments related to the topics discussed. I'd now like to turn the call over to Linda Tharby, President and CEO. Linda, please go ahead. Linda Tharby: Good afternoon, everyone, and thanks for joining us today. Before I provide further detail on our fourth quarter and full year performance, I want to take the opportunity to comment on the announcement of my retirement as was press released earlier today. After 5 fulfilling years, I have made the decision to retire and will resign as CEO of KORU Medical effective June 30. This has been one of the most meaningful chapters in my career, and I am proud of what we have built together, including the strength of the business, our growing leadership position in large-volume drug delivery and an exceptional team that will continue to maximize KORU's potential and move the growth strategy forward. My family and I are ready to embrace the next chapter of my life, and I will turn my focus to Board and advisory activity. This transition has been thoughtfully planned by the Board, and I'm very pleased to announce that Adam Kalbermatten, our Chief Commercial Officer, has been selected as my successor. When Adam joined KORU in 2025, it was immediately clear he was a natural fit, not just for the CCO role, but for the potential to lead the company as a whole. Adam brings strategic discipline, commercial leadership and a proven track record of creating shareholder value. He has spent his entire 20-plus year career in drug delivery, spanning large and small med tech companies and including a CEO role, where he led an effective turnaround and growth strategy that resulted in a successful acquisition by Becton, Dickinson. The Board's confidence in Adam is grounded both in him personally and in the strength of the broader team beside him. With over 115 years of combined med tech and pharma experience across the executive leadership team. KORU has the strategic depth needed to continue to drive our growth potential. As we look ahead, we are committed to a smooth and seamless transition. I will remain on the Board and continue to serve in an advisory capacity through the end of 2026. Adam will be appointed President effective March 15 and will assume the role of CEO on July 1. Many of you have had the opportunity to meet Adam at investor conferences and industry events over the past year, and I look forward to partnering with him through this transition period. I want to thank my family for their support throughout my career. The Board for their partnership and guidance; our shareholders for the trust you have placed in us; our customers for your passion and knowledge; and above all, our KORU team for the enthusiasm and dedication they have demonstrated throughout my tenure. It has been an honor to be part of the KORU team, and I'm confident the best chapters of this company are ahead. And now with that out of the way, let's turn to our fourth quarter and full year results. I'll begin with some commentary on our fourth quarter and full year highlights and strategic progress. Then I will hand the call over to Tom to review our financial results before we open the call for questions. 2025 was a very good year for the organization. We accelerated our revenue growth and made progress in all of our strategic growth pillars, protecting and growing our Core Domestic business, expanding internationally and enabling more drugs to reach more patients. Revenue of $10.9 million in the fourth quarter marked our third consecutive quarter of greater than 20% revenue growth and we delivered full year revenue of $41.1 million, a 22% increase over the prior year. This consistent performance reflects the fundamental strength of our business. A few highlights I want to call out. First, both our Domestic and International Core businesses continued to outperform the underlying SCIg market, which grew approximately 10% in 2025. In the fourth quarter, Domestic and International Core grew 18% and 71%, respectively, driven by a recurring base of approximately 59,000 patients. We received EU MDR certification for the FREEDOM60 with prefilled syringe compatibility, marking a critical regulatory milestone that positions us to pursue the ongoing valve-to-prefilled syringe conversion across Europe. We also received 510(k) clearance for RYSTIGGO in January, which marks the ninth drug cleared on the Freedom Infusion System and our second non-IG clearance. This is a step in our strategy to expand our platform beyond IG, and it opens a meaningful new channel for us in the infusion clinic setting. I'll speak to further details on the RYSTIGGO opportunity in a subsequent slide. We are also announcing two new pharma collaborations as we continue to expand our development pipeline into two new therapeutic areas, a Phase III nephrology molecule and a Phase I multi-indication drug. We ended the year with $8.9 million in cash and achieved positive cash flow from operations, continuing the progress we've made towards sustained profitability. Building on that momentum, we are initiating 2026 revenue guidance of $47.5 million to $50 million, representing growth of 15% to 22%, and positive adjusted EBITDA and cash flow positive for the full year. Tom will provide additional color on our guidance and underlying assumptions. Now moving to a few comments on our strategy. Health care continues to move from the hospitals to infusion centers to the home and large volume subcutaneous infusion is a direct beneficiary of that shift. In our Core SCIg business, we operate in a greater than $450 million global market, where penetration versus IVIG remains below 20% in the U.S. and external forecast project continued 8% to 10% growth over the next 5 years. We have 7 launched SCIg drugs from the major IG pharma manufacturers on our label and drug manufacturers are actively innovating their IG portfolios, all of which create opportunities for increased subcutaneous penetration and for KORU to capture additional global share. Outside of SCIg, there are more than 95 new drugs in development with volumes greater than 10 ml across multiple indications. IG was the first mover in large volume subcutaneous delivery, and there is significant investment going into subcu formulations across broader therapeutic areas. A large part of our strategy is enabling the administration of those drugs on our system. Turning to our Domestic business. I want to highlight a few key areas, our growing recurring revenue base and the expansion into new therapeutic areas. We have grown our recurring global patient base by approximately 20% to 59,000 global chronic SCIg patients on the KORU Freedom System. The global SCIg market saw healthy growth of approximately 10% this year and industry projections are for 8% to 10% growth in the coming 5 years. With our growth of over 20% this year, we are growing our global SCIg leadership position and will continue to expand through our new product development efforts and key accounts and pharma collaborations. We are also beginning to diversify our business. The clearance of RYSTIGGO, a non-IG drug enables our entry into the infusion clinic channel. With our filing of the 510(k) for Phesgo in the fourth quarter of 2025, we are also anticipating entry into the oncology market in the second half of 2026. We are also closely watching the evolving clinical activity around secondary immunodeficiency or SID. Outside the U.S., SID has been a key focus in many of the large pharma players and there are several ongoing pharma trials that are expected to complete in 2027. Increases in SID are being driven by an aging population, higher prevalence of chronic illnesses and increased use of immunosuppressive treatments, such as CAR T cell therapy. As reimbursement coverage expands in this area, it could meaningfully broaden our U.S. opportunity. Moving to International. This business was one of our largest growth drivers in 2025 with growth of 80%, and we see even greater potential ahead. The overall European SCIg pump and consumables market is valued at approximately $50 million, and we grew our share from approximately 10% in 2024 to 20% in 2025. We remain well positioned to continue expanding our presence in the market and capturing additional growth opportunities. We expect most of our growth to come from the continued shift across large pharma from vial-based delivery to prefilled syringes. The shift from vials to prefilled syringes simplifies the administration process significantly with up to 80% reduction in drug preparation tasks. This last quarter, we received our MDR certification in the EU for our KORU FREEDOM60 system. Combined with the earlier FreedomEdge MDR clearance, we now have two clear pumps for prefill administration. Our system was preferred by over 75% of patients due to its ease of use. That's a meaningful improvement in the day-to-day experience for patients managing a chronic condition at home. Overall, the European opportunity is significant, and we believe we are only beginning to capture it. With 2 MDR cleared pumps, a system that is patient-preferred and pharma driving a broad shift to prefilled syringes, we are well positioned to continue taking share. With a roughly $50 million addressable market in Europe alone, we see a significant opportunity ahead. And now let me turn to our pipeline. Beyond IG, the new drug pipeline now has 9 active opportunities. That combined represent more than 7 million annual infusions worldwide. Within the next year, we anticipate having 3 commercial stage assets on our label, vancomycin, deferoxamine and the Phesgo oncology opportunity. Together, these represent approximately 2.2 million estimated annual global infusions. Two of those 9 opportunities are new this last quarter, a Phase III nephrology drug, and a Phase I multi-indication drug. We are working with our pharmaceutical partners to help advance the delivery of these molecules. Once launched, they are expected to represent combined commercial opportunity of approximately 3 million annual infusions. We now have 9 subcutaneous drugs cleared for use with the FREEDOM Infusion System. IG representing approximately 5.4 million annual infusions and non-IG representing approximately 250,000 infusions. On the IG side, our 6 active collaborations with the major IG manufacturers span new device formats and expanded indications. Work that directly supports continued share gains and geographic expansion as those programs move towards launch. When you step back and look at the full picture, 9 subcutaneous drugs on label with low penetration, 9 drugs in active development with KORU and more than 95 large-volume subcutaneous drugs still in development across the pharma landscape. The runway here is substantial. And now let me spend a moment on RYSTIGGO, for which we received 510(k) clearance on our Freedom Infusion system in January. RYSTIGGO is indicated for generalized myasthenia gravis, a chronic autoimmune disease that causes muscle weakness affecting a patient's ability to control voluntary movements, including swallowing and breathing. In the U.S., this represents a patient population of approximately 60,000 patients. UCB launched the drug in July 2023 and currently publicly reports having reached more than 2,400 GMG patients globally at the end of 2025. We project our total U.S. market opportunity to be about 20,000 infusions in '25, growing to over 100,000 infusions in 2030. It's worth noting that RYSTIGGO has already been used off-label with the Freedom Infusion system. So this clearance enables us to go after further share. Additionally, this clearance marks our first collaboration with UCB and enables our entry into the infusion clinic channel, which opens a new commercial pathway for KORU beyond the home. I'm extremely proud of the team's execution and the strong momentum we built. The strong patient growth in our U.S. and international markets and meaningful pharma pipeline progress across both IG and non-IG opportunities, we're well positioned heading into 2026. I'll now turn the call over to Tom to review our financial results and guidance for 2026. Tom Adams: Thanks, Linda, and good afternoon, everyone. We are pleased with another strong quarter of revenue where we delivered $10.9 million, representing 23% year-over-year growth. This marks 3 consecutive quarters of greater than 20% revenue growth, a reflection of the momentum we've built across the business. Breaking down the performance by business. Domestic Core grew 18% year-over-year, driven by the SCIg market, which grew between 8% to 10% in the quarter. New KORU patient starts and market share gains, resulting in higher pump and consumable volumes. International Core grew 71% year-over-year, fueled by new patient starts and increased penetration into established European markets. Prefilled syringe conversions were a significant driver and we expect this to remain a tailwind as additional markets convert. Our PST business decreased 30% year-over-year. This business is inherently variable given the milestone-based nature of revenue recognition. The decrease reflects timing of contract milestones, for work completed and does not reflect the change in the activity level of our collaboration portfolio, which as Linda just described, continues to grow. For the full year, we delivered revenue of $41.1 million, representing 22% growth over the $33.6 million we reported in 2024. Domestic Core grew 11% for the full year driven by SCIg market growth and new account share gains that increased consumables and pump volumes. Accounting for the dynamic that occurred with our international distributors going back to the U.S. which we discussed in the third quarter call, underlying growth would have been 14% for the full year. International Core grew 80% for the full year, driven by strong SCIg market growth our growing footprint in European markets and entry into several new geographies. Accounting for the international distributor sales dynamic, underlying growth would have been 73% for the full year. Finally, PST declined modestly. Again, due to the project milestone timing, partially offset by higher clinical trial orders versus the prior year. Moving to gross margin. We had a 30 basis point reduction over the last year's Q4, driven by higher material costs and tariffs that were mostly offset by a stronger customer mix in the U.S. where we have higher average selling prices. We delivered a full year gross margin of 62.3% in line with our expectations at the start of 2025. The year-over-year decrease was driven by higher packaging material costs, tariff-related charges and geographic sales mix from our growing international business. Despite these headwinds, we remain resilient in keeping margins above 50% every quarter and on a full year basis. Turning to cash. We ended the year with $8.9 million in cash, representing full year cash usage of $700,000. Importantly, we achieved positive cash flow from operations in both the third and fourth quarters and also for the full year. The key drivers were revenue growth and disciplined spending that enabled a further reduction in net losses. We largely maintained our working capital balance while managing the growth needs of the business, and we continue to invest in capital expenditures to support future new product launches. Turning to our full year financial highlights. I want to call out two things in particular. First, with 22% revenue growth, operating expenses increased by just 3%, demonstrating the discipline we've maintained and the continued operating leverage we have generated. And second, we delivered positive adjusted EBITDA of $600,000, a 124% improvement versus the prior year, marking 3 consecutive quarters of positive adjusted EBITDA. Together, this reflects significant P&L improvement as we march towards profitability. Looking ahead to 2026, we are initiating guidance of $47.5 million to $50 million in revenue, representing growth of 15% to 22% and gross margins for the full year of 61% to 63%. We are also targeting positive adjusted EBITDA and positive cash flow for the full year. On revenue, the primary drivers will be continued U.S. and international share gains in SCIg, NRE revenue from at least 4 new collaborations, 2 already signed and modest incremental revenue from recent or soon to be cleared 510(k) filings. We have also incorporated some geopolitical risk into our guidance given recent events in the Middle East. As you think about our 2026 revenue cadence, I'd note that first half of 2025 benefited from a meaningful prefill inventory build in a key EU market, which we do not expect to repeat at the same level in 2026. Additionally, we would expect revenue to ramp in the back half as we see revenue recognition from recent and pending 510(k) clearances and the introduction of prefilled syringes into new geographies. On gross margin, we expect pricing and manufacturing efficiencies to support the 61% to 63% range as we enter new markets and channels. The associated revenue mix may move margins slightly in either direction, but we feel confident holding that range overall. We also have planned for start-up costs for the new production line for the next-generation pumps. We are confident that we will continue to offset incremental external pressure on costs with our operational excellence programs. On profitability, we are guiding to cash flow positive and positive adjusted EBITDA for the full year. Cash usage is expected to mirror the 2025 cadence with operating leverage building throughout the year and positive cash flow anticipated in the second half. I'll now turn the call back to Linda for closing remarks. Linda Tharby: Thank you, Tom. I want to close with a few thoughts on key milestones in 2026 and our broader market opportunity. . We started the year off strong. In our Domestic Core, we have gained the UCB RYSTIGGO 510(k) clearance and our Roche Phesgo 510(k) application submitted on time in December, giving us two new non-IG drugs currently moving to commercial potential in 2026. We also have our next-generation pump, the FREEDOM60 expected to have 510(k) and MDR submissions this year. The Phase II Flow Controller 510(k) submission is projected for a global submission either in late 2026 or early 2027. Internationally, we have achieved MDR clearance of our FREEDOM60 with prefilled syringe compatibility, and we have now begun to ship that product into the EU market, anticipating prefilled conversions in several EU markets. On our efforts to add new drugs to our label, we have signed 2 of our 4 new collaborations and anticipate 2 additional 510(k) submissions this year for deferoxamine and vancomycin. In closing, I want to step back and frame why we believe KORU is well positioned, not just for 2026, but for the years ahead. This slide references the strong foundation that we have built for our business, some of our recent accomplishments and finally, where we believe we are headed. On the left, you'll note some of the foundational aspects that make KORU an attractive opportunity. We operate in a large and growing market for subcutaneous drug delivery with approximately 95 large volume drugs in development by major pharmaceutical companies. We have a leading position in the U.S. market that is growing 8% to 10%, where we consistently outperform market growth rates. We have significant momentum with international expansion with much more runway to grow and gain share. Underpinning this is a recurring revenue model across a global base of nearly 60,000 patients. And looking ahead, we have 9 pipeline drug opportunities outside of IG, with RYSTIGGO and our oncology market entry, representing near-term commercial opportunity in 2026. Moving to the right, the middle box is a reference to our recent accomplishments and performance, where we have demonstrated the ability to consistently grow revenues more than 20%, where we have attractive gross margins, and where we have proven the operating efficiency of our business model, delivering a 63% in improvement in cash burn and 124% improvement in adjusted EBITDA for 2025. On the right are our long-term targets and some of our strategic goals that Adam and team will continue to work towards, $100 million in revenue, accelerated growth rates, gross margins above 65% and an EBITDA margin of 20% or greater. 