加载中...
共找到 39,862 条相关资讯
Operator: Good morning, ladies and gentlemen, and welcome to the Target Hospitality Corp. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Wednesday, 03/11/2026. I would now like to turn the conference over to Mark Schuck. Please go ahead. Thank you. Mark Schuck: Morning, everyone, and welcome to Target Hospitality Corp.'s Fourth Quarter and Full Year 2025 Earnings Call. The press release we issued this morning, outlining our fourth quarter and full year results, is available in the Investors section of our website. In addition, a replay of this call will be archived on our website for a limited time. Please note the cautionary language regarding forward-looking statements contained in this press release. This same language applies to statements made on today's conference call. This call will contain time-sensitive information as well as forward-looking statements, which are only accurate as of today, March 11, 2026. Target Hospitality Corp. expressly disclaims any obligation to update or amend the information contained in this conference call to reflect events or circumstances that may arise after today's date except as required by applicable law. For a complete list of risks and uncertainties that may affect future performance, please refer to Target Hospitality Corp.'s periodic filings with the SEC. We will discuss non-GAAP financial measures on today's call. Please refer to the tables in our earnings release, posted in the Investors section of our website, to find a reconciliation of non-GAAP financial measures referenced in today's call and their corresponding GAAP measures. Leading the call today will be Brad Archer, President and Chief Executive Officer, followed by Jason Paul Vlacich, Chief Financial Officer. After their prepared remarks, we will open the call for questions. I will now turn the call over to our Chief Executive Officer, Brad Archer. Brad Archer: Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. We entered 2025 with a clear mandate to advance our strategic growth priorities, diversifying our contract portfolio, and accelerating our transition into high-growth end markets. We made significant progress on these priorities, and our disciplined execution resulted in the most successful period of contract awards in Target Hospitality Corp.'s history. Since February 2025, we have secured more than $740 million in long-term contract awards across a broad range of end markets, including over $495 million supported by our expanding WHS segment. This strong momentum is driven by an unprecedented capital investment cycle across AI infrastructure, critical minerals, and power generation development. To capture this opportunity, we launched Target Hyperscale, demonstrating our ability to deliver highly customized solutions through a vertically integrated accommodations platform that scales with customer requirements. Our vertically integrated capabilities, unmatched across the U.S., combined with accelerating end market demand, have established a core strategic growth vertical for the company. We believe Target Hospitality Corp. is at an inflection point, supported by strong execution and an unprecedented pipeline of opportunities. Strengthening market fundamentals have laid the foundation for a robust and expanding pipeline of more than 20,000 beds, creating meaningful opportunities to continue advancing our strategic growth priorities. Turning to our segments and accelerating momentum on key strategic growth opportunities, our HFS segment continues to support our world-class customers by meeting their evolving labor allocation needs through premium service delivered across our extensive network. Target Hospitality Corp.'s vertically integrated operating model and network scale enable us to serve customers through all phases of the business cycle, reflected in customer renewal rates consistently above 90% and average customer relationships of more than five years. Moving to the rapidly expanding WHS segment, our WHS segment continues to benefit from accelerating demand across large-scale AI infrastructure, critical minerals, and power generation projects. Target Hospitality Corp.'s vertically integrated accommodations platform and scalable solutions are uniquely suited to support these increasingly remote infrastructure developments. These capabilities, supported by our differentiated service offerings including Target Hyperscale, position us to meet rising demand in this high-growth sector. Since February 2025, we have secured more than $495 million in multiyear WHS awards, driving the reactivation of nearly 3,000 beds across our asset base and demonstrating the value of modular and highly customizable offerings. Our ability to deliver speed-to-market solutions and scale with customer needs has supported multiple expansions at our data center community, which has grown 320% from its initial 250-bed footprint in just a matter of months. Additionally, today's announcements of the West Texas Power Community and Pecos Power Community further underscore our ability to rapidly deploy assets to meet this accelerating end market demand. Combined, these awards immediately reactivate more than 1,800 beds in Pecos, Texas, and represent over $150 million in multiyear contracts. Across our WHS segment, we have reactivated nearly 3,000 beds in less than a year, supported by long-term committed revenue contracts across a diverse customer base. A successful reactivation of existing assets has reduced our remaining available inventory to approximately 3,000 to 4,000 beds, depending on customer-specific requirements, and highlights the extraordinary momentum of the current AI-driven capital investment cycle. As data center and power generation projects extend into more remote areas, the need for high-quality workforce accommodation has intensified and become essential to their success. Target Hospitality Corp.'s scale and fully integrated solutions uniquely position us to help customers attract and retain skilled labor nationwide and has established Target Hospitality Corp. as a trusted partner. These dynamics have created the largest commercial pipeline in our history, with active discussions representing more than 20,000 beds. The WHS segment has become a core strategic growth platform and a key driver of our strategic growth initiatives. I will now hand the call over to Jason to discuss our financial results and 2026 outlook in more detail. Jason Paul Vlacich: Thank you, Brad. Fourth quarter total revenue was approximately $90 million, with adjusted EBITDA of approximately $7 million. A meaningful portion of quarterly revenue is generated by construction services tied to the workforce hub contract in our Workforce Hospitality Solutions, or WHS, segment. This lower-margin revenue stream, combined with elevated initial operating and mobilization costs associated with recent WHS segment contract wins, temporarily compressed margins. As the workforce hub contract transitions to higher-margin services-based revenue and our new WHS awards continue to scale through 2026, we expect consistent and sustained margin expansion. Our HFS South and All Other segments generated approximately $36 million in quarterly revenue. Target Hospitality Corp.'s customers in these segments continue to value our premium service offerings and extensive network scale, which provides consistent hospitality solutions aligned with their labor allocation demand. While we experienced some moderation in our HFS South segment, this network continues to provide strategic value and reliable cash flow. Its stability supports our long-standing customer base and provides consistent cash generation to advance our growth initiatives and further strengthen our balance sheet. Moving to the expanding WHS segment, this segment's fourth quarter results, which include our workforce hub contract and the data center community contract, generated approximately $40 million in revenue, primarily related to construction services activity associated with the workforce hub contract. As we announced today, the importance of the workforce hub contract led to additional modifications and scope expansion during the fourth quarter. The increased scope of the contract raises the total contract value to approximately $170 million, reflecting a 25% increase from the original contract value. With construction activity substantially complete, we anticipate the workforce hub contract will support margin expansion through 2026 as the contract shifts to higher-margin, services-focused revenue. Regarding the data center community contract, as we previously announced, the strong pace of customer development activity has supported two 400-bed expansions to this community. As a reminder, these expansions will be phased in 400-bed increments over 2026. The first 400-bed expansion is scheduled to be operational by April 2026, with the second 400-bed expansion scheduled to be operational in June 2026. Following the completion of both expansions, the community will be capable of supporting over 1,000 individuals. In total, the data center community contract is expected to generate approximately $134 million of committed minimum revenue over its initial term through May 2028. Additionally, as the data center community expansions are completed, we anticipate enhanced margin contribution from this contract as the community scale will allow us to capture greater efficiencies from our fully integrated operating model and strong unit economics. As we announced today, the accelerating industry activity across AI infrastructure and power generation development supported two new contract awards utilizing our existing West Texas assets. The West Texas Power Community contract is expected to generate approximately $129 million of minimum committed revenue over its 47-month term beginning March 2026, supporting a community of up to 1,400 individuals. And the Pecos Power Community contract is expected to support up to 400 individuals while generating over $23 million of minimum committed revenue over its 26-month term beginning April 2026. In total, these contracts support the reactivation of over 1,800 beds with more than $150 million of multiyear committed minimum revenue serving multiple customers in a project-dense region. While the Pecos and West Texas contracts are centered on fixed minimum revenue commitments, there is an opportunity to capture additional variable revenue from incremental customer demand above the committed minimum. Importantly, the Pecos and West Texas contract awards leverage our existing assets and community locations, enabling immediate customer use, with a combined capital investment of only $4 million to $8 million. These contracts are expected to be immediately margin accretive and demonstrate our ability to rapidly deploy existing assets to support customer demand. Our Government segment generated approximately $14 million of revenue during the quarter. The declines compared to the previous year were driven by the termination of the PCC contract, partially offset by the reactivation of our Dilley, Texas, assets. Corporate expenses were approximately $18 million for the quarter, which includes a true-up to the 2025 short-term incentive plan to reflect the significant progress made on executing Target Hospitality Corp.'s strategic growth initiatives, including multiple fourth quarter contract awards. Our 2026 outlook also accounts for potential incentive payments that may be implemented this year. Total capital spending for the quarter was approximately $16 million, focused on growth in our WHS segment, including the data center community expansions. Target Hospitality Corp.'s strong business fundamentals and durable operating model supported strong cash conversion, resulting in over $74 million of cash flows from operations and $66 million of discretionary cash flow for the year ended 12/31/2025. These fundamentals are reflected in the strength of our balance sheet and our ability to maintain significant financial flexibility through prudent capital management. During 2025, we executed the largest commercial pivot in our history while maintaining a strong balance sheet and capital flexibility. We ended the quarter with zero net debt and total available liquidity of approximately $183 million. Target Hospitality Corp. continues to advance its strategic growth initiatives focused on enhancing revenue visibility, consistent cash flow, and strengthening margin contribution. This momentum and positive operating environment support our 2026 outlook, which includes total revenue of between $320 million and $330 million and adjusted EBITDA of between $60 million and $70 million, with capital spending, excluding acquisitions, of between $65 million and $75 million. As recent contract awards and community expansions come online and scale through 2026, we expect revenue and adjusted EBITDA to build steadily throughout the year. The additional operating scale and improved unit economics should support continued margin expansion through 2026 and into 2027. Together, these factors are expected to position us to exit the year with an annualized revenue run rate of more than $360 million and adjusted EBITDA exceeding $90 million. This strong momentum is driven by significant growth in our WHS segment, which is projected to become our largest operating segment by 2026, contributing more than 40% of consolidated revenue based on the current contract portfolio. Target Hospitality Corp. is well positioned with a flexible operating model and an optimized balance sheet as we continue to evaluate a robust growth pipeline focused on continued expansion of our WHS segment, which we believe offers the greatest opportunity to accelerate value creation for our shareholders. As we pursue these opportunities, we will remain focused on maintaining the strong financial profile we have built while maximizing margin contribution through our efficient operating structure. With that, I will hand it back to Brad for closing remarks. Brad Archer: Thanks, Jason. We made significant progress executing on our strategy in 2025, positioning Target Hospitality Corp. to capitalize on powerful long-duration demand trends across AI infrastructure, power generation, and critical minerals. This strong execution drove more than $740 million in new multiyear contracts, including over $495 million within our rapidly expanding WHS segment. We are also engaged in advanced discussions on additional opportunities that reflect the accelerating development activity across AI and related power generation projects. These secular tailwinds are supported by a multi-trillion-dollar investment cycle to expand AI and data center infrastructure. Additionally, supporting this infrastructure development will require substantial growth in U.S. power generation capacity, with national energy consumption expected to double by 2030. Against this backdrop, we continue to evaluate the most active and robust growth pipeline in Target Hospitality Corp.'s history. With strengthening market fundamentals, we are actively pursuing opportunities representing more than 20,000 beds, highlighting the depth and durability of demand in this end market. Target Hospitality Corp.'s unique capabilities, combined with strong execution, position us as a trusted provider in this rapidly expanding marketplace. With a deep pipeline, strong balance sheet, and a scalable vertically integrated platform, we are well positioned to drive sustained growth and long-term value. We are excited about the opportunities ahead and believe they will play a central role in advancing our strategic initiatives and delivering continued value for our shareholders. Thank you for joining us on the call today. We will now open the call for questions. Thank you. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any of the keys. One moment please for your first question. Your first question comes from Scott Schneeberger with Oppenheimer. Scott, please go ahead. Daniel Erik Hultberg: Good morning. It is Daniel on for Scott. Thank you for taking our questions, and congratulations on the new contract wins. Starting off with the new contracts, could you please elaborate a little bit on the pipeline? I mean, you still have some assets in West Texas. Good to see some of it, but could you please discuss the pipeline, the potential to reactivate the remaining West Texas assets, and how we should think about the ripeness of that? Thank you. Brad Archer: Yeah, Daniel, this is Brad. Let me just give a high level on the pipeline. We have said this many times over the past few quarters, but it continues to grow, right? It is the strongest, most actionable pipeline we have ever seen. As we mentioned, a 20,000-plus bed opportunity. That is after we removed, you know, several thousand beds, and we have added back to that, right? And it continues to grow. We have been alluding to this fact for several quarters that our pipeline is getting stronger and more mature, right? This started over a year ago. We started planting seeds with the customers in these projects, having negotiations, and now we are beginning to harvest, right? It is in the way of executing contracts, which is what you have seen in our release. And it is just funny. Those happened both in one week. I do not expect that always to happen in the future like that. But what I would tell you is we do expect to keep stacking wins throughout 2026. We have mentioned we are in advanced late-stage negotiations with multiple customers. I am not going to get into details there, but it is a very healthy pipeline. If you look at available fleet, that is absolutely being quoted within those 20,000 beds, right? We expect that to be taken at some point. And then we would look to, you know, in the market, if there is available fleet to purchase, and we have secured line times at multiple factories as well, have a great relationship with the manufacturing base out there. So at some point, we would expect to have to reach into that as well, just by the supply and demand that is out there at this point. Daniel Erik Hultberg: Got it. Thank you. I think Jason mentioned earlier there is potential for variable revenue contribution. Could you please elaborate on that? Jason Paul Vlacich: Yeah, absolutely. So that is related to the two new contracts that we announced today. The over $150 million contract value is literally just the fixed minimum amount. Within that, there is a lease component, which is relatively straight line, and then there is a built-in fixed minimum bed committed amount that is attached to a manning curve, so it is not exactly straight line. And then on top of that, there is a variable component attached to those contracts. The all-in rate on those, the head-and-bed for those two new contracts, is right around $100 a night. So there is definitely potential for variable upside. None of that is built into our outlook. So our outlook is materially based on fixed minimum amounts. Daniel Erik Hultberg: Got it. Thank you. A final one for me. Any more color you can provide on how to think about the cadence as we move through this year and any unique modeling dynamics we should think about as it comes in the early? Jason Paul Vlacich: So with respect to our outlook and how that is going to trend, Q1 is going to be the low point as these contracts start to ramp up. Obviously, the two new ones that we announced are immediately accretive. One of those has already started. Another one is going to start in April. But, for example, the expanded data center community will ramp up kind of full force in Q3. Q2, in the power community contract in Nevada, will ramp up June, so you will see the full effects of that in Q3. I would say that is how you would pace it. Q1 is the low point, and then it will continue to ramp up in Q2, much further in Q3 and Q4, until you get to that run rate that we announced on the call for everything that has been contracted, right? None of that includes the variable upside related to the two new contracts. So that over $160 million of annual run rate revenue, over $90 million of adjusted EBITDA on an annual basis, is all based on fixed minimum revenue commitments for everything that has been contracted, and none of that obviously includes the upside related to the pipeline. Basically, you will see that come to fruition in Q4. Brad Archer: So, in short, the low point is Q1, and it builds from there. Jason Paul Vlacich: Yeah, totally different by the end of the year, right? And not taking into account, like I said, any new projects or the upside on anything that we have signed. Daniel Erik Hultberg: Got it. Okay. Thank you, guys, and congratulations. I will turn it over. Operator: Thank you. Your next question comes from Stephen David Gengaro with Stifel. Please go ahead. Stephen David Gengaro: Thank you. Good morning, everybody. Brad Archer: Good morning. Stephen David Gengaro: So a couple of things. The first, just to follow up on the point, when you talk about the run rate exiting 2026, is that just based on announced contracts to date? Jason Paul Vlacich: Absolutely. Yes. Stephen David Gengaro: And when you say run rate, do you mean December or fourth quarter? I mean, I do not want to get too granular, but is $22 million sort of the EBITDA guide for 4Q? Or is that— Jason Paul Vlacich: Yes. It is Q4. Stephen David Gengaro: Okay. Q4. Great. Thanks. The two other kind of higher-level questions: when you mentioned the capacity you have in inventory of 3,000 to 4,000 beds, and you have been talking to a lot of customers about opportunities, are you seeing urgency from the customers yet? Is there any feedback you get or implications from customers that they are getting concerned about available capacity, or is that still not a thing from their perspective yet? Brad Archer: Look, that is the fear, right? Not having the capacity, not having the amount of rooms. If you even just look at the contracts we just signed and you look at the 1,400 and the 400, those are existing beds, right? And they are paying to hold every one of those beds. Different when you are building it new. You have time to put in 250, then another 250, then another 250, very similar to our other project on the data center side. But the fear is there, and it is real, right? This pipeline we are talking about, this is not pie in the sky. It is an executable pipeline. Did we win it all? No. But they are real. They are funded. That is what is on this pipeline. So folks, especially when you look in these clusters where multiple data centers and multiple power plants—if you look at the Permian Basin area—there is already a lack of rooms, if you will. On top of that, you are starting to add new power plants and new data centers. It is fear, but it is warranted, right? The supply and demand, I would just say, in a lot of those areas are very much in our favor. Stephen David Gengaro: Okay. That is helpful. And then the other quick question, the HFS South business, the oilfield had a better-than-expected fourth quarter from kind of a completions perspective, but your numbers were down a little bit. Is that just seasonality and noise? I am sort of expecting that business to be kind of flattish 2026 versus 2025. Is that a reasonable starting point versus your guide? Jason Paul Vlacich: Yeah, that is absolutely right. Built into our guidance is HFS basically steady state year over year from 2025 to 2026, and the fluctuations you see there are just moderate seasonality, normal course, not fluctuating outside of our expected ranges. Stephen David Gengaro: Okay. Great. Thanks. I will get back in the queue. Thank you for the color. Jason Paul Vlacich: Thank you. Operator: Your next question comes from Gregory Thomas Gibas with Northern Securities. Please go ahead. Gregory Thomas Gibas: Great. Hey. Good morning. Brad, Jason, thanks for taking the questions. Congrats on the new contract wins. Jason Paul Vlacich: Thank you. Gregory Thomas Gibas: I guess, a follow-up on what was just discussed in terms of capacity in your remaining inventory. You mentioned 3,000 to 4,000 beds of remaining inventory. Wondering if you could maybe speak to rough plans on what you intend to acquire just given the 20,000 or so active pipeline? And I guess the pricing you are seeing around it. Once you put those 3,000 to 4,000 beds to use, how you would think about how you would work into future contracts the acquisition of new capacity. How would that be reflected in those contracts? Jason Paul Vlacich: Yeah. I will start off, and Brad can certainly chime in on this. In terms of incremental beds above and beyond our inventory, first of all, all of that is going to be built into the economics of the contract. Many of these contracts come with upfront capital requirements from the customer as well, and a lot of their projects do phase over time, so that allows us to be measured in our approach towards capital allocation to these growth projects. We also have multiple tools available. We have secondary market purchases that we have done in the past to secure more beds. Project-level structures, and contract terms that bake in a lot of that upfront capital to meet our minimum return thresholds. That is how we would approach it, and that is how we have approached it in the past. We have already had advanced discussions with those suppliers, as Brad mentioned earlier. Brad Archer: Yeah. We have a very good relationship with suppliers across the U.S., right? So capacity wise for us, I do not believe will be an issue. I would take you back to the data center project that we started last year, the way it built up over time that Jason was talking about. We also got money down from the customer. So on financing, that helps a lot. All those beds are not put in at one time, even though that was quicker than what was anticipated. It still worked out. For the phases, we got some money down, and then we were able to bring in the buildings and set those up and get them performing for the customer, right? We are still in that mode of constructing that site and increasing the capacity. On true capacity from manufacturing or buying within the market, we feel pretty good about where we sit at this point. Gregory Thomas Gibas: That is great. Appreciate the color. And, if I could just maybe more strategically, as I am following developments on Camp East Montana at Fort Bliss and nearby government facility, just given the strong demand you are seeing within the private sector, I wanted to get a sense of whether you are even interested in pursuing those government-related opportunities at this point and how you are thinking about that. Brad Archer: Yeah. To be blunt, we are focused on growing the WHS segment, which we believe offers the greatest value creation opportunities. Much more commercial when we are dealing with that. It is projects that are ready. It is much more predictable at this point, and that is where our focus is. Jason Paul Vlacich: And I would just add to that, really still on contract structures and committed counterparty risk breakdown. Gregory Thomas Gibas: Yep. Makes complete sense. I appreciate that. Lastly, as it relates to the pipeline, I appreciate the color you provided there. If you could characterize it further, I wanted to get a sense—because I know that the previous data center contract, nice to see the expansion there where it started at 250 beds and is now over 1,000 and the ability to get up to 1,500. As it relates to that 20,000 pipeline or so, would you say that is maybe how things would be structured going forward with additional contracts, in that it starts small with continued expansion? Or would it perhaps be more like we just saw, the 1,400 with the power community? Could you speak to the relative size of those opportunities in that pipeline? Jason Paul Vlacich: Yeah. I think size-wise, they range from smaller than 1,000 to much greater than 1,000. We are seeing some really large projects for long duration. The range is big. As far as how they build up, when they get bigger, it just takes longer to put them in. They want this first initial wave, and then it builds up over time, very similar to what we have already shown the market. I think it would probably be a little bit longer than that on the buildup. You have time to get them done. You just cannot build everything that they are wanting all at once, nor can they hire 3,000, 4,000, 5,000 people all at once. But remember, they are not the only company doing the hiring. They are in these clusters. We are looking at five and six of these data centers around a two-hour radius, if you will, on a drive. They could be literally in the same twelve-month to eighteen-month period hiring 30,000 to 35,000 craftsmen in that area. If there is one doing a workforce hub, the others are doing a workforce hub. It takes time to get their own folks hired, and it takes time for us to build out the project. So it starts, if you will, very similar to what we have shown, and then it continues to build up. However, the start could be bigger, and the buildup could be longer as well, because, again, we are seeing much bigger projects than 1,000 beds. On the 1,400, that was a reactivation, so obviously we were able to move really quickly on that because we did not have to move any beds. It was strategically located for the customer, etc. It was literally signed and started billing a few days later. That is what was great about reactivations—they are always going to be faster. Gregory Thomas Gibas: Yep. Makes sense. That is helpful. Thanks very much, guys. Operator: We now have a question from Raj Sharma with Texas Capital Bank. Please go ahead. Raj Sharma: Yeah. Thank you for taking my questions. Congratulations on the solid new wins. I wanted to understand the 20,000 beds, the pipeline exceeding. Could you give how much of this pipeline is, in the next couple of years you think achievable versus the next five years? Can you give some color on the cadence? And then I have some follow-on questions. Jason Paul Vlacich: Yeah. So the cadence here would be within the next twelve to twenty-four months, all of that 20,000. Are we talking to some that is longer out? Yes. But it does not make the pipeline at this point. They have not been FID. They might not have the land. They might not have the power. What we are talking about here is actionable within the next twelve to twenty-four months, some much sooner than that. I would say one to twenty-four months is how I would look at it. Brad Archer: Yeah. These are advanced-stage projects. Raj Sharma: Got it. And then as the hyperscale, the data center, and the power generation sort of accelerates, are you seeing situations—I know there was an earlier question on this—where workforce housing is becoming a bottleneck? If so, is that giving you pricing power or longer durations when you negotiate these contracts? Jason Paul Vlacich: Yeah. We are definitely seeing workforce housing becoming a critical component to getting their project done. They are using it as a competitive tool to attract the workforce, keep the workforce, retain the workforce, and get more productive. So that is definitely working in our favor. When I talk supply and demand, it absolutely helps on maximizing your price. Raj Sharma: Got it. And then on the CapEx requirements, you have given a guide for this year. Is that to be assumed—is that $65 million to $75 million, if I sound correct? Jason Paul Vlacich: Yeah. That is right. It is $65 million to $75 million, and much of that is growth CapEx tied to contracts that we have already executed. Incidentally, that range is materially aligned with what we spent last year. Raj Sharma: Got it. And do you expect that to continue for the next year as well, given your pipeline? Also, could you talk about the cadence through the year and the financing of this CapEx? Jason Paul Vlacich: Yeah. So the CapEx range that we gave does not require any real incremental financing above and beyond our current liquidity. We are well positioned on that. Obviously, any incremental capital that would go above and beyond that would be related to pipeline wins, and those would be built into the economics of those contracts. We have multiple avenues to fund, including growing cash flows from operations. We have the strongest balance sheet that we have ever had as a public company—the first year as a public company that we have exited the year with no debt—and lots of capacity. That being said, the contract structures will be built such that the economics will help fund our minimum return thresholds for sure in the CapEx requirement. There could be incremental CapEx for incremental wins, but certainly nothing we anticipate for the stuff that we have already executed on. Raj Sharma: Thank you. Then, just lastly, on the Pecos facility, I wanted to clarify the 8,000 idle beds. Any news on reactivating or contracting to the government on those? Jason Paul Vlacich: Yeah. I would say a lot of those West Texas assets are very fungible, and we could use them for multiple customers, and a lot of them have been leased out on the new contract wins. At this point, we are really focused on growth in the WHS segment and the pipeline around that, and that is where we see the most value added and the most accretive opportunities for our shareholder base. Brad Archer: Yeah. Let me just put something in there as well. We have already talked about almost 3,000 beds out of that 8,000, right? So there are 3,000 to 4,000 left, just to get a map, right? To your question, I would tell you, just to be more direct, as we look throughout 2026, I would expect those beds to be put in use under WHS. That is where the growth is at. That is where we are focused. That is where the capital is going to go. I am pretty confident that is where they go. Raj Sharma: Oh, fantastic. Thank you for the color and the clarification. I will take it offline. Again, congratulations on the wins. Appreciate it. Thank you, guys. Jason Paul Vlacich: Thank you. Operator: As a reminder, if you wish to ask a question, please press 1. You have another question from Stephen David Gengaro with Stifel. Please go ahead. Stephen David Gengaro: Thanks, and thanks for taking the follow-up. You have the 3,000 to 4,000 idle beds. When you think—when you listen to the contracts you are involved with right now—when you exit 2026, would you be disappointed if the bulk of those beds were not under contract? Brad Archer: 1,100%. Let me give you a little thought on how we look at these beds. Again, when you look at supply and demand—and it is in our industry’s favor at this point—we are sitting with what we believe are some valuable assets. We strategically want to place not all of them on one prime, but we think we have the ability and the pipeline to be strategic here. As we said, these projects build up over time. The thought is, can you use 500 to help win a project? Can you use 750 to help win a project? Can you use 1,000, where you do not drop them all in one, and get multiple contracts out of it versus one? Strategically, that is how we are looking at it. But we would absolutely be upset if we did not have these out in 2026, based on our pipeline. We have been in this market now going over a year, planting the seeds, as I said. Things are starting to grow, and we are starting to harvest. We like where we sit in the market. Stephen David Gengaro: Based on the network approach you take in that business, is there any idle capacity in HFS South that could be mobilized? Jason Paul Vlacich: Yeah. There is a little bit. I would tell you we think we are pretty optimized in that area, especially West Texas. I would also tell you we have a great customer base there with some really long-term, twenty-plus-year customers we are going to make sure we take care of. There is a lot of work in the Permian. We think we can take that business in other ways besides continuing to deplete the HFS side of it. But we will take every opportunity to high-grade those rates and high-grade those beds as needed while we still take care of the right customers that we have had for many, many years. It is a great question. Stephen David Gengaro: Cool. Thank you for all the details. Operator: There are no further questions at this time. I will now turn the call over to Brad Archer for closing remarks. Please continue. Brad Archer: Thank you. In closing, I want to reiterate again that Target Hospitality Corp. is at an inflection point. The hyperscalers are making trillion-dollar investments in remote America. They need us to make those investments work. There is no one else who does what we do at this scale in these locations. We are not an amenity. We are not a nice-to-have. These projects are remote, and timelines are nonnegotiable. Workforce housing is as critical as the fiber in the ground. We also did not stumble into $740 million in contracts. We built the platform, proved the model, and the market needs us. The build-out on AI infrastructure, data centers, and power generation across this country is one of the most consequential investment cycles in American history that I have ever seen, that most have ever seen. The problems we have solved and are solving now are helping transform that infrastructure, and in doing so, it is fundamentally transforming Target Hospitality Corp. With that, I want to thank all of you who have joined us on our call today and for your continued support of Target Hospitality Corp. Operator, that concludes our call for today. Operator: Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Good morning, and welcome to OppFi Inc.'s Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. All participants are in a listen-only mode. As a reminder, this conference call is being recorded. Following management's presentation will be a question-and-answer session. For those listening by dial-in, you will be prompted to enter the queue after the prepared remarks. I am pleased to introduce your host, Mike Gallentine, Head of Investor Relations. You may begin. Mike Gallentine: Thank you, Operator. Good morning, and welcome to OppFi Inc.'s Fourth Quarter 2025 Earnings Call. Today, our Executive Chairman and CEO, Todd G. Schwartz, and CFO, Pamela D. Johnson, will present our financial results followed by a question-and-answer session. You can access the earnings presentation on our website at investors.opfi.com. During this call, OppFi Inc. may discuss certain forward-looking information. The company's filings with the SEC describe essential factors that could cause actual results, developments, and business decisions to differ materially from forward-looking statements. Please refer to Slide 2 of the earnings presentation and press release for our disclaimer statement covering forward-looking statements and references to information about non-GAAP financial measures which will be discussed throughout today's call. Reconciliations of those measures to GAAP can be found in the appendix to our earnings presentation and press release. With that, I would like to turn the call over to Todd. Todd G. Schwartz: Thanks, Mike, and good morning, everyone. Thank you for joining us today. I am looking forward to discussing another year of record-breaking performance at OppFi Inc. For 2025, total revenue increased 13.5% year over year and adjusted net income increased 69% year over year while keeping our industry-leading 78 Net Promoter Score. We continue to find benefits from Underwriting Model 6 which is designed to identify riskier borrowers and properly price risk across segments. Despite higher delinquencies on our summer vintages, OppFi Inc. maintained strong unit economics and adjusted in real time to support continued growth into the fourth quarter. The auto-approval rate in the fourth quarter was 79%, which allowed more customers to be approved without human interaction and helped increase originations 48% year over year. In conjunction with our lending partners, we plan to release Model 6.1 in 2026, which we anticipate will boost originations and reduce risk. We believe Model 6.1 better weights attributes in the model and enables more accurate segmentation of risk when identifying borrowers. The credit team is actively working on Model 7.0 with our bank partners and early indicators are promising on both origination and risk fronts. We plan to launch Model 7.0 in Q3 of this year. We are encouraged to see improving vintage metrics in December and January coupled with strong recovery metrics in Q4, which we believe will enable us to grow the top and bottom line in the double digits in 2026. OppFi Inc. continues to make great progress on building LOLA, the origination and servicing system of the future. LOLA is designed with a clean architecture to leverage rapidly evolving AI tools across origination, servicing, and corporate operation. The build and test phase is complete, and we are actively finishing up the QA phase of the project. We plan to substantially migrate to our new software system in Q3 2026. Early indicators give us confidence that LOLA will help continue to improve funnel metrics, increase automated approvals, enhance efficiency in servicing and recoveries, better integrate major systems, deliver reduced cycle times, and provide greater throughput for our product, tech, and risk teams. We believe our LOLA system and architecture will allow us to rapidly deploy and build new products to respond to our customers' needs and market dynamics. To that end, we are excited to announce a new line of credit product. We expect this product to launch with our bank partners in 2026. We believe this exciting product will not only serve as another high-quality credit access option for customers in the states where we operate, but also enable us to serve new geographies. This product is designed to have fair, transparent features that the OppLoans installment product has provided to millions of customers. 2025 was a great year for OppFi Inc. as we executed on our vision of being the leading technology-enabled platform that facilitates essential credit access and community services to everyday American businesses. We believe the strong foundation of performance sets OppFi Inc. up for another year of potentially double-digit revenue and earnings growth. With that, I will turn the call over to Pam. Pamela D. Johnson: Thanks, Todd, and good morning, everyone. As Todd noted, we achieved another record year, and we finished with a strong fourth quarter generating revenues of $159,000,000, an impressive 17% increase over Q4 2024. Model 6 has been a significant contributor to this growth. Its enhanced predictive power has enabled us to better manage our loan economics through risk-based pricing and to underwrite larger loan amounts for creditworthy individuals, helping fuel record originations and receivables balances. In the fourth quarter, originations increased by 8% to $230,000,000 compared to the prior-year quarter. Factoring in loan repayments, origination growth increased our ending receivables by 16% to $493,000,000 for the quarter. The growth in revenue was fueled by these originations and receivables growth, generating a stable revenue yield of 130%. As Todd noted, for the loans originated in the summer, we continued to see higher default rates. However, one of the benefits of short-duration loans is that loans work through the system relatively quickly. That means that by first quarter 2026, the majority of the higher default rate loans should be reflected in our earnings. As a result of the higher defaults, net charge-offs as a percentage of revenue increased to 45% for the quarter, up from 42% in the prior-year quarter, and net charge-offs as a percentage of receivables increased to 59%, up from 54% in the prior-year quarter. It is important to note we believe that much of the higher risk associated with these loans was appropriately priced into them through higher interest rates. Our scale and focus on cost discipline contributed to our strong financial performance in the quarter. Continued operational improvements drove notably lower total expenses before interest expense, which declined to 28% of revenue in the fourth quarter, a substantial improvement compared to 33% in the same quarter last year. Additionally, by paying down our corporate debt and successfully upsizing one of our main credit facilities at more attractive interest rates earlier in the year, we reduced interest expense to 6% of total revenue, down from 8% in the prior year. As a result of strong revenue growth and improvements in our operating expense structure, adjusted net income increased 27% to a fourth-quarter record of $26,000,000, an increase from $20,000,000 last year, and adjusted earnings per share grew 28% to $0.30 from $0.23 last year. On a GAAP basis, net income increased by 175% to $38,000,000, reflecting our higher revenues, lower expenses, and a $12,000,000 non-cash gain related to the change in the fair value of our outstanding warrants. Because our Class A common stock price decreased during the quarter, the estimated value of the warrants issued when we went public decreased, driving this non-cash income. However, as we have consistently stated, this is a non-cash item and does not affect the company's underlying profitability. Looking at the balance sheet, we continue to maintain a robust financial position, ending the quarter with $93,000,000 in cash, cash equivalents, and restricted cash, alongside $321,000,000 in total debt and $309,000,000 in total stockholders' equity. Our total funding capacity stood at a strong $618,000,000 at quarter's end, including $204,000,000 in unused debt capacity. During the fourth quarter, OppFi Inc. strategically repurchased 515,000 shares of Class A common stock for $5,000,000. Now looking at the full-year results, total revenue increased to $597,000,000, up 14% compared with 2024. Driving this strong growth was a 12% increase in originations to $899,000,000 in 2025, which contributed to a 16% increase in ending receivables to $493,000,000. This also translates to an average yield of 133%, up from 131% in 2024. As we discussed, we experienced growth in originations, ending receivables, and yield from the improvements from Model 6, but we also saw a decrease in net charge-offs as a percentage of total revenue, down to 37% from 39%, and a decrease in net charge-offs as a percentage of average receivables to 49%, down from 51% in 2024, respectively. While OppFi Inc. generated record revenues, the company maintained tight control over expenses excluding interest, driving a sharp decrease in expenses as a percentage of revenue to 29% from 35% in 2024. As a result of the record revenues, coupled with the decreases in expenses, GAAP net income increased significantly to $146,000,000, up from $84,000,000 in 2024, and diluted EPS for the full year was $0.99, up significantly compared with $0.36 in 2024. Adjusted net income increased to $140,000,000 compared with $83,000,000 in 2024. Adjusted EPS was $1.59, also up significantly compared with $0.95 in 2024. The company delivered strong full-year results, exceeding guidance and Street estimates, driven by the successful implementation of numerous strategic initiatives and operational improvements throughout the year. These efforts enhanced efficiency, expanded market opportunities, and strengthened financial performance, underscoring the company's ability to execute its long-term strategy and deliver stockholder value. Given our strong operating performance driven by growth in net originations, revenue, and adjusted net income, we are pleased to provide the following 2026 full-year guidance. For total revenues, we expect $650,000,000 to $675,000,000, an increase of 9% to 13% over 2025. Adjusted net income is expected to be $153,000,000 to $160,000,000, an increase of 9% to 14% over 2025. Based on an anticipated diluted weighted average share count of 87,000,000 shares, adjusted earnings per share are expected to be $1.76 to $1.84, an increase of 11% to 16% from 2025. With that, I would now like to turn the call over to the Operator for Q&A. Operator? Operator: Thank you. We will now open for questions. We will take our first question from David Michael Scharf with Citizens Capital Markets. Your line is open. David Michael Scharf: Great. Thanks for taking my questions. Good morning. Todd, maybe to start more on the macro side, and given the events going on right now geopolitically, can you remind us, since these are such short-duration loans, how quickly loss emergence—like, in weeks or months—typically occurs, and specifically whether it is far too early to be talking about the impact of gas prices on some of your borrowers? Todd G. Schwartz: Yes. David, thank you for the question. We see early indicators very early within the month of when they are originated, looking at first payments 28 days, 42 days out. So we get earlier indicators. And, in the summer, what was interesting was we saw consumer sentiment index take a nosedive during the summer, and what followed was some lower repayments, I should say, and we course corrected pretty quickly. Also, the business is structured with risk-based pricing now, which better prices risk for customers throughout the risk segments, and that helps unit economics tremendously. So, we were still able to grow into the fourth quarter, and the good news is we have definitely seen some improvement on those in December and in January on those early indicators, and it is giving us confidence to allow for double-digit growth on top and bottom line for 2026. Yes, sorry about the cost again. Yes, there is no doubt. Inflation is a tax on our customers. It hits their discretionary income and ability to repay, something we are watching closely. We are hoping it is temporary, but anytime prices of major items like gas go up rapidly like it just has over the last week, it is something that we are going to watch. We are also going to continue to watch the customer sentiment index and just make sure that the customer is in a good place. It is definitely going to be top of mind here in 2026. David Michael Scharf: Got it. Understood. And maybe just staying on credit. I know you do not provide specific loss guidance for 2026, and as you mentioned, obviously risk-based pricing has to be factored in for total returns, but is there anything we should think about in terms of the cadence of losses coming out of—type thing—in the second half? Todd G. Schwartz: Yes. I mean, there was some tightening that was done in response to some of the summer vintages. However, it is stable, and we were starting to feel more confident. Obviously, it is a wait and see here through the first quarter, but we think there are also some strategic initiatives that we are working on in the business that are going to unlock some more growth. We are very bullish on our model refit 6.1, which factors in more recent data to allow us to give us confidence to grow. And then I will point to we are getting more yield. We are getting more yield to price the risk properly across the segments. So back in 2022 when there were some credit spikes due to rapid inflation, we did not have risk-based pricing. So it was not a lever in our toolkit to be able to properly price risk across the segment. So we feel like with our model, with our new product line of credit, and with some of the risk-based pricing initiatives, we are well positioned to continue to grow profitably and keep strong unit economics. David Michael Scharf: Got it. Maybe just one more follow-up, and then I will get back in queue. You noted in your presentation that your bank partners had increased the percentage of their retention. I am assuming it was notable enough for it to be included in the deck. Can you give us some color on both order of magnitude, but more importantly, is this something that usually cycles up and down that maybe we had not paid attention to, or if there is anything else that we should take away from that? Todd G. Schwartz: Yes. It is really just in some states. Every state is a little bit different because we abide by all federal and state laws. Banks do take higher percentages in some states of originations, and so, obviously, our gross to net comes down a little. But I think what gives us comfort is the banks are very comfortable with our servicing and underwriting capabilities and are willing to put their equity into the originations, which is our interest alignment and builds confidence for us. And so we view it as a good thing long term and think that it shows the confidence that the banks have in us. David Michael Scharf: Got it. Great. Thank you. Operator: We will move next to Michael John Grondahl with Northland Securities. Your line is open. Michael John Grondahl: I wanted to ask on those early summer vintages. If you look back, what are the learnings from that? Was there any region to call out, type of loan, or a risk tier to call out? Just curious what you learned from some of those higher losses. Todd G. Schwartz: Yes. That is a great question. We did look at—we have extensive data: banking data, cash flow data, in addition to a lot of customer-level data to look at—and the repayment, the actual repayment. So you