2025 performance shows that the model is working. 2026 is about continuing to execute against it. Before opening the line for Q&A, I want to again thank the entire KORU team for their continued commitment to our mission. Looking back on my tenure with the organization, the progress we have made together is something I'm immensely proud of. The business is stronger. The strategy is clear. And with Adam stepping into the CEO role, I have every confidence in what lies ahead. It has been an honor being part of the KORU team, and I look forward to seeing the next chapter unfold. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question is from Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: Great. First off, Linda, congratulations on all you have achieved. We're certainly sad to see you go, but look forward to working closer with Adam and the rest of the KORU team, I wish you the absolute best in your next chapter. I was hoping to start with some questions on OUS, maybe two questions. . First, on FREEDOM60, maybe talk about what this product does for you in that market? How much of the market might this open up? And then two, you've spoken about, I want to say it's the 5 geographies that you plan to enter, how should we think about the cadence of those geographies and the progress so far. Linda Tharby: Frank, and thank you. It has been an extreme pleasure working with you and the broader Lake Street team. Clearly, very confident as we think about Adam stepping into role and the broader team that surrounds him. So on your questions on the FREEDOM60 and the opportunity that lies ahead of us. Maybe I'll just start with the broader opportunity we're going after here is a $50 million total addressable market in Europe. We were very successful in 2025 in moving our share position from a 10% to a 20% share, but obviously, if you position that share closer to our 60% U.S. share, you see the magnitude of the opportunity we have in front of us in Europe. . So most of that opportunity and share gain in 2025 was driven by a successful prefill conversion in a major market in Europe, and the pharma partner that we're working with has plans to roll this out in several new markets over the course of the coming year. And the 5 geographies you referred to are not new markets for us, but there are markets we're in today, but with fairly low penetration, and we see the opportunity in prebills to really grow that market significantly. So what we see today is that we have our second market. We've started our year off strong in '26 with our second market that's really going live now with this prefill launch, and we expect to see likely a new market being added 1 to 2 every quarter as we move through the year. I think the last part of the question was just the FREEDOM60 and the new approval. Very excited about that because now we have 2 pumps, both our 60 and our Edge that are both approved. We required some slight modifications to our FREEDOM60 and an update to our IFU, we just received approval on that in the fourth quarter of '26. So great news for us. We've now just started distributing that new product into the market today. And of course, what comes at the back end of the year is our FREEDOM360, which is our pump that will work for all prefills. So hopefully, that got all of those questions. Frank Takkinen: Perfect. Maybe just for my second one, Tom, a little more composition of the guide would be good color. I heard ramping revenue throughout the year as some of these initiatives progress, but maybe how much contribution from U.S.? How should we think about that growth rate, OUS? And then any cadencing color you'd like to provide would be great, too. Tom Adams: Frank, thanks for the question. Yes. Great. So we're continuing to see momentum coming into Q1 after a record Q4. So that's very strong for us, particularly on the international side. So as mentioned earlier, prefill still is a driver of that market. So we continue to see that progress. I would say from -- on the international side, you will see a step up in the back half of the year, based on what Linda just mentioned in some of those countries going online for prefills. And then on the U.S. side, I think that's slow and steady. I mean you've seen the last couple of years, a pretty steady growth rate on the U.S. side. And then, of course, as we get further along into the year, you will see more growth from some of those 5 tenant approvals that are upcoming. And then yes, then we'll just continue to grow up there. And then on the PST side, you'll see consistent revenue trajectory like you've seen in the last couple of years. Operator: Our next question is from Chase Knickerbocker with Craig Hallum Capital Group. Chase Knickerbocker: I just want to echo Frank's comments. Obviously, we wish you the best, Linda and all your future endeavors. I appreciate everything you've done there, which is quite a bit. So -- and obviously, congrats Adam on the new role as well. Maybe just first for me on the Domestic side. 18% growth is obviously substantially above the market. Can you give us some sense for what's happening in the market is allowing you to take so much share? And maybe 1 and then 2 on that front, how should we think about the opportunity for further share gains in 2026 after a pretty strong year in '25? Linda Tharby: So thanks, Chase, for the well wishes. I appreciate it, and you and the Craig-Hallum team have been great. So first, yes, very proud of the U.S. growth in the fourth quarter. We continue to see new account gains overall on that business. And of course, we had the return happen of the distributor in international that move back to the U.S. So as we projected, all that business is now back, which is great news. I'll give it to Tom, maybe to add some specifics on the U.S. and what we might see in '26. Tom Adams: Yes. So in '26, as I mentioned, we continue to see a strong SCIg market, and we expect that to continue to grow throughout the course of the year. And then, as I just mentioned to Frank, as we continue to receive approvals for new drugs on label throughout the year, we expect some growth off of that as well. So we will continue to see that revenue grow sequentially in the U.S. market. . Chase Knickerbocker: Maybe on that front, on the novel therapies that we're adding, particularly in the second half. Can you give us a sense for kind of the magnitude of impact there? And then just second for you, Tom. If we think about EBITDA in the year, obviously, a little bit kind of open-ended on guidance. Can you give us a sense for how much operating leverage we should kind of expect from you guys in '26? Obviously, low single-digit OpEx growth in '25 was quite a bit of operating leverage. Can you just give us some goalposts as far as what we should be expecting for OpEx growth in '26? Linda Tharby: So maybe I'll just start with novel therapies and the overall impact that we're thinking about. And what I would say is we have changed its name to pharmaceutical services and clinical trials. So we're still figuring that out here, but now we're calling that our PSD business. So obviously, in terms of overall revenues, these revenues are milestone-based based upon the overall innovations and clinical trials that we're servicing. So that number I would suggest has always been around where it's been historically. So not to expect anything new there, but obviously, very excited about the two new deals that we signed this past quarter, and maybe I'll turn it over to Adam just to talk a little bit more about that. Adam Kalbermatten: Yes. Thanks, Linda. So over the last quarter, we signed two new deals with pharmaceutical companies. One of them is a nephrology drug that's in Phase III. We're really excited about that. The other one is molecule in early Phase I. It's a multi-indication drug. In total, this represents approximately 3 million annual infusions between the two of them. So really excited to add those into our pipeline and get the work going on the feasibility side to keep these moving through the pharmaceutical pipeline and into our future prospects. Linda Tharby: Thanks, Adam. And I think before I just turn it over, I think what you were looking for as well here, Chase was the new drugs on label, and what we see in the near term with RYSTIGGO, and then the other two drugs vancomycin and deferoxamine. Overall, I think a couple of things. First of all, that many of these drugs are administered in infusion clinics. So that is a new entry point for us, and we've already started to hear some of our customers say, "Hey, can we try these other drugs." So we see that as a broader opportunity, one which I'm not going to put a number on today. But I think the numbers that we've mentioned in the past for these 3 drugs in total, somewhere between $0.5 million upwards of $0.5 million of opportunities. We've got a modest number today knowing that two of those drugs are not approved yet. And so we'll refresh the models as time goes on, and we learn more and see how many new accounts we can gain. I would also say on RYSTIGGO, we already had a large portion of that business off label. So excited for the entry. We're already hard at work there, and we'll have more to report as quarters go on. And Tom, a question on the operating leverage. Tom Adams: Yes. Just on the EBITDA, Chase, we continue -- last year was a great year for us. We had adjusted EBITDA positive. We're excited about that. We're excited to hit cash flow positivity. And as I mentioned in the guidance, we will be positive adjusted EBITDA once again and continuing to grow from there as well as cash flow positive for the full year, not just in operations, but for the full year. So we're excited about that again. We will continue to see leverage because our business model allows it with the way our SG&A is set up in our business. So we'll get more specific on that as the year funds through, but we expect to continue to progress on those fronts. Operator: Our next question is from Caitlin Roberts with Canaccord Genuity. Caitlin Cronin: Linda, I'm so sad to see you go, but you're truly an inspiration to women and meta-like in the industry. So thank you so much. I guess just starting with RYSTIGGO, how are you thinking about the go-to-market model here in infusion clinics? And how does this really position you to penetrate the oncology opportunity more quickly when cleared? Linda Tharby: Right. So first, Caitlin, thank you so much. The Canaccord team has been great. And you personally, right back at you in terms of women in leadership, and thank you to all the men who support us in doing what we do. So getting to the overall RYSTIGGO opportunity and how that entry into infusion clinics, I would say, broadly, what we discussed in the earnings was that RYSTIGGO, we see is about 20,000 infusions in the U.S. here today, going to about 100,000 infusions over the course of the next 5 years and even a bigger opportunity globally, which we're at early stages of looking at today. . In terms of infusion clinics and our entry strategy, fortunately for us, this channel today is many of the same specialty pharmacies we deal with are dealing with this channel. I'm going to let Adam say a few words in a moment relative to he's thinking about anything broader relative to our infusion clinic entry, but I would certainly say that oncology infusion center, which I understand can be a little confusing, but oncology infusion centers are different than ambulatory infusion centers and sometimes there's an overlap. So we see this as good for our pending oncology opportunity. It gives us a leap and head start, and then a broader opportunity once we get approval in oncology. Adam, I don't know if you want to add anything. Adam Kalbermatten: Thanks, Linda. Caitlin, I'll start by saying this is our first collaboration with UCB, and it diversifies our revenue beyond just CIG in a meaningful way. On the strategic side, it's significant because as you mentioned, it opens up a new commercial channel for us beyond the home and that's into the infusion clinics. And we see there's a lot more opportunity there in the future beyond RYSTIGGO. As Linda mentioned, we do have off-label sales there today. We look forward to continuing to grow that now that we have the product on label and we could be promoting it. So I want to highlight UCB's reported just over 65% year-on-year growth in global RYSTIGGO sales. So we see this drug has a lot of momentum, and we're really looking forward to continue helping to bring value there. So acknowledging, we've had some really great success over the last few years here under Linda's leadership. The strategic priorities don't change. We have a proven strategy really built around 3 pillars: protecting and growing the Core Domestic business, expanding internationally and enabling more drugs to reach more patients. So I focus really on accelerating the execution against those pillars. I see it as we have a lot of runway in front of us and my job is to make sure we're running as fast and as efficiently as possible towards those opportunities. Operator: [Operator Instructions] Our next question is from Joseph Downing with Piper Sandler. Joseph Downing: Linda and Tom. First and foremost, Linda, I wanted to congratulate you on your retirement. It's been a pleasure working with you and wishing you all the best in the future. Yes, I just wanted to touch on the guidance range here. So it was pretty much in line with where we expected. Just looking at kind of the high end and low end, how you get to each. Curious if you can walk through that. I'm curious if on the low end is a scenario kind of where the new drug clearances and OUS prefill conversions slip into 2027 a little bit. And then the high end is more of you execute everything on schedule in '26. Just curious if you could walk through a little bit more detail there? Linda Tharby: Great. Joe, thank you, and you and your Piper colleagues have been great, and congratulations to you on your recent promotion as well. So referring to the guidance range, I think you had it right. Prefills and the new drugs on label would be -- those are the things that vary. If we get prefill conversions faster, the markets get going faster. That's a great thing. And also new drugs, we get further traction or we get them on our label sooner, there's another big opportunity. The other third piece would be a little bit about the Middle East, which we've got a little bit of a factor in here and depending on the timing of that. And then finally, I would just say, oncology is something we do not have today, a big number in here at all, a very small number. So if we get a bigger head start on oncology or we're looking at new drugs now, I think that could be a meaningful area for us as well. Joseph Downing: I appreciate that and for your comments. One more just on Japan. I know it's been kind of a deemphasized piece of the business with all the great stuff going on in some of the other U.S. markets, but just curious like where you're looking at that for 2026 guidance or expectations there just at a higher level. And is there a point there where the pharma-driven prefill opportunity kind of opens up and makes Japan kind of move back up the list? Yes. Just any color there would be helpful. Linda Tharby: Yes, I'll start, and then turn it over to Adam. So Japan, we see, again, being 1 of the larger IG markets overall, we see that this could be $0.5 million to $1 million total opportunity. We know that today, that's very much a hospital, but moving to the home opportunity and lots of exciting stuff that I'm going to let Adam talk through. Adam Kalbermatten: Yes. Thanks, Linda. In Japan, I'll start with good news, right? So both pumps are approved. Consumables are approved as well. So we're pretty well positioned to continue to grow in that market. At the time we're seeing prefilled syringes there as being important, just as we kind of see in these other international markets. So as those prefills continue to grow, we expect that we're going to be growing with them. So it's a pretty exciting opportunity for us. Operator: No further questions at this time. I would like to hand the floor back over to Linda Tharby for any closing remarks. Linda Tharby: Right. Thank you, operator. I would just want to say thank you to all of you again. I have so appreciated all of your support your guidance, and most of all, your partnership in working with everyone on the call. Thank you all for taking some time with us this afternoon. Incredibly proud I want to say my last thanks to this entire KORU team, to my daughters who actually listened into an earnings call for a change. I told them there were some big news today. So I think they listened in. So thank you to my daughters. Thank you to our Board. Thank you to our investors I'm not gone yet. I am a big investor and will remain so and I look forward to working with all of you as this retirement goes on. But I'm here, as I said, to the end of June, looking forward to supporting Adam and the team and through the end of the year. Have a great rest of your day, and thank you so much. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Good afternoon, ladies and gentlemen, and welcome to Zumiez Inc. Fourth Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Before we begin, I'd like to remind everyone of the company's safe harbor language. Today's conference call includes comments concerning Zumiez Inc.'s business outlook and contains forward-looking statements. These forward-looking statements and all other statements that may be made on this call are not based on historical facts, are subject to risks and uncertainties. Actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available in Zumiez's filings with the SEC. At this time, I would like to turn the call over to Rick Brooks, Chief Executive Officer. You may begin. Richard Brooks: Hello, and thank you, everyone, for joining us on today's call. With me today is Chris Work, our Chief Financial Officer. I'll begin with remarks about our fourth quarter performance and the successful holiday season we just completed before reflecting on our strong full year 2025 results and discussing our strategic priorities. Chris will then take you through the financials and our outlook for fiscal 2026. After that, we'll open the call to your questions. We're pleased with our fourth quarter results, which capped off a second consecutive year of important progress for Zumiez. Q4 results were highlighted by robust full price selling in North America during the important holiday season, which fueled mid-single-digit comparable sales growth in the region and meaningful gross margin expansion. In addition, the work we've done focused on assortment and full price selling in our European business drove 660 basis points of year-over-year product margin improvement. This, coupled with disciplined expense management, resulted in 380 basis points of operating margin growth despite sales being down high single digits year-over-year in local currency for the quarter. Our performance in both regions reflect the continued effectiveness of our full price selling and cost saving strategies even as we faced regional headwinds. From a category perspective, men's led our positive comparable sales growth during the holiday period, followed by women's, accessories and hardgoods. This broad-based strength across multiple categories validates our merchandising approach and the investments we've made in product newness and private label expansion throughout the year. Reflecting on fiscal 2025, we took important steps towards returning to historical levels of sales and earnings. Our merchandising assortments and customer experience initiatives generated positive content every quarter, means from low single digits to high single digits and a 4.3% comparable sales gain for the year on top of a 4% increase in 2024. Our North American businesses demonstrated consistent momentum, registering 8 consecutive quarters of comparable sales growth. Our strategic shift in Europe, implemented just 1 year ago, gained momentum as we moved through the year. This consists of bringing newness, strong inventory management, full price selling and expense management that we believe will drive the business to better results in the near term. The combined impact of our initiatives helped to improve full year earnings per share to $0.78 from a loss of $0.09 last year. These results validate the strategic initiatives we've been executing and position us well for continued success in 2026. As we look ahead, we remain focused on the same 3 strategic priorities that have driven our success throughout 2025. First, driving revenue growth through consumer-focused strategic initiatives. Our commitment to refreshing our product mix with innovative distinctive offerings has proven to be a cornerstone of our success. In 2025, we launched over 150 new and emerging brands across our banners, and this newness continues to generate exceptional customer response. Private label penetration reached its highest level in company history in 2025 at approximately 30% of sales, up from 12% 5 years ago. This sustained expansion demonstrates our organization's ability to identify emerging trends and create compelling products that resonate with our customers while simultaneously enhancing our margin profile. Our investments in delivering exceptional customer experiences across both physical and digital touch points continue to yield strong results. Enhanced staff development programs and technological capabilities we've implemented allow us to engage with customers where they want, when they want and in more personalized ways, strengthening the relations we have that have long served as another cornerstone of our success. Second, sustaining our rigorous commitment to profitability optimization across our geographic footprint. Within North America, our premium pricing strategies continue to support both margin expansion and market share growth, while the operational improvements we've executed throughout 2025 are keeping sales growth well ahead of our expense growth. Our continued focus in this area has established a more efficient and profitable framework that positions the business for a strong flow-through on incremental sales to fuel operating margin gains. Regarding our international operations, while Europe continues to face challenging market conditions, our disciplined approach to new assortments, full price selling and expense management is starting to show results. The significant product margin improvements we achieved in the fourth quarter and full year demonstrate the effectiveness of our strategy, and we remain committed to our long-term vision for the countries in which we operate. We continue to see tremendous value in our ability to identify trends locally in each market before they expand internationally. Third, capitalize on our solid financial foundation to manage volatility by funding strategic expansion. Our financial position remains exceptionally strong, providing us with the flexibility to continue investing in our strategic objectives while delivering value to shareholders. This financial stability enables us to navigate ongoing uncertainties in the macro environment by simultaneously positioning the company for long-term growth and continued market share gains. Despite operating environment characterized by economic volatility and evolving global dynamics, I'm increasingly confident in our ability to generate value for all of our stakeholders. The fundamental strategies that have powered our performance throughout 2025 continue to demonstrate their relevance and our team's proven adaptability and execution capabilities fuel my optimism about our trajectory into fiscal 2026. Our direction remains clear and consistent: maintain our dedication to delivering distinctive fashion-forward merchandise through the customer connection strategies that have driven our growth while preserving the operational discipline that has strengthened our financial performance. We've demonstrated our resilience and ability to execute through various market cycles, and I'm confident we're strategically positioned to continue building on this momentum. Before turning things over to Chris, I want to express my appreciation to our entire organization for their continued commitment and exceptional execution throughout 2025. Their dedication to our values and our customers remains the foundation for all of our achievements and positions us well for continued success in the year ahead. With that, let me hand things over to Chris for our financial review. Christopher Work: Thanks, Rick, and good afternoon, everyone. I'm going to start with a review of our fourth quarter and full year 2025 results. I'll then provide an update on our first quarter to date sales trends before providing some perspective on the full year. Net sales for the fourth quarter of 2025 increased 4.4% to $291.3 million compared with $279.2 million in the fourth quarter of 2024. Comparable sales were up 2.2% for the quarter. As Rick mentioned, the primary driver was our North America business, which showed outsized strength even as macroeconomic uncertainties spurred by global trade policy continues. For the fourth quarter, North America net sales were $224.4 million, an increase of 4.8% from 2024. Other international net sales, which consists of Europe and Australia, were $66.9 million, up 3% from last year. Excluding the impact of foreign currency translation, North America net sales increased 4.6% and other international net sales decreased 7.1% year-over-year. Comparable sales for North America were up 5.5%, marking the eighth consecutive quarter of comparable sales growth in this region. Other international comparable sales declined 7.5% in the fourth quarter. From a category perspective, men's was our largest positive comping category, followed by women's, accessories and hardgoods. Footwear was our only negative comping category. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. Fourth quarter gross profit was $111.4 million compared to $101 million in the fourth quarter of last year. Gross margin was 38.2% of sales for the quarter compared with 36.2% in the fourth quarter of 2024. The 200 basis point increase in gross margin was primarily driven by 180 basis points of improvement in product margin and 50 basis points of leverage in store occupancy costs on higher sales and the closure of underperforming stores. These benefits were partially offset by 20 basis points related to increased incentive costs on improved results. SG&A expense in the fourth quarter of 2025 was $86.4 million or 29.6% of net sales compared to $80.9 million or 29% of net sales in 2024. The 60 basis point improvement in SG&A expenses as a percentage of net sales was driven by 100 basis points of increased incentive costs on improved results and 20 basis points related to corporate wage costs. These cost increases were partially offset by 50 basis points of leverage in store wages related to increased sales and hours management and 20 basis points of leverage in other store operating costs. Operating income in the fourth quarter was $25 million or 8.6% of net sales compared to prior year operating income of $20.1 million or 7.2% of net sales. Net income for the fourth quarter was $19.6 million or $1.16 per share. In the year ago period, we reported net income of $14.8 million or $0.78 per share. Our effective tax rate for the current quarter was 26.3% versus 26.1% a year ago. Looking at our full year results, net sales for fiscal 2025 were $929.1 million, an increase of 4.5% from $889.2 million for 2024. Comparable sales for the full year were up 4.3%. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transaction. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. From a category perspective, for the full year, women's was our largest positive comping category, followed by men's, hardgoods and accessories. Footwear was our only negative comping category. From a regional perspective, North America net sales were $757 million, an increase of 5.1% from 2024. Other international net sales were $172 million, up 1.7% from last year. Excluding the impact of foreign currency translation, North America net sales increased 5.2% and other international net sales decreased 4.2% compared to 2024. Comparable sales for North America were up 6.7% and comparable sales for international were down 5.4% for the full year. 2025 gross margin was 35.8% of sales compared to 34.1% in 2024. The 170 basis point increase was primarily driven by 90 basis points of product -- of improvement in product margin and 70 basis points of leverage in store occupancy costs on higher sales and the closure of underperforming stores. SG&A expense was $315.5 million or 34% of net sales for fiscal 2025 compared with $301.1 million or 33.9% of net sales in 2024. The 10 basis point increase as a percentage of net sales was driven by 50 basis points of increased incentive costs on improved results and 40 basis points related to wage-and-hour litigation settlements in California. These benefits were partially offset by 60 basis points of leverage in non-wage store operating costs and 30 basis points of leverage in store wages on increased sales and hours management. Fiscal 2025 operating income was $17 million or 1.8% of net sales compared to operating income of $2 million or 0.2% of net sales in the prior year. Net income in fiscal 2025 was $13.4 million or $0.78 per share compared to a net loss of $1.7 million or $0.09 per share in the prior year. Fiscal 2025 was negatively impacted by approximately $0.15 per diluted share related to a wage-and-hour litigation settlement in California. Turning to the balance sheet. The business ended the year in a strong financial position. We had cash and current marketable securities of $160.6 million as of January 31, 2026, up from $147.6 million as of February 1, 2025. The increase in cash and current marketable securities over the last year was primarily driven by cash flow from operations of $53.5 million, a $2.9 million benefit from foreign currency fluctuation and our release of $2.7 million in restricted cash, partially offset by common stock repurchases of $38.3 million and capital expenditures of $11.1 million. As of January 31, 2026, we have no debt on the balance sheet and continue to maintain our full unused credit facility. The company repurchased 2.7 million shares during fiscal 2025 at an average cost of $14.18 per share and a total cost of $38.3 million. On March 11, 2026, the Board of Directors approved the repurchase of up to an aggregate of $40 million of common stock. The repurchase program is expected to continue through January 29, 2028, unless the time period is extended or shortened by the Board of Directors. This repurchase program supersedes the prior authorized approval approved by the Board of Directors on June 4, 2025, that was set to expire on June 30, 2026. We ended the year with $147 million in inventory compared to $146.6 million last year, a growth of 0.2% year-over-year. On a constant currency basis, our inventory levels were down 3.8% from last year. We feel good about our current inventory position. Now to our first quarter to date results. Total sales for the 4-week fiscal period ended February 28, 2026, increased 9.8% compared to the 4-week fiscal period ended March 1, 2025. Comparable sales over the same period increased 7.5%. From a regional perspective, North America net sales for the 4-week period ended February 28, 2026, increased 5.6% over the 4-week period ended March 1, 2025, while our other international business increased 27.6%. Excluding the impact of foreign currency translation, North America net sales increased 5.3% and other international net sales increased 12% compared with 2025. Comparable sales for our North America business increased 6% for the 4-week period ended February 28, 2026, compared to the same week in the prior year, while comparable sales in our other international business increased 13.2%. From a category perspective, quarter-to-date, hardgoods is our largest positive comping category, followed by men's, women's and accessories. Footwear was our only negative comping category. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. With respect to our outlook for the first quarter of fiscal 2026, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity in estimating sales, product margin and earnings growth, given the variety of internal and external factors that impact our performance. Our comparable sales results in early fiscal 2026 have maintained positive momentum, and we are cautiously optimistic that we'll continue to deliver top and bottom line improvements in the first quarter, assuming no significant economic impact on the business from the current global conflicts or tariff changes. For the first quarter, we are anticipating total sales to be between $189 million and $193 million for the 13 weeks ending May 2, 2026, representing growth of 3% to 5%. Comparable sales for the same time period are expected to be between 2% and 4%. Consolidated operating loss for the first quarter is expected to be between negative $15.6 million and negative $17.8 million compared to a loss of $19.9 million in the prior year. Included in this reduction of our operating loss is continued product margin expansion in North America and Europe as well as a benefit related to a $2.9 million onetime wage-and-hour litigation settlement incurred in the first quarter of 2025. This is an improvement of between 140 to 270 basis points as a percentage of sales. We expect this improvement to be driven by 130 to 200 basis points of gross margin expansion and 10 to 70 basis points of SG&A leverage. Before providing our first quarter EPS guidance, I'd like to point out that our loss per share comparison to the prior year is negatively impacted by favorable foreign exchange valuation and interest income items in the first quarter of 2025 that did not repeat in the first quarter of 2026. Also, due to share buybacks in fiscal 2025, we have reduced our basic shares outstanding by approximately 10%, negatively impacting our loss per share guidance by an additional $0.07 per share. With that, we anticipate that our loss per share will be between negative $0.77 and negative $0.87 compared to a loss of negative $0.79 in the prior year. As we consider the outlook for the full fiscal year 2026, with 7 consecutive quarters of positive comparable sales behind us and momentum into the new year, we are confident in our strategy and execution. However, caution is warranted, given the ongoing volatility in the macro environment. We will refrain from giving specific annual guidance, but we will provide some context around how we see the business trending throughout the year. Top line strength continues in North America, and we have lapped a promotional period in our European business last year that, along with a difficult snow season, contributed to the fourth quarter sales decline in the region. Both North America and Europe are trending positive in the first quarter to date. With relative stability in the macro environment, we believe we can grow total sales in the low single digits for the year, inclusive of the negative impact of closed stores worth approximately $12 million in sales. From a product margin perspective, 2025 was at a high point, excluding the stimulus-driven 2021 results. We believe that we will continue to grow product margin year-over-year in 2026 through steady improvements in North America and continued pricing discipline in our international entities. We believe that our private label business will continue to grow, helping drive the overall results, including potential tariff benefits, should the current situation hold throughout the year. In addition to product margin growth, we believe further leverage exists in our occupancy costs and other components that will drive gross margin expansion. With sales growth discussed, we would anticipate leverage of our SG&A costs, further contributing to operating margin expansion. With the previously mentioned assumptions, we anticipate operating margin growth in the 50 to 100 basis point range in fiscal 2026. While effective tax rates will fluctuate by quarter, we anticipate that our full year effective tax rate will be roughly 35% to 40% in fiscal '26 compared to an effective tax rate of 44.4% in 2025. We are planning to open 5 new stores in 2026, all within the U.S. This compares to 6 total stores opened in 2025 and 7 stores in 2024. We plan to close approximately 25 stores during fiscal 2026, including 20 in North America and 5 internationally, and we closed 17 stores during fiscal 2025. We expect our capital expenditures for 2026 to be between $14 million and $16 million compared to $11.1 million in fiscal 2025 and $15 million in 2024. We expect that depreciation and amortization, excluding noncash lease expense, will be approximately $18.9 million, down from $21.3 million in 2025. And we are currently projecting our diluted share count for the full year to be approximately 17.1 million shares. This share count does not include the impact of any future share repurchases, including those under the repurchase agreement announced today. And with that, operator, we'd like to open the call up for questions. Operator: [Operator Instructions] Our first question comes from the line of Mitch Kummetz with Seaport. Mitchel Kummetz: Let me begin with Europe. I just want to better understand what's going on there. In the fourth quarter, other international was -- I think it was a negative 7.5% comp. And I know that you guys shifted your focus to more full price selling in the quarter. And now I think, Chris, you said you're running up 13.2% quarter-to-date for other international. So did something change in terms of the full price selling focus? Or was it just not -- were you not lapping that issue in, like, quarter-to-date? Help me understand why we're seeing such a big swing in the comp performance from fourth quarter to Q1 to date in other international. I assume it's Europe that's driving that. Christopher Work: Yes. Thanks, Mitch. And you are right in your assumption. This is Europe that's driving it. I think as you know, Mitch, following as closely as you have, I mean, we started this kind of change in strategy in late 2024, really trying to kind of reimagine what was happening in Europe as we were growing at quite a clip, but not getting to where we wanted to be from a profitability and cash flow perspective. So our determination at that time was really to slow growth and focus on growing the core business and driving to profitability and cash flow. As you know, things don't move as quickly as you like sometimes, but the team put a plan together. It included some change of people within the entity, and that took some time to kind of gain traction. So as we moved across 2025, we saw that business shrink from about $135 million to just under EUR 135 million, I should say. This included, across 2025, product margin growth of 250 basis points with Q4 up 660 basis points. I think a big win for us as we really reimagine the product portfolio and how we are buying inventory. Even though sales were down pretty meaningfully in Q4, high single digits, we still saw $1.8 million of operating profit growth on the back of really strong full price selling and expense control. And this is really despite a pretty soft winter overall for Q4. So -- also really focused on inventory management, more relevant product. And I think it put us in a spot to start 2026 just in a way better position than we were a year earlier. As you mentioned, we have just under 90 stores now operating in 9 countries. 2026 is off to a really strong start. The 13.2% international comp is really all driven by Europe. We're not immune to the macro forces here, but we are just really laser-focused on operating profit and cash flow. And that includes really trying to drive a high concentration of sales out of our existing units and online, where possible, rationalizing the business to its really most core tasks around just how do we bring great product into the business and serve the customer, improving product margin, managing and reducing expenses where possible and just laser-focused on inventory levels. So I think all of that has really led to what we see now is really 4 months in a row of much better results, but we have a long way to go. So we're encouraged by what we've seen over the last 4 months. But like I said, there's still a lot of work to be done. And hopefully, we've laid a good framework for that to be done in 2026. I think at the end of the day, we continue to believe that this international growth is a positive thing for us, and it really is our best way to serve our customers, which exists all around the world and our brands, and how we bring brands around the world. And then just as importantly, how we identify trends because trends do emerge locally and grow globally. And if we are in more locations, it allows us to see those trends and help them move around the world. So we're definitely encouraged with the last 4 months, in February for sure, and we're hoping to build some continued momentum into 2026. Mitchel Kummetz: And then as far as the comp guide for the quarter, I think you said a 2% to 4% comp. Quarter-to-date, you're running plus 7.5%. I know February is a fairly small month. But why are you anticipating worse comp performance over the balance of the quarter? And then, maybe as you address that question, can you also maybe speak to what you're seeing in terms of like tax refunds so far? And then, how are you thinking about higher gas prices potentially impacting your consumers? Christopher Work: Yes. All good questions. Let me start with kind of the guide, but I think these are going to sort of blend together. Obviously, we had a great February really across the business. International, we just spoke about. But North America was very strong, too, up 6% comp across the 4 weeks of February. I'll tell you, as we started to see the global conflict unfold, we did see some softness in week 5 and have kind of guided the business into what we saw as a slowdown from where we were in February. And so, while still positive, we just saw some softness in the business, and that's how we plan the quarter to come out. Now whether that's tied to rising fuel prices and a little bit of uncertainty in the macro environment, I think that's to be determined, and we just need more time to figure it out. But in relation to putting the guide together and how we saw our comp guide, this is really about kind of looking at what's our current run rate sort of post-February and drawing that out across the rest of the quarter. Operator: Our next question comes from the line of Richard Magnusen with B. Riley. Richard Magnusen: So first off, it looks like your private label penetration was strong in Q4 at around 30%. But during the holiday season, did you notice any change in certain categories regarding the performance of private label versus the branded products? Or was it pretty much the same trends in different categories that you saw throughout the year? Richard Brooks: I'll start, Richard, and then Chris can add in, but -- to give you some context, but I don't think we saw any major changes. There are certain categories that are really, really, really dominated by our private label or own brands. And so sometimes it's hard to compare the branded portfolio versus our private label brands. And so I think each of them are targeting a different segment of our business. And so I don't think I would call out any significant trend direction changes from a private label perspective that I can think of in terms of the category performance for the brands that they performed well. But we also had some new brands that have performed really well, too, on the branded side. So I think it's a combination of both. And the new brands tend to be more focused on the T-shirts and fleece and hats in the more screenable portion of the business. So I think the private label is more dominated by the pants departments within the business. So they're kind of a bit separated in that sense, but both, I think, have done well, contributed positively in Q4. Richard Magnusen: Okay. And then my last -- second question is that Easter looks like just over 3 weeks away. Can you -- what can you tell us about your expectations of timing regarding your spring assortment and any observed consumer preferences and the impact of recent weather in different parts of the U.S. and the cadence of promo around Easter weekend? Christopher Work: Sure. I'll kind of take a crack at it as this kind of falls into our planning arena and let Rick talk. Obviously, Easter has pulled up. So we are -- have started our -- putting our product out in a way that will take advantage of that, obviously, and planning the business to have a little higher bump in the middle part of the quarter versus a little bit later in the quarter. So we're certainly planning on that. Richard, from a promotional perspective, this is just not really our game. We try to stay really full price and full margin. I think you see that within our product margin results here across 2025 and really the last few years as we've really been able to grow product margin, and that's not just our private label business, that's our branded business as well, really working with our partners to refine this. So I don't see anything specific there. We do have a variety of, what I would call, sort of spring season initiatives that, as you would imagine, would play into the gift giving that happens around Easter, but also just into what you would expect from a seasonal floor set. So I'm not going to go into those in detail either. That's kind of part of our product and secret sauce, but we're always trying to bring new in. I think that's what the customer wants. That's what we're really happy we've been able to provide within private label. And it kind of add on to your last question, too, of what we're going to do in our branded portfolio. I mean our branded -- our top 20 brands really continue to gain traction this year as a percent of the total business, which we view as a good thing. I mean we go through these cycles where our biggest brands will kind of ebb and flow. And sometimes they disaggregate and we bring on a lot of new brands and other times they aggregate and hopefully, that leads to really strong results as they grow in breadth and depth, right? So I think all those things are playing into the business. You see it really across all of our categories, whether we're talking about Q4 or whether we're talking about February, we're up with the exception of footwear. Footwear continues to be the one area of challenge for us, but that's our model. So we're really excited to be running a total comp and obviously running a big portion of the business positive. Operator: [Operator Instructions] Our next question comes from the line of Marcus Belanger with William Blair. Marcus Belanger: I'm on for Dylan Carden. I just wanted to ask a follow-up to an earlier question about international. Obviously, you've seen a lot of volatility in that area. Can you tell me what you guys are doing to stabilize the area and have greater visibility into future growth? And then I have a follow-up. Christopher Work: Yes. I'll just -- I'll kind of add on to my earlier comment and let Rick jump in if he has anything to add. I mean I think, like all of our business, it really does start with product. So as we thought about reimagining the business at the end of '24, part of it was slowing growth just to make sure the focus was really laser-focused. But it was about looking at products and saying, how do we see trends, see where that customer is at, see who that customer is and bring it to them in a way that they will adapt to and they'll be excited about. And of course, we can sell it at full price. So this was really about rethinking that, really starting to look at our assortments and who we are carrying and how we are carrying them and what they were saying to the customer and starting to push that into the business in a different way than we've been doing. Obviously, as you can imagine, that takes time when you buy seasons ahead of time. So for us, we knew in the turnover at the end of late 2024 that it would be sort of a back-to-school holiday time period where we start to see this take shape. And we were pretty encouraged by some of the early areas we reimagined in that and what those meant going into Q4 and then some of those same items that we were dropping even late into Q4 that we're driving into the 2026. So it's really about product. I mean there's a huge part of execution beyond that of your store environment and the people in stores and how they bring the product to life. We continue to invest in that. We continue to invest in our teams there, just like we do here in North America. I mean this is really about driving a human-to-human relationship, right, of how you connect with your customer and how you talk with them. And so that's been part of what we've driven as well. And we think when you have the right product and you can bring it to them in a way that you really connect with them, I think that drives a different experience and hopefully one that brings that customer back again and again. Richard Brooks: I'd just add that -- again, just for context, I think we have looked deeply at every other -- every area of our business in Europe. And as Chris said earlier, that we made some personnel changes in terms of some of the leadership in Europe and now we're leading particularly in some really key areas. And we're just leaving no stone unturned as we revisit every aspect of what we're doing. And again, I'm really encouraged, as Chris has laid out, with the Q4 performance. I'd just highlight again that, that was against a very -- one of our worst snow years ever in Europe, and we have a very dominant position in the snow retailing business in Europe. So despite the difficult snow year, we still were able to improve the bottom line results by a pretty good amount. So we're really encouraged. I think we're heading in the right way. But as Chris said, we have a long ways to go and a lot of work to do and more work to come. And we're very, very focused on making sure that we are continuing to improve the assortments, bring newness into the business, make sure that we're really delivering great experience for customers and commercializing our offering as we think about delivering to customers across all channels. Marcus Belanger: For stores, where are you guys in terms of how many more years maybe do you guys think about closing stores? And then, for the new stores that you are opening for this year, it looks like you're going to open up 5, how are -- over the last couple of years, how have those new stores been performing? Are they at a higher -- mature? Do you think that they're going to hit a higher sales per store maturity curve than your other stores? Just any comments on basic productivity for the first year or 2 years for your new stores? Christopher Work: Yes, sure. And let me -- I'll talk about new stores real quickly and then we can talk about closures. I think this is really -- I would say, post-pandemic, you've seen our store openings slow from historical levels, which we kind of knew was going to be part of it, obviously, with North America more built out and international being our area of further growth over the last few years. As we've talked about here on the call today, we have slowed international just from a standpoint of really focusing on profitability and cash flow. So the store opening cadence is much less. I think when you think about opening approximately 5 stores a year in North America, the last few classes of stores have been really good. We've been able to be selective in where we're opening and really try to fill markets or fill opportunities we wanted to get into for a long time. There's still a lot of -- a fair amount of good assets in the country that we want to get in. We just have to find that right fit, right, that right location within the mall at the right economics that makes sense for us to be able to invest. And I'm quite happy with how the real estate team and our store operations team has performed here in the last few years in our openings and each class having more winners than tougher situations. So that's a really good thing. From a closure perspective, we started more significantly closing stores in 2023. And then in 2024, a few more. And last year was around 17. We are forecasting we'll be ahead of that 17 number this year, although, I'll tell you, these are forecasts. You're never quite sure what's going to happen in those markets and how malls will move or economics can change. But we are expecting to close approximately 20 stores in North America and 5 internationally. And our closure process is -- as you would expect, it's a diligent process, right? It's looking at each trade area we're in, each market we're in. Are there underperformers, are there opportunities for consolidation and trying to figure out where those opportunities are. I mean we look at everything from sales and profitability, what the store's impact on that trade area is in regards to how it helps to fill product and even kind of leverage with the A centers in the market, obviously, the conditions of the centers, who the landlords are, how they're investing in the center. We try to really manage the peak performance. And if that peak performance was 10-plus years ago, sometimes it speaks to where that center is headed, right? And then obviously, we try to do whatever we can around store economics before we walk away. But all those things combined, it's about sales growth. And I think that's why when we talk about 2026, we talk about growing sales in the low single digits despite closing some stores that are about $12 million impact. So at the end of the day, I mean, we're really just trying to consolidate and we've given ourselves a challenge for quite some time, but we don't want to have one more store than we need in any given trade area, right? That's just extra capital and inventory you've got tied up. So we're really trying to be intentional about it. Internationally, this will be a few more closures than we've had historically -- in 2026 is expected, and that's really just kind of, I would say, trimming that portfolio as well, right? We're trying to look at stores and say, okay, these ones are definitely working. They're great locations. There's maybe a mid-class that is -- that we're happy with, but we think we can still do better. And there's a third class that's kind of the lower class of stores that we are like, all right, we really have to make movement here or we will see consolidation. And that's where we're kind of at, at this point is kind of going, okay, some of these are not making the traction we need and they're closures to make the overall business better. Richard Brooks: I'd just add in that -- again, with a little bit longer context, as Chris said, 10, 15 years out. What we're seeing in the U.S. is actually finally the end of, I think, the final leg on a bunch of mall locations at the lower end C- and D-volume mall locations, where we had traditionally been able to make some money, but now they've just got to the point where they're just not working anymore. But the important point in this is that, as you saw in our results in '24 and '25, where we closed units, total sales grew in North America. So what we're really talking about is how customer behavior has changed and moved to different centers within the trade areas. And I think that's -- this is kind of a long-term tail of playing out of -- that our malls are winning and the lesser malls are finally really losing to the point of closure. And we're often one of the last retailers to leave in some of these centers. And -- but it's not about per se sales declining; it's about how customers are moving to the better retail experiences in the stronger and better malls. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Rick for closing remarks. Richard Brooks: All right. Thank you again for all of your questions today, and we always appreciate your great interest in what we're doing and the progress we're making towards building back towards our historical profitability levels. And as I said earlier, I really want to thank everyone on our team and our partners and our brand partners and the support as we really drive better results. So much appreciated from everybody, and we'll talk to you again in June. Thank you. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Eastman Kodak Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. I would now like to hand the conference over to your speaker host, Anthony Redding. Please go ahead. Anthony Redding: Thank you, and good afternoon, everyone. Welcome to Kodak's Fourth Quarter and Full Year 2025 Earnings Call. At 4:15 p.m. this afternoon, Kodak filed its annual Form 10-K and issued its release on financial results for the fourth quarter and full year of 2025. You may access the presentation and webcast for today's call on our Investor Center at investor.kodak.com. During today's conference call, we will be making certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. We intend for these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Investors are cautioned not to unduly rely on forward-looking statements and such statements should not be read or understood as a guarantee of future performance or results. All forward-looking statements are based upon Kodak's expectations and various assumptions. Future events or results may differ from those anticipated or those expressed in the forward-looking statements. Important factors that could cause actual events or results to differ materially from these forward-looking statements include, among others, the risks, uncertainties and other factors described in more detail in Kodak's filings with the U.S. Securities and Exchange Commission from time to time. All forward-looking statements attributable to Kodak or persons acting on its behalf only apply as of the date of the presentation and are expressly qualified in their entirety by the cautionary statements included or referenced in this presentation. Kodak undertakes no obligation to update or revise forward-looking statements to reflect events or circumstances that may arise after the date made or to reflect the occurrence of unanticipated events. In addition, the release just issued and the presentation provided contain certain measures that are deemed non-GAAP measures. Reconciliations to the most directly comparable GAAP measures have been provided with the release and within the presentation on our website in our Investor Center at investor.kodak.com. Speakers on today's call are Jim Continenza, Kodak's Executive Chairman and Chief Executive Officer; and David Bullwinkle, Kodak's Chief Financial Officer and Senior Vice President. We will not be holding a formal Q&A during today's call. However, as always, the Investor Relations team is available for follow-up. I will now turn the call over to Jim. Thank you, and have a great day. James Continenza: Welcome, everyone, and thank you for joining the Fourth Quarter and Full Year 2025 Investor Call for Eastman Kodak. I'm proud to say our long-term plan continues to be on track. We finished the quarter and the year very strong. It's almost a tale of 2 halves. If you look at the first and second quarter and look at the results of the third and fourth and the closet of the year, and we're going to cover that through the presentation, you'll see the difference. And the difference really comes from the long-term investments that we've made are really starting to pay off. One piece you'll notice going forward is the pension fund and the reversion. As you look at the reversion in the 2025 numbers, right, it really took place in late November, early December. So the numbers you're seeing, the interest expense and the reversion had very little impact. These are true operating numbers within the business. By completing that, we're able to focus more clearly on our financial reporting and operations. It simplifies the company and easier for everyone to understand the true impact of the operations. And I'm proud to say our balance sheet hasn't been this strong in many years. We have continued to reduce debt over the last several years. We've reduced over $40 million of interest expense, and that all falls to the bottom line. So where does Kodak go from here, right? We stabilized the business. We put the investments in place. We fixed the balance sheet over several years. We've lowered our interest. We're poised for growth. And that is where we're going. When you look at the company going forward, heavily delevered, streamlined operations and investments in new products. We have continued to rationalize the business, focused on smart revenue, took out over $200 million of operating expense over the last few years, invested heavily in new infrastructure and new products. Today, Kodak is well positioned to drive growth. Kodak is in a good position between balance sheet and operations to focus on free cash flow. Highlights for the fourth quarter, as I said, it's a tale of 2 halves of the year, the success of the third quarter carried into the fourth quarter as we expected, increase in both revenue and profits. Revenues of $290 million, an increase of 9%. Fourth quarter revenues grew for both AM&C and Print. Said differently, both sides of the company are now contributing to our growth and our success. Gross profit percentage of 23%, an increase of 4 percentage points demonstrates our value of executing on smart revenue. Now let's jump to highlights of the full year. Consolidated revenues of $1.069 billion, an increase of $26 million or 2%. Gross profit percentage of 22% compared with 19% for the prior year is an increase of 3 percentage points. What's driving these results are a number of factors: streamlined operations focused on innovation, putting that customer first and continuing to drive smart revenue. Moving on, let me give you an update on AM&C. As we said for the last several years, right, we're a great industrial manufacturer and primarily American manufacturer, bringing back that Park and investing into our core competencies, we're starting to see the results truly pay off. When you look at revenue, up 25% for the fourth quarter. We launched owned direct distribution brand of still films to stabilize the market and to provide distributors and retailers, consumers with a more reliable source. Many Oscar nominees were shot on Kodak film. As an example, One Battle After Another, Sinners, Marty Supreme and many others. We've seen a real resurgence in our film group. And on to Pharma, we've invested into our Pharma group. And let's be very clear, our goal here is to get Class II certification. In the interim, we also launched 4 new products from PBS to Water for Injection. Continued highlights, right? Again, remind everyone the 3 core things Kodak does today: brand licensing, AM&C and commercial print. I'm pleased to say our investment in commercial print has been paying off. We continue to be heavily committed to Print. Areas of growth for our Print division have been in North America in our Plates division, imprinting systems. I'm proud to say finally, the PROSPER 520 is moving from controlled introduction to full production. We've also invested in a new rapid response service system to better serve our customers, and we continue to incorporate AI and machine learning to also better serve our customers. These investments will help drive additional growth and better margins. As I touched on brand licensing, something we should not forget, it continues to grow. It's a significant contributor to our gross profit. It adds value, increased awareness of Kodak, especially among the next-generation of consumers. Our brand continues to grow outside the U.S., particularly in Asia, there are stores that sell only Kodak-branded clothes and materials. I will now turn it over to Dave to discuss the fourth quarter and full year financial results. David Bullwinkle: Thanks, Jim, and welcome, everyone. Thank you for joining us today. This afternoon, we filed the annual Form 10-K for the year ended December 31, 2025, with the SEC. As always, I encourage you to read this filing in its entirety. Before we review the details for the quarter and full year, I want to address a few significant developments that occurred after the filing of our Form 10-Q for the third quarter 2025. In November 2025, following the full settlement of all Kodak retirement income plan obligations, we successfully completed the pension reversion process. This transaction generated approximately $1.023 billion in pension reversion proceeds, a combination of cash and investment assets that strengthens our balance sheet, establishes an overfunding of the new Kodak cash balance pension plan, reduces our ongoing interest expense and supports future growth. Here is a brief overview of the pension reversion proceeds which totaled $870 million of net benefit to the company after excise tax payments of $153 million on the reversion surplus. Number one, debt reduction. Under the November 2025 term loan credit agreement amendment, we paid $312 million of cash proceeds to reduce the term loan principal to $200 million and to satisfy accrued interest and prepayment premiums, significantly lowering our ongoing interest expense by approximately $40 million annually and further strengthening our capital structure. Number two, funding the new pension plan. We contributed $251 million in investment assets and $5 million in cash to fund the new Kodak cash balance plan. The establishment of this replacement plan provides the same level of benefit for active Kodak employees that was available under the KRIP plan, which is very rare in pension terminations. Number three, net proceeds to Kodak. After the pay down of debt, replacement plan funding and excise tax payments, Kodak received net cash of $144 million and $158 million in investment assets. $9 million of these investment assets was redeemed in the form of cash proceeds in December 2025. As a result, Kodak ended 2025 in a net positive cash position relative to our $300 million in term loan and Series B preferred equity obligations with a cash balance of $337 million as of December 31, 2025. Lastly, on March 11, 2026, the company filed the 2026 Series B amendment effective on the same date. In summary, the amendments extended the mandatory redemption date of the Series B preferred equity obligation out 3.25 years' time from the effective date of the amendment to June 2029. It revised the terms of the cumulative dividends payable to a rate of 6% per annum from 4% previously. It reduced the conversion price from $10.50 to $10 per share, and it revised the mandatory conversion terms. In parallel to this amendment, the term loan credit agreement was also amended on March 11, 2026, and requires the company to further pay down the term loans by $50 million within 5 days of the effective date and by another $50 million on or before June 1, 2026. As a reminder, prior to this amendment, the Series B preferred equity obligation of approximately $100 million was coming due in May 2026. Also note, that the term loans accrue interest at a rate of 12.5%. Thus, by extending the preferred equity obligation, the company will be using $100 million to pay down the higher interest rate bearing term loan balance over the next 3 months, which will further strengthen the company's liquidity position as well as reduce our weighted average interest rate and therefore, cash used for interest and dividend payments. Please refer to the annual Form 10-K filed with the SEC today for further information and disclosure on all of these matters. I will now review the financial highlights, including operational EBITDA and cash flow performance for both the fourth quarter and full year 2025. Despite a challenging global environment marked by economic and geopolitical uncertainty, including pressures on global trade and inflation, we delivered strong financial results. Our progress is especially evident in gross profit and operational EBITDA, demonstrating continued execution against our priorities and long-term objectives. Turning to Slide 7. Key highlights for the fourth quarter of 2025 include revenue of $290 million, an increase of $24 million or 9% year-over-year. Revenue increased $19 million on a constant currency basis. Gross profit of $67 million, up $16 million or 31% from 2024. Foreign exchange had no impact on gross profit. The gross profit percentage was 23% compared to 19% in the prior year quarter. Our GAAP net loss of $108 million compared to GAAP net income of $26 million in the fourth quarter of 2024 represents a decline of $134 million. The primary drivers impacting fourth quarter GAAP net loss are $153 million related to excise tax expense on the KRIP reversion surplus and a $7 million loss on early extinguishment of debt tied to the term loan paydown using reversion proceeds. These were partially offset by a $66 million gain on the settlement of the KRIP plan. Adjusting for these nonrecurring items and excluding noncash asset impairment charges and noncash changes in workers' compensation and other employee benefit reserves impacting both periods, net loss was $12 million for the fourth quarter of 2025 compared to net income of $27 million in the prior year quarter for a decline of $39 million. This decline was largely due to a $41 million year-over-year reduction in noncash pension income, excluding service cost component and a gain on the settlement of KRIP, stemming from a lower expected return on KRIP assets following a strategic shift in investment strategy leading up to the planned termination and a $7 million increase in restructuring costs compared to the prior year quarter as we continue to streamline our global operating model. All these factors weighed on our year-over-year comparison, each reflects deliberate decisions that enhance the company's long-term stability, strengthen our balance sheet and position us to drive sustainable value creation going forward. For the quarter, operational EBITDA was $22 million, up $13 million or 144% year-over-year, driven by improved pricing and higher volume, partially offset by higher manufacturing costs and continued global cost increases. Our operational EBITDA increased $15 million year-over-year when adjusted for noncash changes in workers' compensation and other employee benefit reserves impacting both periods. Moving on to the company's cash performance for the fourth quarter of 2025 as shown on Slide 8. The company ended the quarter with $337 million in unrestricted cash. On an adjusted basis, cash and cash equivalents increased by $24 million year-over-year after excluding the favorable impact of net proceeds from the KRIP reversion, net of debt-related repayments and excise tax as well as the effects of changes in restricted cash and foreign exchange. Turning to Slide 9, which summarizes our full year 2025 results. Consolidated revenue was $1.069 billion, an increase of $26 million or 2%. On a constant currency basis, revenue increased $15 million. Gross profit improved $29 million or 14%. On a constant currency basis, gross profit improved $28 million. Gross profit percentage was 22% for 2025, up from 19% in the prior year period, reflecting stronger pricing discipline and continued operational execution. The GAAP net loss for the full year 2025 was $128 million compared to GAAP net income of $102 million in 2024, for a decline of $230 million. However, similar to the impact of nonrecurring items on our fourth quarter results, full year net loss includes the impact of pension-related excise tax and a loss on early debt extinguishment, partially offset by a gain on the settlement of KRIP. In addition, the prior year period includes a net gain on sale of assets and both years reflect noncash asset impairment charges and noncash changes in workers' compensation and other employee benefit reserves. Adjusting for these current and prior year items, net loss was $11 million for 2025 compared to net income of $87 million in 2024, a decline of $98 million. This is largely driven by $111 million reduction in noncash pension income, excluding service cost component in 2025 and a gain on the settlement of KRIP and a $13 million increase in restructuring costs when compared to the prior year. Our full year operational EBITDA was $62 million, an increase of $36 million or 138% year-over-year. This increase was driven by improved pricing, operational efficiencies and lower inventory reserve adjustments in our EPS business, partially offset by higher aluminum and manufacturing costs. There was no net impact on the year-over-year change in operational EBITDA when adjusted for the impact of foreign exchange in the current year and the impact of noncash changes in workers' compensation and other employee benefit reserves in both periods. Moving to Slide 10, which outlines our full year 2025 cash performance. As I stated earlier, we ended the year with $337 million in unrestricted cash, up $136 million from year-end 2024, largely reflecting proceeds from the KRIP settlement and asset reversion and operational improvements. We reduced the principal balance of our term loans by $303 million, bringing the year-end balance to $200 million. As a result, Kodak is in a net positive cash position relative to our term loans and Series B preferred equity obligations, significantly strengthening our balance sheet and supporting future growth. Excluding the favorable impact of the KRIP settlement and reversion proceeds, net cash provided by operating activities was $21 million, an improvement of $28 million compared to 2024, driven by stronger operating performance, partially offset by working capital changes. Excluding the net impact of the KRIP reversion, debt-related repayments, excise tax, changes in restricted cash and the effects of foreign exchange, we decreased our use of cash year-over-year by $26 million. Finally, as disclosed in our annual Form 10-K, we remain in full compliance with all financial covenants. I will now turn the discussion back to Jim. Thank you. James Continenza: If you can leave here with anything that you've heard or seen today, I want to make sure you leave with this message. Kodak is focused on growth following a very strong 2025. We continue to be one Kodak. Customer-first has not changed. Today, we are a diversified industrial manufacturer with one goal, winning. We put our customers first because we only win when they win. We had a very strong finish to 2025. Year-over-year, fourth quarter 2025 revenue increased by $24 million or 9%. Gross profit increased by $16 million or 31%. Operational EBITDA increased by $13 million or 144%. Growth in key businesses, plates and in film. Kodak today is on a very solid foundation for growth. We have a strong balance sheet with more cash than debt. In many years, that has not been the case. Back in second quarter, we had approximately $700 million of debt. Today, we're sitting at $300 million with $300 million plus of cash. We're on the way of taking out another $100 million of long-term debt, which will leave us with over $200 million of cash and $200 million of debt. We'll continue to strengthen that balance sheet, which allows us to execute on growth in our long-term plan. All 3 businesses, Print, AM&C and Brand Licensing are contributing. And inside of that, we have promising new investments in our pharma division, in our battery coating. We continue to invest in the business for a long-term plan. We are pleased with the direction we're in. We have a long way to go. But I can tell you, this is a good start, especially having the balance sheet out of the way. We're really truly focused on growth in our business. I would be remiss if I didn't again thank the leadership team. Over the last several years, we made over a 50% change in the leadership and a melding of the best of what Kodak had and the best of the skills that we knew we needed to bring in to help drive the fundamentals of this company to bring Kodak where it is today. We look forward to the future, and thank you for your support. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Inovio Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, March 12, 2026. I would now like to turn the call over to Jennie Wilson. Please go ahead. Jennie Willson: Good afternoon, and thank you for joining the Inovio Fourth Quarter and Full Year 2025 Financial Results Conference Call. Joining me on today's call are Dr. Jacqui Shea, President and Chief Executive Officer; Dr. Mike Sumner, Chief Medical Officer; Steve Egge, Chief Commercial Officer; and Peter Kies, Chief Financial Officer. Today's call will review our corporate and financial information for the quarter and year ended December 31, 2025, as well as provide a general business update. Following prepared remarks, we will conduct a question-and-answer segment. During the call, we will be making forward-looking statements regarding future events and the future performance of the company. These events relate to our business plans to develop Inovio's DNA medicines platform, which include clinical and regulatory developments and timing of clinical data readouts and planned regulatory submissions, our interactions with the FDA regarding our BLA for INO-3107, including our yet to be scheduled meeting with the FDA to discuss eligibility for the accelerated approval program. The potential benefits of INO-3107, along with capital resources including the sufficiency of our cash resources, our expectations regarding competition, the size and growth of the potential market for INO-3107, if approved, and our ability to serve those markets. The rate and degree of market acceptance of INO-3107 and strategic matters. All of these statements are based on the beliefs and expectations of management as of today. Actual events or results could differ materially. We refer you to the documents we file from time to time with the SEC, which, under the heading Risk Factors, identify important factors that could cause actual results to differ materially from those expressed by the company verbally as well as statements made within this afternoon's press release. This call is being webcast live, and a link can be found on our website, ir.inovio.com, and a replay will be made available shortly after this call is concluded. I will now turn the call over to Inovio's President and CEO, Dr. Jacqui Shea. Jacqueline Shea: Good afternoon, and thank you to everyone for joining today's call. These are very exciting times for Inovio with our first BLA for INO-3107 as a potential treatment for adults with recurrent respiratory papillomatosis or RRP, currently being reviewed by the FDA. In late December last year, we were pleased to announce that the FDA accepted our BLA review under the accelerated approval program. The FDA granted a standard 10-month review with a Prescription Drug User Fee Act or PDUFA target date set for October 30 of this year. While the BLA was accepted under the accelerated approval program, in the file acceptance letter, the FDA noted as a potential review issue, its preliminary conclusion that the company has not provided adequate information to justify eligibility for the accelerated approval program. This preliminary conclusion was made during the initial 60-day filing review period and was the first time a potential issue with respect to eligibility have been raised. As Mike will explain later in the presentation, we strongly believe that INO-3107 does fulfill the criteria for review under the accelerated approval program, by meeting an unmet medical need and providing a meaningful therapeutic benefit over existing treatment. The FDA has agreed to meet with us, we have provided additional documentation, and we're waiting for them to provide a meeting date. In the meantime, we are continuing to advance our commercial preparations, focusing on optimizing and expanding our resources towards our October PDUFA date. To achieve this, Inovio has taken steps to further conserve its financial resources, rescoping projects and activities and eliminating roles that don't directly support our primary goal for advancing INO-3107 towards U.S. approval. These efforts have enabled the extension of our estimated cash runway into the fourth quarter of this year. While the majority of our resources are directed to advancing our lead candidates towards approval, we are continuing to leverage the power of partnerships to advance other promising candidates in our pipeline. We have recently announced an exciting opportunity to build on our research in glioblastoma through an innovative Phase II adaptive platform trial sponsored by the Dana-Farber Cancer Institute, where we'll collaborate with Akeso to evaluate INO-5412 in combination with their novel PD-1, CTLA-4 bispecific antibody checkpoint inhibitor. Like our lead program, INO-3107, this program utilizes the antigen-specific cytotoxic T cell generating ability of our DNA medicines platform, but in this instance, to target cancer cells. We have also continued to advance some of our earlier-stage next-generation DNA medicine candidates, which I'll touch on later in this presentation. I look forward to advancing these programs in tandem with our top priority for 2026, achieving FDA approval of our first product and bringing INO-3107 to patients. Now I'll turn it over to Mike for some additional insights on our regulatory progress with 3107. Mike? Michael Sumner: Thanks, Jacqui. As Jacqui outlined, we have made significant progress with our BLA as outlined on this slide, including the acceptance of our file for review under the accelerated approval program, with a PDUFA date of October 30, 2026. We believe our BLA makes a strong argument outlining how INO-3107 meets an unmet medical need and provides a meaningful therapeutic benefit over existing treatments, thus fulfilling the accelerated approval program criteria. Our next step is to discuss this with the FDA. In preparation for this meeting, they had requested that we complete an assessment aid, which we submitted in February. In this document, we reiterate and expand on our rationale for accelerated approval review. It is important to note that while we wait to meet with the FDA, the BLA is under active review, and we have been responding to routine requests for information. In addition, we submitted an updated protocol for our confirmatory trial to the IND and are awaiting feedback from the agency regarding finalizing the study design. I'd like to take a moment to focus on why we believe 3107 meets the accelerated approval criteria. Following the unexpected full approval of PAPZIMEOS in August last year, the regulatory landscape changed with respect to the requirements for eligibility. Based on published FDA guidance, when there's an already approved product, eligibility for accelerated approval depends on a candidate's ability to provide a meaningful therapeutic benefit over existing treatments and its ability to meet a remaining critical unmet need among patients. We believe that 3107 meets both of those criteria based on demonstrated efficacy and improved safety profile that does not include required surgery during the dosing window and a differentiated mechanism of action that provides the ability to treat patients who are not able to be served by existing therapy. Getting into more detail. In our trial, the majority of patients experienced fewer surgeries after treatment with 3107, with most experiencing a 50% to 100% reduction compared to the year before treatment. That clinical benefit continued to improve in the second 12-month period post treatment with half of the patients requiring 0 surgeries during that time. Efficacy was achieved without the vast majority of patients requiring surgery during the dosing window, a key differentiating advantage of the 3107 safety profile. Remember, in our Phase I/II trial, our protocol counted every surgery conducted after day 0. In contrast, surgeries conducted during the 12-week treatment window in the PAPZIMEOS trial were not counted against the efficacy end point, and 72% of the reported complete responders in the single-site Phase I/II trial had at least 1 surgery during the 12-week dosing window. To maintain what is referred to as minimal residual disease, or MRD, a protocol that is required for the efficacy of that product and is included in the label. Additionally, 3107 offers a differentiated mechanism of action, which provides the ability to treat patients who are not served by existing therapy, and thus address an unmet need in the RRP treatment landscape. PAPZIMEOS utilizes a gorilla adenoviral vector, and it is well established in the scientific literature that efficacy of adenoviral vectors may be impacted by preexisting neutralizing antibodies as they have been shown to limit the immune response that patients with these antibodies can generate. In addition, several immune factors relating to the papilloma microenvironment were identified by the investigators as being linked to the lack of efficacy for PAPZIMEOS. In contrast, ad data published in Nature Communications shows that efficacy of INO-3107 is not impacted by the papilloma microenvironment. We look forward to discussing our rationale for review under accelerated approval with the FDA. And with that, I will now turn it over to Steve for a brief commercial update. Steve? Steven Egge: Thanks, Mike. The burden of RRP on patients is significant, and there's an urgent need for treatment options that reduce the need for repeated surgery. RRP is characterized by chronic wart-like growth called papilloma, to grow in the respiratory tract and can cause difficulty speaking, swallowing and breathing. Surgery is still the standard of care and patients have numerous surgeries, sometimes hundreds of surgeries in the most severe cases throughout their lifetime. Every surgery matters to patients because the risk is well established. Every surgery carries the risk of permanent damage to the vocal cords and airways, and the cost of surgery can have a significant impact as well. Traveling hundreds of miles for specialized RRP care, missing work and social functions while preparing for or recovering from surgery, the anxiety and frustration of impaired voice quality making it difficult to communicate, and the psychological trauma of undergoing repeated surgeries. This is why we're committed to delivering on the potential of 3107 for RRP patients. And that potential has been validated in market research, which supports our belief that this product is approved to become the preferred treatment based on its efficacy, tolerability and simple treatment regimen. I shared these insights previously, but I think they bear repeating. Physicians we engaged in market research were most interested in the fact that the vast majority of patients by 50% to 100% reduction in surgery from 3107 and for many of them, that clinical benefit continued to improve over time. Physicians were similarly impressed with the tolerability data, which shows that 3107 was generally well tolerated, limiting the impact on patients return to daily life. This is important considering the treatment protocol includes 4 doses over a relatively short period of time. And in terms of the treatment regimen itself, 3107 takes into account concern of both physicians and RRP patients. It can be administered in the physician's office without an ultra cold chain requirement. The device is simple to use and importantly, there's no requirement for surgeries to maintain minimal residual disease during the treatment window. This is a key area of differentiation from Precigen's gorilla adenoviral based therapy, which, as Mike noted, requires scoping and surgery during the treatment window to maintain minimal residual disease. Precigen's data publication indicates that these surgeries are required to mitigate the effect of the immunosuppressive papilloma microenvironment to maximize the chance of clinical benefit from the product. We believe this key difference makes 3107 a more patient-centric approach to treating RRP. I will also mention that the recently published RRP foundation position statement on the management of adults with RRP now recommends immunotherapy as first-line treatment for RRP and notes that 3107 if approved, would also be included as a first-line treatment option. I would also like to share just a few updates on our ongoing commercial launch preparations. Over the past year, we've executed critical market research, which informed strategic choices on launch preparations for 3107. We completed targeting segmentation of product positioning work and developed our pricing strategy. On the operational front, we've selected key commercial partners, including our third-party logistics provider, specialty distributor, specialty pharmacy, patient services hub and our agency of record. We are also finalizing our go-to-market model and planning the build-out of our commercial organization. I look forward to providing further updates on our progress next quarter. I'll now turn it back over to Jacqui for a pipeline update. Jacqueline Shea: Thanks, Steve. While we remain steadfastly focused on INO-3107, in the past few quarters, we've also provided some important updates on how we're continuing to advance our DNA medicine platform. That includes promising Phase I proof-of-concept dMAb data published in Nature Medicine in October of last year, which demonstrated the technology's ability to durably and tolerably produce monoclonal antibodies, a complex protein within the human body for up to 72 weeks without generating antidrug antibodies. Additional data presented this year has now demonstrated consistent production of dMAbs out to 96 weeks. Our DPROT technology builds on this research, aiming to enable additional types of complex proteins being made within the body. Preclinical work evaluating the potential to expand into in vivo production of other types of therapeutic proteins, which presented at the World Federation of Hemophilia Global Forum last November, including our first data on Factor VIII production. We see great potential for this DPROT technology to treat multiple diseases and are actively seeking partnerships to advance additional rare disease targets into clinical evaluation. We also announced an exciting opportunity to build on our research in glioblastoma, or GBM, the most common and deadly brain cancer, through an innovative Phase II adaptive platform trial sponsored by the Dana-Farber Cancer Institute. In this trial, we will partner with Akeso to evaluate INO-5412 in combination with cadonilimab, their first-in-class PD-1, CTLA-4 bispecific antibody checkpoint inhibitor. The trial is planned to initiate in the second half of this year. INO-5412 is composed of INO-5401, which encodes for 3 tumor-associated antigens. And then INO-9012, which encodes for IL-12 and immune stimulants. When combined with a checkpoint blockade, this targeted DNA immunotherapy has the potential to overcome the limitations for immune checkpoint therapy alone by stimulating a T cell-based immune response against the tumor antigen, and driving T cell infiltration into the GBM tumor micro environment. Combining 5412 with Akeso's novel checkpoint modality represents an important evolution of our research in GBM, building on our previous data showing the potential to improve patient outcomes and highlights our ongoing commitment to advancing innovative treatments for rare diseases with significant unmet need. We are looking forward to collaborating with these 2 trailblazing partners and leveraging a unique opportunity to efficiently advance another promising late-stage candidate. Now I'll turn it over to our CFO, Peter Kies, to give financial update. Peter? Peter Kies: Thanks, Jacqui. Today, I'd like to provide an overview of Inovio's financial results for the fourth quarter and full year of 2025. As Jacqui noted, our primary goal is to advance INO-3107 towards approval, and we remain focused on directing resources and extending our cash runway towards a potential launch date in 2026. With the October PDUFA date in mind, we have further prioritized programs and resources, including recently reducing head count by approximately 15% and have focused on continuing to reduce spending to extend our cash runway. We now estimate our cash runway to take us into fourth quarter 2026. This projection includes an operational net cash burn estimate of approximately $22 million for the first quarter of 2026. Historically, our first quarter operational net cash burn runs higher than other quarters. These cash runway projections do not include any further capital raising activities that we may undertake. We finished the fourth quarter of 2025 with $58.5 million in cash, cash equivalents and short-term