cannot get better data than that. There is nothing that stood out to us as being the sole reason as to why we started to see some strain and some lower repayment rates. One thing that is and has been is customer sentiment index—has been something that we have started to look at as being a way to, not obviously decision on credit, but as an early indicator of how the customer is, how the customer is feeling. And there is some ability to see that when the customer is not feeling financially secure, or they do not feel like the direction of their financial path is upward, that you see some lower repayments. But there is nothing to decision on. We looked across the spectrum at a lot of different data points. There was nothing that stood out as, “Oh, that is the reason for this happening.” But that is why we monitor this on a daily basis, and it is something that we have really good reporting to be able to read and react. In this world, it is not set-and-forget anymore on credit. That is why we are doing the refit. That is why we are building Model 7. The pace of model building and change is rapid now, and I think we are well positioned to respond to it and make course corrections along the way. Michael John Grondahl: Got it. And then just to clarify, is it Model 6.1 goes live in 2026? Todd G. Schwartz: Model 6.1 is going to go first half. We are going to be launching—it is a refit, so it is taking Model 6 and improving on it—and we do see early indicators are boosting originations and better credit performance across the board. It really has a benefit on the origination side too, which we are excited about. We have been testing it all throughout the fourth quarter and into the first quarter, so our confidence level is getting higher. And then we are also already starting to work on building Model 7, which is a brand-new model, which will take in a lot of the data from last year and the most current data and be able to build our strongest model ever. Michael John Grondahl: Got it. And if there is one or two things to call out in 6.1, which you are relaunching now, what advantages or what benefits—is it a certain data cohort, or what would you say you are getting an edge from there? Todd G. Schwartz: Yes. It is looking at repayment data and reweighting our variables to have the model be more predictive. That is really what it is. We look at a lot of different data points throughout the application process to determine creditworthiness, and when you actually have repayment data to support it, it becomes extremely powerful. So it is a reweighting. We have really good tools. Our credit team does a great job at constantly back testing and finding areas for improvement. Once they go to work and they start to run the regression analysis, we found some things where we could better weight different variables and produce a more accurate score. Michael John Grondahl: Got it. Then, lastly, 2024 had $95,000,000 of free cash flow, 2025 had $94,000,000—low to mid-nineties each year. I would assume 2026 is going to be in a similar ballpark, maybe adjusted for a little bit of growth. How are you thinking about capital allocation? Do you have a chunk of buyback ability to buy in 2026? I am trying to think about uses for another large year for free cash flow. Todd G. Schwartz: In the fourth quarter, we did buy back some shares. We thought that the long-term value of our stock price and the record performance that we have had and the consistency of that was not being valued properly. So we did buy back some shares with some of our capital. I am happy to support the stock at those prices for sure. I kind of always say this, but it is a menu of options. We like to be well capitalized to read and react to the broader markets and see what is going on. We are still active in the M&A space looking at stuff. We are exploring different strategic initiatives that would need capital. We have been investing in our tech systems. We believe that LOLA, when launched, will be the most cutting-edge tech-enabled lending system out there, and it will allow us to plug into AI tools. So we are investing in that. There is a menu of options. In the past, we have done a special dividend as well. We do anticipate free cash flow to continue to increase this year. We are paying down debt, as you can see, and getting the benefit there as well. We are using our cash wisely and strategically and like to be well capitalized to take advantage of situations that come up and continue to build the business. Michael John Grondahl: Got it. Thank you. Operator: We will move next to David Joseph Storms with Stonegate. Your line is open. David Joseph Storms: Morning, and thanks for taking my questions. I wanted to start by maybe pivoting back to the macro question from earlier. You mentioned that in the summer you guys course corrected pretty quickly. You would expect to do the same thing again should gas prices run. I was hoping you could illuminate a little more about what the playbook would be here. Is that targeting higher-quality segments? Is that adjusting your pricing a little more aggressively? What does that look like? Todd G. Schwartz: Yes, absolutely. That is something that we have successfully been able to do: targeting lower-risk customers and even adjusting pricing to accommodate more growth in the lower-risk segments. We have been launching that in the fourth quarter and will continue that throughout the year. The lower-risk segments are more predictable on payback and repayment rates. We are not seeing as much degradation in those segments, and we will continue to market and target. We think that the line of credit product that we are building, when we launch, will potentially open up some new geographies for us with our bank partners. We are excited about that. It will give us some new geographies to provide credit access for customers. Inflation is something we are watching, and seeing gas shooting up that quickly is concerning, but we are ready to respond if needed, and right now it appears to be a temporary surge. Hopefully, it will come back down in line and will not impact our customer repayment rates. David Joseph Storms: Very helpful. Thank you. Turning to the new model we will also have this year, maybe could you spend a little time talking about what has changed between—not maybe the models themselves—but the process of putting a model together? I have to imagine you have a lot of tools at your disposal to create better, faster, stronger models with the advent of AI and such. Are we going to see that turn into faster model rollouts, or should we expect a step change in the quality of the model? Todd G. Schwartz: First of all, you are absolutely right. The AI tools and the tools that we are now able to deploy—the pace of change, the cycle times of developing refits and developing new models—has significantly reduced, which is a huge benefit to read and react. But the world is also changing at a much faster pace. I do not remember a time where gas went from $80 a barrel to $120 in one week. You have to— that is table stakes now—be able to read and react and be out in front of any macro noise that may affect repayment rates and be ready to make changes as needed. You will continue to see more rapid model development, reduced cycle times, and better, more predictive data as we continue to operate. David Joseph Storms: That is great. And one more for me if I can sneak it in. Just looking at your guidance, anything here that is baked in that we should be aware of? Do we expect pretty simple seasonality on the year based on what you can see? Anything there would be very helpful. Todd G. Schwartz: We are encouraged by some of the early vintage metrics of December and January. We are seeing a normal to strong tax refund season. It was well documented from the IRS that the average return would increase this year, which is also very beneficial for us from a credit perspective. We see growth. We feel like we have some good growth initiatives and feel good throughout the year that we can achieve double-digit revenue and profit growth. Operator: It does appear that there are no further questions at this time. This does conclude the Q&A portion of today's call, and this also concludes today's meeting. We appreciate your time, and you may now disconnect.
Operator: Good morning, and welcome to Campbell Soup Company’s second quarter 2026 Question and Answer Session. After the introductory remarks, we will open the lines for questions. As a reminder, this conference is being recorded. I will now turn the call over to Rebecca Gardy, Chief Investor Relations Officer. Ms. Gardy, you may begin. Rebecca Gardy: Good morning, and thank you for joining the Campbell Soup Company second quarter 2026 Earnings Question and Answer Session. Earlier this morning, we released our earnings press release, earnings slide presentation, and management’s prerecorded remarks, including both the transcript and the audio of the remarks. All of the Q2 earnings materials are available on our website. At the conclusion of today’s live Q&A session, we will post the transcript and an audio replay of this call. During today’s call, we may make forward-looking statements, which reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, which could be inaccurate and are subject to risk. Please refer to slide 3 of our earnings presentation or our SEC filings for a list of factors that could cause our actual results to vary materially from those anticipated in the forward-looking statements. Because we use non-GAAP measures that we believe provide useful information for investors, we have provided a reconciliation of each of these measures to the most directly comparable GAAP measure in the appendix of our earnings presentation. Non-GAAP measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Joining me today are Mick Beekhuizen, Chief Executive Officer, and Todd Comfer, our Chief Financial Officer. We will now open for questions. Operator? Operator: Thank you. Our first question today comes from Andrew Lazar from Barclays. Andrew Lazar: Maybe focusing in on Snacks to start with. From a top-line standpoint, what are you seeing in the key areas here of Goldfish, Fresh, and Salty? And so what is the plan for progress in the back half? And I guess for Salty specifically, you called out heightened competitive intensity, around which there has been plenty of discussion lately in the category. I am trying to get a sense of what the solution is. Is it lower everyday prices, higher promotional spend, bonus packs, etc.? And what sort of magnitude are we talking about? And then just on the margin side, the 7% snack segment margin was a bit of a shock. Given the investments that need to be made, is that the sort of level we should be thinking about for the next few quarters? I know it is a lot. I was hoping we could dig into that a little. Mick Beekhuizen: Thank you for the questions. We will take them one by one. So Snacks’ top line, Salty, I will comment on, and then Todd, if you can take the margin. And I will give the broader lead-in around the margin. If you look at the Snacks top line, three key focus areas: first, Goldfish; second, Fresh Bakery; and then Salty. Let us go through each of these pieces. With regard to Goldfish, we need to make sure that we maintain the Goldfish momentum. We had momentum, as you saw in our prepared remarks, going throughout the first half. We need to see that sequential progress throughout the second half of the fiscal year, and that is really with regard to in-market consumption. Then when I go to Fresh Bakery execution, we ran into execution challenges as we described. When I look at the remainder of the year, I expect that in Q3 we will likely see some continued headwinds, and that is partially self-inflicted as we reduce some market promotional activity in order to make sure that on-shelf availability and service levels are improving, and then by the fourth quarter we are working towards back to more normalized levels. When I get to Salty, we need to improve our overall competitiveness within that part of our Snacks portfolio, and it is predicated upon three key focus areas: first, making sure that we improve our competitiveness from a pricing perspective; second, focusing on the daily blocking and tackling, or the in-market execution, which is absolutely critical; and third, evolving our portfolio with innovation, which is primarily focused on premium, better-for-you, as well as flavor exploration. All that being said, within Salty, we expect we are going to make some progress throughout the second half, but it will take some time. With regard to your specific question around Salty pricing—and my comments really come back to the chips side of the business—Salty for us consists of two key pieces: first, pretzels; and second, chips. That is really where we are seeing more of that competitive pricing dynamic playing out, and you have heard that also from some of the other players in the space. What are we doing there? It is really focused on promotional activity. It is going to be very surgical, and we are going to make sure that we are competitive in the areas that matter during the times it also really matters—so again, just making sure that we are competitive in key moments. There is always a continued opportunity around some of the price pack architecture; however, that is going to take a little bit longer. From a margin perspective, obviously, poor performance, down 390 basis points in the quarter. Todd Comfer: As we mentioned in the script, about a quarter of that was the bakery performance that Mick just mentioned, and three quarters of it, quite frankly, is just when net sales were down 6%, there is a very large deleverage both in our plant network and also as we continue to invest in marketing and SG&A. When you are down 6%, that math on margin is challenging. For the second half, we will do a bit better on Snacks margin in Q3. We are still in the process of stabilizing bakery. We are still going to have a fair amount of spending, particularly in marketing, in Q3. So we will see some margin improvement in Q3, nothing dramatic. I think we will see a lot better performance in Q4, because we feel very strongly we will have the bakery performance stabilized much more greatly at that point. We will have lower marketing year over year, and then we have a lot of activity on Goldfish in the quarter, which is by far our highest margin product line in the Snacks portfolio, so that should help margin as well. Operator: Our next question comes from Tom Palmer from JPMorgan. Tom Palmer: Maybe to start off, I wanted to get a little more detail on the Fresh Bakery challenges. The remarks to Andrew and in the prepared remarks indicate that they emerged before the winter storms. It seems like they are related to execution challenges. I am just trying to understand where you are seeing this. Is this a production issue? Is it a challenge with route to market in terms of servicing customers? And then just how you are addressing it in terms of resolving it here over the next couple of quarters? Thanks. Mick Beekhuizen: Let me address it. With regard to Fresh Bakery, I mentioned this in my prepared remarks as well. It is really focused on both the manufacturing as well as distribution disruptions, and it was exacerbated by the January winter storm. But you are right, we already started to see that throughout the quarter. It is really coming back to making sure that we have products available on the shelf. That comes back to service as well as the in-market execution piece. We deployed a cross-functional team and we are already seeing measurable improvements across the board. At the same time, I am also very conscious that we need to make sure that we are making sustainable improvements. As a result, we are investing in the business so that the changes that we are making are sticking, so that we can service this business better going forward. As I mentioned, we already started to see progress over the past, call it, four weeks. We have to continue to work through that in the third quarter, and then we are working towards normalization in the fourth quarter. Tom Palmer: And then on capital allocation priorities, you noted the plans to focus more on debt reduction versus share repo. There is the dividend, which equates to a little over two-thirds of EPS at guidance this year, and then you have the La Regina acquisition soon to close. It seems like there also might be some investments needed to support the business. Maybe just an update on how you see this all balancing out? Todd Comfer: I will take that one. Cash flow obviously has become extremely imperative for us just given the debt leverage we are currently at and the takedown in the earnings. We will continue to invest in our business. We will reallocate some of our marketing money, as we have mentioned, into promotional activity to get sharper price points, but the net effect of that will be that is part of the reason why it is impacting our earnings. We are going to have to get really tight on capex. As you know, we already took it down $50 million for the year. Working capital is going to have to be really tight. We are going to have no more share buybacks; even anti-dilutive share buybacks we will not do. The dividend is extremely important to us, but we will not be increasing that dividend anytime soon. We mentioned a $100 million cost reduction in overhead that is going to take place over the next couple of years, and that is in place to help cash flow as well. The La Regina acquisition in the near term is not going to be significant from a cash flow perspective. We will make one payment of roughly $140–$150 million before the close of the year. If you remember, that second payment, we have the option of issuing equity. That second payment comes a year from now, so if we need to issue equity instead of cash, we have that ability, and then the second half of buying up the 51% is probably a few years off. But rest assured, cash flow preservation is heightened for us right now, and getting that leverage down closer to three than to four is imperative for us. Operator: Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open. Peter Galbo: I actually wanted to go back on the Salty Snacks points, Mick, that you were making. I think I heard you correctly: the focus is really to be more promotional within chips versus maybe moving the everyday. Obviously, your largest competitor is making it more of an everyday shift. Why is promotional the right route or tactic for that within chips when you have, I guess, the 800-pound gorilla that is doing a more permanent shift on the price side? Mick Beekhuizen: Let me give you a little bit more context around it. As I mentioned, we are going to take a surgical approach. That is important, and the other aspect of it is we are going to make sure that we continue to be competitive with our brands. If we look at the brands that we have with Cape and Kettle that both play more in the kettle subcategory, we believe that with the brand positioning itself, we have a right to win with these brands. That is important to recognize, and accordingly we need to make sure that we continue to lean into that brand’s right to win. Back to your point around value: values are absolutely critical. We have been pretty diligent in the past about making sure that we continue to maintain a competitive position. We are going to continue to look at key channels, and if I look at what the competition is doing, making sure that we stay competitive within those channels. What we are seeing right now, most of the time, can be resolved with our overall promotional strategy. There could be instances where we have to reset some of the pricing more permanently, and if so, then we will do that. I do not want you to take away that we are just going to solve this with pure promotional activity. I think it is going to be that surgical approach that I led in with. Peter Galbo: Thanks for the additional context there. And, Todd, I think you gave some color around the EPS cadence for the back half, but just wanted to clarify that. I believe Q3 looks similar to Q2, and then you would see a normal step down in Q4 just to hit the $0.90 you need to deliver in the back half at midpoint. Do I have that math right? Mick Beekhuizen: You have it correct. Peter Galbo: Perfect. Thanks very much, guys. Operator: Our next question comes from Megan Clap from Morgan Stanley. Please go ahead. Your line is open. Megan Clap: Hi, good morning. Maybe we could just pick up there on the Q3 to Q4 cadence, and, Todd, maybe follow up on some of the margin commentary you gave Andrew in the first question. So if Q3 operating EBIT growth performance looks similar to Q2, obviously an improvement expected in the fourth quarter. As you think about the margin profile, it would imply improvement in margins as we get into the fourth quarter. I think typically Q4 is a lower margin quarter for you. Can you, whether by segment or on a consolidated basis, unpack the expectations as we go sequentially from Q3 to Q4 that would imply that step-up in margin? Thank you. Todd Comfer: Absolutely. A couple of factors give us more confidence that Q4’s profile will be better than in Q2 and Q3. One, if you remember, the Sovos ERP conversion that brought volume into Q3 last year out of Q4—we will lap that, so we will get a benefit organically. We will get a benefit from that volume coming back into Q4 this year. We do anticipate Snacks stabilization—not going to be all the way to right—but we believe the Snacks margin will improve sequentially as we get into Q4. Tariffs—we will start to lap some of the tariffs in Q4 of last year. That year-over-year hurt will not be as great in Q4 as it has been in the first part of the year. And we will have lower advertising spend in Q4. It will be up in Q3; it will be down year over year in Q4, and that will help the margins. Megan Clap: Okay, great. And maybe just one follow-up while you said on the stabilization in Snacks. From an organic sales perspective, Q3 to Q4, can you help us understand what you are expecting now for Snacks for the year? I know the compare does ease in both segments in the fourth quarter on the top-line perspective, but should we still be thinking about Snacks declining in the fourth quarter? Todd Comfer: It is going to take a while. We have a lot of good activity going on, but Snacks will probably be down about 4% in the second half. That is going to be fairly balanced between Q3 and Q4, probably a little bit better in Q4 than Q3. But we are not anticipating a big sequential increase benefit on the net sales line. We do think we will stabilize margins. They will get better. They will not be all the way upright, but we do think the margin profile will get better as we end the year. Megan Clap: Okay. Great. Thank you so much. Operator: Our next question comes from Michael Lavery from Piper Sandler. Michael Lavery: Just wanted to understand a little bit better—you said that some of the marketing spending will shift to promo spend. I get the need for some of the pricing adjustments or stepped-up promo spending, but it seems like the ideal is to walk and chew gum. Why not both? Is it just maybe being handcuffed given where you are on the leverage, or is there a way to get both? Do you have the right marketing spending level, and how do you think about balancing the need for that versus the pricing? Todd Comfer: To be clear, our anticipation is marketing spend year over year will be up. As we started the year, we were hoping it was going to be up a bit more than we are now forecasting, but it will be up year over year. I would love to be spending more marketing money versus trade if the market would allow it right now, but we just think it is prudent to be competitive in certain areas where we have price gaps in the marketplace, whether it is on broth or on chips. We are not talking about dramatic changes in our trade philosophy or spend. We will spend more. Some of that will get funded by marketing. There will be an incremental hit to the P&L, as we have mentioned. The anticipation is marketing will still be up, but we are going to lean in a little bit more heavily into price. Mick Beekhuizen: And I think, Michael, to add to that as we go through the year, we are taking a very balanced approach. I want to make sure that we reiterate that, because on core brands we are going to continue to make sure that we build them. If there is one brand that we are continuing to support—and we will continue to support—it is RAO’S on the Meals & Beverages side, and you see the positive effect from that in the results. Another brand on the Snacks side that we must continue to support with marketing is Goldfish. So we are being very selective in how we are allocating our dollars and our support between trade and marketing. Michael Lavery: That is helpful. And just to follow up on the pricing approach. You touched on the promo increases, but then you have also talked about sharpening value architecture and some of the price pack architecture. You also touched on at least considering some list price adjustments. Can you give a sense of phasing and where you are in that process? Would I have heard it correctly that any list price adjustments are not decided but just under consideration? And on the price pack architecture, how much is underway versus under consideration? Mick Beekhuizen: Let me unpack it. Some of the price pack architecture is going to take longer if it requires changing some of our package formats. But it might also mean—around, for instance, Goldfish—that we lean into an area that we see is actually working and is providing value to the consumer, such as multipacks within Goldfish. That has been working, and we need to make sure that we continue to lean into that space because we have a moment here with that particular pack. That is also what I mean when I mention price pack architecture. Then there might be some of the larger pack sizes that we have within Goldfish where we are leaning a little bit more into promotional activity in order to make sure that we hit a good price point that is providing that value for the consumer. Obviously, the promotional activity, as I mentioned, is a bit more of the focus right now—again, very surgical. I can see, for instance, on chips—if we are finding ourselves where certain list price gaps are just too large—we might selectively adjust. But the latter I expect to be smaller than the trade component. Todd Comfer: Michael, this work is underway. We will do some things in the shorter term, but some of the activity that we are doing will take a little bit of time. As we look at some of the price slopes, particularly in our Snacks business, some of them are just out of whack. We have price per ounce in some sizes that are below where they should be and, conversely, some that are above. We need to get those aligned. It is going to take a little bit of time, but if we can execute that really well, there is some margin to be had. Michael Lavery: Okay. Great. Thanks so much. Operator: Our next question comes from Max Gumford from BNP Paribas. Max Gumford: Another one on Snacks for me. Really just on this recovery. It has been ongoing for some time now. We have not seen the volume grow in a couple of years. At what point do you stop talking about a recovery to what you view as a normalized level of growth, and maybe reset your expectation for what normalized growth is? Asked differently, what is giving you the confidence that this is still a segment where there is a reasonable chance of growing sales organically at the levels you have at the past Investor Day? Thanks very much. Mick Beekhuizen: Let me unpack that. With regard to Goldfish, based on the brand that we have, we have a right to win, and we believe that we have an opportunity to grow that business. We are seeing sequential improvement. We are obviously not all the way back to right yet, but I feel pretty confident around that, also because of the differentiated positioning of the brand. It has good better-for-you credentials, and we need to make sure that we amplify those. It is a brand that fits well with what consumers are generally looking for. We need to make sure that we tell that story and provide the value in the marketplace, and net-net we can, as a result, grow that business. I feel pretty good about the Goldfish side of things. If I look at Bakery as a whole, people continue to focus on moments of indulgence, and that comes back with cookies. We have been able to grow our cookies business now for four quarters in a row with the Milano innovation, and we have some incremental innovation that recently came out with Chessmen. I feel pretty good about our overall cookies business. The cookies category has not been growing, so we need to make sure that we continue to differentiate our cookies business, and that, as a result, fuels the growth. With regard to Fresh Bakery, as I described earlier, we need to make sure that we get the execution right, and at that point I believe we should be able to get that back to, call it, at least a flattish top line. That is with regard to Bakery. When I get to Salty, if I look at the two pieces of our business, we are playing in subcategories that are growing. Within pretzels, the pretzel subcategory has been growing, and we have two great brands with Snack Factory as well as Snyder’s of Hanover. Snack Factory has been growing. We have made some sequential progress on Snyder’s of Hanover. We have more work to do on it in order to get that back to growth, but because we are participating within a growing subcategory, I feel if we gain our fair share, we should be able to grow that business. On the chips side, that is obviously a more competitive space, as we have been discussing. Although the subcategories that we are in—kettle chips with Cape Cod as well as Kettle Brand—are well positioned within the kettle chips subcategory, which is the growing part of chips, the competition has increased over the past 12 to 24 months. As a result, we have more pressure and we are losing share there. That is why we need to do the work that I described earlier to make sure that we get a fair share of that growing subcategory. Finally, you have Late July. Late July’s positioning is exactly what consumers are looking for. It is growing. It is a little wonky between different quarters because of some promotional activity, but overall I feel very good about that brand. Hopefully that gives you some context to unpack our overall Snacks portfolio. Around why we believe we should be able to grow it, it is because the brands that we have and the subcategories that we are in are well positioned with what the evolving consumer is looking for. The consumer is looking for that premium, better-for-you, and flavor exploration experience, and our brands can provide that. Max Gumford: Great. Thank you. And then on Goldfish, back in 2023 you announced you were investing about $100 million in the Richmond manufacturing facility to expand Goldfish capacity. Since then, at least based on what we are seeing in tracked channel data, volumes have been in decline. Can you talk about any capacity utilization impacts you have seen as a result of that expansion and your view on your ability to fill that capacity going forward? Thanks very much. Todd Comfer: What you just described, unfortunately, is part of the reason why we have a 7% margin in Q2. One of the issues—not everything—but one of the issues is deleverage in the P&L. We invested, particularly in Goldfish but in other areas coming out of the pandemic, where we thought volume would continue to grow. It obviously has not. When you have higher fixed costs and your business is in decline a bit, that is really bad for margins, and that is what you are seeing. Our job as a management team is to make sure we can get that volume back, and the P&L really starts to improve if we can do that. It is as simple as that. We have to get Goldfish volume going in the right direction, or we will continue to have these margin hurts. Max Gumford: Great. Thanks very much. Appreciate it. Operator: Our next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open. Robert Moskow: Hey, thanks for the question. Just a couple more add-ons. I wanted to ask about distribution for your Snacks business. Your competitors talked about double-digit gains, and I wanted to know if you have seen distribution losses as a result of that. And then secondly, Todd, oil is jumping all over the place. It is going to have an impact on diesel, and I wanted to know if you could talk about how that may impact the cost structure of the DSD network. These are independent routes, so it is a little complicated. Wanted to know if you could help us. Thanks. Yeah, great, thank you. Mick Beekhuizen: Todd, why do you not take the second one, and then I will come back on the first one. Todd Comfer: Absolutely. Obviously, an incredibly fluid situation. Oil is bouncing all over the place right now, and I do not think anyone knows how this is going to play out in the next few weeks and, more importantly, months and years. The good news is right now, we are about 85% hedged on all commodities, including things like diesel for freight, and resins, and other plastics and aluminum that could get impacted by what is going on in the Middle East right now. There could be some impact to this year. It is not going to be significant. If this continues for several months—if oil remains where it is as we start the fiscal year—obviously things are different. This will start to have an impact on our business and everyone’s business if oil remains elevated, not just on freight but on other products that leverage oil in their products as well. More to come on that. Hopefully this will get resolved. As I mentioned in prepared remarks, we have no incremental cost embedded in our forecast from it. There is a little bit of risk there, but nothing substantial. If we are sitting here three or four months from now and oil is still elevated, we are going to have to address it, either through pricing or really sharpening our pencils on getting more cost out of the system. Mick Beekhuizen: When I look at overall distribution, Rob, with the strength of our brands, you continue to see distribution opportunities, and we are also gaining some of that distribution. It is more profound in areas like Goldfish where we have a right to win. It is a well-positioned brand, and we continue to work with our retail partners in growing that brand. In some of the more competitive areas, such as chips, I see a mix of some gains and losses and, as a result, a little bit more net neutral around the distribution side. When I think about what we are doing about areas like that, if we have great innovation, we find that our retail partners are excited about making sure that we gain that incremental distribution, and you see that, for instance, in cookies. Cookies have done really well with the Milano as well as the Chessmen innovation, and as a result, we have seen continued distribution gains in those areas. Hey, Rob, one impact you mentioned—the independent DSD—just so we are clear: they are independent operators. They are responsible for their fuel costs and other operating costs. So there is no direct impact to us. But, obviously, if they do not have a competitive route where they can make money, ultimately at some point in time it impacts our ability to grow these businesses as well. We will have to be cognizant of that, but they are responsible for their fuel costs. Robert Moskow: Thanks for that. Operator: Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open. David Palmer: Thanks. I am wondering if there is a bigger long-term comment to be made about the Snacks business. Sometimes when you have a margin of a segment get down towards what looks like maybe 10% this fiscal year, the implied valuation of it is compressed. There is something perhaps liberating about that in terms of how you are thinking about it. You have Mohit—he is joining from a company that spun out DSD and sold cookies; in other words, they rethought that business more completely. I am just wondering if you think that this is maybe a time when you can really think about the complexity of the business, what you own in it, so you can put the resources you want against the good stuff within it. I know there is limited detail that you could share, but maybe you can make a comment on that and I have a quick follow-up. Mick Beekhuizen: We have spoken about this in the past. We are obviously operating the portfolio that we currently have. We are big believers in the brands that we have. We will always continue to make sure if there are alternatives that create better shareholder value that we take those into consideration. When I look at our current Snacks portfolio, another way of looking at some of what we are talking about—particularly with regard to the margin—is that there is a lot of opportunity here. You see that, hopefully, throughout our commentary—the action orientation and making sure that we go after these different areas. Making sure, as Todd mentioned, that we are stabilizing our top line is absolutely critical. Growing areas like Goldfish, which will help from an overall mix perspective, and making sure we get that Fresh Bakery execution right are all going to help margins. We are not going to stop with those initiatives. Continued focus on that elevated productivity level is really important—that is both within the plants as well as within our logistics network. Finally, Todd already mentioned the cost savings, whether they are with regard to a network or within our SG&A. We are going to continue to work on those areas, although some of them might take a little bit longer. We will always continue to look at all the different alternatives, but we are focused on the portfolio that we have and making sure that we work that as hard as we possibly can. David Palmer: Thanks. Just a quick one on the other side of the business. I think a lot of your comments in your prepared remarks are really true about the cooking behaviors of the younger generation, and you are leaning in on that with this new condensed sauces business. I wonder about how incremental you think that can be. On the other side, how much should we be worried about ongoing market share slippage on the broth side? Your broth business has flattened out lately. I am wondering how you are thinking about perhaps reviving growth there, or at least forestalling whatever progress is being made by private label getting back on shelf. Thanks. Mick Beekhuizen: Thank you for asking the question. We did not talk as much about the Meals & Beverages side of the business, but the in-market growth that we generated during the second quarter and the strong performance of RAO’S are obviously something that we are very excited about. The other thing that is really working within the M&B portfolio, as you are describing, is the overall focus on cooking occasions, and our portfolio is catering very well to that. Also, products within the soup aisle—broth on the one hand, and on the other, our condensed portfolio—have actually been doing relatively well because of the parts of the business that are focused on cooking and are being used as an ingredient. A little over half of the condensed portfolio in the second quarter has been the growing part of the portfolio. On the flip side, the eating side has been declining, so net-net, condensed has been relatively flat during the quarter. We are seeing that differentiated proposition that we can provide with our condensed cooking soups—which are being used as an ingredient, like cream of mushroom and cream of chicken—and we are now expanding that into Campbell’s condensed sauces, and we believe we have a right to win with that. What does that do? It allows us to start transforming more and more of the soup aisle into an ingredient that we are providing. It provides convenience and comfort at a very attractive value proposition. I am very excited about the Campbell’s condensed sauces. We are going to introduce that in June. I think it will be incremental to what we are currently providing, and I think we are going to learn a lot with that introduction. It is a great complement to our condensed cooking soups as well as broth. With regard to broth, broth has been a growing category. The two great brands we have within that category—Pacific as well as Swanson—both continued to grow during this past quarter, albeit, as you are pointing out, with a little bit of share pressure, which we anticipated because of private label recovery. We are going to continue to make sure that we stay competitive within the space and also focus on how we can grow that business, as it is a very attractive value proposition that fits right within that cooking behavior. Pacific has been growing double digits. The pressure has probably been a little bit more on Swanson. Todd also mentioned earlier that we are watching very closely the price gaps to some of the private label participants and making sure that, as a result, we stay competitive during key drive periods like the holiday period. Operator: Our last question comes from Jim Salera from Stephens. Please go ahead. Your line is open. Jim Salera: Yes, good morning. Thanks for taking our question. Mick, I wanted to build on David’s question there and ask if you could give us some details around Meals & Beverages in the back half of the year—particularly what we should expect on pricing given some of the competitive dynamics you just highlighted. Is there still opportunity for modest net price realization in the back half of the year? And embedded in your updated guidance, do you have incremental at-home consumption given some of the pressures on the consumer? Typically that benefits that portion of the business. Any detail on that would be helpful. Todd Comfer: I will take pricing first. We will still have positive net price realization in the second half. It will not be as great as it has been, just because of some of the investments we have made in broth. We are actually making a little bit in RAO’S as well, but we still will have positive price. Mick Beekhuizen: From a consumption perspective, you are probably going to see a little bit of pressure in the second half. You saw that in Q2 we did really well from an in-market consumption perspective, driven by the holiday period. Our products typically do very well during that period, and that was also very evident again during this holiday period. On top of it, as you saw, we had very healthy growth with regard to RAO’S. RAO’S grew in-market consumption 14.5% during the second quarter. As I mentioned in the past, we expect for the full year high single digits, and that is still what I am expecting—so a little bit of that disproportionate growth during the second quarter. Overall, I expect continued growth with the RAO’S brand. However, that leads to a little bit lower overall consumption growth in Meals & Beverages in the second half of this fiscal year. I think you are hovering probably around minus 1% to 0%. That is probably what you are going to see in the second half. Operator: And we are out of time for questions today. This will conclude today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, and thank you for standing by. My name is Regina, and I will be the conference operator today. At this time, I would like to welcome everyone to the Infinity Natural Resources, Inc. Fourth Quarter 2025 Earnings Conference 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 this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Tom Marchetti, Vice President of Investor Relations. Please go ahead. Tom Marchetti: Thank you, operator. Good morning, and thank you for joining Infinity Natural Resources, Inc.’s fourth quarter and full year 2025 earnings conference call. With me today are Zack Arnold, our President and Chief Executive Officer, and David Sproule, our Executive Vice President and Chief Financial Officer. In a moment, Zack and David will present their prepared remarks with a question and answer session to follow. An updated investor presentation has been posted to the Investor Relations section of our website, and we may reference certain slides during today's discussion. A replay of today's call will be available on our website beginning this evening. Before we begin, I would like to remind everybody that today's call may contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. All statements that are not historical facts are forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those forward-looking statements. Please review our earnings release and the risk factors discussed in our SEC filings. We will also be referring to certain non-GAAP financial measures. Please refer to our earnings release and investor presentation for important disclosures regarding such measures, including definitions and reconciliations of the most comparable GAAP financial measures. With that, I will turn the call over to Zack. Zack Arnold: Thank you, Tom, and good morning, everyone. Before I begin, I would like to formally welcome Tom Marchetti to our team. Tom will lead our investor relations function and is a great addition to the team. We appreciate everyone joining us today to review Infinity Natural Resources, Inc.’s fourth quarter and full year 2025 results and to discuss our outlook for 2026. Overall, 2025 was another transformational year for Infinity Natural Resources, Inc. Importantly, we did what we said we would do during the IPO process. We continued to add scale. We have significantly increased production, we have grown our operating cash flow, we have expanded our asset base through acquisitions, we have accessed the capital markets, we have entered into strategic partnerships, and we preserved our operational and financial flexibility. We have been busy. Most importantly, our Appalachian platform continues to deliver strong operational and financial execution across both our extensive Utica position in Ohio and Marcellus position in Pennsylvania. Our results during the fourth quarter and year overall are underpinned by our strong well performance across our asset base as well as the disciplined execution of our development program. Our teams remain focused on improving drilling and completion efficiencies, extending lateral lengths, and maintaining capital discipline as we develop our high-quality asset base. Before reviewing our operational activity for the quarter, it is worth highlighting the strength and flexibility of our development portfolio across Appalachia. We have over 390 locations across our portfolio, representing more than ten years of inventory when developed on a two-rig program. Our returns in oil- and liquids-weighted projects are strong, especially true in today's oil environment, and our gas returns are strong as well. Balance and optionality: it is how we build our business in order to maximize value for our shareholders. Well costs are consistent across our position, whether in our Ohio Utica development or our dry gas Marcellus wells, which allows us to allocate capital efficiently across our development opportunities depending on commodity conditions. In addition, much of our drilling and completion design is standardized across our development program; utilizing common equipment and consumables packages allows us to efficiently shift activity between Ohio and Pennsylvania. Combined with our extensive drilling inventory across these development areas, this portfolio provides significant operational, commodity, and financial flexibility as we allocate capital across our assets. As a result, our development program can be adjusted to prioritize the highest-return opportunities while maintaining disciplined growth. During the fourth quarter, we continued to operate one drilling rig across our base asset. We added a second rig in January, bringing our total operated rig count to two, advancing development across our diversified portfolio. During the fourth quarter, net production averaged 45.3 MBOE per day, bringing full-year production to 35.3 MBOE per day, exceeding the high end of our guidance range for fiscal year 2025. When compared to 2024, the company was able to deliver year-over-year growth of approximately 46%. During the fourth quarter, we spudded nine wells totaling approximately 142,000 lateral feet, while finishing completions activities and turning into sales six wells totaling 103,000 lateral feet, evenly split between Ohio oil-weighted projects and Pennsylvania dry gas projects. For the full year, we turned 23 wells into sales, including 12 wells in Pennsylvania and 11 wells in Ohio, reflecting our balanced development approach across our asset base. Our development program continues to emphasize extended lateral development and operational efficiencies that support strong capital returns across both our Utica and Marcellus positions. For calendar year 2025, our average well turned into sales exceeded 15,700 lateral feet. The longer laterals helped to reduce our per-foot drilling cost. It is not just about drilling longer laterals. It is also about cycle times, getting those wells online, and having them track our anticipated well performance. We continue to target six to seven months cycle times on our development projects ranging from three to five wells, which we believe is one of the fastest cycle times in the industry. With regards to well performance, we placed a lot of wells online in 2025. We are pleased with the performance of those wells to date, and they continue to track in line with our type curve expectations across both development areas. Looking forward, we intend to operate two rigs throughout calendar year 2026. While the world is ever changing these days, especially with commodities, we anticipate allocating slightly more capital towards natural gas-weighted development based on wells turned into sales during the year. Approximately 30% of our projected wells turned into sales will be on the asset we recently acquired, developing our rich gas locations in the Utica Shale of Eastern Ohio. Turning to our recent acquisitions, on February 23, we closed the previously announced $1.2 billion acquisition of Ohio Utica assets from Atero Resources and Antero Midstream. This transaction is a highly complementary bolt-on to our existing position in Ohio, adding extensive inventory across multiple phase windows directly adjacent to our legacy acreage, further supporting our long lateral development strategy. Just as importantly, the transactions included ownership in the associated midstream system, which provides us with attractive midstream costs and further reduces well breakevens across the acquired asset. We intend to devote a rig to the development of these assets during the year beginning early in the second quarter, and we expect our first pad from the acquired position to come online during the second quarter. As we begin developing this inventory, we expect to increase production from these assets meaningfully in the coming months and years. Not to be forgotten with all of our activities, we also completed the Chase acquisition, which increased our working interest in our dry gas South Bend field in Pennsylvania. Transactions like this, where we can increase working interest in assets we already operate, are typically among the most attractive investments that we can make using our equity as they increase our exposure to future development and production without requiring incremental corporate overhead or G&A. This acquisition represents another milestone for Infinity Natural Resources, Inc. as it is the first time post-IPO we have used our equity to acquire assets. Together, these transactions expand our development inventory, increase our participation in high-quality drilling projects, and strengthen the strategic position of our Appalachian platform through enhanced infrastructure and marketing advantages. In conjunction with the Antero transaction, Infinity Natural Resources, Inc. successfully issued $350 million of perpetual convertible preferred stock to two highly respected energy investors, Quantum Capital Group and Carnelian Energy Capital. We believe the strong demand from these investors reflects confidence in both the quality of the underlying assets and our long-term development strategy. This hybrid equity structure is consistent with our philosophy of maintaining a strong and flexible balance sheet. We were able to raise significant equity capital above our IPO price while reducing outstanding debt and preserving financial and strategic optionality for the company. Importantly, this capital supported our election to increase our participation in the Ohio Utica acquisition to a 60% working interest, deepening our ownership in an asset we know well and believe strongly in, while maintaining balance sheet discipline as we continue to advance development across our Appalachian platform. Looking more broadly at the market environment, we continue to see strong structural demand for natural gas-associated liquids across North