investments compared to $94.1 million as of December 31, 2024. Turning to our results for 2025. Our total operating expenses dropped from $20.5 million in the fourth quarter of 2024 to $17.5 million in the fourth quarter of 2025. Our full year operating -- operational expenses decreased 23% from $112.6 million in 2024 to $86.9 million in 2025. Inovio reported a net income for the fourth quarter of 2025 of $3.8 million or $0.06 per share and a dilutive net loss per share of $0.26. Our total net loss for the full year of 2025 was $84.9 million or $1.81 per share basic and dilutive. The net income for the fourth quarter 2025 was primarily driven by $21.2 million noncash gain on fair value adjustment related to our warrant liability as the fair value of the warrants fluctuates with our share price and other market inputs, the adjustment can result in significant variability in our reported net income or loss. As a reminder, you can find our full financial statements in this afternoon's press release as well as in our annual report Form 10-K filed with the SEC today. And with that, I'll turn it back over to Jacqui. Jacqueline Shea: Thanks, Peter. I'd now like to pause and open up the call to answer any questions you might have. Operator? Operator: [Operator Instructions] And we have our first question from Ted Tenthoff with Piper Sandler. Edward Tenthoff: Great. I wanted to first start just with respect to the conversations with the FDA upcoming regarding accelerated approval. Are there any additional data that you would need to submit? Or what other factors will go into that conversation for potentially transitioning the review to accelerate our approval? Jacqueline Shea: Thanks, Ted. Great question. So there's no new clinical data. However, we have already submitted new documentation to the FDA in the form of an assessment aid, which we submitted in February. So we are now waiting for the FDA to get back to us regarding the date of the meeting. Mike, anything you want to add to that? Michael Sumner: Yes. The only thing I'd add, Ted, is we utilize that document to sort of reiterate what we put in our original BLA submission and really expand on our rationale for accelerated approval review. So we're -- as I mentioned, we're looking forward to having those discussions with the agency. Operator: We have our next question from Jay Olson with Oppenheimer. Jay Olson: Thanks for providing this update and taking our questions. We had a couple of questions. I guess maybe to start with, if you do eventually gain alignment with the FDA on a priority review, how would a 6-month priority review timeline impacts your ability to launch? And any launch preparations that you have underway. If you could just talk about that, that would be great. And then we have 1 follow-up, please. Jacqueline Shea: Thanks, Jay. Nice to hear from you. So our focus at the moment is really on ensuring we have align with FDA for review under the accelerated program. We're not really focused on priority review at this stage. However, having said that, we are well advanced in our commercial preparations. And I'll ask Steve to make any comments here. Steven Egge: Yes. So as I mentioned in the prepared remarks, I mean, we've done a lot of market research with physicians, with patients, with payers. So we feel like we know the market opportunity quite well. We've built kind of our strategies around that. We've got our commercial partners kind of onboard or selected. And we will be prepared to get out of the gate really, really quickly, should we get approved. So I think we're doing everything that we need to, to be prepared and to move very quickly once the FDA makes a decision. Jay Olson: Okay. Great. And then if we could follow up on the publication in Nature Communications and The Laryngoscope. Can you just talk about any feedback that you got from KOLs and patients and how you might anticipate that feedback to translate into the uptake trajectory upon approval? Jacqueline Shea: Yes. Great question, Jay. So as we mentioned on the call, we do believe that we have the preferred product profile in this space, and that's based across efficacy, tolerability in a very patient-centric treatment regimen. And when we have conducted research and with research conducted by third-party providers, both patients and physicians really appreciated and preferred the product profile for 3107. And what was really interesting to them was the fact that the majority of patients see a significant reduction in the numbers of surgeries. So 72% of patients see a 50% to 100% reduction in the first year following treatments, and that improves up to 86% in the second year with 50% of patients in the second year, requiring no surgeries at all. So a very strong efficacy profile. With regards to tolerability, the fact that we don't require these minimal residual disease surgeries during the treatment window is very well received. And for the competitor product, over 70% of the patients required surgery during their treatment window, requiring one or more surgeries during that treatment window. Actually -- sorry, that number was actually 83%, and it was 72% of their complete responders. So as you can see, the competitive product -- patients receiving competitive products in their trial actually required a lot of surgery during the dosing [ period ]. And the fact that INO-3107 doesn't require these surgeries maintain minimal residual disease is very attractive. And then as I think Steve mentioned, it's our ability to administer 3107 in the doctor's office, and the simple patient-centric treatment regimen, again, is very attractive to patients. Steve, anything else you want to add to that? Steven Egge: No, I think you covered it. I mean the research has shown really repeatedly a lot of evidence that we have the potential to be the preferred product in this space. Operator: We have our next question from Sudan Loganathan with Stephens. Kesav Chandrasekhar: This is Kesav on for Sudan, and congrats on wrapping up the quarter. Just a quick one. So as you engage with the third-party logistics and commercial partners ahead of launch, are you specifically using those partners to incorporate learnings from the PAPZIMEOS rollout to inform your distribution strategy, site activation plannings, reimbursement approach and overall launch execution for 3107? Steven Egge: Sure. So yes, I mean, obviously, we would -- we're watching carefully what our competitors doing and learning from that. I don't know that they're necessarily the same commercial partners that Precigen is using but they have very deep broad experience in the rare disease space. So we're learning from that as well. So I would say the more general rare disease experience, but also Precigen's experience as well to do everything that we can -- to ensure that we're kind of very well prepared from a launch standpoint. Jacqueline Shea: And if I can add, there were some key differences for 3107 to PAPZIMEOS. We don't require any ultra-cold chain also -- so we don't have those logistical issues setting up an ultra-cold chain. And also as we don't require these minimal residual disease surgeries during the treatment window, physicians don't have to plan for scoping and possibly doing surgery as well, which obviously makes the treatment regimen very attractive to physicians and to patients. Operator: Our next question is from Roger Song with Jefferies. Nabeel Nissar: This is Nabeel on for Roger. I had a question on the Akeso partnership. If you could just kind of walk us through that biological rationale of the dual PD-1, CTLA-4 blockade. How does that sort of add on top of the T cell priming that you've shown before with 5412 and GBM? Jacqueline Shea: Yes, great question. So in the previous study, we combined 5401 plus IL-12 plus a PD-1 inhibitor from Regeneron called Libtayo. And what we saw in that study was encouraging data where we saw beneficial patient outcomes linked to the immune responses against the antigens that were encoded within 5401. So by partnering with Akeso in this innovative trial, what we're hoping is that the CTL4 element in addition to the PD-1 inhibition by providing an additional pathway for checkpoint inhibition will allow those immune responses against the tumor-associated antigens to provide additional benefit. So we're excited to be partnering with Akeso and excited to get the study underway. Mike, anything else you would like to add? Michael Sumner: The only point, I mean it's well established that there is significant synergism between CTLA-4 and PD-1. So as Jacqui said, we think it will be a very nice combination to 5412. Nabeel Nissar: Yes. That's exciting. A follow-up on that. I think inside, historically, you guys emphasized the O6-methylguanine methyltransferase the unmethylated group. Any idea, this is like early, but in terms of subgroups, like does the methylation status influence any expectations for like the immunotherapy responsiveness? Jacqueline Shea: Yes. So it is a prior trial. We saw benefits in both methylated and unmethylated groups. So we were very encouraged by that data. Sorry, Mike, you wanted to say something? Michael Sumner: I was going to say exactly the same. But the INSIGhT trial is actually in the unmethylated population. So while it's very sad for the patients that will lead to a quicker readout as they have a poorer prognosis. Operator: We have our next question from Yi Chan with H.C. Wainwright. Unknown Analyst: This is [ Katie ] on for Yi. Taking a look at your pipeline, if 3107 is approved, what are your plans to move forward with 3112? Are you guys planning to reinvest internally or seek partnership for that type of program? Jacqueline Shea: Yes. Great question. So for those of you who are not familiar, 3112 is our program in HPV-16 and HPV-18 positive head and neck cancer, oropharyngeal squamous cell carcinoma. And there, we announced a partnership with Coherus for their PD-1 inhibitor, Loqtorzi, which is approved in nasopharyngeal carcinoma. We're looking to start a Phase III trial. However, at the moment, the vast majority of our resources are going towards moving 3107 forward. So should -- should 3107 be approved later on this year and we have sufficient financial resources available, then we'll be looking to move forward with the other candidates in our pipeline. But we're very excited by our later stage candidates, which are predominantly focused on T cell mechanisms. So 3107, 5401, 3112, are all focused on driving T cell responses, either against viral antigens or against cancer antigens. And then we also have our earlier stage pipeline around our DPROT and our dMAb candidates, where we're looking to move those candidates into the clinic through partnerships. So partnerships are going to be very important to us in terms of how we see our pipeline developing going forward. Operator: Thank you. We have no further questions. I will now turn the call over to Jacqui Shea for closing remarks. Jacqueline Shea: Thank you. As we've outlined here today, our strategic focus for the months ahead is clear, advancing the BLA review for 3107 and optimizing our resources to extend our cash runway towards our October 30 PDUFA date. At the same time, we'll continue driving progress across our pipeline where possible, leveraging partnership opportunities and the potential of our platform in GBM, hemophilia and other rare diseases. As I close today, I'd like to reiterate our belief that 3107 can address the unmet needs of RRP patients. Patients who have faced the risks and burdens of their disease were far too long. We're moving forward committed to making sure that every patient can find relief from repeated surgery that they deserve. Thank you for your attention, and good evening, everyone. Operator: And thank you, ladies and gentlemen. This concludes our conference call. We thank you for your participation. You may now disconnect.
Anthony Rasmus: Good afternoon, and thank you for joining us on today's conference call to discuss Shimmick's Fourth Quarter and Full Year 2025 results. Slides for today's presentation are available on the Investor Relations section of the website, www.shimmick.com. During this conference call, management will make forward-looking statements based on current expectations and assumptions which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect. We identified the principal risks and uncertainties that may affect our performance in our reports and filings with the Securities and Exchange Commission, which can also be found on our Investor Relations website. We do not undertake a duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth quarter press release for definitional information and reconciliations of historical non-GAAP financial measures to comparable GAAP financial measures. With that, it's my pleasure to turn the call over to Ural Yal, Shimmick CEO. Ural Yal: Good afternoon, and thank you all for joining us on today's call. I'm joined by Todd Yoder, Shimmick CFO. Before I get started, I would like to recognize the women and men who work at Shimmick, safely and effectively delivering the projects we take on as good stewards of the communities where we work. Our work is supporting our nation's infrastructure, and we are all very proud of it. With that, I'm going to start by discussing our financial results for 2025. We finished 2025 strong and in line with our expectations in what was largely a transformational year for Shimmick. We made meaningful progress on the strategic priorities we introduced at the beginning of the year. As a reminder, our strategy remains centered on 3 pillars: one, growing the top line by bidding, winning and strategic risk balance work aligned with our expertise; two, completing and winding down legacy low-margin noncore projects, and three, driving operational improvements to deliver consistent margins and improved G&A leverage. We made substantial progress across all 3 pillars throughout the year and still believe we are in the early stages of the new Shimmick we're building. These priorities have strengthened our business fundamentally, evident by our 2025 results. As we turn to our 2025 results, for the full year, we delivered a consolidated revenue of $493 million 7% gross margin and adjusted EBITDA of $5 million. Full year 2025 Shimmick projects revenue was $395 million, a 12% increase year-over-year. These projects now represented 75% of our total revenue in 2025, highlighting the concentration of activity on more strategic work. In turn, we expanded our gross margin on Shimmick projects to 10% and a 400 basis point improvement over last year. For our noncore projects, 2025 revenue was $96 million compared to $125 million in 2024, reflecting our focus on effectively advancing the wind down of these projects. We also maintained a strong liquidity position, finishing the year with a total liquidity of $44 million. As you can see from our fiscal year results, we've made substantial progress executing our plan, specifically narrowing our focus to projects that leverage our core strengths. Now I'd like to spend some time speaking about that progress, providing an update on our wins, what are we seeing in the market and the operational improvements we are making. As we look at the market today, our momentum continues to build. Our core markets are continuing to see consistent investment and we're able to selectively bid projects that advance our strategy. This means we are increasingly able to improve our resilience by diversifying our customer base, focusing on growth markets geographically and lowering the risk profile of our book of work. Our backlog has grown meaningfully and remains well above a 1:1 book-to-burn ratio, which is an important indicator of the underlying strength in our -- in demand and our ability to win. We expect our book-to-burn ratio in the first quarter of 2026 to remain well above 1 as well, reinforcing the trajectory we've been on. Looking ahead to 2026, our pipeline volumes continue to be a real strength, allowing us to grow our revenues and margins while being strategic about what we pursue. Our wins in this quarter, some of which you are seeing on the screen continue to be aligned with our strategy and reflect the strength of the market. Our bidding activity has translated directly into backlog growth, which has increased to $793 million at the end of our fiscal year with $139 million in new awards and ended up near the numbers we started the year with, which shows the stabilization of our backlog as we continue to complete noncore projects. Additionally, we've been awarded contracts with $128 million that added to our backlog so far in 2026. And lastly, after the year concluded, we've been selected as a preferred bidder on projects totaling $234 million with projects that are predominantly in our core sectors of water and electrical construction and are mostly located in California and Texas. We are currently negotiating these contracts or waiting for awards from our clients which we expect to happen over the upcoming weeks and months. From a commercial standpoint, the market environment looks relatively unchanged from last quarter with a strong and growing backlog, a healthy pipeline of new work and several pending items we expect to convert over the next quarter or 2. Our overall 24-month pipeline remains robust, supporting $600 million to $1 billion of bidding volumes per month. Last year, we explained our approach to position Shimmick to compete and win in collaborative delivery markets. Those efforts are now paying off. This quarter, we expect to announce our first progressive design-build awards since I joined Shimmick. A milestone that reflects the credibility built and the value we bring to owners through early engagement and partnership. This project is valued at approximately $55 million located in Southern California and will allow us to bring our expertise in waste water treatment as well as specialty electrical work. Instead of competing through low bid contracting, we will be working with the client to provide value through the preconstruction phase, building trust and alignment before construction begins. We expect to negotiate the construction contract at the end of 2026 with the construction beginning in '27. This is exactly the kind of work we want to be doing. It derisks the business improves predictability and aligns our interest with the client from day 1. Another collaborative contracting method we are focused on is construction manager, general contracting, the CM/GC method. We have completed a few of these projects in the past and continue to see strong momentum in our pipeline for these lower-risk projects. One such project and an estimated $200 million effort that supports [ bus ] infrastructure as Los Angeles prepares for the 2028 Olympics is approaching the construction phase. We expect to announce this milestone in the second quarter and start