America. Recent geopolitical developments in the Middle East have strengthened crude prices across the forward curve through 2030, representing another opportunity for us to demonstrate the value and flexibility of our unique asset base. With our development activities in the fourth quarter, we have significant oil-weighted volumes planned for 2025. We have taken this opportunity in the commodity markets to lock in attractive oil hedges for 2026 and 2027 using a balance of swaps and collars. Additionally, we are evaluating our development plan as to whether we should accelerate any additional oil projects to take advantage of attractive prices. We cannot predict whether this will be a short-term event, but we will continue to monitor the situation to see if elevated oil prices prove to be longer lasting and warrant additional development of our oil inventory. On a more micro level and for our Ohio Utica liquids production specifically, we are witnessing increased regional demand dynamics. Condensate and other light hydrocarbons produced from liquids-rich plays such as the Utica are used both as refinery feedstock and as diluent for heavier crude oils. As production of heavier barrels from regions such as Canada and Venezuela increases, producers require additional volumes of condensate and other light hydrocarbons to blend those barrels to move them through pipeline systems and into refineries. Given our proximity to regional refining markets and infrastructure, we believe our Ohio Utica liquids production is well positioned to serve this demand. Turning to natural gas, global demand for U.S. LNG continues to expand, and with additional liquefaction capacity expected to come online over the next several years, U.S. natural gas supply is increasingly positioned to serve global energy markets. Domestically, rising electricity demand is expected to drive additional natural gas consumption within the U.S. power sector. Looking ahead, we remain focused on executing a disciplined development program that balances growth with capital efficiency. Our diversified asset base across our Appalachian platform provides flexibility to allocate capital toward the highest-return opportunities depending on market conditions. With that, I will turn the call over to David to review our financial results and outlook. David Sproule: Thank you, Zack, and good morning. Our financial results for the fourth quarter and full year reflect the strong operational execution delivered by our team throughout 2025. During the fourth quarter, net production averaged 45.3 MBOE per day, and we generated adjusted EBITDAX of $94 million, representing adjusted EBITDA margin of approximately $3.76 per Mcfe, or $22.58 per BOE. During the quarter, we realized average prices of $51.22 per barrel for oil, $3.14 per Mcf for natural gas, and $23.56 per barrel for natural gas liquids, with realized pricing reflecting regional market conditions and differentials across Appalachia, consistent with our expectations during the quarter. For the full year, adjusted EBITDA totaled $261 million, reflecting continued production growth combined with disciplined cost management. Operating costs during the quarter averaged $5.56 per BOE, reflecting continued operational efficiency and increasing contribution of natural gas production from Pennsylvania within our overall portfolio. We believe that we maintain one of the lowest operating cost structures in Appalachia, supporting our strong capital efficiency metrics. We continue to witness our costs decline approximately 36% during the fourth quarter when compared to the prior year. As we continue to expand our natural gas volumes in Pennsylvania, we would anticipate experiencing further declines in our overall cost structure as those volumes are on our wholly owned midstream system. During fiscal year 2025, we incurred approximately $326 million in capital expenditures, including drilling and completion CapEx of $274.7 million, land spend of $35.5 million, and midstream and infrastructure investments of approximately $16.1 million. Our development program will pursue strategic opportunities. As Zack mentioned previously, during the fourth quarter, we also completed a $350 million strategic equity investment in the form of a perpetual convertible preferred security, which is convertible into common equity at $21.36 per share, which is above our IPO price, aligning investors with long-term equity value creation. This hybrid structure provides permanent equity capital that allowed us to repay a portion of the revolver borrowings used to finance the Ohio acquisition, while also supporting an increase in our working interest of the transaction to 60%. Importantly, the structure limits immediate dilution to existing shareholders and preserves balance sheet flexibility relative to incremental debt. At year-end, we had net debt of approximately $148 million and total liquidity of approximately $227 million. Before turning to our outlook for 2026, it is important to note that our guidance reflects both the operational progress discussed earlier as well as the capital structure initiatives completed during 2025 and 2026. Our development program is expected to operate two drilling rigs during 2026, including one rig deployed across our legacy assets in Pennsylvania and Ohio, and one rig dedicated to the recently acquired Ohio Utica assets beginning early in the second quarter. This level of activity supports continued production growth while maintaining capital discipline and operational flexibility across both areas. Looking ahead, we expect to continue advancing development across all areas within our portfolio and anticipate turning into sales 31 gross wells during calendar year 2026, consistent with the development plan outlined in our investor presentation. In 2026, we expect to turn four oil-weighted wells in line on our Ohio Utica asset. For 2026, we expect net production to average between 345 and 375 MMcfe per day, representing growth of approximately 70% year-over-year. Development capital expenditures, which are a combination of drilling and completion as well as midstream capital expenditures, are expected to range between $450 million and $500 million. With that, I will turn the call back to Zack for closing remarks. Zack Arnold: Thank you, David. To summarize, 2025 and early 2026 has been a transformative period for Infinity Natural Resources, Inc. as we continue to execute operationally, scale our Appalachian platform through strategic acquisitions, and reinforce the balance sheet with new long-term equity partners. We enter 2026 with a strong operational foundation, expanded development inventory, and a strengthened capital structure. Our position across oil-weighted Ohio Utica, rich gas Ohio Utica opportunities, and dry gas Marcellus and Utica development provides the flexibility to continue delivering sustainable growth and value for our shareholders. Operator, please open the line for questions. We will now begin the question and answer session. Operator: A question, press star then the number one on your telephone keypad. We kindly ask that you please limit your questions to one and one follow-up. Our first question will come from the line of Michael Scialla with Stephens. Please go ahead. Michael Scialla: Hi. Good morning. Wanted to ask about your 2026 plan. Your CapEx guidance is a fair bit above annual assessments. Can you talk about any changes you made from—you gave some soft guidance back in mid-December when you did the call on the Antero acquisition. Any changes that you have made since then? And any things that might be in there that, David, you mentioned—you know, midstream is built into that. I wanted to see if you could break that out at all. Thank you. Zack Arnold: Michael, Zack speaking here. Thank you for that question. I think it is a timely one. First and foremost, I would want to point you back to slide seven and ten of our investor deck showing how well we performed last year. We have had cost improvements from a D&C perspective and continue to have great capital efficiency and EBITDA margin. So this capital guidance range that we are talking about and that you are trying to interpret is not a reflection of drilling cost concerns. We continue to execute very well there, and we are gaining scale, so we expect additional synergies and improvements. What I think is helpful to understand is some things related to the acquisition. First of all, we have an additional 9% of CapEx. Now we took on additional working interest from the Antero deal than what we knew when we were talking before. Also, the first pad out of the gate, the English pad, will be completed by us and the capital borne by us. So that is 19,000 lateral feet on three separate wells. So that is a lot of lateral footage with completions activities that are coming to us. Another point on the Ontario deal, we wanted to make sure we had a rig ready to go as quickly as we could, and we did not want to have the asset close and be looking for a rig. So as a result of that effort, we picked up the rig before close, and that rig has been drilling on INR projects. So effectively running two rigs across our base business for part of this first quarter. So those things are all adding to it that were a little bit different than when we visited before. You talked about midstream. I think that is an important component of this too. And while we do not break that out, we more than doubled the size of our midstream with the acquisition of Antero. We are actively developing in both areas that require midstream investments, and so we will expect to spend money in both areas, PA and Ohio, as we build out midstream. And I think for us, we do not break it out because it is a little bit fungible and it still gives us some flexibility in our pad selection and where we are deploying capital between drilling wells that do not require midstream—maybe you add an extra well to that pad—versus somewhere where you need to add midstream to allocate dollars there. Couple other things just to point out too is we want to make sure we maintain flexibility in that capital guidance for what we did last year, which is pick up working interest. Our land group has been incredibly skilled at the ground game and adding in working interest and lengthening laterals. So we do not want to surprise somebody if we end up with more interest or longer laterals than we talked about. And now that we are running two rigs, the timing component becomes a little bit magnified, where if those rigs gain pace and start drilling faster because we have rigs that are having shorter rig moves because they are staying in Ohio instead of bouncing back and forth between Ohio to PA, for example, and we pull forward a well into the year, and that is another $10 to $15 million that hit your CapEx budget. And those back-of-the-year CapEx spends do not reflect themselves in 2026 production. So a lot of things going on there, but I think for us, we want to make sure we give ourselves the flexibility to react and be able to plan our business without surprising anybody as other projects come up. And there are certainly capital projects we have not budgeted before that I think could be interesting, including for the deep dry gas unit. Michael Scialla: I appreciate that detail, Zack. I guess just to clarify, in terms of well costs, you are not anticipating any OFS inflation or anything. You are still anticipating well costs to at least stay flat or maybe even trend down. Is that right? Zack Arnold: Yes. That is correct. Michael Scialla: Great. And then I wanted to follow up on—you mentioned the Deep Utica, which you have budgeted for this year. Anything more you can add on that play—why you decided to—I know you guys have gone back and forth on when you were going to drill that first well. I guess, what helped you decide to put it in the 2026 plan, and what do you think your exposure there is if the play works? Zack Arnold: Yeah. You know, we wanted to budget for it. We will still maintain the flexibility to choose to do it or not do it as we see gas prices and other factors, maybe oil prices, ripple through our decision-making process. But we set ourselves up with a rig that is capable and experienced at doing this. One of the things we wanted to do was make sure we set ourselves up for success to the greatest extent possible, and we are really excited about some of the deep dry gas Utica experience that we have added to our internal staff and to our field staff as well. When we get to the right project and we do have a permit in hand, we have a rig that is capable and experienced drilling this, we will be positioned to execute. David Sproule: Hey, Michael. This is David Sproule. I think you can look at the development plan that we have, and the development of that well would be towards the latter half of this year. We would not anticipate that well coming online this year. You know, I think we have always been excited about the Utica. That has not changed. It has only been more excitement about what we see in the dry gas Utica. There are plenty of offset development activities to us. We have been watching those. So I think for us, it is just consistent with our overall theme of kind of walking before running with regards to developing it. But we are very excited about the prospectivity therein. Michael Scialla: Sounds good. Appreciate it, guys. Zack Arnold: Thank you. Operator: Our next question comes from the line of Timothy A. Rezvan with KeyBanc Capital Markets. Please go ahead. Timothy A. Rezvan: Good morning, folks, and thanks for taking our questions. Michael actually took some of the ones I was going to hit at, but I want to dig back in on the Deep Utica first. It looks like you have a spud plan or you may have recently spud that well in the Deep Utica. I know there is a Cooper Pad in Armstrong County. Can you give any context? Have you spud this well yet? I recognize you do not plan to complete it this year, but is that definitely happening, or is it still kind of a TBD? Zack Arnold: Yeah. So I will make a sort of technical differentiation here for you. If you are watching stuff online, when you set the conductor it triggers a regulatory spud. So we view that as really just preparation for a true spud and do not want to get anybody confused as to what is specifically going on. I think what David said a moment ago is most accurate—that we have got it really, like, the capital towards the back half of this year and production really not coming in until next as we look at it today. The other thing I would note here, Tim, for you and everybody listening is if you think about our development in the South Bend field, remember, we have multiple horizons that we are targeting. So one of the good things about our position that is unique is that we have dry gas Marcellus there and dry gas Deep Utica. And so as we come in and develop Marcellus, we can come back in and develop Deep Utica. So, you know, consistent with our approach there, consistent with our view of maintaining optionality, that is kind of what you are seeing when you see that alert from a regulatory spud. Timothy A. Rezvan: Okay. Okay. Okay. We will stay tuned. Sounds like nothing imminent on that front. And then I appreciate the comments on CapEx. So Zack, as my follow-up, we talked about a year ago and you mentioned, you know, Infinity wants to stay nimble, but you cannot be schizophrenic, you know, as you sort of chase commodity prices. You know, cycle times seem to be ever shorter and sort of more violent today. How does the board think about that balance—sort of chasing kind of what you are seeing on the screens in a day versus the cycle times you have? How nimble can you be and sort of how locked in is this 2026 program? Zack Arnold: Sure. So I will give a little bit of color as to what we have done and what to expect. So we already this year have turned in line four oil-weighted wells. So it feels like that is—maybe that is a testament as to why you cannot be schizophrenic in your capital deployment, because these wells are now—we are very excited to have them on. If we had been fully focused on natural gas, we would have missed a lot of this exposure. We anticipate another pad coming online by midyear. And so the oil volumes that we are bringing in in this calendar year. As far as how we deploy capital differently, our development plan did not come together in the last two weeks. You know, our development plan has been thoughtfully put together and presented to the board. We really like the projects both in oil and gas. And you will always have the slide in our investor deck where you see the returns at different prices. So we will always evaluate if there is an oil project that we should swap in or tuck in, but it becomes not necessarily always the most prudent thing for us. So we will take some time here. We will see if these prices stay. That is a big part of the question. Is this a blip? We do not want to move the rig from a gas project to an oil project, and it turn out to be a headache. We have seen that on the gas side from time to time. So we will continue to have our land teams and our regulatory teams and our construction teams be prepared for that optionality. And we will see what the next quarter brings. Timothy A. Rezvan: Okay. Thank you. Zack Arnold: Thank you. Operator: Our next question comes from the line of John Freeman with Raymond James. Please go ahead. John Freeman: Morning. Just wanted to flush out maybe how to think about the production cadence as we go through the year. Obviously, appears to be a pretty back-half-weighted program with—you have only got four of the 31 wells coming on in 1Q, and maybe just how to think about how we progress through the rest of the year just to give us a little bit of help on that side. David Sproule: Yeah. I think, John, you know, we think back to some of the comments that Zack made earlier about cycle times, I would push you to think about that. When you bring a rig out and you start drilling holes, it is a good rule of thumb for us that it is kind of six months from spud to turn in line for us—six to seven months after that. So to your point, as we ramp up development, much like what you witnessed in 2025, we would anticipate a considerable ramp through the middle of the year and into the fourth quarter as well. So, you know, we started the year, albeit relatively slow. We have turned in, as Zack noted already, four wells—four very long oil-weighted wells. We will start picking up pace with regards to the turn-in-lines through the balance of the year. John Freeman: Perfect. Thanks. And then just a quick follow-up on that. How many DUCs did you all enter 2026 with? David Sproule: The interesting thing here, John, is the timing of where that calendar falls. I think we entered the year with eight that we had, and we were in the process of drilling a couple more wells during where December 31 fell. Of those eight DUCs that we carried into the year, we have turned into sales four of them. We turned in two wells in Carroll County, and we turned in two wells in Garza County, and we are actively completing the remainder. John Freeman: Got it. Thanks, guys. Nice quarter. David Sproule: Thank you. Appreciate it. Operator: Our next question comes from the line of Sam Cox with RBC Capital Markets. Please go ahead. Sam Cox: Hi. Good morning. Thanks for taking my question. I just wanted to touch on the rig cadence for 2026. Obviously, certain macro conditions—what would need to happen to evaluate a potential third operated rig? Thanks. Zack Arnold: That is a great question, Sam. I think for us, we are cognizant of our portfolio and the returns that we have. So we are really excited about that. I think we are probably more likely to maybe consider additional frac crews, I would say, than drilling rigs at this stage. But it is difficult to say. I mean, honestly, three weeks ago, oil prices were a little bit different than they were during the straight kind of considerations that we are seeing right now. So, you know, if oil prices stay extremely elevated from spot relative throughout the remainder of the year, that is something that we would evaluate. But I want to caution you to think that we are not wind socked here. We are systematically exploiting the reservoirs that we have in a prudent manner. So, you know, we would like to maintain optionality. We built into our forecast the ability to maintain optionality both in natural gas and oil. So we have flexibility to do the right things. But we are going to let other people kind of wind sock with the commodities and make that determination. Today, we are just systematically exploiting what we have. Sam Cox: Got it. No. I appreciate that. Then you also recently added some long-term hedges to the disclosure this time. How are you all thinking about your hedging strategy? David Sproule: Sure. It is always—hedging is always interesting. Right? You always look back with the hindsight of 20/20. You know, it is not shocking—everybody would like to have higher hedging prices. I think we are not speculating on—I mean, we are really not speculating on oil price or natural gas price. What we do is de-risk our development program. You know, if you look on slide eight, you can see the returns that we have here for oil-weighted or natural gas-weighted projects. So when we can get to a situation, whether it be a swap or collar, that we can lock in really attractive discounted returns on investment, we will do that. The other thing I would note is we stay true to our tenets here. You know, we have talked about hedging when the rig shows up. We have talked about hedging when the completion crews show up. Zack was talking about the activities that we had. We entered the year with eight oil-weighted wells that we were completing and turning into sales. So we have layered on hedges. You know, obviously, some of those hedges are a little bit lower than maybe the spot is on 2027, but not by much. But we are looking to systematically de-risk our development plan and lock in those returns as we dedicate to our shareholders, and we have done that. So we are pretty proud of what we have done. Sam Cox: Got it. Appreciate it, guys. Thanks. Operator: And our next question will come from the line of Nicholas Pope with Roth Capital. Please go ahead. Nicholas Pope: Good morning. Fourth quarter saw a big jump in oil volumes. Just three wells brought online in Ohio. I mean, it was obviously, I think, the strongest quarter you all have seen. Just curious if there is anything, I guess, performance-wise from the wells over there in Ohio that you all saw that kind of really supported that, or if it was just really where in the Utica you guys were drilling in the quarter. It was just a really big jump. So just kind of curious if that was performance, timing, or just location that was kind of driving that really strong oil number. Zack Arnold: Well, thank you for noticing. We were really excited with those results too, and I think the projects that we brought in in 2026 were—or 2025, excuse me—were fantastic. Really a testament to the operational team making sure cycle times were fast, and execution of long laterals was done flawlessly. So kudos to them for putting us in a position to talk about these volumes. And then kudos to the land department for making sure that our working interest was high, because volumes are important, but having a high working interest in those volumes is even more critical. And I think from a performance perspective, we do not think those performances are anomalies. That is how we expect to perform, and we are very excited with the way that those projects have worked in the back of the year. Nicholas Pope: That makes sense. Jumping around a little bit, I know you did not provide explicit guidance here. But unit operating cost, gathering cost, were both down throughout the year. SIG acquisition of midstream assets, a lot of capital spend in 2026 implied kind of in the midstream businesses. Directionally, trying to understand where those costs are going with that midstream investment. And is there also going to be line items kind of growing for midstream revenues outside of the operating cost line items? Like, how is that going to be supported? What buckets? David Sproule: Sure. I am going to take the operating cost question first, and then I will come back to the midstream revenue question second. With regards to operating cost, what you have witnessed in 2025 is an increased activity in Pennsylvania as well as managing our costs down in Ohio. So let me unpack that just a little bit. Remember, in Pennsylvania, on our gas assets, our Marcellus assets there, we own the midstream. So we do not have a meaningful GP&T charge. The second thing is volumetrically, the natural gas wells that we put on are significantly larger than the oil-weighted wells that we put into sales in Ohio, just from a petrophysical aspect. So as you think about the blending of that, not only are you blending in a lower cost structure, but you are also blending it in with higher volume. So, naturally, you are seeing some of that decline happen. We have witnessed declines from an LOE, in particular, basis in Ohio. We have seen consistent GP&T in Ohio. But on a blending aspect, you are seeing a decline quarter over quarter and year over year with regards to our overall cost structure for 2025. We would anticipate that to continue as we bring on more natural gas volumes as well as when we bring on more volumes associated with the acquired properties from Montero. Antero properties—again, we own the midstream. So while there are additional expenditures associated with fractionation activities on some of the wells, we can reduce our overall blended cost—or continue to reduce our overall blended cost—by integrating those assets there. Turning to the midstream side, you know, we do generate some third-party midstream revenues on our system. We have done that; you can see that in the line item for revenues that we have for midstream. It is a great opportunity set for us as we think about the future, not only for our assets in Pennsylvania, but our assets that we have acquired from Antero. We have a very large system. Currently today, we are capable of moving upwards of 1.2 Bcf per day of capacity. So we have a very big midstream system that is definitely on our radar and strategic in endeavors to expand volumes associated with third parties onto that system. Nicholas Pope: Got it. That is all very helpful. I appreciate it. I appreciate the time this morning. Thanks, everyone. Operator: This concludes the question and answer session. I will hand the call back over to Zack for any closing comments. Zack Arnold: Alright. Thank you all very much for your interest in Infinity Natural Resources, Inc. We were very excited to talk about the quarter and the upcoming year, and look forward to visiting again soon. Operator: Thank you. This concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, good morning, and welcome to Cadre Holdings, Inc.'s Fourth Quarter 2025 Conference Call. Today's call is being recorded. All lines have been placed on mute. If you would like to ask a question at the end of prepared remarks, please press star one. At this time, I would like to turn the conference over to Matthew Berkowitz of the ICR Group for introductions and the reading of the safe harbor statement. Please go ahead, sir. Matthew Berkowitz: Thank you, and welcome to today's conference call to discuss Cadre Holdings, Inc.'s fourth quarter results. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements, and we make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to the risks and uncertainties that face Cadre Holdings, Inc. in the industries and markets in which we operate. More information on potential factors that could affect Cadre Holdings, Inc.'s financial results is included from time to time in Cadre Holdings, Inc.'s public reports, filed with the Securities and Exchange Commission. Please also note that we have posted presentation materials on our website at https://www.cadre-holdings.com, which supplement our comments this morning and include a reconciliation of certain non-GAAP financial measures. I'd like to remind everyone that this call will be available for replay through 03/25/2026. A webcast replay will also be available via the link provided in yesterday's press release, as well as on Cadre Holdings, Inc.'s website. At this time, I would like to turn the call over to Cadre Holdings, Inc.'s Chairman and CEO, Warren B. Kanders. Warren B. Kanders: Good morning. And thank you for joining Cadre Holdings, Inc.'s earnings call to discuss our results for the fourth quarter and full year 2025. I am joined today by our President, Brad E. Williams, and Chief Financial Officer, Blaine Browers. Fiscal 2025 was another year of steady progress for Cadre Holdings, Inc. Our focus remains consistent: building a company that delivers mission-critical technologies for professionals operating in demanding environments while generating disciplined and sustainable growth for our shareholders. Throughout the year, we made progress in three areas: strengthening our portfolio, integrating our businesses, and continuing to build demand across our core markets in public safety, defense, and nuclear safety. First, we expanded our capabilities with the acquisition of CARS Engineering. CARS is a well-regarded provider of engineered solutions serving the nuclear safety market. The business brings deep technical expertise and long-standing customer relationships that fit well with our strategy of investing in specialized companies that operate in highly demanding environments. During the year, we also signed an agreement to acquire TIER Tactical, a company widely recognized for its advanced protective equipment and strong reputation with military and law enforcement customers. That transaction closed earlier in 2026, and we are excited to welcome TIER to the Cadre Holdings, Inc. platform. We believe their capabilities and product portfolio are highly complementary to our existing businesses and further strengthen our position in mission-critical safety solutions. At the same time, we continued integrating the businesses we have brought into Cadre Holdings, Inc. over the past several years. Building a strong portfolio is only the first step. Real value comes from operating as a cohesive platform, aligning leadership, sharing engineering capabilities, and strengthening how we go to market. We made solid progress on that front in 2025. Operationally, we also saw strong demand across many of our end markets. Our team secured a number of meaningful contract wins during the year, particularly in advanced sensor technologies and blast mitigation seating, areas where performance and reliability are essential. These programs reinforce the trust our customers place in our technologies and in the Cadre Holdings, Inc. brands. As a result, we continue to build backlog, providing increased visibility as we move forward. That backlog reflects both the strength of our portfolio and the long-term nature of many of our customer relationships. Importantly, we entered the new year with a strong balance sheet. That financial strength allows us to remain disciplined but also opportunistic, continuing to invest in the businesses while pursuing acquisitions that expand our capabilities and market reach. We maintain an active M&A pipeline and are focused on opportunities that fit our strategy and meet our return thresholds. Stepping back, what is encouraging is the consistency of our progress. Year after year, we have continued to strengthen the platform, expanding our capabilities, integrating our businesses, and serving the markets where our technologies truly matter. I would like to thank our employees across the organization for their commitment and expertise, as well as our customers and partners for their continued trust. And I want to thank our shareholders for their ongoing support. With that, thank you for being with us today. I will turn the call over to Brad. Brad, over to you. Brad E. Williams: Thank you, Warren. On today's call, Blaine and I will provide a Q4 update and business overview, including recent trends and financial performance as well as our 2026 outlook followed by a Q&A session. We will begin on slide five. We delivered on our strategic objectives in the fourth quarter, driven by strong and recurring demand for our mission-critical safety products combined with the continued implementation of our operating model. Favorable mix in the quarter reflected higher duty gear volume and lower distribution volume. Orders backlog was up significantly. 2025 order growth plus the addition of CARS engineering division in April results in a nearly 50% increase in our backlog versus last year. This includes the blast exposure monitoring system, or BMO, contract that we discussed last quarter. As a reminder, this is a $50,000,000 IDIQ contract and represents a major achievement for our team and a key milestone in our work with the U.S. military. Based on the expectations we had previously outlined for 2025, you will recall that we saw a higher mix of larger opportunities that had been delayed. In fact, our Med-Eng, ICOR Technology, duty gear, Defense Technology, and armor categories have been extremely busy and successful winning larger opportunities in South America, Eastern and Western Europe, UAE, and parts of Asia. Large opportunities typically bring challenges around visibility of closing and booking the opportunity. With that said, we continue to have additional larger opportunities that are still in play that we have not closed that we expect continued progress on throughout 2026. Turning to M&A execution, as you heard from Warren, we completed the acquisition of TIER Tactical last month. Its addition to our portfolio advances Cadre Holdings, Inc.'s strategic focus on mission-critical products with high margins, strong cash flows, and compelling growth tailwinds. It also opens the door to international markets and provides access to new customers based on long-standing relationships. The integration process is underway. We have started our first 100 days of functional integration activities which have included initial site visits by both TIER and Cadre Holdings, Inc. teams. Based on our initial diligence, we kicked off two projects to evaluate product use of TIER capabilities within two different Cadre Holdings, Inc. businesses. TIER has shown an impressive dedication to manufacturing processes that deliver customers best-in-class solutions. We look forward to leveraging their engineering capabilities as well as employing core Cadre Holdings, Inc. operating model tools to unlock additional opportunities across the organization. While TIER is our latest acquisition and our teams are focused on integration, we are certainly not done when it comes to M&A, and we are actively evaluating a robust funnel and high-quality strategically aligned businesses to add to our portfolio. Critical to our success is Cadre Holdings, Inc.'s ability to generate significant free cash flows through cycles, which enables us to both pursue acquisitions and make strategic investments in core organic growth, while also returning capital to shareholders. We have paid 17 consecutive quarterly dividends since going public and recently raised our dividend to $0.40 per share on an annualized basis. Turning to slide six, we continue to operate in two markets defined by durable long-term demand drivers. On the law enforcement side, we see rising safety threats globally, coupled with resilient and growing spend on protection equipment. There is bipartisan commitment to public safety in the U.S. and across Europe supported by growing defense budgets. On the nuclear safety side, long-term demand is tied to policy and commercial tailwinds across our three market segments: environmental management, national security, and nuclear energy. I will speak more about some of the dynamics we are seeing in the nuclear market in a moment. The next two slides outline more current developments in our business environment. Trends in North America law enforcement remain positive, highlighted by significant federal investment in government agencies. From a geopolitical perspective, global conflict is on the rise, underscoring the importance of the work that we do. As we have discussed previously, the opportunity for Cadre Holdings, Inc. to play a more meaningful role generally comes when hostilities end, and we can provide various EOD offerings to address unexploded ordnance. In our consumer channel, while overall consumer demand is down, we have benefited from the strength of the Safariland brand and new product introductions. During 2025, we saw growth in this channel of 7% for the full year and 15% growth in the second half of the year, both versus prior year. Turning next to the latest market trends affecting our nuclear on slide eight, we continue to see multiple multidirectional support driven by expanded government and commercial programs. On the national defense front, expanding government mandates for weapons modernization and production are driving consistent and growing demand. The broader nuclear power space also continues to support growth opportunities for Cadre Holdings, Inc. The momentum in this market segment has only grown greater. Based on our follow-the-fuel strategy tied to the expanding nuclear fuel cycle, we are seeing stronger-than-expected opportunities in our funnel related to nuclear ventilation and containment systems and criticality alarm systems. Our third nuclear market segment is environmental management, where we support nuclear material processing, handling, and remediation. A development to call out in this area has been a recent executive order aimed at repurposing the U.S. plutonium stockpile to fuel nuclear reactors. Historically, Alpha safety products were used to transport stabilized plutonium to sites where it was down blended with uranium and ultimately packaged in a criticality control overpacks per shipment. Following the executive order, this down blending program has slowed, which has directly reduced demand for some Alpha safety products. Additionally, we have seen a shift in priorities at multiple nuclear sites toward pit production programs. With resources heavily focused on rebuilding plutonium production infrastructure, waste disposition programs are currently receiving less operational focus. As a result, plutonium material movement has slowed. While this will have a near-term financial impact, keep in mind this development pertains to only one subsegment of the nuclear group. Blaine will discuss this in greater detail, but overall, the broader Cadre Holdings, Inc. Nuclear Group outlook remains positive. Before I turn the call over to Blaine, I would like to highlight another major win for Cadre Holdings, Inc.'s Med-Eng subsidiary that Warren alluded to in his introduction. Earlier this week, we announced that Med-Eng has been awarded $86,000,000 in contracts by General Dynamics European Land Systems, or GDELS, to provide blast attenuation seats designed to protect occupants from mine and roadside explosive threats. These are life-saving seats that highlight differentiated expertise in blast physics and integration into military vehicles. We are honored to be awarded these contracts, which mark an important endorsement of Med-Eng's breadth of engineering and product development capabilities. Production and first delivery of the larger of the two programs will begin in 2026 and continue until 2031, while the second contract will run in parallel beginning in 2026 and continue through 2029. With that, I will now turn the call over to our CFO, Blaine Browers, to speak more about M&A, Cadre Holdings, Inc.'s Q4 financial results, and 2026 outlook. Blaine Browers: Thanks, Brad. I will kick off my comments by spending a moment to underscore Cadre Holdings, Inc.'s M&A track record and the momentum we expect to carry into 2026. As you can see on slide nine, the acquisition of TIER completed in February marks our sixth acquisition since going public. Each of these transactions has been in line with our thoughtful and patient approach and met our highly selective key criteria focused on strong margins, leading and defensible market positions, recurring revenues, and cash flows. Looking ahead, we maintain a robust acquisition pipeline in both the public safety and nuclear markets and intend to grow our diversified portfolio of mission-critical safety businesses through disciplined capital allocation. Turning to slide 10, we highlight the criteria that guides our process when evaluating potential transactions. Overall, we anticipate additional M&A in 2026, and continue to see attractive opportunities to broaden our product range, enter new markets, and increase customer wallet share. On the next two slides, we have provided a broader overview of the TIER acquisition which represents another step forward in the strategy we have articulated over the last several years. As Brad discussed, we have begun the integration process and look forward to the beginning of this next phase of growth together. TIER brings significant hard armor capabilities via their large presses and autoclaves that will be a significant resource addition to the Cadre Holdings, Inc. armor businesses. We are excited about how the strengths of both companies will complement each other and enable new growth opportunities. Another key point to highlight is that the TIER Tactical customer base has minimal overlap with Cadre Holdings, Inc.'s existing Safariland armor business. On slide 11, we show TIER and Cadre Holdings, Inc. armor revenue by customer channel which illustrates how complementary the two brands will be in the marketplace. TIER serves a worldwide customer base, including top-tier special ops units, government agencies, and militaries. You can see that 66% of its revenue is derived from international customers, while U.S. federal and U.S. military totaled 27%, both areas where Safariland does not have a major foothold today. Turning now to a summary of Cadre Holdings, Inc.'s financial performance, slide 14 details our fourth quarter and full year results. Fourth quarter top- and bottom-line results were down versus last year's record Q4, while our full year net sales, net income, and adjusted EBITDA increased significantly year over year. In Q4, Duty Gear and Armor product lines saw revenue and margins in line with our expectations, but we did experience revenue timing shifts in our nuclear businesses and EOD product lines, some distribution softness and run-rate, and a slight impact in our chemical luminescence product due to the government shutdown. Notably, 2025 adjusted EBITDA of $111,700,000 marked a record for the third consecutive year and 2025 gross margins improved 140 basis points. Similar to what we have seen in the past, irrespective of party, there can be uncertainty as a new administration gets their footing. We have seen similar impacts in the past, but these impacts have been short-lived. We have also seen the resiliency of our business as we exit these transition periods. I would like to reiterate that we have had two significant wins in public safety that reinforce our optimistic view of the future with the blast sensor contract and the blast attenuation seat contract, both of which have multiyear horizons for our life-saving products and are two of the biggest contracts in our history. I would also like to highlight the fact that the gross margins for the full year 2025 for public safety products, excluding distribution and nuclear, were up 188 basis points on a full-year basis, which further reinforces the strong execution of the teams and sets the stage for strong EBITDA margins as we see more typical growth. Illustrated on slide 15 is net sales and adjusted EBITDA growth year over year, including our 2026 guidance, which I will discuss more in a moment. Our full year outlook implies year-over-year revenue and adjusted EBITDA growth of 22%–24%, respectively, at the midpoints. You can see that over the last several years, Cadre Holdings, Inc. has delivered consistent and stable growth. Our resilience is a key differentiator with the businesses that are largely unaffected by economic, geopolitical, and other cycles. On slide 16, we present our capital structure as of 12/31/2025. After completing the acquisition of TIER Tactical, our leverage is just under 3x, not including TIER's earnings. If you adjust for TIER's adjusted EBITDA contribution, our leverage drops to about 2.5x. We believe Cadre Holdings, Inc.'s strong free cash flow generation coupled with the strength of our balance sheet gives us ample financial flexibility to continue to pursue organic and inorganic opportunities. We provide 2026 guidance on slide 17. Net sales are expected to be between $736,000,000 and $758,000,000. Our adjusted EBITDA guidance is between $136,000,000 and $141,000,000, implying adjusted EBITDA margins of approximately 18.5%. Guidance indicates organic growth for both Public Safety and the Nuclear businesses to be in the 3% to 5% range, as well as continued implementation of our pricing strategy of a 1% price increase net of material inflation. Brad discussed near-term headwinds for one of our nuclear businesses, which is reflected in our guidance. From a profitability perspective, these declines represent negative mix, and that impact is considered in the outlook. We believe over time, as we realize these commercial nuclear opportunities in our funnel, that our nuclear mix will return to what we have seen in the past. As we look at the quarterly cadence of revenue, similar to the past, we expect the second half of the year to be heavier with a lighter Q1. Public Safety businesses have their larger opportunities timed for later in the year. For example, the blast sensor order is expected to ship later in the year as the team ramps up production on this new product line. We expect Q1 to be up year over year, driven by TIER, but organically down in the quarter driven primarily by armor project timing combined with armor material constraints, lower distribution revenue, and Alpha project timing. Expect Q1 to be very similar to Q3 of last year on the revenue line, with margins around 39% due to volume and mix, as we have discussed. We do expect margins to climb as we exit Q1 as the mix improves and volume increases, and EBITDA margins in the low teens in Q1 for the same reason. This does not include the impact of the inventory step-up for TIER, or amortization, as part of the purchase accounting. Overall, our businesses are performing well. We expect continued strong demand in 2026 across our core markets in public safety and nuclear safety. I will now turn it back to Brad for concluding comments. Brad E. Williams: Thank you, Blaine. We continue to execute well against our strategic priorities, and our strong 2026 outlook reflects our confidence in the business's fundamentals and the effectiveness of the Cadre Holdings, Inc. operating model. We believe the combination of Cadre Holdings, Inc.'s track record of superior execution, resilience in the face of economic, political, geopolitical, and other cycles, as well as the dedication of our talented teams around the world, will continue to drive strong results moving forward. Beyond our core organic growth initiatives, we are actively evaluating compelling M&A opportunities and remain committed to targets with strong financial profiles, durable competitive advantages, and structural growth drivers. In conclusion, we are excited to continue to build our platform and further our market leadership supported by Cadre Holdings, Inc.'s entrenched positions and favorable industry trends across our law enforcement, first responder, military, and nuclear end markets. With that, operator, please open up the lines for Q&A. Operator: Thank you. We will now open for questions. If you have dialed in and would like to ask a question, please press star one. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Excuse me. Again, it is star one if you would like to ask a question. And our first question comes from the line of Lawrence Scott Solow with CJS Securities. Your line is open. Lawrence Scott Solow: Great. Thank you. Good morning, everyone. I guess just first, kind of question, Brad, very encouraged to see the kind of organic outlook returning to a somewhat normalized rate there in the 3%–5%. So if I do my math somewhat correctly, it looks like you were down about 2% organically in 2025, and you kind of outlined a bunch of larger orders pushed out. I am just curious, like in this environment, is it kind of a domino effect where some of the things that were pushed out from 2025 into 2026, or then you are seeing stuff go from 2026 to 2027, or, you know, is there any catch up? Just kind of curious on your visibility. Obviously, with geopolitical stuff, you know, Iranian conflict, all that other stuff. Eventually, stuff like that probably should be good. But in the short term, government shutdown, partial shutdown, there is some of this stuff also kind of impact your visibility for the current year? Brad E. Williams: Hey, Lawrence, it is Brad. Thanks for the question. You know, the good news is when you look at when there are large opportunities within this business, or quite frankly many other businesses I have been in, you have good visibility to those. So, you know, that mix of large opportunities that we talked about last year, we have closed a lot of those opportunities. They are sitting in our backlog now. We talked about blast seats we announced earlier this week. We just talked about it. That was something that we were expecting more toward the end of last year, but we have got that one in the bag now. We also have the sensor program which was the other one that, you know, we thought we would get earlier in the year last year, but we ended up having more toward the end of the year last year. And then we have other ones that, you know, we cannot disclose the customer base for competitive reasons, but there are other larger opportunities within multiple categories that, you know, they are funded, but there are various details around those orders that have kept those orders from getting booked at the moment. So we continue to work those, work them hard. And I am also proud to say, I mentioned in the prepared remarks that our international teams have been closing a lot of various orders within many different countries within not just a single business unit, but multiple business units. And, you know, we are really proud of the traction that we have been making there. Lawrence Scott Solow: Right. So it certainly sounds like a temporary thing. Right? I mean, it feels like your backlog continues to grow. Question just on the nuclear front. So I guess kind of that shift in prioritization, less cleanup on the plutonium side, more focus on plutonium build out. I guess, in theory, you know, you are taking it from one hand and giving to the other hand, but that giving to the other hand may take a little bit longer so you have potentially a build out. So you have a temporary short-term negative impact. Is that kind of a good way to look at that in terms of how you view it? And if I could just slip one more. Just margin outlook, it looks like the implied kind of midpoint is slightly up, almost pretty flattish. Is that, and I know TIER is sort of accretive. So is most of that impact just on the mix side in nuclear? Is it kind of dragging the margin this coming year? Blaine Browers: Yeah. I think there is, you know, a timing difference when we think about an existing revenue stream for nuclear related around that down blending and then the pickup on the commercial nuclear side. There is a timing lag just because of the size and significance of those projects for it to pick up. It is kind of point one. And then the second point, which Brad brought up, is really just the mix change and the impact in margins that has. You know, down blending is a very highly technical side of the business with, you know, margins that go with the kind of technical expertise required. You kind of have this twofold, you know, kind of impact. You know, what we are excited about, though, is how robust that commercial nuclear energy funnel has become since acquisition. Right? If you kind of rewind back when we started, and I think this is the great thing about the portfolio, is we play in all three of these end markets. So over the long run, we are comfortable there are plenty of revenue opportunities, not only to offset that loss, but really to continue to drive growth in that segment. That is really it. Yeah. It is that mix impact. Lawrence Scott Solow: Gotcha. Okay. Great for the color. Appreciate it. Blaine Browers: Absolutely. Operator: And our next question comes from the line of Eegan McDermott with Jefferies. Eegan McDermott: Hey. Good morning. Thank you, guys, for taking the question. It sounds like some of those bigger orders are still being pushed to the right and we have seen some recent wins. But for the remaining contracts, what gives you confidence that they are delayed and not lost at this point? Brad E. Williams: 100% confidence that they are delayed and not lost at this point. That is the type of visibility that we have to those. I cannot go through the details for, you know, those specific ones, but the visibility is 100% there. Especially one, two, actually, larger orders in one of our business units that, you know, has been awarded to us, let us call it. Right? So we look at the products that we have that have been specified, no issue there. So definitely no losses. High confidence in those. It is just a timing situation, and they are both two different specific situations taking place. Eegan McDermott: Understood. That is helpful. Thank you. Maybe if I could follow up on CapEx. You guided in the $10,000,000 to $14,000,000 range for 2026. It is obviously a step up from recent years. And maybe just some commentary on that if you could, and should we be thinking of that as going towards capacity expansion or focused on any specific area of the business? Blaine Browers: Yeah. Really, the uplift from historical is around capacity, in particular in the nuclear area or the nuclear businesses, where we have some site buildouts. And you go back in history, you know, we have had periods where we get closer to, you know, not quite 2% of revenue, but closer to 2% of revenue as we talk about. And generally, what drives that is capacity expansion, buildings, and that is the case for this year. Outside of that investment in one of our sites, the CapEx is very, very typical for the rest of the businesses. Eegan McDermott: Great. Thank you. Blaine Browers: Thank you. Operator: And our next question comes from the line of Matthew Butler Koranda with Roth Capital. Your line is open. Matthew Butler Koranda: Hey, guys. Appreciate the detail on the organic components of the 2026 outlook. Just wondering what are you factoring in from TIER from a revenue contribution standpoint? It sounds like it is still going to be accretive on EBITDA margin, but wanted to hear a little bit more about revenue and then cadence of revenue from TIER throughout the year. Blaine Browers: Yeah. Our outlook with TIER out of the gates is a conservative approach, as, you know, we do with all acquisitions. So we have them laid in at about $100,000,000 on a full-year basis. Given that we closed in February, that would put them in the high eighties to low nineties baked into guidance. And then EBITDA margins, you know, right where we talked about in that 20% range. As we move forward in the year and, you know, get a little closer to the team's process and develop, you know, more confidence in the funnel, we will adjust accordingly from there. But, you know, we feel comfortable with where we are starting with them. Matthew Butler Koranda: Okay. And then on the blast seat contract, I was curious how that ramps up. I know you said there is contribution in 2026. It sounds like probably later in the year. Maybe any color on how you are thinking about the ramp up and contribution to sales in the back half of 2026? And then just on a go-forward basis, I guess, is it kind of a run-rate type deal through the two contracts’ terms that you gave in the press release? Any additional kind of thoughts on the way to thread that into the model would be helpful. Brad E. Williams: Hey, Matt. It is Brad. So think of it this way, new program. We wanted to get it out as soon as possible to getting the $86,000,000 PO in our hands. So what the team is working on now with GDLS is the production planning side of things for 2026. So we actually have just started that here in March so that we can begin ordering parts and begin to get the supply chain cranked up. And then there are some sample deliverables as we go into the fourth quarter as we go into that phase of the project overall. So, you know, most of this revenue will be timed into 2027 and beyond for the schedule that I mentioned earlier. Matthew Butler Koranda: Okay. That is helpful. Thanks, guys. Operator: And our next question comes from the line of Jeff Van Sinderen with B. Riley Securities. Your line is open. Jeff Van Sinderen: Just wanted to circle back to down blending for a moment if we could. Would you expect down blending funding to increase again at some point, or might down blending be replaced by some other sort of disposal process? And is that one that Cadre Holdings, Inc. could be involved with? And then can you tell us a little bit more about the General Dynamics seat attenuation product? What all you are supplying there? Maybe a little more about the vehicles that the seats are going into, and is there potential for follow-on orders from General Dynamics? And just maybe what the overall outlook is for Med-Eng, just given the recent wins? Brad E. Williams: Jeff, overall, it is hard to tell. What we are referencing is an executive order that went out last year that directed—it was really directed from the DOE—to decrease the down blending of excess plutonium, except in areas that are required by law. So you can go read the executive order, but that is roughly what the executive order says. Then what we have seen by working with some of our customers like LANL and Savannah River and those folks is things have shifted more toward pit production programs with the goal of increasing pit production since the U.S. has, quite frankly, been producing zero pits over many years since the Cold War ended. So that seems to be the focus at the moment. That does drive additional opportunities. They are different opportunities compared to what cleanup activities would look like with our high-end containers that Blaine had already mentioned that bring higher margins within that product category for us. And what it shifted to is from a commercial nuclear standpoint and more of the nuclear ventilation and containment type systems that we have within the Alpha Safety business unit, and then also criticality alarm systems, also within the Alpha Safety business unit. You know, the good news is the funnel for those two product categories has been growing significantly since this shift has been happening. We have got various companies that are in the enrichment side of things and also fabricators that we have an extensive list of quotes that are going on with them that we are pursuing at the moment for these offsetting type opportunities. It is not a category that we have talked a lot about in the past. It is a category that, you know, we have an approximate installed base of 13,000-plus seats that are out there that we have designed and manufactured over time across 15 to 18 different distinct configurations. So, you know, we have been doing this for about 18 years. So the team at Med-Eng has a lot of experience on the crew survivability side of things. So think of it as the product is a purpose-built blast attenuation type seat. It is engineered to protect occupants of tracked and wheeled combat vehicles and then also other vehicles within, you know, militaries. So these vehicles, anytime there is a blast that happens, you know, it could be under the vehicle, it could be close to the vehicle, this is a way to protect the occupants that are sitting in these seats in the vehicle. We do have field-proven performance with various situations where vehicles have experienced those types of blasts and lives have been saved due to these blast seats that we have. So that gives you a little more detail and a little more color around what we do in this category. The team—very proud of this team—they have been working really, really hard to continue to build up the funnel and land some of these projects as they come about in these programs, and we are proud to be working with GDLS on this. It is a customer that we have a lot of experience with, whether it is General Dynamics USA, General Dynamics Canada, General Dynamics Europe, obviously the UK. We have experience working with them overall. So we are happy to have this program. Jeff Van Sinderen: Good to hear. Thanks for taking my questions. Blaine Browers: You are welcome. Operator: And our next question comes from the line of Mark Eric Smith with Lake Street. Your line is open. Mark Eric Smith: Hi, guys. First question for me, just wanted to ask about TIER, kind of synergies as we think about their facility and opportunities maybe with some of your current Safariland products. You know, what is maybe built into the guidance? What opportunities there are as well as maybe cross-selling opportunities and if there is anything built into the guidance for that? And the second one for me is just kind of housekeeping and maybe for Blaine. Just can you just walk through a little bit more on the Q1? You gave some numbers around maybe Q1 on revenue and margin. If you could just review that, and then curious if there is, you know, some continued transaction costs that roll over into Q1. Brad E. Williams: Hey, Mark. It is Brad. Great question. The short answer is there is zero built into the guidance related to TIER synergies. As you know, our first 100 days as we get out of the gates, we focus on all the functional-related activities—IT, finance, accounting, tax, treasury, compliance, you name it. That is the immediate focus with the teams as we bring people into the Cadre Holdings, Inc. organization. We have kicked off a couple of projects. I cannot go into details of those projects because it would bring up some potential competitive-type situations out there. But we have kicked off two projects that I have approved within actually two separate business units. One is within our armor business unit. Another is within our Med-Eng business unit. To work with the TIER folks together on looking at how TIER capabilities can be used within those two parts of those businesses. So we are really excited about those two projects. I would call them lower-complexity projects that have higher opportunities of success as we go forward to get our feet wet with the TIER team working with our Cadre Holdings, Inc. business units. Blaine Browers: Yeah. Absolutely. So we said revenue really in line with Q3 of last year, which was right at $155,800,000. Gross margins around 39%, with EBITDA margins in the low teens. And there will be some carryover on transaction costs into the year as we close the deal. Mark Eric Smith: Perfect. Thank you. Blaine Browers: Absolutely. Operator: And our next question comes from the line of Jordan J Lyonnais with Bank of America. Your line is open. Jordan J Lyonnais: Hey, good morning. Thanks for taking the question. On the organic backlog decline, is it fair to think that most of that should be from the environmental cleanup work inside of the nuclear business? And then, for 2026, the verticals that we should see this 3% to 5% organic growth—if it is commercial versus true defense—what probability of win do you guys have around the commercial side coming through that gives you the confidence we will see that shift to make up for the environmental down? Blaine Browers: And you are talking backlog sequentially, Jordan, is the question. Right? Okay. Yep. Yeah. It is kind of as we expect. There were a number of larger projects. Our backlog had increased coming into or at the end of Q3, and then as those large shipments went out. So, you know, duty gear had some large orders Brad mentioned on some international wins that got shipped in Q4 that lowered their backlog. Nothing alarming, but it is kind of a little bit spread amongst a lot of the businesses. You know, just calling attention to year over year. If we look back to where we were, you know, December 2024, we are still up organically pretty significantly. So I think kind of use that as a base point just to ground on that backlog growth on a year-on-year basis. And then, you know, on the commercial nuclear side, you know, we have always had these products that we are talking about. So I think the “how do we come around the probability of win” is really relative to our past track record in this area. The real difference here is not that it is new products or new uses. It is just the sheer number that we are seeing. So if you think about ventilation containment as an example Brad mentioned, that is something the business has done for many, many years, both in fuel production as well as in remediation. So this is not a new application. You know, when you think about the competitor side, it is the same competitors they have competed against in the past. Very similarly with the criticality accident alarm systems. Same set of circumstances, same competitors, same application. And that is what gives us comfort around those future wins. This is not a new market for us by any means. Jordan J Lyonnais: Got it. Thank you so much. Operator: And that concludes our question and answer session. We will now turn the conference back over to Brad E. Williams for closing remarks. Brad E. Williams: I would like to thank everyone for joining our call today and your continued support of Cadre Holdings, Inc. Operator, that will conclude the call. Operator: Thank you. Ladies and gentlemen, this concludes today's conference call, and we thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to Franco Nevada Corporation's 2025 year end results conference call and webcast. This call is being recorded on March 11, 2026. [Operator Instructions] I would now like to turn the conference over to your host, Candida Hayden, Senior Analyst, Investor Relations. Please go ahead. Candida Hayden: Thank you, Joanna. Good morning, everyone. Thank you for joining us today to discuss Franco-Nevada's year-end 2022 results. Accompanying this call is a presentation, which is available on our website at franco-nevada.com, where you'll also find our full financial results. Presentation is also available to you on the webcast. During our call this morning, Paul Brink, President and CEO of Franco-Nevada, will provide introductory remarks followed by Sandip Rana, Chief Financial Officer; who will provide a review of our results, followed by Eaun Gray, Chief Investment Officer, who will provide a review of our recent acquisitions. This will be followed by a Q&A period. Our full executive team is available to answer any questions. Participants may submit questions by the telephone or via the webcast. We would like to remind participants that some of today's commentary may contain forward-looking information, and we refer you to our detailed cautionary presentation. I will now turn over the call to Paul Brink, President and CEO of Franco-Nevada. Paul Brink: Thanks, Candida, and good morning. 2025 was a record-breaking year for Franco-Nevada driven by higher precious metal prices and growing production. Thanks to a strong fourth quarter, we achieved the top end of our revised 2025 GEO guidance range. Big focus for us is growing the business profitably. So it's a proud moment when the annual earnings increased by roughly 75%. The more than $1 billion in earnings is close to a 60% earnings margin a level of profitability that's impressive in any sector. In January this year, we increased our dividend for the 19th consecutive time. For the record rise in our 2025 cash flow, we announced a higher-than-normal 16% dividend increase. Our 2026 GEO guidance shows good growth over 2025 with further growth in our 5-year outlook. In many ways, this is just a baseline. With the abundant cash flow and capital in the gold sector, the draws will be turning on the 70,000 square kilometers of mineral [indiscernible] that we cover globally. We've identified $250 million of exploration spend on our Canadian assets allowed this year. So we expect a multiple of that on our global portfolio. A restart of Cobre Panama would add significant further growth and the Panamanian government's willingness to approve the processing stockpiles as a positive step in that direction. While our goal is to be a go-to gold stock, we recognize the cyclical nature of commodities and the benefits of some commodity diversification. Our guidance this year is based on $70 per barrel oil. The last I saw WTI prices were $85 a barrel. If that sustained our 2026 guidance may be too conservative. 2024 and 2025 have been 2 of our best ever years for capital deployment, adding 6 quality long-dated assets to the portfolio that contribute to our 5-year outlook and help sustain those production levels over the next decade and beyond. Our strategy of being the financial bank of strong teams has worked wonders. We've seen the [indiscernible] discovery share prices increased tenfold, and they're now some of the dialings in the sector. Post year-end, Eaun and the team have backed to other teams in North America, Patty Downey and the Ozon team win Kasperadi from Hecla and Richard Young and the IA team developing their suite of assets in Nevada. Most recently, we've backed [indiscernible] and the Minerals 260 team developing the Bullabulling assets in Western Australia. We're delighted that their share price is up 50% in the couple of weeks since the transaction was announced. By making their shareholders successful, we believe we can open the eyes of the Australian markets to the power of our financing model. You will have seen in our asset and the term royalty ounces representing MI&I resources and streams and royalties, where the economics are 100% attributable to us. In the deals we have done since year-end, we've added 820,000 royalty ounces. That's an undiscounted value of over $4 billion at today's gold prices. Our average cost was $770 an ounce, a fraction of the cost you see in other transactions in the sector. We're committed to promoting sustainable mining, and we're delighted to be made by the corporate nights in 2026 as one of the 100 most sustainable corporations globally. To wrap up, we're excited about the outlook for Franco-Nevada in 2026, with the industry's largest portfolio of gold royalties, no debt, $3.1 billion in available capital we really are uniquely positioned to create further shareholder value. Over to you, Sandip. Sandip Rana: Great. thanks very much, Paul. Good morning, everyone. As Paul mentioned, Franco Nevada reported record financial results for fourth quarter and year ended December 31, 2025. Our diverse portfolio of royalty and stream assets performed well and continued to benefit from higher precious metal prices. Slide 4 provides a recap of the company's performance against the revised guidance provided for the year. The updated guidance range was 495,000 to 525,000 total GEOs sold. Of this total, the company guided 420,000 to 440,000 precious metal GEOs, with the balance being from diversified assets. With strong performance from a number of assets during fourth quarter, the company finished the year with 519,106 GEOs sold, which was near the top end of the guidance range. For precious metal GEOs, we slightly exceeded the top end of the range with 440,140 GEOs sold. The diversified assets, which include our nonprecious metal mining assets and energy assets, resulted in 78,966 GEOs sold for the year. On Slide 5, you will see a summary of commodity prices for fourth quarter and full year 2025 and 2024, and Gold and silver prices increased significantly year-over-year, with the average gold price higher by 56% in the quarter. However, the 2 strongest performers during the fourth quarter were silver and Platinum, each up 75% and and 74%, respectively. The strong silver price performance resulted in a stronger gold silver ratio, which benefited our silver assets, in particular, Antamina and while our west -- and also our Western Limb Platinum stream, which benefited from stronger platinum price. For diversified commodities, prices for iron ore remained essentially flat year-over-year oil was lower, but we saw a significant increase in natural gas prices year-over-year. The strong performance from our assets, combined with record gold and silver prices resulted in record financial results for 2025 as seen on Slide 6. Revenue was higher by 64% and adjusted EBITDA of 74% and adjusted net income, 74%. This was also the case for fourth quarter as compared to prior year as seen on Slide 7. Total GEOs sold for the quarter increased 18% to $141,856 compared to 12,063 in fourth quarter 2024. Precious metal GEOs sold in the quarter were $127,959, higher by 34% compared to prior year. 50% of total GEOs sold were sourced directly from mines where precious metals are the primary commodity. For the quarter, we received strong contributions from a number of key assets. Antamina, where we benefited from both higher deliveries as fourth quarter was the highest delivery period during the year and also benefiting from higher silver price when converting to GEOs. Both Guadalupe and Antapacay had strong production quarters. And at Hemlo, we benefited from the leverage that net profit interest provide. As you know, the Hemlo NPI is difficult to forecast as it depends on how much mining is performed on Franco-Nevada's Interlake lands. During fourth quarter, we benefited from both higher production on our lands as well as higher margin per ounce with the rising gold price. In addition to the strong performance from those assets mentioned, we benefited from asset acquisitions that were new contributors to Franco-Nevada during fourth quarter. Western limb, Porcupine and Cote. Diversified GEOs sold were 13,697 for the quarter compared to $24,498 for prior year. This was partially due to lower diversified revenue than prior year, but the larger impact for the reduction in GEOs sold is due to the impact of higher gold prices when converting revenue to GEOs. As you can see from the chart, total revenue increased by 86% for the quarter to $597.3 million, which is a record for Franco-Nevada. Precious metals accounted for 90% of revenue. Adjusted EBITDA, also a record, was 95% higher for the quarter at $541.2 million compared to $277.4 million in fourth quarter 2024. With respect to costs, we did have an increase in cost of sales compared to Q4 2024 due to higher stream ounces sold. Depletion increased to $87.3 million versus $60 million a year ago. has received more GEOs from Antapaccay and Antamina and began depleting our recent transactions, Yanacocha, Western Limb, Porcupine and Cote. These assets are higher per ounce depletion assets. Finally, adjusted net income was $356.2 million or $1.85 per share for the quarter, both up 94% versus prior year. Slide 8 highlights the continued diversification of the portfolio. 85% of our full year 2025 revenue was generated by precious metals, with revenue being sourced 88% from the Americas. No 1 asset generates more than 13% of revenue as we have one of the most diverse portfolios in the industry. Slide 9 illustrates the strength of our business model to continue to generate high margins. As you can see over the last number of years, as the gold prices increased, our margin per geo has remained fairly constant. The cash cost per geo has increased from $242 in 2020 and to $325 per GEO in 2025, a 34% increase over this 5-year period. However, the margin has increased from $1,528 per geo, in 2020 to $3,110 per GEO in 2025, a 204% increase while during this period, the average gold price increased 194%. Our business model is very profitable as royalties and streams are usually top line revenue interest with either no cost or a fixed payment associated. As a result, as seen on Slide 10, our adjusted EBITDA margin for 2025 was 91%. And when accounting for depletion and taxes and other costs, our adjusted net income margin was 59%. As we look forward, Slide 11 summarizes our GEOs sold guidance for 2026. Beginning in 2026, we will be adopting a fixed GEO conversion ratios based on the pricing assumptions that you see on the slide. This methodology replaces our previous variable GEO conversion ratios based on actual average commodity prices. and is intended to make our GEO guidance better reflect production volumes. Our total GEOs sold are expected to range from 510,000 to 570,000 ounces with 90% from precious metals and 10% from our diversified assets. As you can see, we have provided guidance ranges for gold, silver and PGM ounces and for diversified assets, we are providing a revenue range. The main drivers for the GEO sold increased year-over-year are for precious metals, we will be benefiting from full year contributions from a number of assets, both acquisitions and new mine starts. Cortez Gold, Porcupine, Casa Berardi, IA and Valentine Lake, and we will continue to benefit from the ramp-up of new mines that began production over the last couple of years, Greenstone and Solaris Norte. Please note that we have not assumed any contributions from Cobre Panama. First Quantum has stated that they are awaiting formal approval to process stockpiled ore, which would produce approximately 70,000 tons of copper and result in stream deliveries to Franco-Nevada of approximately 23 ounces of gold and 265,000 ounces of silver. Timing of deliveries would be dependent on when formal approval is received. Also on the slide, we provided guidance for depletion, tax and funding commitments. Slide 12 illustrates our outlook for 2030, which is 555,000 to 615,000 GEOs sold. Main contributors will be contributions from new mines, Stibnite Gold, Copper World, SK Creek, Cascabel and Tacataka; contributions from expansions that are either underway or planned [indiscernible], Detour Lake and Castle Mountain. We do anticipate a step-down in deliveries at Candelaria in the second half of 2027 and at Antapacay in the second half of 2020. For the energy assets, we've assumed an increase in production over the next 5 years, resulting in an increase in GEOs, but have kept commodity prices flat at $70 a barrel WTI and $3 Mcf natural gas. Overall, when you look at the outlook for GEO sold, the company has approximately 13% built in organic growth from 25 to 2030 at budgeted commodity prices, excluding Cobre Panama. Cobre Panama is a large growth driver if the mine were to restart, should production restart, there's the potential for maturely higher geos depending on the conditions of the restart. Based on the average of the next 5 years of the Cobre Panama mine plan, the stream could contribute between 150,000 to 175,000 GEOs to Franco-Nevada per year. With a Cobre Panama restart, the company has approximately 45% built-in growth to 2030. As we look past 2030, Franco-Nevada has a very deep portfolio of assets that should begin to contribute meaningfully over time. I won't go into the specific details as shown on Slide 13. And but overall, these assets have the potential to generate over 220,000 GEOs to Franco-Nevada over time. Each asset is a different stage of development. And when looking at this group of assets as a whole, they contain approximately $6 million measured and indicated and 1.7 million inferred royalty ounces. Our royalty ounce is net of any cost such as stream costs, so it represents a 100% cash flow to Franco-Nevada before taxes. But even beyond that, we have not included any upside from over 230 exploration assets which provide additional optionality. And in this price environment, we are seeing exploration drilling increasing on our lands. We look forward to seeing what positive news is released on some of these options over time. And with that, I will pass it over to Eaun, who will highlight the recent new additions to the portfolio. Eaun Gray: Thank you, Sandip. It's been an exciting year so far as we've delivered meaningful growth with several large acquisitions in key gold mining districts. This growth has come at a low cost per ounce of resource, which Paul highlighted earlier. Starting with our [indiscernible] stream, we were delighted to support Patty Downey and his team and the acquisition of this established producer in Quebec. We have confidence in Patti and his team to execute their plans, and in particular, are excited by the increased exploration the property will now receive -- for too long, this project has been underloved. The extensive land package and deep cover, our team sees great promise to extend mine life at increased grades. Similar to our investment with Discovery, we see focused management as key to the success of this mine and is now in place, so the future should be bright. We're also excited to have completed the financing with i80 in February. This is the third financing we've completed with Richard Young and his team speaking to the strength of that relationship. We structured this royalty to dovetail the company's growth plans with a step up to 3% in 2031. The royalty covers all of the precious metals assets and over 200 square kilometers of key gold trends in Nevada, our name sake. We'll see cash flow starting immediately with Granite Creek, expanding with our communities and ramping up with the development of Mineral Point, which we envisage as a large-scale project. A significant portion of the financing is earmarked for acceleration of development in all 3. Finally, I'd like to briefly touch on our first sizable acquisition in Australia for some time, the Bullabulling loyalty. We historically have held a royalty on a portion of the deposit but with the renewed focus on the asset by Minerals 260, we quickly realized the larger potential of this project, which is a short distance from Kalgoorlie, a key gold producing region. We're delighted as Paul said, to be working with Tim Goyder and Luke McFadden, who lead the team at Minerals 260. We expect the PFS in the next few months, which should better define the project parameters for the market. The expanded resource has already been published, but extensive drilling has since been completed and will continue. Given the brownfield nature of the project in a well-established historical mining area, we see a rapid path to production with meaningful contribution to our Australian business. To conclude, I would highlight that we're debt-free with significant cash flow generation, which positions us well for continued acquisitive growth. With that, I'll hand it over to the operator for any questions. Operator: [Operator Instructions] First question comes from Josh Wolfson with RBC Capital Markets. Joshua Wolfson: Yes. First question is just on South Arturo. Very strong results in the fourth quarter. I'm wondering if you can provide any more information on expectations for 2026 and if that's assumed as well for 2030. Sandip Rana: Josh, Sandip here. Yes, no, South Toro was a very strong performer in the quarter. they are mining the open pit ahead of schedule. It's going to carry on into 2026. So 2026 should be a strong year. And what we've seen in the first part of this year, it is occurring. But starting in 2027, we do see it falling back off. So it's really a 2026 benefit with minimal for 2030. Joshua Wolfson: Okay. And then the minimum deliveries still apply for 2027, correct? Sandip Rana: Yes, correct. Joshua Wolfson: For Cascavel, a couple of questions there. I mean, first is for the stream buyback, should we assume that, that -- assuming it's the gold payable that's going to be received, should we assume that that's reflected in production for guidance? And then similarly for 2030. Is there any additional disclosure the team can provide in terms of what the production volumes are there? Sandip Rana: Sure. So for the buyback on the screen, we are receiving ounces those ounces are not included in our guidance at this stage. We have been notified they will be delivering GEOs for the roughly $40 million buyback that's been calculated. But as I said, it's not in our guidance. We're still working on how to account for that buyback. And as we decide that we'll provide additional disclosure. As per 2030 Cascabel mine Start is in our outlook, and it's probably a range between 15,000 to 20,000 GEOs. Joshua Wolfson: All right. And then one last question. Just on Musslewhite. Very strong quarter they reported previously by the operator. It looks like the NPI didn't pay out as high as expected. Is that something we should expect to occur, I guess, as a true-up in 2026? Or is there something more we should be aware about? Sandip Rana: So yes, the Orla did report very strong Q4. We do not have an estimate of the NPI at this stage. And as you know, one of the major deductions is capital. And so we made an accrual once we get the actual number from Borla, we will make an adjustment in all likelihood, there will be a true-up but as to the quantum unknown at this time. Operator: The next question comes from Larry Lee with CIBC. Chunshan Liu: Paul, Sandip and Eaun, I guess my first question would be on energy prices. So if we look at the 2026 guidance, oil is calculated using $70 a barrel because of recent events, we've seen the oil price strengthen. So I'm wondering if you can give us a little more sensitivity around how that would impact Franco-Nevada. As you know, Francois on a few, if not the only company -- royalty company that has exposure to energy. Sandip Rana: Sure. Larry. So as you're correct, we used $70 per barrel WTI in preparing our guidance a $5 increase in the WTI price is essentially a 7% increase in energy revenue. Chunshan Liu: Sounds good. And I guess on a similar topic, now that we're looking more towards unlocking value of the portfolio, I kind of want to ask about Cobre Panama. So from that perspective, I'm wondering what's the next step after the environmental audit conclude? When should we expect a potential decision from the government? Is that something you can share with us? And how long does it take to -- for the assets ramp up and deliveries to restart for Franco? Paul Brink: Thanks for the question. The -- the best information that's out there was the government themselves, President Molino, saying his target is the summit to try and have a resolution on the issue. So we'll pull that something can be achieved in that sort of time line. In terms of a ramp-up, the -- my understanding is that the -- once you've got a go decision that it would be roughly 6 months to get to 50% of production in 12 months to get to about 90%. Although the -- if the company is allowed to go ahead with the processing of stockpiles, that does allow them to operationalize. They're already increasing their workforce. It would allow them to start at least one of the trains, the mill trains. So I expect that could accelerate the ramp-up time line. Chunshan Liu: Perfect. Sounds good, Paul. I guess I have just one last question, if that's okay, is I want to ask about the balance sheet. So Franco currently holds about $1.1 billion in publicly traded equity investments, and that's a significant increase from just $770 million in Q3. So I'm wondering what would be strategic positioning for the public traded equity investments? Could that be a potential source of liquidity? How should we look at it? Paul Brink: So the large part of those equities are shares that we obtained in supporting GM and Discovery Silver. We are -- our intent is to be their financial bankers. I want the market to know that we're in those stories. So we intend to be long-term holders of the stock. but at the same time, we are -- if there are good opportunities, if we have got good returns, there is the potential that we'll take some money off the table. But we are long-term investors. And so principally, with the is to realize the value that we think both teams can add in their companies. Operator: The next question comes from Heiko Ihle with H.C. Wainwright. Heiko Ihle: I'm going to follow up with one of the last questions that was asked. I mean the oil segment, we're 3 weeks away from Q1 being over. Do you have a year-to-date figure of cash receipts? And also, I'm cognizant the high prices didn't really start until a couple of weeks ago or really just 2 weeks ago. But maybe a bit of color of what number we should be modeling out for the full quarter? Sandip Rana: Sandip here, you're right that this event is recent. I do not have a number off the top of my head. If anything, the real benefit to this, if this carries on, will be a Q2 event for us. And as part of our Q1 results, we'll provide additional color as to sensitivities, et cetera. Heiko Ihle: You wouldn't be willing to give us a quarter-to-date guesstimate on receipts, though, would you? Sandip Rana: Not right now, no. Heiko Ihle: Okay. Fair enough. And then just thinking out loud, I mean, like now there's talk about mines getting put into the straight and just geopolitical risk factors are lowering even more so than they have been over the past couple of years. Just maybe a bit of color on where internally you move your discount rates and your risk-based premiums for acquisitions that you're thinking and willing to make? Paul Brink: That would be a long answer to that question. Other than that, I think you -- the main point you make is a very good point is the -- we've seen deglobalization. We've seen the world breaking into trade blocks and now you have an added dispute on top of that. it does raise risk globally. We try to be a low-risk way to invest in this business. We need to have most of our assets in good jurisdictions. We're very glad that, that is the case. Very glad that in terms of the recent deals over the last number of years, most of that has been in Canada, the U.S. and Australia. We think those are super jurisdictions. We will continue to do deals that are across the board, but we do like having most of the assets in good jurisdictions. And obviously, when you're going into jurisdictions when there's more risk, you've got to think about the discount rate. You've got to think about the size of capital that you're putting at risk. But in particular, we think about the payback and you want to make sure if there is a bit more jurisdictional risk that you're getting a faster payback. Operator: The next question comes from Tanya Jakusconek with Scotiabank. Tanya Jakusconek: First one, I'm going to start with Sandip on just how you're going to be showing guidance. I understand that you put out your commodity pricing, and that's what you're going to use for the year. So when you report, should I be thinking that the GEOs that you're going to be reporting every quarter would be exactly on those commodity prices you've outlined, but your revenue is actually going to be on what was realized per quarter. I'm just trying to understand how you're going to show it. Sandip Rana: That's correct, Tanya. Revenue will berealized [Audio Gap] Tanya Jakusconek: Clarity. So my next question then is going to go back to the guidance. And I want to go back to 2030 because we were quite off on 2030. So I'm trying to understand if it's possible for you, would you be able to take that guidance range and break that out to what is gold in that 2030 guidance for what is silver and what the other diversified. Sandip Rana: I think we would break it out just between precious metals and diversifying, but I can give you a call after and can give you some color. Unknown Analyst: Okay. And then in that guidance as well, you gave us what the contribution from Casabe would be. I don't have the new deposit coming in at an Cai. Would you happen to know how much is in there as well? And then is this new Australian Bullabulling in there in your 2030 guidance as well? Sandip Rana: So I don't have the [indiscernible] number in front of me. Bullabulling is in there, but it's minimal ounces. Tanya Jakusconek: Okay. That's very helpful. And then I'm just trying to understand also, maybe Eaun wants to take this 1 just on the environment. that you're in because it's moving quite fast these commodity prices. So maybe just an idea of what you're seeing out there. Any opportunities for you to double down on RECONNECT areas of investments that you already have exposure to. And then obviously, we saw the big weeks in transaction on Antamina as we're trying to understand how many other big ones are is that you're also seeing? Paul Brink: Thank you, Tanya, for the question. I would say, overall, it remains a very robust seen a number of transactions. We're very proud of the deals that we got done year-to-date. My expectation is you'll continue to see similar kind of deal environment to what we've seen over the last 2 years despite the changes to prices just based on what we're seeing at the moment. What I'm very excited about is given the deal that we've done in Australia, the deal that BHP did, I think the streaming market is very much in consideration by CFOs in the mining industry at the moment, and that should drive further activity going forward. So I'm quite hopeful on that front. Tanya Jakusconek: And what is the size of the deal environment you're seeing? Because you can run the truck through the 0 to $4.3 billion. Most -- what are most of that you're seeing? Are we still in that 100 to 300 or 100 to 500. I'm just trying to understand what the majority are separate from these big ones. Eaun Gray: Yes, Tanya, unfortunately, it's really hard to handicap. I would say at the moment, you're going to see a range, similar sizes to what has taken place. So for the last year or so, that's what I would expect in the market going forward. So there are larger transactions and smaller transactions. We'll see what actually crosses the finish line. Tanya Jakusconek: And is your focus on mainly on precious metals right now? Or are there opportunities in other metals as well? Eaun Gray: That really hasn't changed. We remain open to investments outside of precious metals, but precious metals make up the majority of what's in the pipeline at the moment. Operator: There are no further questions on the phone line. I will now turn the Q&A session back over to Candida Hayden, who will take questions from the webcast. Candida Hayden: Thank you, Joanna. Our first question comes from Rene Picifrom Palisade Capital based on the recent transactions or investments in Canada, U.S. brackets, Nevada and Australia, it would seem that you may have made a strategic decision to focus on OECD-type post countries, developed countries, is this just a coincidence or happy occurrence or deliberate. Paul Brink: As I mentioned earlier on in terms of how we think about the portfolio, it's -- make sure that most of the assets are in great mining jurisdictions, we're blessed. The A lot of our assets are in Canada, U.S., Australia, but also in Chile, Peru, Mexico, Brazil. These are all great mining countries. We continue to invest in all of them. So it is the -- yes, what we've done does reflect our strategy is a happy coincidence that of all our deals are in Canada, U.S. and Australia, it is a happy coincidence. Candida Hayden: Thank you, Paul. There are no further questions from the webcast. This concludes our 2025 year-end results conference call and webcast. We will host our Investor Day on Wednesday, April 8, 2026, -- the in-person presentation will be hosted at the Lumi Experience Center in Toronto at 2:00 p.m. Eastern Time. The presentation will also be available to view virtually. Details will be available on our website. We expect to release our first quarter 2026 results after market close on May 12, with the conference call held the following morning. Thank you for your interest in Franco-Nevada. Operator: Ladies and gentlemen, this concludes your call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Greetings, and welcome to Broadwind, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Thomas A. Ciccone. Thank you. You may begin. Thomas A. Ciccone: Good morning, and welcome to the Broadwind, Inc. Fourth Quarter and Full Year 2025 Results Conference Call. Leading the call today is our CEO, Eric B. Blashford, and I am Thomas A. Ciccone, the company's vice president and chief financial officer. We issued a press release before the market opened today detailing our fourth quarter results. I would like to remind you that management's commentary and response to questions on today's conference call may include forward-looking statements which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest annual and quarterly filings with the SEC. Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during our call in the press release issued today. At the conclusion of our prepared remarks, we will open the line for questions. With that, I will turn the call over to Eric. Eric B. Blashford: Thanks, Tom. And welcome to our call. 2025 was a pivotal year in our evolution as a leading manufacturing partner of choice for global OEMs in power generation and critical infrastructure, while becoming a leaner, more diversified business equipped to deliver profitable growth through the cycle. The divestiture of our industrial fabrication operations in Wisconsin in the third quarter represented an important step in optimizing our asset base and increasing our balance sheet optionality, which positions us to redeploy capital toward higher value opportunities. Our fourth quarter performance was in line with the preliminary results we issued in early February 2026. Fourth quarter results were impacted by a raw material supply disruption in our Heavy Fabrications business associated with an OEM customer's directed buy program, which reduced manufacturing throughput and operating efficiency during the period. The company has implemented corrective actions to address the issue, and expects operations to normalize during 2026. Demand conditions and customer activity were strong during the fourth quarter, supported by robust project activity across our Gearing and Industrial Solutions segments. Orders were led by 38% year-over-year growth in the Gearing and Industrial Solutions segments, partially offset by a 20% year-over-year decline in the Heavy Fabrication segment reflecting the divestiture of the Wisconsin operation. Gearing orders increased to nearly $9.7 million as we saw strength in power generation, along with some resurgence in oil and gas and the wind aftermarket. In March 2026, we received a $6.0 million follow-on order for precision machined gearing components used in midsized natural gas turbines which power data centers and other applications. This order represents the second half of the significant order we received in July. Within the Industrial Solutions business, we received orders of $11.1 million. In summary, the team and business continued to perform well as we sharpen our focus within adjacent higher margin precision manufacturing verticals. This past quarter, we quickly identified and addressed the supply disruption by working with our customer to bring on an alternative supplier, minimizing the overall impact to our business. Furthermore, recent strategic actions to divest our Wisconsin facility position us for increased balance sheet strength and flexibility, while improving capacity utilization at our Abilene facility and reducing overhead costs. Despite the volatile trade policy environment, our 100% domestic manufacturing base remains a key competitive advantage as we partner with tier one OEMs who value our deep technical expertise, commitment to quality, and on-time service. With that, I will turn the call over to Thomas A. Ciccone for a discussion of our fourth quarter financial performance. Thomas A. Ciccone: Thank you, Eric. Turning to Slide five for an overview of our fourth quarter performance. Fourth quarter consolidated revenues were $37.7 million, representing a 12% increase versus the prior-year period. The fourth quarter increase was driven primarily by strength within the Industrial Solutions segment, in which revenue was up 60% year-over-year. Furthermore, the fourth quarter revenue level within the Industrial Solutions segment represents a 40% increase versus the average over the past four quarters. We believe that this volume level will continue based on current customer indication. Outside of our Industrial Solutions segment, lower Gearing deliveries were more than offset by increased revenue within the Heavy Fabrication segment, which benefited from increased wind revenue versus the prior-year quarter. Adjusted EBITDA declined to $1.9 million versus the prior year of $2.1 million. Despite higher volume, adjusted EBITDA decreased due primarily to lower capacity utilization within our Gearing segment and operating inefficiencies associated with the directed-buy raw material supplier issue we referenced in our February 5 press release. Fourth quarter orders were strong, nearly $39.0 million. Orders increased within our Gearing and Industrial Solutions segments, driven by strength in the power generation, oil and gas, and natural gas turbine verticals. Orders decreased within our Heavy Fabrication segment, reflective of our exit of the Manitowoc facility late in 2025. Turning to Slide six for a discussion of our Heavy Fabrication segment. Fourth quarter orders were nearly $18.0 million, a 20% decrease versus the prior-year quarter. However, after backing out the $6.3 million in industrial fabrication product line orders received for the Manitowoc facility in the prior year, orders increased more than 10% on an adjusted basis due to meaningful tower orders being recognized in the current-year quarter. Fourth quarter revenues of $21.6 million are up 6% versus the prior-year quarter. Despite delays associated with the raw material supply issue we experienced, we were still able to recognize increased wind tower and repowering revenue in the fourth quarter. However, adjusted EBITDA was down versus the prior year due to manufacturing inefficiencies associated with the aforementioned raw material supply issue. Turning to Slide seven. Q4 Gearing orders remained strong at $9.7 million, an increase of 38% versus the prior-year fourth quarter. We ended 2025 with approximately $26.0 million in backlog, a level we have not reached since 2023. As we noted in the prior quarter, we continue to see strength in the power generation and oil and gas verticals, and that momentum continued into Q4. Additionally, as we announced via this morning's earnings release, we recently received just over $6.0 million in follow-on orders from a leading OEM in the natural gas turbine segment of the power generation end market. Including this order, we have already booked almost $11.0 million in Q1 orders. Segment revenue was $7.0 million, down almost 8% versus the prior-year quarter. We recognized an adjusted EBITDA loss of $0.3 million compared to $0.1 million of adjusted EBITDA in the prior-year period. Due to the lower revenue levels, earnings were adversely impacted by reduced capacity utilization. As volumes recover, expect operating leverage to improve in 2026. Turning to Slide eight. Industrial Solutions booked over $11.0 million of orders during the fourth quarter, a 38% increase versus the prior-year quarter. Orders remained at an elevated level; the resulting backlog again hit a new record level of over $38.0 million at the end of the fourth quarter, eclipsing the previous record of $36.0 million set at the end of Q3. This quarter represents the fifth straight quarter setting a record backlog level. Q4 segment revenue was $9.4 million, up both sequentially and versus the prior-year quarter, reflective of the elevated order levels received recently. Fourth quarter revenues represent a 60% increase over the prior-year quarter and is the highest revenue level ever recorded within the segment. We believe this business will operate at these elevated revenue levels throughout 2026. Adjusted EBITDA of $1.5 million, or almost 16% segment EBITDA margin, increased significantly over the $0.6 million, or 10% segment EBITDA margin, reported in the prior-year quarter, reflective of the increased revenue levels. Turning to Slide nine. We ended the fourth quarter with total cash and availability on our credit facility of nearly $25.0 million. This is down from the prior year, and we were carrying significantly lower working capital levels as we had received advance payments from our major customer late in 2024. Working capital levels were flat during the quarter and we expect them to remain relatively consistent moving forward. Finally, with respect to our financial guidance, today we are reaffirming our full-year 2026 guidance. We expect full-year 2026 revenue to be in the range of $140 to $150 million and adjusted EBITDA to be in the range of $8 to $10 million. That concludes my remarks. I will turn the call back over to Eric to continue our discussion. Eric B. Blashford: Thanks, Tom. Now allow me to provide some thoughts as we move into 2026. We continue to make a decisive shift toward increasingly stable, growing power generation markets with an emphasis on oil and gas, renewables, and potentially nuclear. Our strategic emphasis is on pursuing the highest growth and highest margin opportunities that leverage our precision manufacturing expertise. Our facilities in Abilene, Texas; Chicago; Pittsburgh; and Sanford, North Carolina, near Raleigh, have more than 600,000 square feet of manufacturing space ready to serve our customers. Quarter upon quarter of repeat wins within the Gearing and Industrial Solutions segments from power generation, specifically within distributed power, as well as growing opportunities in both small-frame utility-scale natural gas turbines, support our strategy to expand in this market. Quote activity continues to increase in both Gearing and Industrial Solutions, generated by our ability to solve the complex precision manufacturing and sourcing challenges faced by customers in this growing market. So we are expanding resources to meet this demand in both divisions. In our Gearing segment, we continue to execute our strategy to move beyond traditional gearing markets through opportunities in other precision machined products. We are pleased with the increasing level of customer activity we are seeing in various new infrastructure-related markets such as road maintenance, cement plants, and aggregate material processing, along with some early green shoots in defense. Recent sizable orders we received from the power generation sector are the beginning of a multiyear cycle for which we are prepared. The expansion of our capabilities to serve the high-speed gear segment, such as the dynamic balancing capabilities I mentioned earlier, allow us to bring more processes in-house, decreasing lead times while improving quality and profitability. In Industrial Solutions, continued growth in the natural gas turbine industry driven by the global demand for power is having a positive commercial impact on our business. New data center installations are driving increased demand for distributed power solutions, including those that provide redundancy, and many of our key customers are adding significant production capacity in order to meet both the current and foreseeable future demand from power generation. We are proud to have recently received the 2025 supplier quality and delivery award from our largest customer, in recognition of our quick response to their significant growth in demand, all while meeting their strict quality and delivery requirements. In our Heavy Fabrication segment, we believe that domestic onshore wind tower activity will continue at its present rate through 2026 and into 2027. We have good visibility for tower production into 2026 and good customer indications beyond that. We are seeing increased quoting activity for our PRS line of natural gas pressure reduction units and expect sales to increase proportionately. In summary, I am pleased with the order growth and strategic actions we have taken this year as we continue to demonstrate our strong execution of our strategic priorities. Our divisions are well positioned to support the nation's growing need for power generation and infrastructure improvement, which we see as long-term opportunities for us. Our quality, quick response, and ability to solve complex manufacturing challenges for our customers continue to help us win new opportunities. We have reduced our cost structure, are investing wisely, and are taking strategic actions to refocus our resources toward higher value and growing end markets. We value our people and are committed to keeping them safe, fulfilled, and productive. This year, we will be implementing an ISO 45001 occupational health and safety readiness program, with plans to add that certification to our existing ISO 9001 and AS 9100 certifications. Our 100% U.S.