construction shortly thereafter. We're also progressing a number of opportunities in higher-growth verticals. The data center market continues to evolve quickly and while we're not yet in a position to announce a new contract, we are actively pursuing several meaningful opportunities. These include potential engagements with large operators in Texas, Washington and Nevada. And should any of these materialize, they would represent significant contributions to our pipeline. I've talked about pairing the pipeline improvements with operational improvements over the last year. We are making progress on that front as well. We believe we can support strong top line growth without significant increases to our SG&A spend, and we continue to adapt and transform how we do business and use those SG&A dollars effectively. We've strengthened our project controls enhanced our procurement capabilities and expanded the use of Power BI and other AI-based analytical tools to improve visibility, decision-making and accountability across the organization, spending all of our critical functions like safety, quality and human resources. In project controls, we now have the capability to manage a much larger number of contracts with a higher level of rigor. The structure we put in place allows us to scale without sacrificing control, which is critical as our backlog continues to grow. On the procurement side, we've added expertise and systems that significantly derisk the business. We are improving risk management or one of the biggest cost drivers in our operations with more discipline and transparent oversight across the company. This gives us the ability to manage supply relationships more strategically and ensure we're extracting real value from our spend. We've also made real progress on the talent front. Our attrition rates continue to move in the right direction, which is a direct reflection of the work our teams are doing to strengthen employee experience and create a more supportive and performance-driven environment. Retaining top down is critical to executing our long-term strategy. And the data we're seeing gives us confidence that we're on the right track. In short, the market remains healthy. Our competitive position continues to strengthen and our backlog and pipeline dynamics are moving in the right direction. We are operating with greater efficiency, executing with more discipline and building the foundation for sustained growth. With that, I'd like to turn to Todd, who will review our financials in more detail. Todd Yoder: Thank you for joining us today. We're pleased to report another solid quarter and a strong full year performance that reflects the operational improvements and disciplined execution Ural outlined earlier. Before I dive into the numbers, I want to thank the entire Shimmick team. Your focus on safety, your commitment to quality and your consistency in executing with excellence have all played a critical role in our results this year. Thank you for everything you do. With that, let's jump into the financial results, beginning with Slide 8. As a reminder, all comparisons made today will be on a year-over-year basis as compared to the same period in 2024, unless otherwise noted. Shimmick project revenue for Q4 2025 was $84 million, up 4% compared to $81 million in Q4 of 2024. The net increase of $3 million was primarily driven by our new projects ramping up. Noncore project revenue for Q4 '25 was $16 million, down $24 million as compared to Q4 2024. This is reflective of the fact we have less noncore in our backlog to burn off, this year versus prior year. And I will point out that noncore projects in total were close to 90% complete ending 2025. Shimmick consolidated total revenue for Q4 '25 was $100 million as compared to $104 million in the prior year. Moving on to gross margin. Shimmick project gross margin was $10 million for Q4 '25 of $8 million or 400% compared to $2 million in Q4 '24. Gross margin as a percentage of revenue was 12% for Q4 2025 versus 3% in Q4 of 2024. The $8 million increase in gross margin was driven by $6 million from new awards and $2 million from existing projects. Noncore project gross margin was flat for Q4 2025 as compared to negative $23 million for Q4 of 2024. The $23 million increase in gross margin was driven by cost overruns on noncore loss projects during Q4 of 2024 that did not recur this year. Shimmick consolidated total gross margin for Q4 2025 was $10 million. up $31 million compared to a negative $21 million gross margin in Q4 of 2024. Total gross margin as a percentage of revenue improved to 10%, from a negative 20% in Q4 of 2024. G&A expense for Q4 2025 was $11 million, favorable 32% were $5 million as compared to $16 million of G&A in Q4 of 2024. The favorable impact was the result of our continued transformation of the business. Net loss for Q4 2025 was $3 million, favorable $37 million as compared to a net loss of $38 million in Q4 of 2024. Adjusted EBITDA for Q4 '25 was $4 million as compared to negative $27 million in Q4 of '24. The improvement was primarily driven by the increase in gross margin combined with the decrease in SG&A. Turning to liquidity. If you recall, we ended Q3 '25 with $48 million of liquidity. We ended Q4 2025 with liquidity of $44 million. The $44 million consisted of unrestricted cash and cash equivalents of $20 million and availability under our credit agreements totaled $24 million. We remain comfortable that our liquidity position provides the capital needed to continue executing on our strategic and operational priorities. New awards booked during Q4 '25 were $135 million, a sequential increase of more than $39 million from Q3 2025. Giving us a book-to-burn for the quarter of 1.4x. We ended the quarter with total backlog of $793 million. Turning to Slide 9 for the 2025 full year results. Shimmick projects gross margin was $397 million for the year, up $41 million or 12% compared to $357 million in 2024. Noncore project revenue was $96 million for the year compared to $125 million in 2024. Shimmick consolidated total revenue for 2025 was $493 million, up $13 million or 3% compared to $480 million in 2024. Shimmick project gross margin was $40 million or 10% as a percentage of revenue. This is a $28 million increase compared to $12 million or 3% in 2024. Noncore project gross margin was negative $7 million or negative 7% as a percentage of revenue. This is a $61 million increase compared to negative $68 million in 2024. Shimmick consolidated total gross margin was $34 million for 2025. Making gross margin 7% of revenue overall. This is a $90 million increase compared to negative $56 million gross margin in 2024. Adjusted net loss was negative $15 million in '25 as compared to negative $81 million in '24. Adjusted EBITDA for 2025 was $5 million, favorable $66 million from negative $61 million adjusted EBITDA in 2024. Again, new awards booked during Q4 2025 were $139 million, a sequential increase of $39 million from Q3, giving us the book-to-burn of 1.4x. We ended the quarter with a total backlog of $793 million. Our backlog mix continues to improve, with Shimmick projects now representing close to 90% of our total backlog ending 2025. Additionally, we have $128 million in new awards added to backlog as of the close of February 2026. And we have another $234 million of additional new awards that were pending fully executed contracts as of the end of February 2026. Turning to Slide 10 and our 2026 guide. To set the stage, I want to call out that some Shimmick projects in California and Texas experienced slower burn due to unusual heavy rainfall in California and cold weather in Texas, which limited field activity. In addition, some of our newly awarded contracts have taken a bit longer to ramp up than normal. While these projects experienced some shift to the right, they are back on track. While we anticipate a slower start to the year due to this weather, we expect quarter-over-quarter sequential improvement throughout the year as new project awards ramp up and represent a growing share of our project mix. We expect Shimmick consolidated revenue to grow between 12% and 22%, 17% at the midpoint, representing approximately $550 million to $600 million of work put in place for the full year 2026. Adjusted EBITDA is projected to increase between 200% and 500%. That's 350% at the midpoint, putting adjusted EBITDA in the range of $15 million to $30 million for the full year. With that, we are confident 2026 will be a great year for Shimmick. I thank you for joining us today and for your interest in Shimmick. Now back to Ural. Ural Yal: 2025 was a pivotal year for Shimmick. We delivered results in line with our expectations, executed with greater discipline and made meaningful progress on the strategic priorities we set out at the beginning of the year. Our focus on bidding and winning strategic risk balance work, winding down legacy noncore projects and driving operational improvements is reshaping the company and setting us up for long-term success. The improvements we're seeing in backlog growth, project execution, talent retention, procurement discipline and project controls, all point out to a business that is operating with more predictability, resilience and focus than a year ago. Our pipeline remains robust. Our market backdrop is healthy, and we're winning the right work, work that is aligned with our expertise and our long-term value proposition. While we recognize there is still more work to do, we are moving in the right direction, and our progress in 2025 gives us confidence in our ability to advance our journey to make Shimmick a top infrastructure provider in the market and delivering value to our shareholders. We look forward to updating you on our progress as we move forward in 2026. Operator, you may now open the line for questions. Operator: [Operator Instructions] Our first question comes from Gerry Sweeney with ROTH. Gerry is connecting now. One moment, please. [Operator Instructions] Gerard Sweeney: Good afternoon. I forgot I was going to be on video. Otherwise, I would have dressed up a little nicely. So anyhow, congratulations, obviously making nice progress, continuously push some of the legacy business behind you. And there's a lot of initiatives on the forefront. So a couple of questions around -- I'm going to use gross margin as sort of the overlying aspect, but some progressive design awards, I think CM/GC opportunities and electrical opportunities. How does this all play through? And how does that impact margins as we go through 2026? Ural Yal: Yes. No, I think overall, gross margins are going to be -- we expect them to go up. It's always a function of the mix of projects, obviously. So however, some projects tend to be closer in the high teens, some projects tend to be in the lower in the teens. But we're going to -- we're watching that balance very carefully to make sure that we're continuously making improvement on the gross margin. But what you'll also see at the bottom line as we grow the revenues, we're very focused on controlling the SG&A around the levels that it is today for 2026. And that's also going to be contributing. It's not just top gross margin, but it's the more efficient SG&A running a larger book of business. Gerard Sweeney: Got it. I had a question on SG&A, but before I get there. What about just the -- I think you mentioned you were bidding $600 million to $1 billion a month, but how does the backlog look? Obviously, I think Texas has been very strong with some of our other companies. I mean there's always water projects to do in California. But what's your visibility and feeling on just the overall spend in sort of the macro environment across your territories? Ural Yal: Yes, it's great. Actually, great question. So really, very focused in California and Texas, like we've been along with the Pacific Northwest. Waterwise, Texas is very active. California is always active, like you mentioned. So we're seeing opportunities, like, there's really no shortage of opportunities going in the next 12 to 24 months in that kind of volume. Which then -- we don't need all of it in our win rates, but that gets us to be more selective, more strategic about. We really want to be California, Texas, Pacific Northwest and focus on those markets and grow from there. So it really allows us to be -- to pick the right jobs with lower competition, maybe higher margins, more strategic for the future. So it's -- as far as kind of overall pipeline perspective, it hasn't let up in the last 6 months at all. Gerard Sweeney: Then circling back, SG&A came in just shy of $11 million. I think you indicated that maybe that's a good number that you use on a -- at least for 2026. One, I want to see if that's accurate? And then two, how much more revenue can you have prior to maybe starting to invest a little bit more in the SG&A front? Ural Yal: Yes. So I think what we had in 2025 is a reasonable number to assume for 2026 approximately. Gerard Sweeney: Okay. So the [ $84.5 ] million... Ural Yal: Somewhere around there. And I think as we do that, the revenues are going to go up, that's what we're guiding. And to the second part of your question, I think we're going to be fine kind of in that range, plus or minus in that mid-50s range up until about [ $750 million ] honestly. Todd Yoder: [indiscernible] '26, in the G&A for the fourth quarter, right? It was a little lower than you saw in previous quarters, but as you model that out for '26, I think that 14 number is a good number, a good run rate. Operator: Our next question comes from the line of Gerry Sweeney with ROTH. [Operator Instructions] Apologies. This question comes from Aaron Spychalla with Craig Hallum Capital Group. [Operator Instructions]. Aaron Spychalla: Maybe first for me on the guidance for 2026. Can you just kind of talk about some of the puts or takes there, especially on like the EBITDA range? And then just maybe how much of noncore revenue and kind of margin gross profit are you looking for, for the year? Ural Yal: Yes. Good question. So yes, so we've simplified the guidance a little bit this time. But looking at the noncore work, we are expecting to burn through pretty much all of it. It's right now about 11% of the backlog. It's going to be very little left, if any, into 2027, so -- and then that's also kind of along the lines of we've booked forward losses on those. So you're going to assume those at 0%. You're going to continue to kind of impact overall aggregate margin. But I think as far as the gross margin, the real key is how fast can we get the new work to be kind of hitting there -- hitting its stride, all these projects that we won and now starting how fast can they start generating revenue and margins. That's really the story of 2026 for us. As far as backlog goes, we finished the year almost at where we started. So we've really stabilized very close to where we started and now with the wins that we've announced today as those contracts come to fruition, we have a clear path to getting over $1 billion in backlog. And it's just going to be a matter of how do we get those jobs going quickly throughout the summer. Did that answer your question? Aaron Spychalla: Yes. No, that was great. And then maybe on the electrical infrastructure side of things, you kind of talked about, I think, in the release and the call, some pending awards on the electrical side of things. So it starts -- it sounds like you're starting to see some traction there. Maybe just a little bit more color, and I think you noted significant kind of potential there. Just what types of projects and project sizes? Are you looking for there? Ural Yal: Yes. So electrical business, our electrical business is a low-voltage, medium voltage electrical business that does a variety of sizes of projects. projects that are very small, $5 million, $10 million all the way to $200 million kind of like more of the larger Shimmick projects, and we're able to do range in that -- up and down in that range. Texas is extremely strong. We're bidding a lot of work in Texas, continuing to bid a lot of work in California, continuing to support the larger Shimmick projects with our electrical capabilities. So there's a lot of activity. And what I'm tracking every month is that the amount of Axia work we're bidding is becoming a higher percentage of the overall bids pretty much every month. So I think it's just a matter of time. We're really hitting our stride now on the bidding side. We're going to see some serious increase in our backlog for Axia work, and then that will translate to revenue in a quarter or 2. Aaron Spychalla: Good. And then on the legacy or the noncore projects, good kind of execution this quarter, and it sounds like they're 90% wrapped up. You just kind of talk about it. It seems like you have a good handle on ramping those up. But maybe just a little bit of color there would be helpful. Ural Yal: Yes. I mean we're moving along. It's really 2 projects at this point that are active, that's left. And we're going to get through those this year. The end of these larger kind of more complicated projects, there are always some risk at the end of them to close them out and cost overruns, but we're managing it, and we're pretty comfortable that we're going to -- that's going to really start decreasing as part of our revenue, especially in the second half of this year. Todd Yoder: Yes. I would just add, it was nice to see flat gross margin, which you would expect to see outside of some minor costs related to legal and other factors. But these are noncore loss projects, right? with 0 margin. But when you look at our total gross margin over the year, quarter-over-quarter, 4%, 6%, 8%, 10%. So you see as that like you all mentioned the mix, right? So noncore is becoming such a small percentage of the mix. And especially given the strong wins with $330 million in new awards in the second half and already starting just through February, right, with $128 million and $234 million pending. So it's a step change, right? And so we'll see that favorable mix throughout '26. Aaron Spychalla: Looking forward to it. Operator: There are no more questions at this time. I'd now like to turn the call over to Ural for closing remarks. Ural Yal: We've had another strong quarter and a strong year to finish 2025. It was a -- it was a year of change for Shimmick, and we've made a lot of operational improvements and made a lot of progress in getting through the noncore projects. So we're very optimistic about 2026 and beyond for our company, and these new awards that we've announced and booked are a good indication of that as we shift towards more of the work that we won in a risk balanced and effective way. Our margins are going to improve and both bottom line and top line. So we're really looking forward to a great 2026. Thank you all for joining.
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