-based plants are expanding capabilities to take advantage of opportunities afforded by the pro-domestic manufacturing policy backdrop afforded by the current administration. We are encouraged that our order intake continues to grow, positioning us for improved utilization of our manufacturing footprint in 2026, as we strengthen our foundation for steady, profitable growth serving the power generation, critical infrastructure, and other key markets with high-quality precision components and proprietary products to capitalize on improved demand in the years ahead. With that said, I will turn the call back over to the moderator for the Q&A session. Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Eric Stine with Craig-Hallum. Your line is now live. Eric Stine: Hi, Eric. Hi, Tom. Hi, Eric. Good morning. Good morning. So I know Gearing and Industrial Solutions backlog is up 2x or more year-over-year. You did mention your expectations for revenue for Industrial Solutions in 2026. I am curious if you could just talk about Gearing a little bit. I know that, I mean, obviously, the demand is there, but the quarter was limited by utilization. So just curious, maybe thoughts on that, steps you need to do to get through that, and what 2026 growth might look like in Gearing throughout the year? Thomas A. Ciccone: Sure. Yes. So as you mentioned, our backlog is about double from where we entered 2025. So we are expecting significant growth within that segment in terms of revenue. For sure, double-digit growth can be relied on there. We are entering with a much stronger backlog. So it is about execution versus commercial success this year. Eric Stine: I mean, on execution, can you talk about that a little bit? I mean, this is not limited by timing of when customers want these components. It is more about you driving higher throughput, or just any details about how the year ended and why 2026 may be different or may be limited at the start, or anything along those lines? Eric B. Blashford: Well, I can add a little bit. This is Eric. With the backlog that we have, we are working towards the customers' requested dates, which are spread out throughout the year. So I would say there is a ramp up going to happen in Q1 with steady revenue in Q3 and Q4. Again, much visibility for the full year. Some of our backlog is into 2027, but most of it is 2026. If that helps you. Eric Stine: Yeah. No. That is helpful. Okay. Maybe, after selling Manitowoc, the balance sheet is in solid shape. You talked about redeploying it to different areas. That includes bolt-ons and some new capabilities. Maybe it is hard to share, but if there is anything you can share about areas that you think need added to, whether organic or inorganic? Eric B. Blashford: Well, we are definitely focused on power generation and critical infrastructure in all of our divisions, and our M&A search is in those areas, especially with grid or power generation. I think we are entering a super cycle for power generation and grid both. It is going to last at least ten years. And that is where my focus is, my targets are, in M&A. Also for organic growth, in BIS, which is obviously power generation, and in Industrial Solutions, and in Gearing with power generation in these turbines that are, I would call, midrange, which are 100 megawatts and less. Eric Stine: Got it. And maybe, so these are not, I mean, I guess bolt-on certainly implies that these are not necessarily significant acquisitions, but more about adding capabilities, whether it is a new product line, new manufacturing footprint, that sort of thing? Eric B. Blashford: Yeah. So they would be bolt-on acquisitions to our existing platforms. Eric Stine: Okay. Alright. Thank you very much. Eric B. Blashford: Thank you, Eric. Operator: Our next question comes from Justin Clare with ROTH Capital Partners. Your line is now live. Justin Clare: Hey, good morning. Thanks for taking our questions here. I wanted to just start out on capacity outlook for Industrial Solutions. You mentioned that you are expanding the capacity there, I think, by 30% to accommodate future growth. So just wondering, with that added capacity, how much potential revenue might be supported for the Industrial Solutions segment when it is fully utilized? And then if you could speak to how you anticipate utilization increasing over time here. Eric B. Blashford: Sure. Just for clarification, our footprint is increasing 30%, but our capacity, we have already doubled it through staffing and equipment. So that floor space is just over and above that. So I think we can easily double our revenue, if not maybe 2.2 times more than 2025 revenue, in our existing facility before we end up having capacity constraints. We are right now only operating at one shift, so we can add another shift if necessary. So I think we could certainly get into the $70.0 million range, revenue within our existing facility. Justin Clare: Okay. And any sense for the timing in which you might be able to achieve that level of revenue, given the visibility you have into demand and the discussions that you are having with your customers? Eric B. Blashford: Well, the growth in the combined cycle natural gas utility-scale natural gas turbines, which we serve in that market, is really, really strong. Our primary customers, their primary customer, GE, says orders increased 77% in 2025 alone. So I expect that the demand will be there from our primary customer and others all the way through 2030. So with customer indications, I think we have got a real strong chance of hitting that revenue number over the next several years. Justin Clare: Got it. Okay. That is helpful. And then maybe shifting over to the Heavy Fab business here. The backlog was down in Q4, but that partly reflects the Manitowoc divestiture. Wondering if you could speak to the underlying demand trends that you are seeing, the visibility you have, and maybe the timing for backlog conversion? And what you are expecting in terms of the cadence in orders in terms of the timing of bookings relative to when revenue will be recognized. Eric B. Blashford: Sure. As has been the practice in the market for some time now, our customers tend to release orders about six months or so in advance of their production needs. We have got good visibility for towers and adapters into Q3 2026, and customers have indicated that level of volume should continue through the remainder of 2026 and into 2027. Thomas A. Ciccone: Yeah, just to add to that, Justin, you asked about converting backlog. We see this as a ratable conversion consistent through 2026. So we are not seeing any spikiness in terms of revenue. It should be pretty ratable over the period. Justin Clare: Okay. Got it. That is helpful. Thank you. Operator: Our next question comes from Amit Dayal with H.C. Wainwright. Your line is now live. Amit Dayal: Thank you. Good morning, everyone. Thanks for taking my questions. Eric, with respect to sort of the 20% roughly level of organic year-over-year revenue growth you are guiding for, with the kind of visibility you have right now, and some of the macro conditions, I mean, they look favorable. Do you think this is a level of growth you can maintain for the next few years, at a minimum? Eric B. Blashford: Well, the markets that we are growing into have CAGRs of about 6% year-over-year, but in the great demand cycle that we are in, the products that we are in, such as natural gas turbines in medium and high capacity, the growth is beyond that CAGR that I mentioned to you. So I think we can, in those two divisions, achieve that kind of growth rate going forward over the several years, really through 2030, which is as far as we can see out now. Amit Dayal: Okay. Understood. And then the $6.0 million follow-on order, is this with just one customer? And then adjacent to that, are there other opportunities similar to this that you may be pursuing that are in the pipeline but not in the backlog? Eric B. Blashford: Sure. Again, this is the power generation market, which we are really excited about. That is the market that we are attacking because we have the capital equipment in place. We have got the certifications in place. We have got the customer relationships in place now. That is one customer that we are talking to with regard to that particular order, but we are talking to several others in that space. Amit Dayal: Okay. And, you know, just given sort of the recent volatility around events taking place in the Middle East, your exposure to the oil and gas space, are you seeing a little bit more inquiries, etcetera, or activity from that segment right now? Eric B. Blashford: We are. Several of our customers, now the orders are not huge like they were several years ago, but they are, I would call them, substantive, and it is multiple customers. So I think what they are doing is hedging their bets, if you will, that there could be a disruption in their supply, which sometimes comes from overseas. But there is demand, because the price of oil is an indicator of demand in the U.S., and our customers are in the fracking and drilling U.S.-based space. Amit Dayal: Okay. Yeah. That is all I have, guys. I will take my other questions offline. Thank you. Eric B. Blashford: Thanks, Amit. Operator: We have reached the end of the question and answer session. I would now like to turn the call back over to Eric B. Blashford for closing comments. Eric B. Blashford: Yes. Thanks, everyone, for being on the call today and your interest in our company. We look forward to coming to you again at the end of Q1 to talk about our results. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, everyone, and welcome to the Consumer Portfolio Services, Inc. 2025 Fourth Quarter and Full Year Operating Results Conference Call. Today's call is being recorded. Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements. Any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. Statements regarding current or historical valuation of receivables, because dependent on estimates of future events, are also forward-looking statements. All such forward-looking statements are subject to risks that could cause actual results to differ materially from those projected. I refer you to the company's annual report filed 03/12/2025 for further clarification. The company assumes no obligation to update publicly any forward-looking statements as a result of new information, further events, or otherwise. With us here is Mr. Charles Bradley, Chief Executive Officer; Mr. Danny Bharwani, Chief Financial Officer; and Mr. Michael Lavin, President and Chief Operating Officer of Consumer Portfolio Services, Inc. I will now turn the call over to Mr. Bradley. Charles Bradley: Thank you, and welcome, everyone, to the fourth quarter and year-end conference call. 2025 was a very good year. We might have expected it to be even better, but we did not quite get the growth we were looking for. But still, overall, a very strong year. We focused on credit. We focused on keeping our margins. All in all, it was very good. Couple of highlights. We renewed, or actually, we signed a new warehouse line with Capital One for $150 million. We also signed a $900 million prime forward flow commitment. Both of those will be very instrumental in how we grow and what we are going to do in 2026. But more highlight than that is the fact that, you know, credit is readily available. The company has done well enough to where lots of people, banks, and such, not to mention on the securitizations, are very eager to either buy our bonds or lend us money. So we are in a very good spot in terms of moving into 2026. 2026, you know, is a quick peek, already looks like it could be very, very good. So 2025 was really good. Again, we had focused on getting the 2022 and 2023 paper, which was not particularly profitable and did not perform as well as we would have liked. I think at the beginning of 2025, that was almost 40% or more of the portfolio. Today, it is 2026. We would expect that number to gradually decrease over the year to where it is de minimis by the end of 2026. So getting that kind of piece of bad credit out of the portfolio is very good. Portfolio is nearly $4 billion. We expect that to grow substantially in the coming year. Now reached a size where we are really at a good size in terms of our industry standing. Overall, we are in a very good position. Credit remains strong. Interest rates look good. We will get back to that more, but for now, I will turn it to Danny to go through the financials. Danny Bharwani: Thank you, Brad. Looking at some of the numbers, revenues for the fourth quarter, $109.44 million, an increase over the $105.3 million in 2024. For the full year 2025, revenues were $434 million, a 10% increase over the $393 million in 2024. The interest income on our fair value portfolio is the main driver of our total revenues, and that is actually up 16% year over year. The fair value portfolio now sits at $3.6 billion and is yielding 11.4%, remembering that that yield is net of expected losses. Outside of interest income, the other component of our revenues are fair value marks. These are adjustments to our fair value portfolio that we occasionally record to revenues as needed. We had no marks in 2025, compared to $5 million in the fourth quarter of the year before. For the full year, we had fair value marks of $6.5 million compared to $21 million the prior year. In terms of expenses for the fourth quarter, $102.2 million is a 4% increase over the $98 million in 2024. For the full year 2025, expenses were $406 million, which is 11% higher than the $366 million in 2024. The biggest component of that increase is interest expense. Interest expense was $59 million in the fourth quarter. It was $53 million in the fourth quarter a year ago, and that is a 13% increase. The increase is largely due to our higher securitization debt balance from our higher loan portfolio. Our loan portfolio, which I will cover when we look at the balance sheet, but the loan portfolio is actually, the securitization debt from that loan portfolio is up 15% year over year. Looking at pretax earnings, $7.2 million for the fourth quarter, compared to $7.4 million in 2024. For the full year, pretax earnings were $28 million compared to $27.4 million for the full year 2024. If you look deeper into the numbers and exclude the fair value marks, pretax income would have been $7.2 million in the fourth quarter, compared to $2.4 million in the fourth quarter of 2024. So there is some significant improvement there if you strip out the marks and focus on interest income. For the full year, the pretax income would have been $21.5 million in 2025, compared to $6.4 million in 2024. Again, there is significant improvement in 2025 if you exclude the nonrecurring items. Net income for the quarter, $5 million compared to $5.1 million in the fourth quarter of 2024. For the full year, net income, $19.3 million compared to $19.2 million in 2024. Similar trends for net income as pretax income, but again, if you exclude the fair value marks in 2024, which were higher than 2025, there is significant improvement there. Diluted earnings per share, $0.21, is flat from the $0.21 in the fourth quarter last year. For the full year, $0.80 versus $0.79 in 2024. Moving now to the balance sheet. Our total cash, cash and restricted cash, finished the year at $172.2 million, which is up from $137.4 million at the end of 2024. Our fair value portfolio is up 10% to $3,655,000,000 compared to $3.3 billion at the end of 2024. Looking at our debt, I guess the biggest jump would be from our securitization debt we talked about earlier, 15% higher to $2,986,000,000 compared to $2,594,000,000 in the prior year. Moving to shareholders' equity. The $309.5 million ending balance for equity at December 2025 is a 6% increase over $292.8 million at the end of 2024. Equity continues to climb and currently sits at an all-time high for us. This translates to a book value, measured on a fully diluted basis, of about $13 a share. Looking at other important metrics, our net interest margin, $50.1 million in the fourth quarter, compared to $52.8 million in the fourth quarter of 2024. Full year net interest margin, $202.5 million, flat from $202.3 million in 2024. Again, the fewer marks in 2025 from the fair value portfolio have an impact on that. If you strip that out, the net interest margin would have been $50.1 million versus $47.8 million. And for the full year, $196 million versus $181 million, which is an 8% increase year over year. Our core operating expenses, $43.4 million in the fourth quarter, compared to $46.2 million, is a 6% decrease. For the full year, core operating expenses of $177 million are down 2% from $180 million last year. So besides growing our auto loan portfolio and increasing our interest income, we have also put a lot of focus on improving operating efficiencies, which you can see in the decline in our core operating expenses as a percentage of the managed portfolio, which is now down to 4.8% from 5.6% a year ago. I will turn the call over to Mike. Michael Lavin: Thanks, Danny. A few operational notes today. In 2025, we originated $363,000,000 of new contracts. For the full year of 2025, we purchased $1,638,000,000 of new contracts compared to $1,682,000,000 during the same period in 2024. So pretty good year, as Brad said, but a little flat. In 2025, it ended up being our third-best origination year in our thirty-five-year history. This, despite our continued practice of originating with the tight credit box, which we did in 2025. We heard from the trenches that dealers were reporting lower foot traffic, and we saw at times increased and, in some cases, irrational competition for less business. So overall, when you consider all the factors that were against us, $1,620,000,000 was a pretty good year. In 2025, we grew our portfolio of assets under management from $3,760,000,000 to $3,779,000,000. And for the full year, we grew the portfolio from $3.4 billion to $3.7 billion, which is an increase of 8.24%. Our focus in Q4 and as we turn to the new year is to grow via, one, hiring new sales reps and adding new territories. I think the second one is adding more active dealers to our funding dealer pool. We have been successful doing that. In the fourth quarter, we added about a thousand in December alone. Three, we have a goal to drive our applications from 250,000 a month to 325,000 a month. And four, we started doing this in the fourth quarter and into this year so far as mix and strategic risk initiatives that we have seen be successful so far. Also in the fourth quarter, we implemented our Generation 9 credit scoring model that, as with our previous generation models, utilizes AI/machine learning in its development. We have found that, at least so far, the new model has increased our approvals 11%. So they were running in the low 40 percentiles, and now they are running in the low fiftieth percentiles. It has kept our cap capture flat, which is good news. And, you know, doing the math, it has increased our total fundings about 8.4% just by implementing that new model. Also in the fourth quarter, as Brad alluded to, a little more detail on the partnership regarding the prime program. We partnered with a large credit union to source, originate, and service prime auto loans. As part of that deal, we get an origination fee and a servicing fee to sell that credit union prime auto loans that we source. Interestingly, the credit union has committed to buying up to $50,000,000 a month, $600 million annually. Over eighteen months, $900 million. But it is important to note that we think that the growth will be a slow buildup, as we kind of have to rebrand ourselves to our dealer base as more of a full-spectrum lender, considering we have been a subprime lender for thirty-five years. We are getting good feedback from the dealers. We are growing month over month. But, again, it is going to be a slow build. I kind of compare it to when we started our meta near-prime program years ago. It did not come out of the gates too strong, but eventually, you know, it is now 5% to 6% of our originations, and we are kind of hoping the prime program gets to be about the same. Just sort of following up on what Danny said on our OpEx. We were able to decrease it year over year from 2024 to 2025 by 14%. One note is on the employee cost front, we were able to lower employee cost as a percent of the portfolio from 2.6% in 2024 to 2.4% in 2025. And, you know, we did this despite growing the portfolio 8.24%. That is a little more evidence that we have properly scaled the business. We are at the right size. And, you know, as we continue to grow in 2026, we look for that OpEx to continue to trend downward. Turning to credit performance, the total DQ greater than thirty days for the full year 2025 was 14.77%, as compared to 14.85% for the full year 2024. The total annualized net charge-offs for the full year 2025 were 7.76% as compared to 7.62% for the full year 2024. Further, repossessions were down a little bit year over year. Potential DQs, which we call pots, were down year over year. And extensions remain at our historical average as a percent of the portfolio. Our extensions are also about the same as benchmarked against our competitors in the subprime space. So taken together, our improved portfolio performance in 2025 was quite an accomplishment considering the macroeconomic headwinds we faced in servicing with affordability, stubborn inflation, increased interest rates, some stagnant wage growth affecting, you know, some of our customers' cash flow. We found that using the right collection techniques and processes, you know, along with our customers still prioritizing their car payments, sort of fought off those trends. I mean, to lower delinquency year over year in this environment is quite a tip of the hat to our servicing department. Looking more closely at the vintage performance, we continue to see significant positive credit performance sort of starting with our 2023v vintage and continuing vintage over vintage through 2025. Now that it has more time to season, we are sort of looking at the 2024 vintage performance as being a positive result, probably due to our credit tightening that we took in early 2023. And we continue to do today. It is early, but a steep peek at our 2025 vintages shows even better potential for that performance than the 2024s. As Brad alluded to, the trouble of 2022 vintage and 2023 vintages are running off quickly. And as compared to our competitors' credit performance, the Intex data that our bond investors use to evaluate the space reveals that we remain among the very best credit performers in the subprime space when you compare us apples to apples to our competitors. Finally, turning to recoveries, they remain somewhat relatively light, settling into the 28% to 30% range. We typically want them to be in the low forties. But our analysis suggests that there is a light at the end of the tunnel. Our data revealed that recoveries for vehicles from the 2022 and 2023 vintages, those cars are actually driving down our overall recoveries. So, for example, in Q4 2025, looking at Q4, vehicles from the 2022 vintage were recovering at about 20.5%, and vehicles from the 2023 vintage were recovering 22.9% on the recovery. Compare that to, you know, recoveries on the 2024 vintages are more palatable at 36.3%, and recoveries for the 2025 vintage, at least so far, are hitting 43.4%. So we feel once the 2022 and 2023 vintages sort of flush out, as Brad said, by the end of this year, our recoveries will get back to normal. And as everybody knows, recoveries are a critical part of reducing our losses and increasing our net income. And with that, I will throw it back to Brad. Charles Bradley: Thank you, Mike. Switching over, taking a look at our industry. Normally, not a lot going on in the industry. As we have sort of pointed out already, it was a little bit slow. Traffic was down in the dealerships. And that seems to have changed in 2026 so far. But the interesting notes were GLS, one of our friendly competitors, got purchased. I think that is a good, it was a very good valuation, or extremely good valuation. So having that happen was interesting. Also, Flagship, which had kind of been sinking for a while, was purchased also, but, again, more at a discount. I think Flagship, for instance purposes, had ceased originations when they were sold, but that would be, you know, some of the M&A movement in the industry. And lastly, Prestige, more recently, stopped originating loans as well. You do not really see a lot in our industry. More importantly, we have seen almost no new entrants into our industry in, like, five years. So it has gotten to the point where unless you really have some size, we will call a minimum of a billion-dollar portfolio, you are really in a tough competitive standpoint within the industry. So being at $4 billion and on our way growing puts us in a very good spot. Having a couple of our competitors go away and maybe try and reinvent themselves is fine. Certainly Prestige is not. And then having to say, also GLS puts a valuation on the industry players, all good news across that board. I think, you know, the industry is very solid without having people blow up. The trichloro thing was a bump in the road, but really had nothing to do with the real industry. It did affect the market slightly for us in doing securitization, and that had no impact whatsoever. So moving into the future, what we care about, as we have mentioned many times, are the interest rates and unemployment. We believe the interest rate environment is very positive. If anything, the interest rates may come down as opposed to go up. Down is obviously way better. As long as they are not going up, we are kind of fine with where they are, but it would be nice if they came down a little bit more because those pretty much go straight to the bottom line, those improvements. Unemployment seems to be relatively steady. Unemployment could bounce around a little bit, and we really would not be affected. We really do not want unemployment to skyrocket. Obviously, that could trigger a recession, which is all bad. But we do not really see any of that. We see unemployment holding steady. We see interest rates steady or coming down. It really sets us up for a very good environment right now. Generally, other than the Iran war, which hopefully will go away pretty soon, the economy seems very stable and very strong. Again, we would think 2026 and beyond look very positive in terms of where we are going with the company. So having said that, I mean, the goal in 2026 is to focus on growth. We want those margins to improve through better interest rates. We want the overall portfolio performance to improve by getting rid of that 2022–2023 paper. We believe a good economy is good. We think we are, as I mentioned earlier, in great position to raise money. We did a residual deal recently, which is cheaper by a bunch than the last couple we have done. So again, there are a lot of favorable tailwinds as we move into 2026. So we are really looking forward to see what we can do this year. Got a bunch of stuff going the right way. We raised the money. We have the warehousing. The credit model looks great. We are very positive in terms of where things go from here. With that, thank you all for attending the conference and the conference call, and we will speak to you in a month or two. Thank you. Operator: Thank you. This concludes today's teleconference. A replay will be available beginning two hours from now for twelve months via the company's website at www.consumerportfolio.com. Please disconnect your lines at this time, and have a wonderful day.
Operator: Thank you for joining Ur-Energy Inc.'s Year End 2025 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If you have joined via the webcast and you wish to submit a question, please use the Ask Question button in your viewer window. If you have dialed in, please press star 1. Please note this conference is being recorded. I will now turn the call over to Alex Ritchie, General Counsel and Corporate Secretary of Ur-Energy Inc. Thank you. Alex Ritchie: Thank you. Today's discussion includes forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results to differ materially. We do not undertake to update or revise any forward-looking statements except as required by law. Slide two contains disclaimers that relate to forward-looking statements, risk factors and projections, and cautionary notes to investors. Please consider these carefully along with the risk factors in our Annual Report on Form 10-K that was filed on 03/10/2026. I will now turn the call over to our CEO and President, Matt Gilley. Matt Gilley: Thank you, Alex. Thank you everyone for joining us today. Slide one. As many of you know, I joined Ur-Energy Inc. midway through 2025. From my perspective, it was a year of strong execution and meaningful progress. Across our operations, development pipeline, and financial position, we delivered tangible improvements that position the company for production growth in 2026. Slide two disclaimer. As Alex mentioned, we will likely make forward-looking statements today. Please read the disclaimer at your leisure. On to Lost Creek, Slide three. At Lost Creek, our focus on operational execution translated into significant year-over-year gains. We ended the year with 406,000 pounds of product in inventory, an increase of 21% over 2024. We increased pounds drummed in 2025 by 65% over 2024. We also improved wellfield flow rates, increased pounds captured by 40%, and increased our profit per pound sold by more than $12. Our average cash cost per pound sold, including severance and ad valorem taxes, was $42.89. These results reflect stronger wellfield performance, improved plant throughput, and disciplined operating focus. Slide four. Ongoing drilling at Lost Creek continues to create value. As detailed in our updated S-K 1300 technical report, the measured and indicated resource is now estimated at 11,900,000 pounds and the inferred resource is at 10,400,000 pounds. The estimated mine life at Lost Creek was extended by nearly three years, and the post-tax net cash flow increased to $442,000,000, roughly 45% more than the previous estimate. The NPV with an 8% discount rate is now estimated at $244,000,000, with an internal rate of return of almost 66%. Slide five. We still only drilled a portion of the more than 35,000 contiguous acres at the Lost Creek property. As our Chief Operating Officer, Mr. Steve Hatten, said in yesterday's press release, every time we drill Lost Creek, we have been fortunate to increase the resource base. This underscores Lost Creek's scale, longevity, and long-term growth potential. On Slide six in Shirley Basin, at our Shirley Basin project, we made substantial progress towards bringing our second ISR production facility online. The initial processing plant construction is nearing completion, with all ion exchange columns installed and heat tanks in place. To support start of operation, we have drilled 469 injection and production wells. In Mine Unit 1, Header House 1 is ready to begin initial injection and recovery from the well pending approval from the state environmental department. They began their pre-operational inspections in late February and are looking at our wellfield data package, so that process is underway. The March 2024 technical report for Shirley Basin estimated a nine-year mine life and 8,800,000 pounds of resource in the measured and indicated categories. The estimated post-tax net cash flow is $119,000,000. The NPV with an 8% discount rate is $82,000,000, and an internal rate of return of 69%. The estimated all-in cost is $50 per pound. During 2025, we grew our Ur-Energy Inc. workforce by 55% and welcomed 56 new team members. The majority of those were added to support Shirley Basin, but we also strengthened our operational, technical, and corporate teams across the company. We are proud of the team we have built. Slide seven. From a financial perspective, we ended the year with $123,900,000 in cash, driven largely by the successful closing of our 4.75% convertible senior notes. Our cash position as of 03/04/2026 is $115,300,000. That does not include $18,500,000 that we will receive this month for $24.724700000.0 warrants that were exercised last month for about 12,300,000 of our common shares. All of our outstanding warrants were exercised over the last few months except for an insignificant number that expired. The strength of our balance sheet gives us the flexibility to fund Shirley Basin commissioning, continue ramp up at Lost Creek, and disciplined resource growth. And while we are not taking any victory laps just yet, it is worth pointing out that we finished the year with a positive gross profit of $74,000. A milestone, but an encouraging milestone, as operations and production continue to improve. On Slide eight, at our Lost Soldier project, we installed 18 aquifer test wells in late 2025 to support the evaluation of the potential for ISR development. Aquifer testing will begin this month, followed by baseline environmental studies for permitting and for additional permit—pardon me. Lost Soldier is just 17 miles from the Lost Creek process plant, which could mean an opportunity to develop it as a satellite operation using our existing infrastructure. We have also started work on a technical report for the project that we expect to complete by the end of this year. At our North Hassel project in the Great Divide Basin, drilling continues to deliver very encouraging early results. Through February, we drilled 32 wide-spaced holes totaling 33,000 feet. Seven of those intersected significant uranium mineralization, including 13 intercepts exceeding our Lost Creek cut-off grade. These results suggest multiple stacked roll front horizons, with grade and thicknesses comparable to Lost Creek, supporting the potential for future ISR development. The results include two standout holes, about 1.5 miles apart, that intersected significant stacked mineralization at similar depths, giving us some early confidence in the potential scale of the system. And North Hassel is only 18 miles from Lost Creek. Once we wrap up the 50-hole program at North Hassel, we will move the rigs over to our Lost Creek South project this summer. Lost Creek South is located adjacent to Lost Creek, and we are planning a 120-hole drill program there this year. These exploration programs are critical to expanding our development pipeline, growing our resource base, and diversifying potential future production across multiple projects. Slide nine, wrapping up. As we entered 2026, we continue to optimize our operations at Lost Creek while our second ISR facility, Shirley Basin, is making significant progress towards startup. Our combined estimated mineral resource totals 21,000,000 pounds in the measured and indicated categories, and 10,400,000 pounds in the inferred category, as of 12/31/2025, providing a strong resource base for our production. We have contracted for sales of 1,300,000 pounds in 2026. We plan to cover those sales with pounds in inventory and new pounds that we produce at Lost Creek and Shirley Basin. And on March 4, we had 379,000 pounds in conversion facility inventory. With our growing resource base and strong balance sheet, we believe Ur-Energy Inc. is well positioned to benefit from positive uranium market fundamentals and increased demand for secure U.S. uranium supply. And with that, I will turn it back to the operator to open it up for questions and answers. Thank you. Operator: Thank you. At this time, we will be conducting a question-and-answer session. If you have joined via the webcast, please use the Ask Question button on your viewer window. If you have dialed in, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question today is coming from Sundari Iyer from B. Riley Securities. Sundari, your line is live. Sundari Iyer: Thank you. Hi, Matt. Thanks for taking my question, and congratulations on the quarter. I just have two questions. Starting with the 1,500,000 commitments, including the 250,000 loan repayment. With current inventory levels, can you help us understand what gives the confidence in meeting these deliveries and increasing utilization from the current levels to the 50–60% range? Matt Gilley: Certainly, Sundari, and thanks for the question. So, look, when you talk about what gives us that confidence, it is what we are seeing now with the current ramp up of operations at Lost Creek, combined with the positive progress on construction at Shirley Basin. We do our mine planning. We do our analysis of risks and opportunities. As we go through this year, our plan, which is a very solid plan we have gone through very carefully, is to be able to make our deliveries of 1,300,000 contractual sales for the year from the existing inventory as well as the new production that we will be bringing on during the year. There are a lot of different parts there. We are seeing a continued ramp up of operations at Lost Creek. We are seeing the wellfield continue to produce high-quality uranium in solution. The improvements in the plant are really taking shape. The team at the Lost Creek plant is expanding. We have a very strong business improvement program in place there. We brought on key individuals, as well as we are going to be adding sand filters to the front of the Lost Creek plant over the next several months. These are the parts from Lost Creek that give us the confidence. Shirley Basin is the positive construction. We are on track to be able to start moving solution through the plant this month, and we are on track to begin shipping resin deliveries in the second quarter. That is all coming together nicely. We still require pending environmental approval from the state of Wyoming. Those are all on track, and they seem clear. We cannot always predict when we will get those, but everything seems on track, and we are very confident in our ability to ship. Sundari Iyer: Thank you, Matt. Thank you for that update. I will turn it over. Matt Gilley: Okay. Thanks, Sundari. Operator: Thank you. The next question will be from Anthony Tagliari from Canaccord Genuity. Anthony, your line is live. Anthony Tagliari: Good afternoon, Matt and team. Thanks for taking my questions. Just curious on the product loans that you have outstanding. Given your cash balance, when should we expect that this might get repaid? Would it be by the deadline in November? Would you settle it earlier? And then maybe on the settlement, does it have to be settled by replacing the physical or could it be cash settled as well? Thanks. Matt Gilley: Alright, Anthony. Good questions. We have a 250,000-pound loan with a trading entity that is due in November. As you pointed out in your question, Anthony, we have multiple options on how and when we repay this loan. With our cash balance, we could always have the opportunity to pay back that loan by buying pounds on spot. Regarding the payment of the loan, the loan is to be repaid in physicals. That is not necessarily our physicals, but the loan is to be repaid in physicals. We are not going to pin down exactly how we are looking at that. What we are doing, Anthony, is looking at our opportunities. If we were to see a short-term decrease in spot price, that could give us an opportunity to get that loan off of our books at a very favorable price. Other than that, we look at other opportunities. We have not pinned down, and we are not projecting, a certain path on that. We do know that loan is outstanding. It is due in November, and we have the contingency plans in place to fulfill that loan. Anthony Tagliari: Great. Thanks. That is very clear. Maybe just as a follow-up. How should we think about the cadence of realized prices through 2026? Do you expect a ramp in prices or to stay fairly consistent? How should we be thinking about that? Matt Gilley: We have not given, specifically, a price per pound for 2026. But you can see in our 10-K the detail that shows we are contracted to deliver 1,300,000 pounds for proceeds of up to $82,000,000. Those contracts are all different stages and different prices throughout the year, so there is not a ramp up through the year. Those were contracts that were signed multiple years ago for delivery in 2026. You can do the math and come out with the average price per pound, and you should think of it as an average because of the way that the contracts come in and the way that we deliver onto those contracts. It is not a ramp up, but it is a series of different prices at different slots. Anthony Tagliari: Thanks, Matt. I will pass it on. Operator: The next question will be from Geoff Graham from Northland. Geoff, your line is live. Matt Gilley: Good afternoon, Geoff. Thanks for the time. Geoff Graham: Hey, Matt. Was curious at Lost Creek, given we are a couple months plus into the quarter, any commentary you can share on how production has trended thus far in Q1 relative to Q4 levels and maybe how you are expecting that asset to ramp throughout the year? Matt Gilley: Good question again. I am going to be hesitant to be too specific because I want to keep everything nice and tight as far as disclosure. Ramp up certainly continues at Lost Creek. I will say in December, we had a significant weather event of 11 days of power disruption from a windstorm that came through Wyoming with winds well over 100 miles an hour. The plant delivered beautifully through December, and the teams responded to that power outage and really did a fantastic job of stripping resin and drumming uranium. January is rough as we reloaded the resin. We are back on track for February. March looks on track for very positive. So the ramp up continues, Geoff. I am being very coy in giving you real specifics yet, but you will get those numbers as soon as they are available. We see the steady path for ramp up at Lost Creek and, with Shirley Basin, deliver into that 1,300,000 pounds. That is our standard answer there, Geoff, and that is what we are committed to. Geoff Graham: Fair enough. We will stay tuned. For my follow-up on the cost side of the equation, any thoughts on where cash costs go in 2026? Should we expect as Lost Creek ramps up we see some downward pressure on the cost side? And how might the introduction of Shirley Basin pounds impact some of that arithmetic? Matt Gilley: We are not giving cost guidance, but I will tell you that in an ISR operation, your costs are incredibly fixed. So it is really a function of pounds drummed, or pounds sold. The more pounds you sell, the lower your cost per pound. It really is an incredibly fixed cost structure. The wells are the wells, the electricity is electricity, the same number of people are there regardless of how many pounds you drum, and the cost of the reagents is really just oxygen and carbon dioxide, and they are relatively minor in the big scheme of things. So it is quite a linear relationship between pounds drummed and sold and cost per pound. Geoff Graham: Got it. Okay. Thank you. I will turn it back. Operator: Thank you. The next question will be from Joseph Reagor from Roth Capital. Joseph Reagor: Hey, Matt. Thank you for taking the questions. I guess most might have been answered. But on the regulatory front, some of your peers have noted that because there is this rush to get production up across the industry that there have been regulatory processing delays. Is that what you are dealing with at Shirley Basin? And then on that note, do you have a timeline on when you will get regulatory approval there to get started with production? Matt Gilley: Joe, thanks for the question. I will start off with the answer, then I am going to hand over to Ryan. He is our VP for Regulatory Affairs. I think the commentary you are hearing about the delays in the process from the increase in activity is fairly focused on Texas. But nonetheless, there is a growing amount of activity across the industry that does impact everyone. With regards to the timing of the regulatory approvals, we certainly anticipate those to be approved this month. I will pass this over to Ryan for some more color. Ryan, do you mind answering Joe's question? Ryan: Absolutely. The one thing that I would add is Ur-Energy Inc. has an excellent working relationship with our regulators in the state of Wyoming. We work very closely with them in partnership to come to those approvals. As Matt said, all indications are that we are under timely review for those wellfield data packages and approvals to start Shirley Basin. There is nothing that causes us or points us to likely delays. We are working with the state and they are as well. A concern that you have mentioned is as there is more activity, those resources at the state do get stretched, and we are aware of those, and we monitor those and we work with the state as we try to overcome those delays. But as far as Shirley Basin is concerned, everything is on track. We are working closely with the regulators and anticipate receiving those approvals soon. Joseph Reagor: Okay. And then just as a quick follow-up, if you had the regulatory approval in normal course, when would that header house have started production? I realize it is ready now, but how long ago was it ready? Matt Gilley: I am sorry to mislead you in my commentary, Joe. We are building the plant. We are on track. We have the header house ready for production on schedule. We have it ahead of the production plant, just because that is good planning. We will be mechanically ready for the plant to receive solution on Monday of next week, and that is when we are going to be loading the first resin tank. Then any delays past then would be due to waiting for regulatory approvals. Joseph Reagor: Okay. Alright. Thanks for the clarity on that and the color in general. I will turn it over. Operator: The next question will be from Mike Kozak from Cantor Fitzgerald. Mike, your line is live. Matt Gilley: Yeah. Good afternoon, Mike. Mike Kozak: Thanks for hosting the call. It has been a while since you guys have done an earnings call, so I appreciate it. Most of my questions have been answered already. I had one housekeeping-type one left, though. I noticed there was a large discrepancy between pounds drummed and pounds captured at Lost Creek in Q4, much wider than any other quarter I can recall. Could you give some detail on what drove that in Q4 and whether to expect that to mean revert in Q1? Thanks. Matt Gilley: Mike, good question. Mr. Steve Hatten, this is a COO question. Steve Hatten: How is it going, Mike? The biggest difference is you heard Matt talk about issues we had with not environmental, but with the environment, where we had some power down. At these facilities, we run the plant on generator power, and the wellfield is all on line power. If we have a major power outage, that can affect the production that we see coming in versus what we can do in the plant. So any variance, for instance, if you see production lagging coming in from the wellfield, that gives the plant a chance to still process material, and vice versa. If the plant is doing maintenance for whatever reason, you will see the wellfield captured come up versus the plant go down. Mike Kozak: Okay. That makes sense. That is very helpful. I appreciate it, Steve and Matt. I will revert back, and best of luck on the Shirley Basin ramp up this year. Matt Gilley: Alright. Thanks, Mike. Operator: Thank you. As a reminder, if you have dialed in and wish to ask a question, please press star 1 on your phone at any time. Next question will be from Justin Chan from SCP Finance. Justin, your line is live. Justin Chan: Hi. Thanks, operator. Thanks, Matt, for hosting the call. My first one is on getting a sense of milestones through the year in terms of ramping up towards that 1,300,000 pounds delivered, and let us leave aside moving the loan around for a sec. What would you like to see at each operation when we speak at this time next quarter? At Lost Creek, maybe get a bit more granular in terms of mine units and header houses, and at Shirley Basin, if you could provide some more detail, that would be really helpful. Matt Gilley: Thank you, Justin. I will answer at a general level, and then I will turn it over to Steve to give you some more color on the number of header houses and very granular details. When we talk about milestones for the year, we are looking for the continuing ramp up of Lost Creek, and it is fairly linear for the entire year. The Shirley Basin milestones we are looking for are the delivery of solution into the plant in March, and then the loading of resin and the shipping of resin to initiate in the second quarter to the Lost Creek facility. For the mine unit at Lost Creek, the ramp up is fairly linear. The plant itself is going to have a lot more loaded resin delivered to it, and we are anticipating the plant at Lost Creek to have a ramp up that is not linear, but really peaks in the third quarter. We get initial deliveries coming in in the second quarter, and then you see a large jump in the third and fourth quarters for the amount of pounds that are drummed at the Lost Creek facility. Steve, do you want to give any clarity on header houses? Steve Hatten: Sure. One of the big things—and as you are very aware—this is a stepwise production at any ISR facility. You have to get the drilling ahead first, and then that focuses on so much of the germination and pattern layouts. Then we get those patterns installed, then they go into surface construction, and then that turns into flow into the plant. One of the things that we have really stretched ourselves out on over the last year or so is to develop those new areas. We are actively developing Mine Unit 5, getting that monitoring going there so we can get it tested and be in production later this year. But Mine Unit 1 Phase 2 has been very productive from a construction standpoint. The rigs spent a lot of last year and are focused heavily this year on getting that done. We have already seen Header House 14 come on. Header House 15 is in research mode to bring grade up, and 16 is in the pipeline next. That continues throughout the course of this year, as Matt said, in a linear fashion to bring up both production flow and grade—the two components that make up production. Those are the main components for the header houses, and I think Matt hit it spot on on Shirley. We have our targets for initial excipient movement in the wellfield in the month of March. Then we expect in the second quarter to bring that into realized capture—true significant capture on resin—which means shipping over to Lost Creek and getting that turned into drum production. Does that help? Justin Chan: Yeah. That was really helpful. Maybe for each, what is a good deployment rate of bringing new header houses or mine units online through this year—on a monthly or quarterly basis? Steve Hatten: I will continue answering, and then Matt can stop me if he wants to. What we like to see at Lost Creek—typically at a 1,000,000-pound-per-year production rate—you are looking at about eight to 10 header houses a year for construction, drilling, and readiness. At Shirley Basin, as you have seen in our previous press releases, we are anticipating much higher flow rates there. We will determine how that plays out during the first year of operations. We are going pretty heavy there initially and trying to get six to eight header houses on this year. Then, depending on how that production-grade curve goes and the flow comes in from each area, you are going to see us possibly—this is one of those forward-looking statements—scaling back to six, maybe eight, header houses year over year. What we have seen initially from our first drilling has been very good for us. We have been very happy with the pounds that are showing up under pattern there, but that is still early. Justin, does that give you the color you are looking for? Justin Chan: Yeah. That was fantastic. Thanks, Matt and Steve. Maybe just one last one. I led the witness a little bit on the question, but to hit your targets more holistically, is it a case of deployment of wellfield development and header houses, or is it also on the plant side of things? Are there improvements you would like to see there in order to hit those numbers? What are the keys to hitting those targets this year? Matt Gilley: The key business improvement initiatives right now are focused on the plant. The Lost Creek wellfield just delivers, and we are well ahead on the drilling there. We have deployed a lot of drills at Lost Creek over the last two years, and we are well advanced on the drilling of header houses and patterns at Lost Creek. Shirley Basin is in the same mode. The wellfield there is well developed, and it is on track and on schedule. The key business improvements for this year are focused on plants. If you then drive down into a subset of that, it is on fines management and what we are doing to remove fines coming into the plant so that it reduces the complications that fines in the plant cause with the resin tanks. That is where the key focus is right now. You will see in our 10-K that we are dedicating some fairly significant capital towards upgrading the water treatment at Lost Creek, and that is both on the front end with the fines and sand filters in front of the plant as well as on the back end with the reverse osmosis and water treatment for delivery of the water back into the shallow aquifer and/or surface discharge. Justin Chan: Thanks, Matt. Is that more of an IX issue going into the IX plants? Or just to clarify. Matt Gilley: It is an IX issue, where fines in the IX columns cause inefficiencies. It is about keeping the fines out of the resin column. The resin columns act as a sand filter. If you put fines into them, then you create a fine layer on top of the resin, and it makes it inefficient. You have to clean that out. So we are working on improving that part of the system. Justin Chan: Understood clearly. So it is essentially fines clogging it up. Matt Gilley: Fines are bad. It is great—fines are actually kind of good for us in that a significant portion of our uranium is in the fines. So fines are making uranium, but removing fines from the solution before it enters the plant is the real key. Justin Chan: Understood. Thanks a lot. That was really useful color. I will free up the line. Operator: Thank you. The next question is coming from Matthew Key from Texas Capital Securities. Matthew, your line is live. Matthew, please, your line is live. Please check your mute button. Matthew Key: Sorry about that. Good afternoon, everyone. Thanks for taking my questions. I wanted to ask about future sales commitments and whether you are working on, or if it is possible to fold in, some incremental commitments in 2027 and 2028, or are talks at this point mostly for 2029 and out? Matt Gilley: Hey, Matthew. Thanks for the question. Our talks right now are mostly for 2029 and beyond. That is where we are focusing. We are comfortable with our sales book right now. As many of our peers have done, we do not see the necessity to have our book completely committed several years in advance. We are looking for opportunity. We are a uranium miner, and we are very optimistic and bullish on the uranium price. We like the idea of having some pounds in inventory that we can place opportunistically when the time is right. Matthew Key: Got it. That makes sense. Just a broad one for me—most of my questions were asked. Are you thinking about M&A in the current environment? Any targets out there that could potentially be compelling, or do you see the need for mergers in this space right now? Matt Gilley: When you say the need for M&A, we do not necessarily say there is a need for M&A. We do say that adding more resource base to Ur-Energy Inc. will have a very valuable contribution to the company. We recognize that more resource is going to help this company a lot. It is going to provide us with what we need to continue to advance. How we get those extra pounds—we are already focused on exploration both in the Great Divide Basin in general as well as mainly adjacent to Lost Creek. Lost Creek has a lot of open ground on almost all sides. It is open for expansion and exploration. We are not going to—when it comes to M&A specifically, we are going to answer like every corporation answers when they are asked that question. What I can also say is that part of the catalyst for the convert issue at the end of last year was so that we would have funding available such that if an opportunity were to arise, we could act on that opportunity. That was part of the catalyst for why we went for that convert raise, and those funds are available for our use in a very prudent and disciplined manner. Matthew Key: That is very clear. I appreciate all the color, and best of luck. Operator: Thank you. The next question will be from Heiko Ihle from H.C. Wainwright. Heiko, your line is live. Heiko Ihle: Hey there. Thanks for taking my questions. Matt Gilley: Hey, Heiko. Heiko Ihle: Just following up on Matthew’s question a little bit. Can you walk me through what you are seeing with the demand for longer-term pricing as opposed to spot? How desperate are the buyers, and are they pushing towards longer-term contracts? What kind of pricing structures are they guiding towards? Matt Gilley: Thanks for the question, Heiko. I was wondering who was going to ask that question. I am not going to use the adjective desperate. But I am going to say that the interest in securing uranium supplies for use in the nuclear industry is growing and is vibrant. We get a lot of requests for proposals. We are careful in what we look at. As we touched on before, we are not interested in over-obligating in the near term. We have a curve going in front of us of our commitments. We have a model that we have built on what we are looking for, committing our forecast production in every year ahead of us, and it peters out after six years. Then, of course, each year, the wave moves forward. From the standpoint of pricing, what we are seeing right now is that pricing certainly has a market-related component. That market-related component is becoming more meaningful in the majority of the way that pounds are being sold going forward. I do not think I am telling you anything unique to Ur-Energy Inc. at all. That is the same commentary you are hearing from other producers. But the industry is moving more towards market-related contracts and certainly de-emphasizing a term with escalation. Heiko Ihle: What are you seeing with geopolitical demand factors as things are progressing, especially given what happened the last couple of weeks? Matt Gilley: On the geopolitical standpoint, I hope from the U3O8 standpoint, geopolitical does not come in as much as you would think. Kazakhstan is still the world's major producer and still feeds into the market. You see a lot of geopolitical coming from the enriched side of the fuel cycle. From our standpoint, producing U3O8, we do not see the geopolitical as far as the world market. What we are seeing—and we have seen significantly over the last couple of months—is the idea of U.S.-based production. Not U.S.-legal production, but U.S.-based production. We feel—this is a very forward-looking statement—that there is growing potential for U.S.-based production to see a meaningful premium compared to U.S.-legal production. That is part of the reason that we are being careful with the deployment of contracts. We want to be able to keep some material available for opportunistic placement in contracts that have a premium for U.S.-based supply. Heiko Ihle: That is helpful. I will get back in queue. Thank you. Operator: Thank you. Operator: There are no other questions from the phone lines at this time. I would now like to hand the call over to Valerie Kimbell, IR Director at Ur-Energy Inc., for webcast questions. Valerie? Valerie Kimbell: Thank you, Paul. Our next question is regulatory in nature. How confident are you in your abilities to navigate regulations that might be reinstated down the road? Matt Gilley: Thank you, Valerie. How confident are we in navigating regulations that may be reinstated down the road? I am not necessarily sure. I am going to ask Ryan—do you have an idea of the basis of that question, Ryan? Ryan: I do not know if I entirely have a basis, but I would say we are actively monitoring all rulemakings, and we are actively participating in those processes. As part of our management of our business, we are aware of those, and we keep track of any changes to regulations or policies and are responding and working with regulators appropriately to minimize risk to our operations. Matt Gilley: Thanks, Ryan. I think that question might be pointed towards some work that is being done on the ISR binding regulations. Ryan, do you want to summarize your involvement and you as a representative for Ur-Energy Inc. in that rulemaking? Ryan: Absolutely. As you know, there are major changes to the Nuclear Regulatory Commission, much of which was directed by Executive Order 14100. In response to that, the NRC will be issuing draft rules in the coming months on ISR. We are very much involved in that process. We have been involved with NRC commissioners, national groups, National Mining Association, Wyoming Mining Association, Nuclear Energy Institute, a number of different groups that are all watching that, and we are all participating as much as we can to ensure we understand how that will affect our business and ensure that it is appropriate for the business that has been established over the last fifty years or so. I could go in more detail on why ISR rulemaking is needed, but at this point, I will just leave it at that, Matt, unless you want me to expand further. Matt Gilley: I think that is a great summary. Thank you very much, Ryan. Valerie, are you feeling the question is answered? Valerie Kimbell: Yes. Our next question concerns new technology. Do you have any plans to work with new technologies of uranium productivity? For example, Lightbridge Fuel or some other company looking to up the efficiency of uranium power. Matt Gilley: Thanks, Valerie, for that question. I am relying heavily on Ryan today in this call. Ryan, we as Ur-Energy Inc. are quite active—and I am very proud of this—in the advancements in the uranium industry. First, I am going to ask Ryan to give a quick summary on what we are doing with the DOE labs for initiatives in advancing uranium. Ryan: For sure. Overall, in our culture as a company, we are always looking to advance and to increase efficiencies and look at new technologies. That is something that we have always participated in. To give a flavor of what Matt was talking about, we have partnered with National Laboratories to look at a number of different issues. We, in essence, partnered with those laboratories to say, here are some struggles that we may have or that could use some efficiencies, and they are working very closely with us. It is exciting to see. These are national labs across the United States. It is not just a single national lab, but this is all with the Department of Energy. We have some exciting things that we are looking at. As far as your question regarding fuel and new fuels and things of that nature, while we may be a provider of the source material for those fuels, we are not actively engaging in those fuel fabrications like you mentioned, Lightbridge. That make sense, Matt? Matt Gilley: Yeah. That makes sense. I will also stress that the recent commitment of over $2,000,000,000 towards the advancement of the enrichment capacity of the U.S.—we are involved in discussions with all of those parties with regards to the potential to supply them with U3O8 as they are doing their testing and as they are doing their ramp up of their facilities, and we build those out. If you are involved in the nuclear industry in the United States, you are involved with us. Is it Valerie? Valerie Kimbell: There are no more questions. I will hand it back over to you for closing remarks. Matt Gilley: Alright. Everybody, I was thrilled with the interaction, the number of questions, and the interest in Ur-Energy Inc. I am thrilled to be here. I could not be more proud of the operations and our teams. Thanks everybody for being on this call. This was a great restart of the quarterly earnings call, and I am very excited about being able to talk to you in the next three months. Thank you. Operator: Thank you. This does conclude today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Conference will begin in one moment. Thank you for your patience. Greetings and welcome to the Frequency Electronics, Inc. third quarter fiscal 2026 earnings release conference call. As a reminder, this conference is being recorded. Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call. It is now my pleasure to introduce your host, Thomas McClelland, President and Chief Executive Officer. Good afternoon. Thomas McClelland: And thanks for joining Frequency Electronics, Inc.’s third quarter fiscal year 2026 earnings call. With me today is our CFO, Steven Bernstein. On our second quarter fiscal 2026 earnings call in December, I discussed our vision for how we see the growth in our company developing in the coming years. Specifically, I told you that the exciting growth prospects we have in large and growing end markets, which are larger than our historical addressable markets, will come in addition to continuing strength and growth in our ongoing businesses in space and defense. These new markets, such as quantum sensing, proliferated satellites, and alternative position, navigation, and timing programs, are built upon our industry-leading capabilities in our core space and defense programs. I also told you on that December call that we anticipate multiple awards in the coming months, some of which are as large or larger than the biggest ones we have historically announced. Today, we are very pleased to report significant progress on all of these fronts. In a separate press release that came out at the same time as our earnings report after the close of market today, we announced that we were awarded two contracts, valued at approximately $45 million. One of these contracts is in the domain of Frequency Electronics, Inc.’s traditional space satellite programs, and one is part of the new proliferated satellite paradigm. Customer confidentiality prevents us from discussing these with greater specifics at this time, but there are two important points to consider. First, of course, is that these contracts reflect our ability to continue to win meaningful contracts in our traditional space business while also winning significant business in our next-generation markets at the same time. In other words, while our business is never perfectly linear, we are definitely not projecting a dislocation in which the traditional business wanes while the new business replaces it. Rather, they will both grow and pave the way for us to become a substantially larger company. Second, we are already actively working on additional contracts of similar magnitude in both our traditional and new business lines, and anticipate additional awards in this calendar year. On the December call, I also told you that while backlog in any given quarter can fluctuate given newly funded awards and what is converted into revenue in a given quarter, based on what we are seeing coming down the road, we believe it is reasonable that we could see backlog north of $100 million in the not too distant future. Our January quarter-end backlog was at a new record for Frequency Electronics, Inc., and, of course, this backlog amount was prior to the award of the contracts announced today. This new business announced today will start to enter backlog in this current fiscal fourth quarter, which should help us make further progress towards the $100 million mark in the near future. Now that $100 million level, by the way, is not meant to indicate a level we are capping at, but a level we are currently building towards. Adding more awards like the ones we announced today could push us well past that over time. Steven will provide more financial details a little bit later, but I would make a few financial comments here. For the third fiscal quarter, we reported revenue of $16.9 million, essentially the same as the second fiscal quarter. This revenue number is down year-over-year because of the particularly strong execution we exhibited in fiscal 2025, which allowed the company to produce revenue on certain programs in fiscal 2025 that we had originally expected to produce over a much more extended period of time well into fiscal 2026, essentially pulling forward some revenue as we have discussed in previous calls. Nonetheless, this was still the fourth highest quarter of revenue in the past ten years, with only three higher quarters having occurred within the past four quarters. As we said on the December call, though our business does not proceed in a perfectly linear fashion, we have established a new higher base and we anticipate building upon that base now and in the years to come. Before I turn things over to Steven, I would like to make a few comments on the current state of the world and how it relates to Frequency Electronics, Inc.’s business. Obviously, most immediately, our country is now at war. As we have discussed on previous calls, we are involved in numerous defense programs, including Golden Dome, the Patriot missile system, the B-2 bomber, and the Terminal High Altitude Area Defense missile system, the THAAD system, as well as other multi-domain defense systems. Missile systems and interceptors have been in the news quite a bit over the past two weeks, and I would like to remind you of remarks we have made previously on our calls. Our exposure on major missile programs is principally in the missile batteries, which are ground-based units used to detect, track, and intercept incoming threats, generally by firing missiles at those threats. As the government increases the deployment of these batteries, our business will expand along with that, and we have already seen that in the current quarter. Further, the early days of this war as well as the action earlier this year in Venezuela have shown an increased reliance on traditional jet fighters and naval fleets, as opposed to next-generation defense technologies. Similar to our discussion earlier on our space positioning in the traditional and emerging markets, we believe this military deployment is a good example of how there remain strong opportunities in our traditional defense business even as we are engineering products for next-generation modalities. We expect defense to continue to be a meaningful and growing business for Frequency Electronics, Inc. for many years. Meanwhile, in the Ukraine-Russia war and in the Strait of Hormuz, GPS jamming has become ubiquitous, creating dead zones that threaten civilian aircraft, telecom and financial systems, shipping firms, and NATO allies. The need for alternative position, navigation, and timing systems, Alt PNT, including the use of quantum sensing and magnetometers, is paramount, and we expect to be a part of that solution set in the years to come. In fact, in this current fiscal year, we have already won some new business in both magnetometers and other quantum sensing, including business won out of our new Colorado facility. We expect a lot more Alt PNT business in the years to follow. Our technology is used in systems and programs that play critical roles in keeping our country and our military safe. We are very proud of this work, and it creates an additional sense of mission for our team. I would like to thank our employees, our customers, and our shareholders, all of whom we serve by carrying out this important work. Lastly, we will be participating in two investor conferences in the fiscal fourth quarter, and we look forward to meeting with a number of you at the Craig-Hallum New Space Conference on March 25 and the Morgan Stanley Golden Dome and National Security Innovation Summit on June 15. I will now turn the call over to Steven to provide some more financial detail, and I look forward to taking your questions during the Q&A following Steven’s remarks. Steven? Steven Bernstein: Thank you, Tom, and good afternoon. For the three months ended 01/31/2026, consolidated revenue was $16.9 million compared to $18.9 million for the same period of the prior fiscal year and substantially similar to the second quarter of this fiscal year, as Tom mentioned earlier and which we have described on the past several calls. The components of revenue: revenue from commercial and U.S. government satellite programs was approximately $4.2 million, or 25%, compared to $11.2 million, or 59%, in the same period of the prior fiscal year. Revenues on satellite payload contracts are recognized primarily under the percentage-of-completion method and reported only in the FEI New York segment. Revenues from non-space U.S. government and Department of Defense customers, which are recorded in both the FEI New York and FEI Cypress segments, were $12.5 million compared to $7.4 million in the same period of the prior fiscal year and accounted for approximately 74% of consolidated revenue compared to 39% for the prior fiscal year. Other commercial and industrial revenues were $180,000 compared to approximately $367,000 in the prior fiscal year. The revenue for the three months ending 01/31/2026 was lower than the revenues in the prior period partly as a result of certain space programs in the FEI New York segment during the prior fiscal year that were being expedited during the period due to very aggressive schedules. In addition, several new space bookings anticipated for the three months ending 01/31/2026 are now anticipated in fiscal ’26 Q4. For the three months and nine months ending 01/31/2026, both gross margin and gross margin rate decreased compared to the same periods in the prior fiscal year. The decrease in gross margin and gross margin rate is attributable to a change in the mix of high-margin production satellite programs in the prior-year periods versus lower-margin programs with significant nonrecurring engineering efforts during the three months ending 01/31/2026. Going forward, the mix of programs will vary in any given quarter, but in general, we expect our gross margin to move up over time, particularly as we add more business with a higher rate of unit production and follow-on business from successful programs. For the three months ending 01/31/2026 and 01/31/2025, selling, general, and administrative expenses increased by approximately $213,000 and were approximately 21% of consolidated revenue, up from 18% in the prior year. The increase in SG&A expenses during the three months ending 01/31/2026 was due to fluctuations in various expense accounts that make up SG&A. R&D expense for the three months ending 01/31/2026 increased to approximately $1.8 million from $1.4 million for the three months ending 01/31/2025, an increase of approximately $327,000, and were approximately 10% and 8%, respectively, of consolidated revenue. Fluctuations in R&D expenditures will occur in some periods due to current operational needs supporting ongoing programs. The company plans to continue to invest in R&D in the future to keep its products at the state of the art. In total, operating expenses increased approximately $540,000, but this includes approximately $500,000 of nonrecurring expenses, so we anticipate showing more operating leverage going forward as additional revenue should expand at a much faster rate than expenses. For the three months ended 01/31/2026, the company reported operating income of approximately $1.3 million compared to operating income of approximately $3.5 million in the prior fiscal year. Operating income decreased due to lower revenue, lower gross margin, and increased SG&A described earlier. Other income (expense), net, is derived from various sources. The majority of the approximately $200,000 of investment income for the three months ending 01/31/2026 was from interest income and unrealized gains on assets held in the Frequency Electronics, Inc. deferred compensation trust. This yields pretax income of approximately $1.4 million for the three months ending 01/31/2026 compared to approximately $3.6 million pretax income for the three months ended 01/31/2025. For the three months ending 01/31/2026, the company recorded an income tax benefit of approximately $127,000, which includes a discrete tax benefit of approximately $568,000. The discrete income tax benefit is primarily due to a stock compensation windfall deduction. For the three months ended 01/31/2025, the company reported an income tax benefit of $11.8 million, which included a discrete income tax benefit of $11.9 million. The discrete income tax benefit in the comparable period is primarily due to the release of the valuation allowance. Consolidated net income for the three months ended 01/31/2026 was approximately $1.6 million, or $0.16 per share, compared to approximately $15.4 million, or $1.60 per share, for the same period of the previous fiscal year. Our fully funded backlog at January 2026 was approximately $83 million, a new all-time high for Frequency Electronics, Inc., as compared to approximately $70 million for the previous fiscal year ended April 30, 2025. The company's balance sheet continues to reflect a strong working capital position of approximately $32 million at 01/31/2026 and a current ratio of approximately 2.6 to 1. The amount of cash reported as of the quarter end January 31 should represent a low point going forward, which is a combination of investments made by the company, purchases of stock, and collections coming in early in the fiscal fourth quarter that were in just after the third quarter. Specifically, we have already collected over $11 million of cash since 02/01/2026, and we expect that to continue building through the quarter. Additionally, the company is debt free, and the company believes that its liquidity is adequate to meet its operating and investing needs for the next twelve months and the foreseeable future. I will turn the call back to Tom, and we look forward to your questions shortly. Thomas McClelland: Thanks, Steven. We will now open for questions. Operator: Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset while we poll for questions. Once again, please press 1 if you have a question or a comment. The first question comes from Jeff Van Rhee with Craig-Hallum. Please proceed. Jeff Van Rhee: Great. Thanks for taking the questions. A couple for you here, guys. So, Tom, the proliferated win—talk to me about what you are learning out in the marketplace and your ability to win in these proliferated constellation deals. I know it is something you have sort of felt your way through. Looks like you have got some success and you are sort of guiding to continued success. Where do you have the right to win? Where do you win? Where do you not have a right to play? Just what have you learned there? Thomas McClelland: Well, I think when we can provide some technical edge, we are very successful. We are seeing that, and that is what the win that we announced today reflects. When there are systems that have minimal technical requirements and all of the emphasis is just on the lowest possible cost, then it is a much bigger challenge for us. Jeff Van Rhee: Mhmm. Realizing your hands are somewhat tied, talk to me to the degree you can on the $45 million. I think you said there is a couple wins in there. Are these roughly equal in size? I know you said one was proliferated, one was not, but just rough proportion of what is in there? Thomas McClelland: Well, I am going to dodge that one a little bit, Jeff. But let me just say they are both significant. Jeff Van Rhee: And in terms of the coming into funded backlog, I think that phrasing was they will start to come into backlog. I mean, can you give us some swag at how quickly that is going to play into the backlog? Thomas McClelland: Just a reminder that we talk about funded backlog. So it is a question of the funding profile on each of these programs. But the reality is that it will be pretty significant in the quarter that we are in currently. I do not think I can say a whole lot more than that at this point. Jeff Van Rhee: Okay. And, Steven, on the cost structure, I was unclear. I think you referenced there were some unusuals in there. Obviously, R&D has bumped up considerably over the last few quarters. I am trying to understand what the steady-state OpEx levels are going forward. So just what was in there this quarter that was one-time and not? Steven Bernstein: Well, we have in the general operating expenses— we still have investments that we are making into Colorado. It is the largest piece of that. And once that is done, it should normalize pretty much. That was one of the larger pieces of it. Jeff Van Rhee: And so when you say normalize, are we going to go up from this level as we go forward into future quarters, or was there unusual in here and we should step down from here? Steven Bernstein: Well, again, operating expenses in general—unfortunately, there is always some bump, whether at 3%, 4%, 5%, based on just the normal growth of normal expenses. So I do not see any—unless something changes, I do not see a large increase, but I do not see a large decrease. Jeff Van Rhee: Okay. Maybe last for me. Tom, with respect to Turbo, I know you had given some color commentary in a few prior quarters that you felt it had the potential to go from a couple million to maybe $20 million in the out year if things go right. Just your updated thinking on Turbo based on market reception, pipeline, etcetera? Thanks. Thomas McClelland: I think if anything, we are more optimistic about Turbo. We are beginning to see significant revenue at this time, and every indication is that this is going to grow dramatically over the next—even over the next couple of quarters and definitely over the next couple of years. Jeff Van Rhee: Got it. Thanks so much. Operator: Our next question comes from Chris Pokosky, private investor. Please proceed. Chris Pokosky: Hello. Thank you for taking my questions. And congratulations on the new wins. Could you clarify what exactly is the proliferated satellite? Is it the Starlink-type satellite? I am not asking if it is Starlink or not, just if it is that type of satellite. Thomas McClelland: It is actually a pretty good question. I am not sure I really like that term “proliferated satellites,” but it is one that is being used out there. I think the distinction we are trying to make is between what we call traditional satellite systems, where there may be three to five satellites in a constellation, oftentimes in geosynchronous orbits, versus these newer satellite systems that are being envisioned at this point in time, often, but not always, in low Earth orbit, but consisting of many, many more satellites, typically from 300 to, in some cases, many thousands, and SpaceX is now talking about a constellation of a million satellites. But I think that the real distinguishing feature is the thought process that goes behind these systems. What has become very clear recently is that satellites are vulnerable from our enemies, and this has been demonstrated recently that both the Chinese and the Russians in particular have the capability to destroy other satellites. When we have a satellite system that has only a couple of satellites in it, if one of those satellites gets destroyed, it is a huge loss for us. It can represent billions of dollars, in fact. So the idea is, instead of having a couple of satellites worth a billion dollars each, to have a system where there are many more satellites, but the individual satellites are much less costly. The simple way I like to look at it is that the system itself may overall cost the same amount of money, but instead of those costs being distributed over a few satellites—three, four, five satellites—it is distributed over 300 or a thousand satellites. In order to make that approach work, obviously the individual satellites have to cost a lot less. So that is what we end up looking at. We look at individual satellites. The contribution that we make in our product to an individual satellite has to cost a lot less than what we would deliver for one of the traditional satellites. And then, of course, another important feature is that if you are going to launch 300 instead of three, you need to do it at a much more rapid pace than is necessary for the three satellites. So the production rate has to increase dramatically. This lower cost and more rapid production makes for a significantly different manufacturing approach than with the traditional satellites. We are actually investing in order to really get involved in a very significant way in this new kind of satellite business. One of the attractive features is that, on an ongoing basis, many of these systems are envisioned to have just a continuous ongoing production of satellites. The idea is that the individual satellites are intended to have a shorter lifetime—instead of fifteen years for traditional satellites, maybe three to five years for the newer satellites—and so we get into a production mode where we are delivering on a scheduled basis, say, the first 300 satellites in a 300-satellite system, but as soon as we are done delivering the 300 satellites, we have to start all over again, because the first satellites that were launched are nearing the end of life and have to be replaced with new ones. So it makes for potentially a much more continuous kind of production, and that is something that we think makes for a much more predictable business, and it is also in many ways more attractive business than the traditional satellites where we would have a large-scale production activity over a couple of years, and then when we are finished with three or four satellites, we are done perhaps for the next decade until people are talking about potentially replacing those satellites. Anyway, it is probably a more long-winded answer than you wanted, but let me leave it at that. Chris Pokosky: That was very appreciated. Please feel free to be as long-winded as you want. So it seems like there will be some headwinds or some tailwinds for gross margins. I am sure having continuous production would really help gross margins. But then having a new satellite program which requires limited cost, that might hurt gross margins. So do you think you will be able to keep your gross margins on this new proliferated satellite program? And is there going to be, like, a learning period where gross margins will be lower? Thomas McClelland: It is a good question, and something we have talked about on previous calls. I think we do anticipate, in the short run, somewhat lower gross margins on the proliferated satellite business as it gets refined in the initial years. But at the same time—and it is really one of the things we are trying to emphasize today—is that the traditional satellite business is still alive and well, and that is a business where our gross margins are very strong. So whereas we have to invest to some extent in the proliferated satellites, we have really good gross margins with the traditional satellites. I also want to emphasize that, in the long run, we anticipate very strong margins for the proliferated satellite business as well. Chris Pokosky: Okay. And you mentioned that in this current quarter things are going—this $45 million—some of it is going to the funded backlog. Are you allowed to tell us when actual production would start? Thomas McClelland: That is something I think we are not prepared to get into. It is a very early stage of these programs, and the schedules are being worked out now with our customers. Chris Pokosky: Alright. Thanks. Good luck. Thomas McClelland: Thank you. Next question is from Michael Eisner, private investor. Operator: Michael, please proceed. Michael Eisner: Congratulations on the two contracts and future contracts. Most of my questions are answered. Can you comment on Golden Dome? Thomas McClelland: I do not think there is a whole lot I can say. From our point of view, Golden Dome is just sort of being defined at this point in time. We have spoken specifically in the past and earlier today about some of the programs—Patriot missile and THAAD—which I think are, in some ways of thinking, considered part of the Golden Dome concept. We are also involved in several other missile programs, which we cannot talk about in specific. But we are very, very involved in a number of things that are part of the Golden Dome concept. And, of course, satellites are also a very, very important part of the Golden Dome concept, and we are very involved in that also. Other than that, Michael, I do not think I can really get into any specifics. Michael Eisner: Comment. Frequency Electronics, Inc. has been around 60, 70 years, and Frequency is a nice name, good name, respected name. Did you ever think of adding to Frequency—maybe Frequency Quantum Sensing, for example, or Timing—the more what the company actually does? Thomas McClelland: We have thought about it, and there have been all sorts of suggestions along the lines that you are suggesting right now and quite a number of other ones also. I do not think I want to say a whole lot more than that. But, at the moment, we are sticking with the 65-year-old name that we have. Michael Eisner: Yeah. I just thought because it does so much more now, and we keep on—it sounds like from this call—getting involved with more stuff in technology. I did not say technology company. Thomas McClelland: One thing I will say: we have given some thought to this kind of thing, and I am not going to say one way or the other what the future will bring, but I think there is—we have just been talking about it—there is a tremendous amount of business that we are looking at at this point of time, and we are anticipating very, very significant growth. I think the important thing to do is concentrate on executing that business effectively, and that is what we are focusing on, and we feel that is way more important than the name we provide to the company. Michael Eisner: Okay. That is fine. Thank you. See you. Operator: Once again, if you have a question or a comment, please press 1. We have a follow-up coming from Jeff Van Rhee with Craig-Hallum. Please proceed, Jeff. Jeff Van Rhee: Great. Thanks. Yes, just a few from you guys. In terms of the script, Steven, I might have missed it. I thought you had said you had some bookings push-outs, and I did not quite catch it. I think you said Q1 went to Q4. Just that for me. And then, Tom, you have been talking about $100 million backlog you thought in relatively near future—sounded like slightly different verbiage here, so maybe it is not quite as near as you thought it had been. Just connect those two dots for me and help me understand what is going on there. Thomas McClelland: I think that, again, we cannot really get into quantitative specifics. But I do think that the $100 million mark is going to be breached relatively quickly. Just what we talked about today—the numbers—our backlog is up from what it was last quarter slightly, and we just announced today $45 million of new contracts, and that is going to begin hitting the backlog this quarter. There is more in the input pipeline, so we are very quickly approaching the $100 million mark. Jeff Van Rhee: Mhmm. Yeah. Understood. And just back to the original question, Steven, did you reference contracts pushing out from Q1 to Q4? And if so, can you expand on that? Steven Bernstein: To Q4, and that is why some of the revenue was down and dropped because— Thomas McClelland: I said they pushed from Q3. The very specifically—the contracts that we just announced. One of the frustrating things in the satellite business is our wonderful government—they like to get their satellite hardware as quickly as possible, but they are not so fast in executing contracts. Jeff Van Rhee: To say the least. Okay. Thanks so much. Thomas McClelland: Alright. Operator: Next question comes from Robert Smith with Center for Performance Investing. Robert Smith: Good afternoon, Tom. Steve. Hi. I just wanted to congratulate you, Tom, on your transforming this company and positioning it for future growth, and I am hopeful that you can continue to execute, and I think you are doing a wonderful job. And kudos to you. Grateful to be aboard. Thanks so much. Thomas McClelland: I appreciate it, and we will do our best. Operator: Our next question, we have a follow-up actually from Chris Pokosky, private investor. Please proceed. Chris Pokosky: Hello. Thanks for taking my follow-up. I wanted to ask if you can expound a little bit on the alternative position and navigation. Now, obviously, there is GPS jamming all over the place. How do you help address that, and would that lead to your devices being actually deployed in kind of the terrestrial—in the boats and cars and so on? Thomas McClelland: For alternative navigation, there are dozens or more things that people are considering. I think it is maybe worth just a little bit of discussion about this. We all have come to depend on GPS, Global Positioning System, over the last couple of decades, but the one thing that distinguishes GPS is the “G” part of it—the global. It is available literally any place on the surface of the Earth. When people talk about alternatives to GPS, sometimes they talk about other satellite navigation systems which are potentially also global in reach, but in general, people like to talk about things that are not satellite systems. The whole idea is that the satellite Global Positioning System is vulnerable—the satellites can be destroyed or damaged by our enemies in particular—and also the signals can be jammed. If you just replace one satellite system with another satellite system, you have essentially the same problems that you had with the original system. So people talk primarily about non-satellite alternatives, and in general, the non-satellite alternatives are not global in reach. That means that, usually, when you talk about alternatives, you are talking about employing multiple approaches to navigation. One alternative may work in a particular environment—say, an urban environment—and another approach will work over the ocean or in the middle of the desert someplace. With all of that preliminary being said, there are a couple of things that we are involved in and think are going to become important over the next couple of years and probably over the next decade. One of them that we are working on very actively right now is so-called magnetic navigation. The idea here is that the magnetic field around the surface of the Earth is not exactly constant. It varies by small amounts, and the exact magnetic field and direction is location sensitive. So if you have a very accurate map of the magnetic field in a region on the surface of the Earth, and you have a means of measuring the magnetic field, then you can compare your measurements to the magnetic map and locate yourself with really quite good precision—probably not at this point in time with the same precision that we get from GPS, but under the right conditions, it can be pretty close to that. That is something that we are pursuing. We are pursuing the magnetometer end of this—the sensor for measuring the magnetic field—and, of course, that by itself is not going to allow you to navigate. You also have to have the magnetic maps, which, by the way, is something that we are looking at: helping to improve the existing magnetic maps of the surface of the Earth. Another alternative to GPS that is considered is really a similar kind of concept, but you can imagine using a combination of fixed terminals on the surface of the Earth and drones, and those fixed terminals and drones effectively act as a mini GPS system. The drones are equivalent to the GPS satellites, and in a localized area, that kind of configuration provides a means of very, very precise localized navigation. These are just a couple of things that Frequency Electronics, Inc. is actually involved in, in terms of alternative navigation. There are, of course, many other things that people talk about—various detecting radiofrequency signals from radio stations and using that, inertial navigation, and various other things. I will just leave it at that for now. Chris Pokosky: Well, thanks for the thorough answer. And are you getting any revenue right now? I guess production revenue will be a couple of years out. Thomas McClelland: We are, because the U.S. government is very interested in developing these technologies and they are funding development activities. So we are getting revenue from those development funds. But we anticipate over the next decade turning that development revenue into product-based revenue. Chris Pokosky: Alright. Thanks again. Operator: The next question is from Sam Nelson, private investor. Sam, please proceed. Sam Nelson: Hi, Tom. Thanks for taking my question. I was just trying to get a better idea of, with the new contracts, how that award might ultimately flow through the backlog. I think on previous calls, you had described how ultimately the impact might be, like, 10x the initial value that is realized on the backlog, and just to clarify, I was wondering if we could look at these new contract awards in a similar way where the initial realized amount of the contract that is falling in backlog—could we 10x that, or what might the impact ultimately be? Thomas McClelland: I think, without making specific kinds of statements, that the 10x approximation is reasonably valid here. The contribution to backlog depends on the initial funding on these contracts. Something along those lines—again, not providing specific guidance. Sam Nelson: Okay. Thank you. Operator: Okay. We have no further questions in the queue. I would like to turn the floor back to management for any closing remarks. Thomas McClelland: Thank you for taking the time to listen and participate in today’s earnings call, and we look forward to providing further updates in the coming months. Thank you. Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, everyone, and welcome to the Tilly's, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. At this time, I would like to turn the floor over to Gar Jackson with Investor Relations. Please go ahead. Gar Jackson: Good afternoon, and welcome to the Tilly's, Inc. fiscal 2025 fourth quarter earnings call. Nate Smith, President and Chief Executive Officer, and Michael Henry, Executive Vice President and Chief Financial Officer, will discuss the company's business and operating results and then host a Q&A session. A copy of Tilly's, Inc. earnings press release, please visit the Investor Relations section of the company's website at tillys.com. From the same section, shortly after the conclusion of the call, you will also be able to find a recorded replay of the call for the next 30 days. Certain forward-looking statements will be made during this call that reflect 2026; actual results may differ materially from current expectations based on various factors affecting Tilly's, Inc. business. Accordingly, you should not place undue reliance on these forward-looking statements. A more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2025 fourth quarter earnings release, which is furnished to the SEC today on Form 8-K, as well as our other filings with the SEC referenced in that disclaimer. Today's call will be limited to one hour. We will include a Q&A session after our prepared remarks. I will now turn the call over to Nate Smith. Nate Smith: Thank you, Gar, and good afternoon to everyone joining us today. We finished fiscal 2025 surpassing our expectations on both the top line and bottom line for the fourth quarter relative to our outlook provided in early December. We ended the fiscal year with six consecutive months of accelerating positive comp momentum and 18 consecutive positive comp weeks. That momentum drove our first profitable fourth quarter and first positive comp sales fiscal year since fiscal 2021. Our momentum has continued to start fiscal 2026 with a 20% comparable net sales result in February. We have meaningfully improved our merchandise assortments and evolved our brand and digital marketing efforts to improve our customer engagement. Additionally, we have closed underperforming stores and sustained solid operational execution, delivering significantly improved results compared to last year. From a merchandising perspective, we began fiscal 2025 looking to reinvigorate our brand mix and to clean up excess aged inventory. With each passing quarter, our comparable net sales results and product margins improved as these changes were being made, ultimately leading to comp sales growth throughout 2025, which is momentum we are carrying into early fiscal 2026. Our merchandising teams put in a lot of effort to make the necessary changes to drive these improved results, and I am confident in their abilities to drive further improvements in fiscal 2026. I would especially like to acknowledge Michael Singulani, who we just promoted to Chief Merchandising Officer, for his leadership and tireless efforts in turning our sales trajectory around over the past year and setting us up for such a strong start to fiscal 2026. Good product offerings need to be supported by effective marketing strategies and tactics to help new customers realize who we are and what we have to offer, to update existing customers on changes we have made, and to reintroduce Tilly's, Inc. to former customers who may have disengaged from our brand. We believe our marketing team's efforts to drive greater consumer awareness and consideration for Tilly's, Inc. have made a significant impact through engaging campaigns, refreshed content, and exciting events, as evidenced by our growing TikTok following and reversing declines in our active customer loyalty program membership. These efforts will continue in various ways throughout fiscal 2026 to build upon the successes achieved in fiscal 2025. In terms of store real estate, with the improved store comp trends we have seen over the last seven months and counting, and because our unit economics support it, we are now pivoting from a store closure posture to a disciplined approach to new store openings in fiscal 2026, with a plan to open four to six new stores. We will remain selective and reasonably conservative in our future expectations for new stores, but it is encouraging to reach an inflection point of feeling the confidence to begin strategically considering store growth again. Fiscal 2025 was a year of significant store optimization, resulting in 21 total store closures. We are proud of the fact that we were able to deliver sales growth in the fourth quarter with 17 fewer net stores. At the present time, we have four known store closures that will take place late in the first quarter, and while that number may change as the year progresses, we do not currently expect to close a significant number of additional stores this year. Our infrastructure investments in a price optimization tool during 2025 and in warehouse management software in mid-fiscal 2024 have now been producing the anticipated benefits we expected. Our price optimization tool has contributed meaningfully to our improved fourth quarter product margins. The new warehouse system is now helping drive significant labor efficiencies within our store and e-commerce distribution centers. Further investments in our business are expected to continue during fiscal 2026, including an AI-driven merchandise allocation tool that we believe will lead to greater operating efficiencies over time. In closing, we are very excited about our prospects for fiscal 2026. We believe our turnaround is real, the fundamentals are fixed, our top line is growing, we are looking to reinitiate store growth, and we must continue to build upon the progress made thus far. The team has done the hard work. Now we are optimizing. We are not yet profitable on an annualized basis, but we see a clear path to get there after generating profit in two of the last three quarters. We built forward momentum in our business throughout fiscal 2025, and that momentum has carried into an unprecedented start to fiscal 2026. Given current trends, we expect to deliver further improvement in both top line and bottom line performance in each quarter of the year. We look forward to discussing our progress with you as the year progresses. I will now turn the call over to Mike to share the details about our fiscal 2025 fourth quarter operating results and to introduce our fiscal 2026 first quarter outlook. Michael Henry: Thanks, Nate. We finished fiscal 2025 with stronger sales and product margins than we anticipated, along with lower expenses, to achieve our first profitable fourth quarter since fiscal 2021. Details of our fourth quarter operating results compared to last year's fourth quarter were as follows: Total net sales of $155,100,000 increased by 5.3% despite finishing fiscal 2025 with 17 fewer stores than a year ago. Comparable net sales for the 13-week period ended January 31, 2026, including both physical stores and e-commerce, increased by 10.1% with increases from both physical stores and e-commerce of 10.3% and 9.8%, respectively. That strong fourth quarter comp performance was enough to pull full-year comp sales slightly positive for the first time since fiscal 2021 at plus 0.3%. Total net sales from physical stores increased by 3.6% despite our 7.1% reduction in year-over-year store count. Net sales from physical stores represented 72.3% of total net sales compared to 73.5% last year. E-commerce net sales represented 27.7% of total net sales compared to 26.5% last year. Gross margin, including buying, distribution, and occupancy expenses, increased to 33.2% of net sales, an improvement of 720 basis points compared to 26% of net sales last year. Product margins improved by 470 basis points as a result of higher initial markups and lower total markdowns associated with operating with reduced and more current inventories than a year ago. Buying, distribution, and occupancy costs improved by 250 basis points, or $1,900,000 in the aggregate, primarily due to lower occupancy costs associated with our reduced store count and partially offset by increased shipping costs associated with our online net sales growth. Total SG&A expenses were $48,900,000, or 31.5% of net sales, a reduction of $3,500,000 or 410 basis points as a percentage of net sales, compared to $52,400,000 or 35.6% of net sales last year. Significant SG&A reductions compared to last year's fourth quarter were attributable to store payroll and related benefits of $1,600,000, primarily related to our reduced store count; lower noncash impairment charges of $700,000; reduced e-commerce fulfillment labor of $700,000; and a variety of smaller reductions across several line items. Operating income improved to $2,600,000, or 1.7% of net sales, from an operating loss of $14,100,000, or 9.6% of net sales last year. Income tax expense was $18,000, or 0.6% of pretax income, compared to $200,000, or 1.8% of pretax loss last year. Both years include the continuing impact of a full noncash valuation allowance on our deferred tax assets. Net income improved to $2,900,000, or $0.10 per diluted share, compared to a net loss of $13,700,000, or $0.45 per share last year, representing an improvement of $16,600,000, or $0.55 per share, versus last year's fourth quarter. Turning to our balance sheet. We ended fiscal 2025 with total liquidity of $87,800,000, comprised of cash of $46,300,000, no debt, and available borrowing capacity of $41,500,000 under our asset-backed credit facility. Net inventories were 10.8% lower, with an improved inventory aging compared to a year ago. Total capital expenditures for fiscal 2025 were $4,700,000 compared to $8,200,000 in fiscal 2024. Turning to 2026. Comparable net sales for the first month of the year ended 02/28/2026 increased by 20.1% relative to the comparable period of 2025. Based on current and historical trends, we currently expect the following for our fiscal 2026 first quarter operating results. Total net sales to be in the range of approximately $119,000,000 to $125,000,000, translating to a comparable net sales increase of 16% to 22%, respectively. We currently expect to generate product margin improvements of 310 to 330 basis points compared to last year's first quarter; SG&A to be approximately $44,000,000 to $45,000,000 before factoring in any potential noncash store asset impairment charges, which may arise; pretax loss and net loss to be in the range of approximately $10,100,000 to $8,000,000, respectively, with a near-zero effective income tax rate due to the continuing impact of a full noncash valuation allowance on our deferred tax assets; and loss per share to be in the range of $0.34 to $0.27, respectively, compared to a loss per share of $0.74 in last year's first quarter, with estimated weighted average shares of approximately 30,100,000. We currently expect to end the first quarter with 220 total stores, a net decrease of 18 stores, or 7.6%, from the end of 2025. We are not in a position to provide annual guidance given we cannot predict our comparable net sales performance for the balance of the fiscal year with any certainty. However, for illustrative purposes regarding our potential to return to profitability in 2026, and subject to various assumptions with respect to product margins, inventory levels, and expenses, we estimate that it would take an annualized comparable net sales increase of approximately 8% to 9% to begin generating profitability for fiscal 2026 as a whole. In closing, as Nate noted earlier, we are optimistic about our prospects in fiscal 2026 based on the sequential improvement in our comparable net sales trend we achieved from quarter to quarter throughout fiscal 2025 and into our strong start to fiscal 2026. Operator, we will now go to our Q&A session. Operator: At this time, we will begin the question-and-answer session. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then one to ask a question. Our first question today comes from Matt Koranda from Roth Capital. Please go ahead with your question. Matt Koranda: Hey, guys. Nice work in the quarter. I guess, first off, curious about the composition of the strong comp. The fourth quarter in particular? It looks like, based on the comments from the last time you guys gave public commentary, it probably accelerated in December and January, so I wanted to hear about the acceleration in comp, but also, if you can break down traffic versus ticket for that period, that would be helpful as well. Michael Henry: Sure, Matt. So, going back to the beginning of the third quarter, we did a plus one in August, plus one in September, plus six in October, then a plus eight in November, plus 10.6 in December, plus 12.4 in January, and, as we just said, a plus 20.1 in February, and March is off to an even stronger start than that so far. So really significant acceleration in our comp sales trend from month to month, on top of the quarter-to-quarter performance we were achieving throughout fiscal 2025 from Q1 through Q4. So just really excited to see this kind of performance. Our conversion rate has been super strong. It has been a high-teens, double-digit percentage increase compared to last year. Traffic has been improving, both stores and e-commerce performing, all departments positive. So, pretty much everything is moving in a favorable direction. Matt Koranda: Got it. Okay. Good to hear. And then I guess just wanted to hear a little bit about what you think is working in the assortment. Obviously, really strong acceleration all the way through the February commentary you gave, and it sounds like March sounds pretty good. What is working? What do you think is driving higher traffic? And is there something in the assortment in particular? Is it a better marketing posture? Maybe just help us identify the big levers you pulled. Nate Smith: Thanks, Matt. This is Nate. Mike and I were talking last night about this, and, you know, we were constructing what we figured this question would come. It really is across every category. We are not seeing any spike in any particular category. We are seeing strength across the board, both genders, and kids. So, I think, obviously, our private label is working as well. So I think when we think about what was causing some of our struggles, it started with the assortment. We feel very strongly now our assortment across the board, across all categories, is where it needs to be, and we mentioned Michael Singulani coming in and taking charge of that and now being promoted to the CMO role. So I think that was a huge component of it. Let us also note the inventory situation was addressed too. So now we are selling far more full price than we were, say, a year ago, when we were selling a lot of off-price with aged and obsolete inventory. So our inventory levels are healthier. Our assortment is stronger. We have obviously rationalized some of our underperforming stores, and the consequence of all that is now really healthy margins. Matt Koranda: Okay. Alright. That is helpful. Thanks, Nate. On the store openings, it sounds like you are telegraphing net opener of stores this year considering the four to six you mentioned in terms of opens and only a handful of closures near term. What determines the path forward on further expansion, I guess? Maybe just help us understand your head at on store expansion over maybe a medium to longer term? And then what are we factoring in, maybe for Mike, on CapEx for the store expansion this year? Nate Smith: So, to your first question, Matt, I think we feel good about our unit economics. We feel good about our ability to execute. For me, it is more the consumer spending environment in the long term. If the macro does turn against discretionary retail spending, certainly double-digit comps will become harder to sustain, no matter how well we execute. But, largely speaking, I would say we are leaning into it this year and can only expect to be more aggressive in 2027, the way we are viewing our business. Michael Henry: Yeah. In terms of total CapEx, we do not expect our CapEx to reach $10,000,000 in the aggregate. It has been less than that each of the last two years, as we noted in our prepared remarks. It should be in a similar neighborhood; I would say not more than $8,000,000 to $9,000,000 would be our expectation as we sit here today. And, you know, look, we are still on the path of recovery. We struggled for a lot of 2025. So we have lost productivity in terms of sales per square foot. Finishing fiscal 2025, we are— Operator: Ladies and gentlemen, we seem to be having a technical difficulty with the main speaker line. Please stay on the line. We will be reconnecting here momentarily, and, again, we do apologize for the audio break. We are reconnecting Mr. Henry's line. One more moment. We should have him back on the line for you. Thank you. This is the conference operator once again. We have reconnected Michael's line into the conference. Michael, we still have Matt on the line for you if you would like to continue with the Q&A. Michael Henry: Yes. Sorry about that, everybody. We had some sort of technical glitch happen here that booted us out of the line. So apologies for that little hiccup. We are back. Hey. Can you guys hear me, by the way? Operator: Yes. We can hear you. Can you hear us? Yes, sir. We can hear you. Matt Koranda: Alright. Got it. Just want to make sure. I think, Mike, you may have, you kind of dropped off when you were talking about CapEx for stores—probably no greater than $8,000,000 to $9,000,000—and then it started getting a little choppy. So maybe if you want to finish commentary around that, that would be helpful. Michael Henry: Yeah. I started talking about our sales per square foot—that we are ending fiscal 2025 at roughly about $260 per square foot, which is still well below where we have been as a business in the past—and we would expect ourselves to continue to improve on that metric. And, as we do, it will continue to give us greater confidence in even expanding the rate of store expansion that we have noted for this year to even higher levels in future years, is what we would expect to be able to do. So lots of room yet to continue to improve this business. We struggled a lot through fiscal 2022, 2023, 2024, 2025, and we are just beginning to regain that lost ground that we struggled with for that three-to-four-year period. So we will walk before we run. We will continue to be reasonably conservative in our expectations for new stores. They have to be at the right economics, but it is nice to reach this inflection point where we are starting to look ahead and feel confident about our ability to reinitiate growth. Matt Koranda: Okay. Great. Maybe just last one from me. It was helpful to hear commentary on the zone in which you would be profitable from a comp perspective. Just curious if there are any other assumptions that we should be embedding in that profitability outlook, or hypothetical, I guess, profitability outlook? Is there more gross margin leverage embedded in that assumption with an 8% to 9% comp? Is there more you can do on SG&A expense that gets you to the breakeven line, or is it just a simple, sort of comp assumption you are making? Nate Smith: No. So, good question. So Mike talked about the sales per square foot. We have targets we want to hit. But on the other side of that, we are really on the efficiency journey now—what we are calling it. And we see a clear path with things like our price optimization tool, where we will continue to see margin upside. We have our AI solution to planning allocation rolling out here later part of the latter part of this year with Impact Analytics. We will be launching RFID latter part of this year, which will give us, obviously, better inventory accuracy resulting in a reduction of stockouts, and it will also cut our manual inventory counting time by probably 80% to 90%. And then we have a series of back-end efficiency projects as it relates to all of our product handling and fulfillment processes, to include store labor efficiency is another workstream we have underway. So we are approaching this from both sides—not only sales per square foot, but what we would consider to be efficiency on the back end. Michael Henry: Yeah, and just to add on to that, an 8% to 9% comp increase does not correlate to a proportionate increase in SG&A. To the efficiency comments that Nate is making from a variety of angles, the aggregate increase in SG&A, despite continuing minimum wage increases and other cost pressures, would not cause SG&A in the aggregate to go up as much as you might expect with an 8% to 9% comp. We do also expect to continue to improve product margins this year—more in the front half of the year than in the back half of the year. If you follow the cadence of our product margin improvement that we achieved each quarter through fiscal 2025, we are still going to have a meaningful amount in Q1. It will start to moderate, but still be triple digits in Q2, if all goes as planned, and then it would more moderate in Q3 and Q4. Matt Koranda: That makes sense. Thanks, Mike, and I appreciate it, Nate. Operator: Ladies and gentlemen, at this time, I am showing no additional questions. I would like to turn the floor back over to management for any closing remarks. Nate Smith: I would just like to say thank you for joining us today, and we look forward to sharing our fiscal 2026 first quarter results with you in early June. Have a good afternoon. Have a good evening. Operator: With that, everyone, we will be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Guardian Pharmacy Services, Inc. Fourth Quarter Earnings Release Conference 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 Wednesday, 03/11/2026. I would now like to turn the conference over to Ashley Stockton. Please go ahead. Ashley Stockton: Good afternoon. Thank you for participating in today's conference call. My name is Ashley Stockton, Vice President, Investor Relations for Guardian Pharmacy Services, Inc. I am joined on today's call by Fred Burke, President and Chief Executive Officer, and David Morris, Chief Financial Officer. After the close today, Guardian Pharmacy Services, Inc. posted its financial results for the quarter ended 12/31/2025. A copy of the press release is available on the company's Investor Relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release, as well as in our Annual Report on Form 10-K to be filed with the SEC, including the specific risk factors and uncertainties discussed therein. We do not undertake any duty to update any forward-looking statements, which speak only as of the date they are made. On today's call, we also will use certain non-GAAP financial measures when discussing the company's financial performance and condition. You can find additional information on these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures in today's press release, which again is available on our Investor Relations website. I will now turn the call over to Fred for commentary. Fred Burke: Thank you, Ashley, and good afternoon, everyone. We appreciate your continued interest as we review another very strong quarter and year for Guardian Pharmacy Services, Inc. Turning briefly to the fourth quarter, we delivered results that exceeded our expectations across the board, reflecting solid execution throughout the organization. David will walk through the quarterly details in more depth. What I would like to focus on today is our full-year 2025 performance, including our key financial results and major accomplishments. Looking back, 2025 was one of broad-based execution and disciplined investment, with results that were ahead of plan. Our annual performance was anchored by organic revenue growth of 13%, driven by new resident additions, script growth, and higher acuity. Acquisitions, three of which were completed midyear, complemented our organic results and brought full-year reported revenue growth to 18%. Adjusted EBITDA grew 27% year over year with margins expanding 50 basis points to 7.9%. This increase occurred even as we integrated acquisitions that remain early in their path to profitability, navigated a branded inhaler category headwind, which was an unintended consequence of the American Rescue Plan, and absorbed new public company costs. That performance reflects disciplined execution, operating leverage, and the scalability of our model. Importantly, this earnings strength translated directly into cash generation and balance sheet flexibility, allowing us to invest for continued growth while further strengthening our financial position. We continue to deploy capital toward acquisitions and greenfield startups in attractive markets, while also investing in new data analytics capabilities. Even with these investments in growth, technology, and infrastructure, we increased our cash balance by approximately $60,000,000, reflecting the strong cash-generating nature of our model. Lastly, we delivered a full-year return of 27%. This performance underscores our disciplined approach to capital allocation. Our financial results ultimately reflect the operational and clinical value we deliver every day. From that perspective, 2025 was a strong year clinically and reinforced the value Guardian Pharmacy Services, Inc. brings to the broader health care network. Our pharmacists continue to play a critical role in medication management and care coordination. Through comprehensive medication reviews this year, our pharmacists performed more than 100,000 clinical interventions, benefiting approximately 74,000 residents. These interventions address serious risks such as duplicate therapies and drug allergies, helping prevent adverse events. Through our proactive insurance optimization program, we helped residents achieve an estimated $56,000,000 in cost savings, illustrating the tangible economic value our teams deliver every day. Our vaccine clinics administered over 120,000 vaccines during the third and fourth quarters, a 9% increase in script volumes for the full vaccine season with a material improvement in profitability year over year. In addition, we continued to invest in our customer service efforts. By way of example, we completed the rollout of our HIPAA-compliant secure messaging systems branded Guardian Hub and Guardian Note. This investment helps improve real-time visibility for facility partners into the prescription order status, from intake to fulfillment to delivery, enhancing service reliability and workflow efficiency. Importantly, our impact is not anecdotal. These outcomes are measured and tracked through our data and analytics platform, clearly demonstrating our ability to deliver differentiated clinical outcomes, reduce adverse events, and drive meaningful cost savings. In doing so, we deepen our partnerships across the care continuum and reinforce our clear, durable competitive advantage. Now, with 2025 in the rearview, I want to turn my focus to the future, and I will start with the IRA, since that is one of the most significant shifts our industry has experienced in over a decade, impacting pricing, reimbursement dynamics, processes, and payments. In January, we announced that we expect to offset the anticipated EBITDA impact in 2026 from this policy change, an important milestone as we navigated the unintended consequences of the legislation. In addition to the pricing and reimbursement changes, the IRA also introduced a new operational complexity with the launch of the Medicare Transaction Facilitator, a government-run payment clearinghouse. We are closely monitoring operations in the early days of this new environment, which involves various third parties, to make sure the systems, processes, and pricing adjustments are functioning as intended. Our objective is to avoid disruption to customers, service levels, partner relationships, and, importantly, cash flow. At the industry level, the IRA has created pressure across the long-term care pharmacy ecosystem. Within that context, we believe Guardian Pharmacy Services, Inc.'s scale, operating discipline, and local service model position us well to provide stability and consistent service as the industry works through this transition. These attributes are also becoming increasingly important in light of other changes in the industry. Stepping back, the long-term care pharmacy environment continues to evolve with ongoing consolidation at the facility level and increasing operational complexity. At the same time, demographic tailwinds are expected to accelerate. As the calendar turned to 2026, the first cohort of the silver tsunami entered their eighties, and with each successive year, the number of people in that cohort increases dramatically, which we anticipate will create an incremental tailwind. As occupancy rates rise, we believe operators will need to place greater emphasis on stability, consistency, and efficient clinical and operational processes. We believe both these dynamics favor pharmacy partners like Guardian Pharmacy Services, Inc. who can help reduce the labor burden on facilities and reliably deliver increasingly sophisticated capabilities. We have also seen recent industry developments, including a bankruptcy filing by an institutional long-term care pharmacy. We are monitoring developments and, as always, we are evaluating market opportunities through a disciplined strategic lens, with a focus on aligning our current geographical presence, operating model, culture, and long-term objectives. With these changes in mind, we believe the need for dependable, high-quality pharmacy service is becoming increasingly important to facility operators. Our priority remains to continue supporting our partners with consistent, reliable execution. With that backdrop, let me turn to our outlook. When we provided guidance in mid-January, we did so earlier than usual to signal that our adjusted EBITDA growth trajectory remained intact despite the IRA. At that time, we did not yet have full visibility into our final 2025 results. With the year now complete, we are updating our outlook to reflect what we now can see with greater clarity. As always, we frame guidance on an annual basis, grounded in what we can forecast with confidence, especially in a period of industry change. We also distinguish carefully between structural improvements in our business and favorable dynamics that can vary quarter to quarter. Reflecting the durable portion of our recent outperformance and applying our low double-digit growth framework, we are raising our 2026 adjusted EBITDA guidance to $120,000,000 to $124,000,000. This outlook reflects the ongoing drivers of our business and reinforces our confidence in the company's continued growth momentum. We are maintaining our current revenue forecast of $1,400,000,000 to $1,420,000,000 as new pricing flows through from the IRA. In summary, we delivered consistent outperformance this year and exited with solid momentum that we expect to continue into 2026 as we focus on driving durable growth, expanding margins as we scale, and investing to support long-term value creation for our shareholders. Most importantly, I want to recognize the people at Guardian Pharmacy Services, Inc., the pulse behind our organization and the reason we continue to deliver. Thank you for your continued focus and efforts. I will now turn the call over to David to walk through the financial details. David Morris: Thank you, Fred, and good afternoon, everyone. I am pleased to review another strong quarter in which we delivered results ahead of our expectations. We ended the quarter serving over 205,000 residents, an increase of 10% year over year. Script volume grew 14% year over year while revenue increased 17% year over year to $397,600,000, atop 12% organic growth. Gross profit rose 27% to $85,500,000 with gross margins expanding to 21.5% from 19.8% a year ago. Performance in the quarter reflects structural improvements, including stronger vaccine economics, improved contribution from acquisitions and greenfield startups, as well as continued success with our plan optimization initiatives. Let me start with vaccines. Vaccine script volumes were up 3% year over year, in line with our expectations, as some volume was pulled into the third quarter. More importantly, we saw an increase in profitability due to better vaccine purchasing and reimbursement. We also benefited from contributions from greenfield locations which are ramping efficiently and performing ahead of our initial expectations. Acquisitions also contributed to the outperformance, as we implemented purchasing and reimbursement programs sooner than anticipated in our Pacific Northwest additions. Both locations also began onboarding national accounts earlier than is typical. Our greenfield startup and acquisitions made over the last two years as a group continue to dampen our overall margin by approximately 90 basis points. We also continue to see success from our plan optimization initiatives, which helped to increase our Medicare Part D mix within the portfolio, supporting better coverage and lower out-of-pocket costs for residents plus improved reimbursement for us. In addition to the structural improvements, a portion of our upside in our gross margin was due to favorable payor dynamics and other quarter-to-quarter variability. While incorporated in our results, we do not forecast this continuing in our outlook. Moving down the income statement, adjusted SG&A was 13% of revenue versus 13.7% in the year-ago period. This reflects increasing scale efficiencies and improved labor leverage. D&A was consistent with the third quarter at $5,700,000. Stock-based compensation declined to approximately $1,000,000 as we sunset the pre-IPO equity program. Adjusted EBITDA increased 53% year over year to $39,500,000, with margins expanding to 9.9%, reflecting the operational drivers I just outlined along with the favorable variability noted earlier. Adjusted EPS came in at $0.37 a share. Turning to the balance sheet, the business continues to generate strong cash flow. During the quarter, we increased our cash balance to $66,000,000, up from $36,000,000 at the end of the third quarter and $5,000,000 at the end of 2024, highlighting our strong cash conversion rate of approximately 60%. We achieved this annual performance while continuing to invest for future growth, funding four new acquisitions and ongoing investments in several de novo greenfield startups from operating cash flow. To recap, our Wichita acquisition earlier this year and our Montana purchase later in the year expanded our operational footprint in key growth markets. We also added locations in Washington and Oregon midyear, establishing a platform in the Pacific Northwest to better serve our national accounts. Building on that momentum, we are actively engaged in discussions with several pharmacies that we believe would be strong additions to our platform and an excellent cultural fit. Importantly, we remain in a very strong financial position with ample liquidity and internally generated cash flow to support these investments. Now let me walk you through how we are approaching our outlook for 2026. For the full year 2025, we delivered adjusted EBITDA of $115,000,000, ahead of our most recent guidance range of $104,000,000 to $106,000,000 and well above our original outlook of $99,000,000 at the midpoint issued a year ago. As noted, fourth quarter results included favorable variability, which we do not forecast continuing in our 2026 outlook. We also forecast acuity remaining at current levels. We view the adjusted EBITDA run rate of our business as we exit 2025 to be approximately $110,000,000. Building on that foundation and reflecting low double-digit growth from the durable drivers of our business, we are raising our 2026 adjusted EBITDA guidance to a range of $120,000,000 to $124,000,000. We are maintaining our current revenue forecast of $1,400,000,000 to $1,420,000,000 as the new pricing impact flows through from the IRA. As always, our outlook does not include the impact of future acquisitions. On a more granular basis, we expect the quarterly distribution of revenue and adjusted EBITDA, as a percent of the full year, to be very similar to what we experienced in 2025. We will continue to see seasonality from vaccine contributions weighted toward the fourth quarter. D&A should be roughly $21,000,000 for the year. Following the additional annual LTIP grants we issued on March 1 this year, we expect our stock-based compensation expense to step up to a quarterly run rate of approximately $3,000,000. Our effective tax rate is expected to normalize to approximately 26% in 2026. Looking beyond 2026, additional branded drug negotiations under the IRA will take effect in 2027 and 2028. We expect these impacts to be much smaller than the 2026 revenue impact, approximately a $65,000,000 revenue headwind in 2027. As a result, we view these incremental impacts as manageable within our existing growth framework. In closing, we are pleased with how we finished the year. The fourth quarter capped a period of consistent execution and reinforced the durability of our operating model, positioning us well as we move into 2026. I also want to echo Fred's recognition of our employees, whose dedication drives our performance every day. Operator, we will now open the line for questions. Fred Burke: Thank you. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. Your first question comes from the line of John Ransom from Raymond James. Please go ahead. John Ransom: Hey, good afternoon. Can you hear me? David Morris: Loud and clear. John Ransom: Hello? Great. I am having some tech issues, David. So just still trying to process the 4Q feed. I know there were some nonrecurring things in there, but could you help us understand what is durable, what was vaccine, and what is not recurring in the quarter? David Morris: John, you are breaking up just a little bit, but we are guiding to our run rate we talked about as we ended the year, approximately $110,000,000 of EBITDA. And the variability with all the change going on in the industry that we had in the fourth quarter, we are not projecting that into our base. And we mentioned the things that related to that. There are always puts and takes with our PBM payors. Typically, they net out. In Q4, we had a net positive. So that is one thing that is not in our base that we are continuing. Also, increasing acuity is not in our base. So those are the main drivers that are not in there. John Ransom: So did the vaccine program contribute more this year than last year? I know it was a big success for you last year. David Morris: It continued to be significant both revenue- and profit-wise in Q4, but we had some improvement on the reimbursement side and the buy side. So it continued to grow with our business. But the margins did expand slightly. John Ransom: Okay. And then just kind of taking a step back. I know you are probably tired of talking about the IRA negotiations, but I think one thing you mentioned before was you wanted to take this opportunity to try to balance the profit contribution between generics and branded to better reflect the fact that 90% of your script volume is generic. So maybe just kind of talk about, at a high level, knowing you have got contract confidentiality, but just at a high level, what were you able to get done from a contracting standpoint to kind of better balance the two profit streams. David Morris: John, that is something we have been working on even before IRA, and we have made progress with several payors in 2025. You mentioned that 92% of our prescriptions that we dispense are generic, and I can say we are moving forward in a positive manner, aligning the gross margin dollars with that activity. John Ransom: Okay. And then just finally, you had mentioned a stat a couple of calls ago that if you were to run everything at your margin, you have got a number of pharmacies now that are not at mature margin. Is that gap between potential margin and realized margin still what it was a couple of quarters ago? David Morris: It is a little bit more. We said 80 basis points last quarter. It was closer to 90 basis points in Q4, and that is the investment we are making for future locations and future accretive profitability. John Ransom: Okay. That is it for me. Thank you. David Morris: Thank you, John. Operator: Thank you. Your next question comes from the line of David MacDonald from Truist. Please go ahead. David MacDonald: Yes. Good afternoon, everyone. Just a couple. I wanted to follow up on John's first question a little bit. On the vaccine program, you highlighted a couple of things that improved profitability. I think you used the word materially. It did not sound like any of those would not be durable. Are we thinking about that correctly? And then, if we look at the better assumed margins in the 2026 guidance, is there one or two things that kind of stand out in terms of what is incrementally driving those margins better than your prior expectations? Fred Burke: Yeah. Let me start with the vaccine clinic. David Morris: The profitability was slightly improved in 2025 versus 2024. That is durable and will continue into 2026. And I think the midpoint of our new guidance is 8.6% for our adjusted EBITDA margin. And, David, that is really a factor of us continuing our year-on-year adjusted EBITDA growth rate in the low double digits while the revenues remain flattish. The combination of that will take us to midpoint adjusted EBITDA of about 8.6%. So we will see it go up. Fred Burke: And I will pipe in, Dave, to add to David's comments that, yes, the vaccine clinics have contributed materially to our full Q4, and we would expect to see that next year. It is part of our business. David MacDonald: And then, you mentioned some of the competitive dynamics in terms of a competitor out there. Can you spend a minute on the opportunity around either share gain with some struggling competitors, potentially more aggressive on the M&A side, or pace of greenfields around some of the areas where you see maybe some outsized opportunities? Just some of the disruption that some of the competitors are seeing, or certainly at least one, and the opportunities that potentially raises for you? Fred Burke: Very difficult topic to expand on because we are participating in the bankruptcy process. But all the things you mentioned could potentially represent opportunities for us as we move forward and that process is complete. David MacDonald: And then just one last one. You mentioned labor as a benefit on the margin side. Obviously, as you scale, you get increased efficiencies. But on the labor side, are you seeing both efficiencies and some improvement in just labor inflation? Or is that more just as you get bigger, you are able to better leverage the labor force that you have got in place? David Morris: Dave, it is more of the latter. The existing platform that scales labor is what is driving the efficiencies. David MacDonald: Okay. Thanks very much. That is all for me. Fred Burke: Thank you. Operator: Thank you. Once again, that is star and one to ask a question. Your next question comes from the line of Raj Kumar from Stephens. Please go ahead. Raj Kumar: Hey, good afternoon. Maybe just touching on the prepared remarks around faster ramp-up in the recently acquired facilities. As you think about the large and regional accounts and what that constitutes as part of the current resident base, any framing on the remaining opportunity on that front? And then also, since ALF is your core end market, there has been a lot of activity around divestitures or disposition of operations from certain large regional accounts of yours, and maybe if there is any impact that you see on that front or any color on how you ensure continuity of service and continue to cover the residents while these operational changes go on in the background. Fred Burke: I will take the latter question and then hand it to David. As the industry undergoes consolidation—I am speaking now about the assisted living operators, our core market segment—we believe that it provides us with opportunity. In fact, the one example that I am assuming you are citing ended up being exactly that. We have maintained service at all the facilities that we were serving, and it has given us an opportunity to meet new operating groups and show them what we can do. So, on balance, those types of dislocations represent, in our opinion, an opportunity for us. David Morris: And then, Raj, on your first question, we mentioned that we were able to integrate and achieve scale earlier with the platforms, particularly those that we closed in the Pacific Northwest. They vary. We talk a lot about, on average, it takes four years, plus or minus, to bring acquisitions up and achieve the synergies. Things like operating systems, purchasing platforms, and national accounts that can come on sooner or later impact these businesses. In the Pacific Northwest, we were able to do some of these things earlier. Raj Kumar: Got it. And then, thinking about the M&A pipeline, there have been estimates where 60% of long-term care pharmacies are at risk of shutting down given cash flow constraints and IRA pricing. As we think about your strategy and what is available from an M&A standpoint in terms of your typical tuck-ins, are you seeing a buyer’s market on that front? And then relative to the inherent opportunity post-acquisition, does that still remain the same, or do you see more upside based on the assets that are coming into the market? Fred Burke: Good question, Raj. I want to start by emphasizing that we believe very strongly in being supportive of our industry, and the last thing we want to see are our industry colleagues under duress. That is why we have worked so hard and diligently with our trade group, the SCPC, to mitigate the effects of the various changes that are occurring on the policy front from DC. That said, it is early days. We are going through the first implementation of this IRA which, as I mentioned in my remarks, introduces new processes, reimbursement procedures, cash flow, etc. I am hopeful that our industry colleagues can manage their way through it. Potentially, it could impact our opportunity on the M&A front, and we certainly would welcome that opportunity with like-minded operators, but it is too early to call on that for sure. Right now, it is something we will be watching as we move forward. David Morris: Raj, as it relates to our pipeline, we had a robust pipeline in 2025 and it continues to be robust in 2026. As Fred said, as we are navigating all these industry changes, we are going to continue to take a disciplined approach. We see like-minded operators and territories that we want to expand into. I think we are adopting a very consistent approach to what we have had the last couple of years. Raj Kumar: Got it. Thank you. Fred Burke: Thank you. Operator: Thank you. There are no further questions at this time. Ladies and gentlemen, this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Good afternoon. Thank you for attending today's TechTarget, Inc. fourth quarter 2025 financial results conference call and webcast. My name is Tamiya, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press 1 on your telephone keypad. I would now like to pass the conference over to your host, Charles D. Rennick, General Counsel. You may proceed. Charles D. Rennick: Thank you, Tamiya, and good afternoon, everyone. The speakers joining us here today are Gary Nugent, our Chief Executive Officer, and Daniel T. Noreck, our Chief Financial Officer. Before turning the call over to Gary, we would like to remind you that in advance of this call, we posted our press release in the Investor Relations section of our website and furnished it on Form 8-Ks. You can also find these materials on the SEC's website at www.sec.gov. A replay of today's conference call will be made available on the Investor Relations section of our website. Following opening remarks from Gary and Dan, they will be available to answer questions. Any statements made today by TechTarget, Inc. that are not historical, including during the Q&A, may be considered forward-looking statements. These forward-looking statements, which are subject to risks and uncertainties, are based on assumptions and are not guarantees of future performance. Actual results may differ materially from our forecast and from these forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our most recent periodic report filed on Form 10-K and the forward-looking statement disclaimer in our earnings release filed earlier today. These statements speak only as of the date of this call, and TechTarget, Inc. undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most directly comparable GAAP measures, to the extent available without unreasonable efforts, accompanies our press release. And with that, I will turn the call over to Gary. Gary Nugent: Thank you, Charles D. Rennick, and good afternoon, everyone. As always, we appreciate you taking the time to join us today, and your interest and engagement mean a great deal to us. I am pleased to report that Q4 2025 marked another step forward in our journey to establish TechTarget, Inc. as the indispensable partner to the B2B technology industry. During 2025, we laid the groundwork to return the business to top-line revenue growth in 2026 and accelerate that growth in the years ahead. Today's agenda is slightly different from previous calls. I will begin with an overview of our strategic progress and some market positioning. And following that, Chief Financial Officer, Daniel T. Noreck, will provide an overview of our financial performance. And then afterwards, we will open the floor for your questions. Let me start by highlighting the significant strides we have made in combining and transforming our business to become a market leader in what is a large and dynamic addressable market—a $20 billion addressable market—where we currently only hold a 2.5% market share, and the opportunities for expansion and growth remain substantial. In 2025, we achieved full-year revenue of $486.8 million on a combined company basis, in line with our guidance of being broadly flat year over year. Importantly, we delivered a strong 10% growth in adjusted EBITDA to $87.3 million, exceeding our guidance of $85 million. I think this demonstrates our ability to drive meaningful margin expansion through strategic focus and operational excellence. Our combination plan has been the key driver of this progress as we seek to leverage the breadth and the scale that the combination affords us. We made significant progress in consolidating, integrating, automating, and leveraging AI technology to improve our processes and systems that underpin the business—making ourselves easier to do business with and easier to work for—improving quality and productivity. On our products, by unifying our intelligence and advisory operations under the Omnia brand, we have created a comprehensive market intelligence platform. Bringing together the expertise of Canalys, Wards, and ESG under the Omnia banner simplifies our market positioning while enhancing the cross-selling opportunities. I think that Omnia’s award in November as the Analyst Firm of the Year by the Institute of Influencers and Analyst Relations (the IIAR) is a true recognition of the strength of this approach. We also streamlined and integrated our portfolio of brand-to-demand products. Launching the TechTarget, Inc. portal in September, the platform was the first offering to leverage our combined audience dataset, providing our clients with expanded reach and enhanced intent signals—over a 40% increase year on year. It also offered seamless integration with industry-leading marketing automation, client relationship, and sales enablement platforms and a unified customer experience. Additionally, we repositioned Netlite to address the cost-conscious demand generation market. This move, in particular, delivered exceptional results in terms of revenue and bookings growth while expanding our addressable market coverage. Our product roadmap for 2026 is compelling, as we leverage AI technology to enhance existing and launch new capabilities. I will talk a little bit more about this slightly later on. On the subject of our go-to-market strategy, we focused on the largest customers and the most dynamic, highest-growth markets. Thus, we increased our investment and coverage, establishing dedicated sales and service teams to deepen our relationships and strengthen our position in the most influential technology companies in the industry. This approach resulted in revenues growing double digit year over year from this cohort. On audience and audience membership, a key differentiation of our company is the role that we play in informing, educating, and shaping the buy side—the buying journey. Our expert, original, trusted editorial content remains a vital investment, and I am proud to share that in addition to the 48 prestigious awards for the strength and the quality of our journalism in 2025, and despite the changing patterns in search traffic due to AI answer engines, we leveraged the breadth of our network and reoriented our editorial and our audience membership development focus. Today, less than 45% of our traffic is sourced from search. Crucially, in 2025, our audience membership grew and our members became more active on our network. We learned that our prowess in search is a transferable asset and skill in this new AI answer engine world. Notably, our citations from AI answer engines increased in volume over 235% year over year. As we have discussed before, we see that the conversion rates to permissioned audience members are two to three times that of traditional search. On the subject of AI, as I have said before, we firmly believe that generative and agentic AI will be a huge positive for our business. We have made significant progress in adopting and embedding AI across four strategic areas of the business. The first one we call conversational AI interfaces—making our proprietary market data and our permissioned audience data more easily accessible and actionable by our clients. In the first half of this year, we will launch the AI research assistant, a multilingual conversational AI interface that will unlock a wealth of value from our proprietary intelligence and market data. Starting in 2026, we will debut a suite of AI-powered go-to-market intelligence solutions. This suite introduces advanced AI skills—the equivalent of apps—that allow marketers to generate actionable insights by synthesizing TechTarget, Inc.’s permissioned audience data and coupling that with their own internal and external web assets. The key capabilities will be AI-driven problem identification: by analyzing the specific content being consumed across our network, our AI will identify the actual business problems that buyers are researching, allowing go-to-market teams to move beyond broad targeting and engage prospects with differentiated messaging tailored to their immediate and specific needs. And AI-driven content insight: performance-based recommendations that will pinpoint which content topics and brand investments are successfully addressing buyer pain points, ensuring the strongest ROI on their marketing spend. Whether utilizing our pre-built AI skills or deploying their own, our customers will be fueled by our AI-powered go-to-market intelligence, making TechTarget, Inc. an indispensable fixture of the modern martech stack. The second area that we are focusing on is personalized audience experiences—bringing the wealth of expert, original, and trusted content from across our network to our audiences, rather than us taking them to the content—creating personalized content experiences based upon a deep understanding of their company, their role, their business problem, and where they are in their buying journey. The third area is enhancing the efficacy of our go-to-market programs, both for ourselves and our clients, as we improve the precision of our targeting and content and campaign effectiveness. Finally, the fourth area is automating our operations—enabling our experts to deliver deeper insights more efficiently and enabling our operations and customer success teams to deliver our products and services to our customers with increased quality and effectiveness. Talking with our customers, particularly with our larger customers, a key takeaway is an increasing desire on their part for integrated solutions rather than point products. Our customers are looking for partners who can provide scale solutions to their scale problems—precisely what the new TechTarget, Inc. was built to deliver. Taking just one prime example, in 2025, a key customer of ours lamented that they had to engage with over 30 supplier companies of our ilk in order to service their scale needs. Following a strategic review and a decision to focus on fewer, larger relationships, they have consolidated those relationships down, and I am delighted to see that we were a natural partner to partner with. Further, those same technology companies are keenly aware that they must deliver a clear ROI from the substantial investment that they have made in R&D and AI. We are very well positioned to be an essential partner in providing a range of products and services to help them achieve that. Our ambition is to become the indispensable partner to the B2B and technology industry—informing, educating, shaping, and connecting buyers to sellers. In 2026, our objective is to return the business to top-line revenue growth for the full year, with adjusted EBITDA expanding to $95 million to $100 million. Our strategy is to continue to build our house on the land that we own, by which I mean producing original, trusted, authoritative content that informs, educates, and shapes the industry through our expert analyst and editorial capabilities, and in doing so, nurturing that proprietary market and our permissioned audience membership data asset. We are going to continue to leverage the breadth and scale of the product portfolio to deliver a unified and integrated customer experience. We are going to continue to focus our go-to-market efforts on the largest customers and the hottest markets where scale solutions solve scale problems. We are going to continue to make ourselves easier to do business with and easier to work for—adopting AI across all disciplines to improve quality, enhance productivity, and in particular, to amplify the expertise of the 1,900 colleagues that ply their trade at TechTarget, Inc. I am incredibly proud of the progress that we have made, and I want to express my gratitude to our dedicated colleagues and their teams for their hard work and commitment. It is their efforts that have positioned us to seize the opportunity that lies ahead. Thank you for your time. I look forward to updating you on continued progress in the quarters ahead. I will now turn the call over to Daniel T. Noreck to discuss our financial results in detail, and then we will be happy to take your questions. Daniel T. Noreck: Thanks, Gary, and good afternoon, everyone. I am pleased to be able to report on 2025 results that I think delivered in line with or ahead of our guidance and market expectations, which demonstrated both our operational discipline and strategic execution capabilities. We delivered full-year revenue of $486.8 million, which Gary mentioned earlier, was right in line with our guidance of being broadly flat compared to the $490.4 million we achieved in 2024 on a combined company basis. While revenues remained stable, our focus on operational excellence and strategic reorganization with accelerated delivery of cost synergies drove strong margin expansion. Our adjusted EBITDA reached $87.3 million, comfortably exceeding our guidance of $85 million, representing a healthy 10% increase from 2024’s $78.8 million on a combined company basis. This translated to an adjusted EBITDA margin of 17.9% in 2025, a meaningful improvement of 180 basis points from the prior year. Our fourth quarter performance was particularly strong with revenues of $140.7 million, representing a solid 3% year-over-year increase on a combined company basis. Q4 adjusted EBITDA of $41.6 million represented a 56% year-over-year increase, with our adjusted EBITDA margin expanding to around 30% compared to approximately 20% in the corresponding quarter of the prior year on a combined company basis. Our Q4 performance reflected some seasonality in the business but also benefited from our strategic initiatives that are gaining traction, which allowed us to accelerate the realization of cost savings, along with some favorable phasing impacts. Our quarterly progression throughout 2025 tells a story of building momentum. Following the seasonally slower first quarter, each of the remaining quarters of the year showed positive sequential revenue progression, a trend we expect to continue in 2026. From a year-over-year perspective—on the comparative combined company measure—revenue performance consistently improved from minus 6% in Q1, narrowing to minus 2% in Q2, getting back to growth in Q3 at plus 1% and plus 3% in Q4. Our balance sheet also reflects a strong financial foundation that supports our strategic initiatives while maintaining the flexibility to capitalize on growth opportunities that may arise. At the end of 2025, we had cash and cash equivalents on the balance sheet of around $41 million and had utilized around $107 million of our $250 million unsecured five-year revolving credit facility, resulting in net debt of approximately $66 million, not vastly different to the approximately $62 million at the end of 2024, despite significant cash expenditures in the year on acquisition, integration, and restructuring costs. Our free cash flow reflects the impact of our integration and restructuring investments in 2025. On an adjusted basis, we delivered meaningful cash flow, demonstrating the strong underlying cash-generation characteristics of our business model. Net debt at year-end relative to adjusted EBITDA for the year was just 0.8x and slightly lower than at the end of 2024, illustrating the strong cash-generating characteristics of our business. Now quickly turning to our guidance for 2026. Following the substantial progress made with our combination program in 2025, the priority for 2026 is to build on the foundations laid and to return to growth in 2026. Our assumption is that the market environment will remain similar to that in 2025. Nevertheless, we expect to grow our revenues in 2026. Coupled with our continued cost discipline, annualization of synergies, and operational leverage, we expect our adjusted EBITDA to grow further to a range of $95 million to $100 million, marking a further meaningful improvement in our adjusted EBITDA margin. Q1 2026 will reflect this trend. This guidance reflects our confidence in the progress we have made through our strategic initiatives and the strong foundation we have established for sustainable growth. In conclusion, our financial model is built to scale efficiently. Every additional dollar of revenue delivers substantial incremental margin, highlighting the strength of our unit economics. This structure enables us to grow profitability and free cash flow over time. With that, we are now happy to answer your questions. Operator, will you please open up the line for Q&A? Operator: Absolutely. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. The first question comes from Eric Martinuzzi with Lake Street. You may proceed. Eric Martinuzzi: I wanted to, first of all, congratulate you on the fourth quarter results and overachieving versus the adjusted EBITDA for the year. But I was particularly impressed with the go-to-market strategy results. Your comments in the press release talk about an approximate 10% growth in revenue from your largest customers. Was that a full-year basis, or is that a Q4 metric, Gary? Gary Nugent: Hi, Eric. Good to hear from you. That is a full-year basis, and on a combined company basis. Eric Martinuzzi: Okay. And then, you know, there was a time when the different tiers of customers—if I go back to, like, 2024—you talked about the 7,500 customers that the combined entity had and that there were 70 customers that were over $1 million a year in billing. Is that the tier of customers that we are talking about here, or are you stratifying the customer base differently? Gary Nugent: Oh, no. We are stratifying the customer base differently. It is not the same. If you recall, we have identified about $10 billion of our $20 billion addressable market sits with about 150 to 200 clients in the marketplace. We then further prioritize that down to a cohort of 30 portfolio customers and then a further 120 or so customers that are what we would call majors. The number that I am quoting for you is for that cohort of 30. Eric Martinuzzi: Okay. And then is there—you know, you have got so many different products that you are offering customers now. What was resonating with that largest cohort? First of all, did they contract in their use of any of the products? And then what was it that they expanded their use of? Gary Nugent: Well, you appreciate it is a bit of a mixed picture when you go down to the individual customer level. I would say, if there was a trend there, we saw really strong demand for demand—so there was strong demand for our demand products. That was encouraging to see, in particular as we consolidated and rationalized the demand portfolio and did a better job of the market positioning of that. Secondly, content. Content was generally a strong theme last year as customers were looking to really establish a distinctive voice in the marketplace, to stand out from the noise, and to leverage the expertise we have—our analyst and our editorial expertise—to really give them a bit of brand association. Eric Martinuzzi: Alright. And then, given the total revenue on a pro forma combined basis actually declined 1%, obviously the smaller customers contracted to sort of offset the success that you had with the higher tier—the, as you put it, the 30 portfolio customers. Was there any themes to recognize across the smaller customer base—either, you know, smaller enterprise or SMB themes? Gary Nugent: It is a good—what I suppose this email would talk to is much more about international markets for us. I think what we saw in particular was in the Asia Pacific region and the triangle between Singapore, China, and Korea—well, it is not tying up by the fourth point to square, is it? Add Tokyo to that. That was definitely a market that was challenged last year, in particular some of the macroeconomic situation with Asian technology companies looking to export their businesses internationally. That was probably the area where I would see the trend really was. I think then we just also saw in that small to medium end of the IT marketplace that that was a market where—I do not think that was the odd—but there was deal—there was customer churn in that market in the small to medium end. Eric Martinuzzi: Got it. Alright. And then, Dan, as we are doing our modeling here for 2026, obviously the top line—did not want to put too fine a point on it—but as I am looking at the growth that you had in the back half of 2025 on the pro forma combined, you were up 1% in Q3, you were up 3% in Q4. Is it a prudent starting point to kind of take the blend there and say, hey, if we are going to grow, let us maybe start with a 2% and just use that as a baseline, or is that too aggressive? Daniel T. Noreck: Eric, I think that the way you are laying it out makes sense. I think you could go maybe a little higher than that 2%, but I think the way you are thinking about modeling makes sense to me. Eric Martinuzzi: Okay. And then last question is around the source of the incremental adjusted EBITDA. Obviously, revenue is not going to be—revenue, we are planning on it to be a little bit higher in 2026, but, you know, let us just, for discussion’s sake, say we are talking about a flat revenue in 2026 versus 2025. In 2025, that adjusted EBITDA number was around the—what was it? Yeah, $87.3 million. And yet you are guiding to kind of a midpoint of $97.5 million. So just to keep it simple, call it $10 million of incremental adjusted EBITDA. What is it that is getting you there? Is this primarily going to be driven by further synergies on bringing the two entities together, or what is driving that? Daniel T. Noreck: Eric, if you think about where the synergies landed in 2025, they were really back-half loaded. So you are really going to start to see the impact of that throughout the full year, as opposed to just being contained to the second half of the year. Eric Martinuzzi: Got it. Okay. Thanks for taking my questions. Gary Nugent: Thank you. Thanks, Eric. Thank you. Operator: As a quick reminder, if you would like to ask a question, please press 1 on your telephone keypad. There are no more questions remaining at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Operator: Good morning, and welcome to the Serve Robotics Inc. fourth quarter and full year 2025 financial results conference call. I am France, and I will be the operator assisting you today. 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 this time, please press star-1 on your telephone keypad. If you would like to withdraw your question, please press star-1 again. Thank you. I would now like to turn the call over to Steve Webb. Please go ahead. Steve Webb: Thank you, operator, and good afternoon, everyone. I am Steve Webb, Serve Robotics Inc.’s SVP of Marketing and Communications. Welcome to Serve Robotics Inc.’s fourth quarter and full year 2025 earnings call. With me today are Serve Robotics Inc.’s Co-Founder and CEO, Ali Kashani, and our CFO, Brian Read. During today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP to non-GAAP measures can be found in our earnings release filed earlier today. Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements. We do not undertake any obligation to update any forward-looking statements we make today, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as the risks and uncertainties described in our most recent Annual Report on Form 10-K and in other filings made with the SEC. We published our quarterly financial press release and our updated corporate presentation to our Investor Relations website earlier this morning, and we ask you to review those documents if you have not already. With that, let me hand it over to Ali. Ali Kashani: Thanks, Steve. Morning, everyone, and thank you all for joining us. A year ago, we told you that we would deploy 2,000 autonomous robots across the country by the end of 2025, that we would expand from a single city to a truly national footprint, and would prove that this technology works, not just in a lab or a closed campus, but on open sidewalks in dense cities, navigating the full complex of urban life. We did all of that and then some. Today, a fleet of 2,000 Serve Robotics Inc. robots have been activated across 20 distinct cities in six major metropolitan areas, from Los Angeles all the way to the Washington, D.C., corridor. We launched Atlanta, Dallas, Chicago, and Miami. We expanded aggressively in every existing market. We also added DoorDash alongside Uber Eats. This gives us access to over 80% of the U.S. food delivery market. We also completed four strategic acquisitions since early 2025, met or exceeded our revenue guidance every single quarter, and through all of it, we maintained a 99.8% delivery completion rate and a proud safety record. So let me say it again: 20 times the fleet, national scale, four acquisitions, and near-perfect reliability. And in Q4, we once again delivered revenue above guidance as we drove 400% year-over-year growth in the quarter. This is not incremental progress. This is a company that is defining a category in real time. But before I get into the quarter, let us look at the broader trends. We are living through one of the most consequential technology transitions of our lifetime. For the past few years, the world has marveled at what AI can do with words and images and code. The next frontier—the one that will reshape our physical world—is physical AI, machines that can see and think and act in real environments alongside people. As we try to anticipate what this future looks like, I find it really helpful to think about the evolution of computing so far. First, it was the personal computer. Then came the Internet. It connected information. It connected people. Next, we put computing and connectivity in every pocket and in every device. We connected the physical things too. As a result of all this, all of commerce and every industry is now digital and connected. Each leap along this path was worth trillions. Fast forward to today, AI has taken over our digital lives over the past few years, arguably becoming the fastest rising rung of this evolution of computing. Physical AI is the natural next phase that is right around the corner. It is the moment when this intelligence leaves the digital realm and enters the streets. And like computing and the Internet before it, the companies that build the platforms for physical AI will define this era. NVIDIA CEO Jensen Huang has called robotics and physical AI the next multitrillion-dollar industry. Every major AI company is racing to build models for the physical world. The investment thesis is pretty clear. The companies that build the platform and own the data will capture the value. And here is what is important. You cannot build physical AI from a research lab. You need robots in the real world gathering real data, encountering real edge cases, and at real scale. That is the flywheel, and it is exactly what Serve Robotics Inc. has built. Every transformative technology goes through the same arc. We are at a very familiar inflection point. Autonomous robots are here to fundamentally shift how we leverage technology in our lives. The question is no longer will this work, as we have seen by our progress last year. Now the question is, how fast can you scale? 2025 was the year we proved the technology. Looking ahead, 2026 is the year we compound the business model. Last quarter, I said that beyond 1,000 robots, the system tips. Scale changes everything. The economics improve. The partners lean in. Learning accelerates. At 2,000 robots, the system does not just tip. It compounds. We are now accelerating the flywheel. We discussed this concept last quarter when we described how more miles lead to more data, better models, and a more capable fleet. This is the flywheel that should be at the core of any physical AI company, and we have really organized our strategy around it. Every investment we make—every acquisition or deployment or partnership—they are all designed to strengthen a specific step of that flywheel and, as a result, make the whole system spin faster. So let me walk you through it: the four steps in the Serve Robotics Inc. flywheel. Step one is amassing data. Physical AI runs on large amounts of data. This is not just some data you scrape off the Internet. This is data collected in real environments. It is collected by robots at scale. Every mile our robots travel enriches our dataset. Every edge case, every construction zone or rush hour or unmarked crosswalk, they all sharpen our models. And this data is proprietary. You cannot just download it on the Internet or simulate it with the same depth and richness. You have to live on the sidewalks. And no one is better positioned for it than Serve Robotics Inc. What is new and exciting is that we are no longer just collecting data from a single environment. Today, our data spans multiple and distinct physical domains. On sidewalks, thousands of robots are mapping the world in 20 unique cities across the country. Every new neighborhood brings new edge cases and new pedestrian and traffic dynamics, new weather patterns. All of that enriches the models network-wide. In hospitals, our recent acquisition Diligent Robotics has a fleet of nearly 100 robots called Moxie, and they are navigating some of the most challenging indoor environments in robotics. These are multilevel facilities with tight corridors, constant foot traffic, high-pressure operations. Moxie robots have completed over 1,000,000 deliveries across more than 25 hospitals, and counting. So, sidewalks and hospitals and beyond—multiple domains, with wide-ranging geographies, all feeding a single robotics and autonomy platform. There is no one who is doing all this and realizing the value of the combination of indoor and outdoor data collection from commercial-scale fleets. The second step of the Serve Robotics Inc. flywheel is the models. Data is a raw material, but step two is where we take everything our robots are seeing and experiencing, and we turn it into better AI models. This is where another recent acquisition comes into focus. VYU Robotics brought us a specialized team that builds end-to-end models for physical AI. We are building systems that empower us to train across all our operating domains, indoors and outdoors, so that what a robot learns in Los Angeles would help a robot in Dallas, or what a Moxie robot learns navigating a hospital corridor could improve a Serve Robotics Inc. robot that is navigating an obstructed city sidewalk. That kind of cross-domain learning is really significant, and it is a compounding advantage that will widen every quarter. Also, our acquisition of Phantom Auto brought us one of the most capable robot connectivity stacks with extremely low latency. This enables us to operate at a large scale and across a significant geographic region because we can reliably assist robots remotely in real time. What is underappreciated here is that every time a remote supervisor assists a robot anywhere in the country, we generate high-quality training data. Our operations, which are empowered by this connectivity stack we acquired, are a conduit to collecting more data and more edge cases, and it is paired with a considerable training dataset, all collected at a faster rate than ever, feeding right back into our models. I should also mention the talented team of engineers that make all of this possible. When you have one of the largest autonomous robot fleets, plus data from multiple physical domains, and the infrastructure to turn all of this into deployed AI, that is where the best people want to work. Retention across our team has been really strong because people love building on real robots in the real world with significant, unique data. The flywheel attracts talent, and talent accelerates the flywheel. The third step of the Serve Robotics Inc. flywheel—after you gather the data and develop the models—is to deploy those models into the real world. Better models only matter if you can actually get them onto live robots. That is pushing all that improved autonomy out to the fleet that is in the real world where the edge cases live. This is where our fleet scale and our partnerships become a strategic asset. Uber Eats and DoorDash combined serve over 80% of the U.S. food delivery market. We are now a multiplatform fleet. We see robots finishing a DoorDash delivery, then picking up an Uber Eats order on the way back. That kind of interoperability drives utilization, and, of course, utilization is the key to both our economics and our data collection. Our merchant network has expanded to over 4,500 available restaurants and retail partners today. Just this morning, we announced a new partnership with White Castle, one of America’s most iconic restaurant brands. And our geographic pipeline also continues to develop. We are in active discussions with city officials across the country, from New York to Boston to San Jose—and even internationally, Vancouver and Toronto and Sydney and Melbourne. As we evaluate all this new wave of market launches, each market will represent a natural extension to our existing footprint, and we are really excited to share more about our plans throughout 2026 as these initiatives progress. And this is the critical point. Every deployment, across every domain, into every new city, generates new, unique data that feeds directly back into step one. And the cycle continues. Finally, the fourth step of the Serve Robotics Inc. flywheel is monetization. This is the step that makes the whole flywheel self-sustaining. When you monetize your fleets, you fund the next turn of the cycle and make the flywheel accelerate much faster. The companies that figure this out early, and can get paid to collect their proprietary data, have a real advantage over those who have to pay for their data. Tesla is the obvious example. They collect massive amounts of road data to train their models by simply selling cars to consumers. One way we are really advancing our monetization is by increasing our revenue sources rapidly. Delivery fees are, of course, our core business. It is continuing to accelerate as we scale geographies. But branding and advertising saw a 50% increase in Q4 year over year. With 2,000 robots moving through high-density neighborhoods, we have effectively built a neighborhood-level media network on wheels. Advertisers’ response has been exceptional, and we are building a robust bookings pipeline. Over time, we believe advertising and branding can represent as much as 50% of our fleet revenues. Think about what that means. It monetizes miles that are already being driven, at nearly zero marginal cost. Also, data and platform revenues are emerging. In 2026, we plan to further invest in our data and platform capabilities to strengthen the foundation of our robotics solution offering. By offering the platform that powers our deployed robots to external partners and other robot operators, we expect this new revenue base to mature and become a meaningful, high-margin contributor. Also, going forward, healthcare revenue from Diligent Robotics will be another meaningful contributor: nearly 100 Moxie robots across over 25 hospital facilities, with each facility generating over $200,000 in annual revenue. This is already a fully functional business unit that is generating both meaningful data and meaningful revenues. Here is what ties everything together. Every dollar of revenue funds more robots, which leads to more data, which helps us create better models, which leads to even more deployments and more revenues. And the cycle repeats. The monetization does not just sustain the flywheel. It accelerates it. I think that our acquisition strategy also deserves a moment of its own. We have completed four acquisitions in the last twelve months. Every acquisition we have made maps directly to a step or two of the Serve Robotics Inc. flywheel. Phantom Auto strengthens our data collection and our deployment scale as well. VYU Robotics strengthens our model creation. Diligent Robotics further strengthens our data gathering by introducing a new operating domain and also boosts our monetization through recurring revenues with compelling economics. And last but not least, Veebo strengthens our delivery robot monetization by boosting our partnerships with restaurants and major QSRs. This is all deliberate. It is a flywheel-driven strategy. Each deal is designed to make the flywheel stronger. Now let me bring this back to our 2025 progress, and specifically, our Q4 results. In Q4, we exceeded our revenue guidance once again. Total revenue for the fourth quarter was $900,000, representing nearly 400% growth year over year, and also meaningful sequential acceleration. Full-year 2025 revenue came in above our $2,500,000 guidance at $2,700,000. We completed the deployment of our 2,000th robot in mid-December, on time and on plan. Q4 alone, we deployed nearly 1,000 robots. That is in a single quarter. That is more than many robotics companies’ entire fleet size. Delivery volume grew 53% quarter over quarter in Q4, and roughly 270% for the full year versus 2024. This is the compounding effect of fleet at scale. Also, it is the geographic expansion and the deepening platform partnerships, all of which are working in concert as we start to see the benefits. And we expect this growth to continue as we deploy new robots and also optimize their operations and utilization. Our merchant base has also expanded to over 4,500 restaurants and retail partners today. This is a more than 10x increase from roughly 400 a year ago. We now reach over 1,700,000 households in our metro areas. This covers a population of over 3,750,000 people. And we did all of this while maintaining our 99.8% delivery reliability and also our strong safety record. This is the part that I am most proud of. Scaling fast is hard, but scaling fast while maintaining quality and safety is what really separates us. Okay. I want to close with where all of this leads to. A year ago, we had roughly 100 robots. Today, we have 2,000. The path is clear from here to 10,000 robots and well beyond. This would be across more cities, more verticals, even internationally. We have the engineering and operations roadmap and also a track record of execution. The hardest part—building the platform and proving the technology, earning the trust of our partners and cities and consumers—these are all tailwinds now. What excites me most is that each additional robot we deploy makes the entire system more valuable. The data gets richer, the models get sharper, the economics improve, the partnerships deepen. This is the nature of a platform business with a flywheel at the core. We are just entering that phase where the compounding effect and the acceleration of the flywheel become visible. With the Diligent Robotics acquisition, we have extended this platform beyond the sidewalk and into hospitals. That is not a one-off. It is a signal of where things are heading. The robotics platform we are building will be general enough to operate wherever very, very intelligent machines are needed to move safely among people, and mature enough to deliver real commercial value right away. We are not building a delivery company. We are building the operating layer for how robots integrate into our lives. That is the long game, and we are playing it from a position of strength. 2025 was the year of proof. 2026 is the year of compounding returns. I have never been more energized about what is ahead. And with that, let me hand it over back to Brian. Brian Read: Thank you, Ali. Good morning, everyone. Entering 2025, we set explicit operating targets around fleet expansion, revenue growth, and geographic scale, and we delivered against each one of them. More importantly, we strengthened the economic foundation of our business while doing so. That operating discipline will continue to define Serve Robotics Inc. into 2026. I will walk through the details. Total revenue for Q4 2025 increased over 400% year over year to $900,000. Full-year 2025 revenue was $2,700,000, exceeding our guidance of $2,500,000 and representing growth of 46% over the prior year. Fleet revenue was $700,000 for the quarter, growing 50% sequentially. Branding saw record bookings during the quarter as our expanded fleet attracted larger advertising commitments. We also recorded our first revenues related to data monetization in the quarter, an early signal of the data and platform opportunity ahead. As Ali and I have mentioned, these opportunities will continue to evolve through 2026. Software revenues were over $200,000 in the quarter. Our transition to recurring software revenue continues to progress, with our recurring software base now representing approximately 70% of software revenues. More broadly than software, we noticed the shift in revenue quality during the year. Our underlying recurring revenues, defined as revenue excluding one-time agreements, grew over 3x during the year. That shift increases revenue visibility while reducing volatility as we scale. Beneath the top line, Q4 margins reflect the largest single-quarter deployment in our history, with nearly 1,000 new robots. When deployments occur at this scale, newly introduced cohorts initially operate below steady-state efficiency. That is expected and by design. What matters is the trajectory as that fleet matures. This past year, we observed average daily operating hours per robot climb 56% to over 12 hours compared to Q4 last year. Cost per delivery trended down quarter over quarter during the year as our operations team gained experience and our systems continued to mature. Collectively, along with other metrics, these trends give us confidence in continued margin improvement moving into 2026. As reflected in our 2025 results, the operational infrastructure required to support our larger fleet was established this past year: expanded market operations, built fleet maintenance capabilities, remote supervision systems, and deployment capacity ahead of 2026 revenue, and, of course, the achievement of our 2,000-robot deployment milestone. As we move through 2026, we expect a growing portion of that infrastructure to be absorbed across a larger and more productive fleet. GAAP operating expenses for Q4 were $34,300,000, reflecting the cost of deploying nearly 1,000 new robots and expanded operational capacity across new cities within Alexandria, Virginia, and Fort Lauderdale, Florida. On a non-GAAP basis, excluding stock-based compensation of $6,300,000, operating expenses were $25,200,000. R&D remains our largest investment area, at $15,900,000 on a GAAP basis or $12,000,000 on a non-GAAP basis. This is directed towards advancing our AI stack, integrating capabilities from the VYU and Phantom Auto acquisitions, and building the data infrastructure for our growing fleet. G&A spending stayed lean and purposeful, decreasing from the prior quarter by $2,000,000 to $11,100,000 on a GAAP basis and $9,100,000 on a non-GAAP basis. We expanded to one new metro area and nine new cities during Q4 and anticipate a flattening of our G&A expense growth even as we continue to scale through 2026. As I mentioned, we will continue to manage operating expenses with discipline, aligning investment with measurable deployment milestones. Interest income generated in the quarter was nearly $2,000,000. Additionally, Q4 reflects a $3,800,000 tax benefit related to deferred tax liabilities associated with the VYU acquisition, resulting in a partial release of our valuation allowance. Turning to the balance sheet, we closed the year with $260,000,000 in cash and marketable securities. Capital expenditures for the quarter were $16,500,000, representing the tail end of our costs for the 2,000-unit build. Our liquidity position provides strategic flexibility in a capital-intensive industry where balance sheet strength is a competitive advantage. We continue to evaluate additional funding opportunities opportunistically. Adjusted EBITDA was negative $28,000,000. As revenue scales and per-unit economics improve, we expect sequential improvement in adjusted EBITDA margins throughout 2026. Turning to our outlook, today, we are raising 2026 revenue guidance to approximately $26,000,000. The improved outlook is primarily driven by the acquisition of Diligent Robotics, which we believe represents a high-return use of capital while broadening our platform, expanding our addressable market, and increasing the proportion of revenue derived from durable recurring contracts. To fund that acquisition, we moderated our planned 2026 capital expenditures. As a result, we redirected a portion of planned near-term fleet investment toward a significant new market opportunity that is expected to contribute roughly $7,000,000 of revenue during 2026, primarily through recurring healthcare contracts. Looking beyond 2026, we continue to expect this newly combined core business to deliver sustained, accelerating growth. We have previously discussed a $60,000,000 to $80,000,000 annualized revenue run rate associated with the full utilization of our fleet. Internally, we view that level less as an endpoint and more as an intermediate milestone as our business continues to scale exponentially. Our growth is expected to be driven in part by disciplined geographic expansion. As Ali touched on earlier, we are in productive discussions to extend our footprint across additional U.S. markets and, over time, pursue selective expansion into major international cities like Toronto, Sydney, Tokyo, Madrid, and London, among many others. We expect 2026 capital expenditures of $25,000,000 associated with the production and deployment of additional robots as we continue expanding the fleet and increasing the volume of real-world operating data that strengthens the flywheel. Recent acquisitions are expected to increase our 2026 operating base by approximately $20,000,000 to $30,000,000. Non-GAAP operating expenses in 2026 are expected to be approximately $160,000,000 to $170,000,000, reflecting continued investment in autonomy development, fleet scale, and platform capabilities across both delivery and healthcare robotics. Let me close with this. The investments we are making in 2026 are specifically designed to strengthen the plan Ali described. We are expanding the fleet, improving the autonomy stack, and increasing monetization opportunities across the platform as the flywheel accelerates. Serve Robotics Inc. has evolved into a diversified robotics platform with multiple revenue streams spanning delivery, advertising, data services, software, and now healthcare automation. In the age of physical AI, we are using our strength in autonomous robotic delivery to build a generational robotics company that will define this era. I will hand it back to Steve for Q&A. Steve Webb: Thank you, Ali and Brian. We will now move into the Q&A session. But first, I would like to say a big thank you to all the investors and analysts who submitted questions via email. Thank you so much for your engagement. The first question we have is related to new robots. Serve Robotics Inc. deployed 2,000 robots last year. What is the goal from a unit deployment perspective in 2026 and beyond that? Ali Kashani: Thank you. I am happy to take this one. So over the next few years, we expect to deploy thousands more robots. But in the short term, as we have shared in the past, before we go on and share a detailed plan, we want to really let the recent growth settle in, and we want to gather all the data and learnings from last year’s 20x fleet growth. We have the capacity to continue growing our revenue right now. On the other hand, manufacturing and supply chain, as we all know, require certain lead time. So we are already working on the supply chain for the next batch of robots, so that we can expand to new major markets as they become available quickly. But the time between now and when the supply chain and manufacturing of the robots would be available is a good time for us to really hone in on our playbooks and get them refined based on the existing growth. And we do not really want to be deploying more robots until we get all the current ones fully activated on a daily basis. Brian Read: Yes, if I can wrap up on that, Ali. In the prepared remarks, we talked about CapEx guidance being approximately $25,000,000 during 2026. A significant majority of that will be for the Serve Robotics Inc. fleet expansion. But we are going to continue to invest not only in Serve Robotics Inc. but for additional Moxie robots and look to accelerate their growth as well. I think, Ali, exactly as you summed up, in this time period—Q1 2026—we are looking to optimize the performance of the full fleet. And most importantly, we retain control over that CapEx timing and also the OpEx deployment costs as that fleet continues to grow. Steve Webb: Great. Thanks, Brian. On to our next question. What percentage of the 2,000 deployed robots should be daily active by the end of first quarter? Ali Kashani: I am happy to take this one as well. So from manufacturing and deploying robots to reaching full utilization of the fleet, as we have discussed in the past, there are several steps that take place. You start with, obviously, creating the depots in each new market, building the operational footprint, which includes hiring and training staff. So this is a lot of the work we have already done. And then the next step after that is getting any requirements by local municipalities, any stage gates, all of that addressed. We need to then activate neighborhoods with our delivery partners, onboard local merchants, and then once all of that is done, we can have robots at full operational hours every day. We would focus on operational efficiency—it is a question of where to put the robots, how to move them around, all of that—so that we capture the maximum demand. So we expect that by the middle of this year, as I said before, before we manufacture any additional robots, we would get all of the existing robots on a fully active daily basis and shift our focus to that operational optimization. We are timing everything again so that we have that full utilization, the full activation of these robots, before manufacturing new ones, given the lead times for manufacturing. Steve Webb: Ali. On to the next question. We received this one about the acquisition of Diligent Robotics. How are the integration efforts going, and what are your plans for growing the healthcare business? Ali Kashani: That is a great question. So we covered some of this earlier, but I can dig in a bit more. We have always intended for our autonomy platform to extend beyond just food delivery and into many other environments, including, in this case, hospital and healthcare. As we looked at Diligent Robotics during our acquisition process, it became pretty clear very quickly that it is the right time and right company for us to expand our scope. So this acquisition actually strengthens our flywheel, as I mentioned earlier, by really enriching our data further. It also creates a more balanced and resilient revenue base for us, and it opens up, obviously, new market opportunities and a new growth engine. We are already starting to integrate our platform capabilities with Moxie robots, but this will take some time. As we do this integration work, we are creating a repeatable playbook for expanding into new verticals and operating in multiple domains. Brian Read: On the second part of that question for the revenue, and just to give a little bit more color, these are existing, established recurring revenue contracts that we were able to acquire through Diligent. And so these are different than our demand cycle for current food delivery. The $7,000,000 number we referenced in the prepared remarks is for revenue here in 2026. And I think it is important, from an integration standpoint, we are going to continue to focus on additional investments into the healthcare business around engineering headcount and infrastructure to support that team through their next phase of growth. Our business development team and sales teams are looking at other opportunities in the pipeline. Several of those are currently being evaluated, and we are going to make the best decisions to drive long-term revenue growth. Ali Kashani: Great. Steve Webb: On to the next question. Is optimization of the fleet a linear process, or are there step functions? And if so, what would cause that? Ali Kashani: Yes. You know, we touched on the steps earlier. Of course, we are pushing a lot of these steps at the same time, but you are never going to get everything done at the same time. I think going from that deployment to full, full utilization steps are pretty important. There are many factors that affect that utilization, and those steps kind of outline, as I said, as I mentioned earlier. Overall, though, we are seeing that our more mature markets are further along on that optimization curve. We mentioned this earlier: 2026 is really about compounding returns for us. 2025 was all about building that infrastructure. So in 2026, we are going to be really laser-focused on optimization and efficiency of the fleet, both on the sidewalk and in the hospitals. Steve Webb: And we have enough time for one more question. Can you speak more about your plans to expand internationally? What is the time frame for those city launches? Ali Kashani: Yes. That is an exciting one to end on. Let me maybe give some context on our thinking here. So we have really built a great foundation for expansion. We are now in 20 cities, six major metros. We have really proven the tech at scale, built the operational playbook, a way to launch new markets efficiently. So this work really supports that international expansion well. We are now in active discussions with city officials and partners in multiple international markets, from Canada to Australia, Japan, Spain, and many other countries. We are considering major cities, dense urban environments, strong delivery markets, and municipal governments that are really leaning into autonomous robots on sidewalks. I want to emphasize that we are going to be disciplined and intentional about these expansions, especially weighing our growth opportunities here in the U.S. versus markets abroad. We have learned from our U.S. expansions to date that the right way to go to a new market is methodical, and we want to really be measured as we identify the right partners and the right expansion cities. We do get a ton of inbound interest to consider, but we want to be very selective. And we see this ultimate growth opportunity internationally as a 2027 opportunity, but 2026 is for us to lay the groundwork for it, just as we laid the groundwork for this year last year by expanding to new cities. In the meantime, our robots obviously will continue and collect more data in more than 20 cities today and expanding by the end of the year, and we will keep making that flywheel move faster and become more durable so that we can enable even further rapid growth and expansion. I will just end by saying this again. I have never been more energized and excited about what is ahead for Serve Robotics Inc., and I cannot wait to see Serve Robotics Inc. robots operating in cities across the globe. Steve Webb: Great. Thanks, Ali, and thanks, Brian. That is all the time we have for today. I would like to thank everyone for joining us again. Thank you for joining us on the call today. Operator: Ladies and gentlemen, thank you all for joining, and that concludes today’s conference call. All participants may now disconnect.
Operator: Good day, everyone, and welcome to Elutia Inc. Fourth Quarter 2025 Financial Results Call. At this time, all participants are in a listen-only mode. After this presentation, there will be a question-and-answer session. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please note this conference is being recorded. Now it is my pleasure to turn the call over to Sonali Fonseca. Please proceed. Sonali Fonseca: Thank you, operator, and thank you all for participating in today’s call. Earlier today, Elutia Inc. released financial results for the fourth quarter and full year ended 12/31/2025. A copy of the press release is available on the company’s website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. All statements contained in this call that do not relate to matters of historical fact or relate to expectations, predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, are based upon our current estimates and various assumptions. These statements include material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For lists and descriptions of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the SEC, including Elutia Inc.’s Annual Report on Form 10-K for the year ended 12/31/2024, and in our subsequent periodic reports on Forms 10-Q and 10-K, accessible on the SEC website at www.sec.gov. Such factors may be updated from time to time in Elutia Inc.’s other filings with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, 03/11/2026. Elutia Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements because of new information, future events, or otherwise. Also, during this presentation, we refer to gross margin excluding intangible asset amortization, which is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is available in the company’s financial results release for the fourth quarter and full year ended 12/31/2025, which is accessible on the SEC’s website and posted on the investors page of the Elutia Inc. website at investors.elutia.com. With that, I will turn the call over to Elutia Inc. CEO, Randy Mills. Randy Mills: Thank you, Sonali. Good evening, and welcome to our fourth quarter 2025 earnings call, from our Gaithersburg, Maryland facility, and I am super glad to be here. Wherever you are, however you may be listening, welcome. We are super glad to have you. I am going to try to keep my comments brief tonight, but on that point, you know I may fail. We have so many exciting things going on in Elutia Inc. right now, and I am eager to share them with you. With that, let us just jump in. Here is a forward-looking statement slide that basically says what Sonali just said. And then really quickly on our conference call, so what is on the agenda today? We are going to go over some of the basics. You may have heard this, but we also have a lot of new callers on the call today, so be patient as we go over things like our mission and what we are good at, where we are headed as a company. We made a couple of announcements in that press release that are kind of important, and so we will be updating some of those things there. Matt is going to then talk about finance topics. And then lastly, we will close the call and take your questions. So let us start out with our mission. Humanizing medicine so patients can thrive without compromise. Humanizing medicine. Humanizing medicine. Every 98 seconds, a woman in this country is diagnosed with an invasive form of breast cancer. That means even if I keep my remarks short today, there will be 18 new cases diagnosed during this call. Three of those are going to die during this call. Ten will have breast reconstruction. And three are going to have a serious complication from that surgery. Who are these people? These are our mothers. These are our wives. These are our friends. And our daughters. You know them. That is humanizing medicine. I am looking around this room right now at a group of brilliant overworked, tired professionals. And the look on every one of their faces is the same. Randy, let us go get at this. So why do we think we can fix this appalling problem? Well, let us look at what we are good at. What we are great at, actually. We are great at combining an optimal biological matrix, and we use the biological matrix to hold an implant in place and regenerate into the patient’s own healthy tissue. That is an essential part of the surgery. But what we do that no one else does is we combine that with powerful antibiotics for sustained antibiotic release that prevents infection and these other complications that we are talking about. Infection is the number one complication of surgery, period. And we have the ability to significantly reduce it. And this is not theoretical. Right? We have already done this. LU Pro, we launched in January. We got it through a 194 VACs in nine months. We got it up to an $18 million run rate because physicians loved it. And most importantly, it worked. So that is what we are doing with 41X in breast reconstruction. We cannot do this without an incredible team and I am super pleased to announce that we have done a great job adding some serious horsepower to our team this last quarter. I would like to welcome Guido Nils as our new board member. He is an operating partner at Edsburg Woodlands and the former Chief Operating Officer of Guiding Corporation. He is also, importantly, a longtime friend and mentor of mine. And we are blessed to have him join the team. I would also like to welcome Pete Ligotti as our new Chief Commercial Officer. Pete joins us with a brilliant 30-year career, including 20 years at Integra. Some more time at NuVasive where he ran a successful business. He is going to be coming in here, and he is going to be spearheading our commercial efforts as we move towards the launch and commercialization of 41X. Welcome to both of these gentlemen, to the Elutia Inc. crew. Okay. So where are we headed? I want to be really clear about all this so everybody understands. We are going to solve a really big problem that exists right down in breast reconstruction, and why this is such a transformational opportunity for us really comes at the intersection of three things. One is, it is a really big market. It is a really big market, and that matters. Breast reconstruction is a $1.5 billion market. But it is also a really big market that is facing an enormous problem. As I said, 15% to 20% of breast reconstruction patients will develop a serious postoperative infection. It is just unacceptable. We can do better. We have to do better. And the good news is that our technology platform is almost purpose built for this specific problem. Our first FDA-cleared drug-eluting bioenvelope turns out to be a really, really great way of addressing breast reconstruction infection. And so that is what we are going to do. So digging in here a little bit, breast reconstruction is a really big market. There are 102,000 breasts reconstructed after mastectomy annually. That means there are a lot of biological meshes that are already being used. Biological meshes are already used in 90% of these surgeries. So what does that mean? It means we do not have to train a surgeon on some brand-new technology to solve their problem. We just take a technology that they are used to, that they are familiar with using, and make it much better so it solves their number one problem. Human ADMs, human acellular dermal products lead this market and they are expensive. We are talking about $7,500 to $9,500 per breast. That makes them 65% or more of the total implant spend during a breast reconstruction procedure. So this is a really, really big market. But it is a market that confronts some very unique challenges. When I talk about the postoperative infection rate being 15% to 20%, people look at me and think, oh, that just could not be. It is. It definitively is. I want to explain just a little bit about why we see such high infection. And I am not going to go through all the slides. Some of you may have seen this. I have a longer series on this. But I do want to show you what is really at the root of this. So in a mastectomy, all of the breast tissue has to get removed. If all of the breast tissue is not removed, the woman’s mastectomy is not complete and they have to go through follow-up and surveillance and mammograms and other types of things and still have the risk for redeveloping breast cancer. So all of this tissue has to be removed. Well, one of the things that you should sort of know about breast tissue is that the blood supply for the anterior, or the front, side of the breast all goes through this breast tissue that has to get cut out. And so when a mastectomy is done and that tissue is removed, the blood vessels and therefore the blood supply for the front half of the breast is removed with it, and that closes off that blood supply. And what does that do? Well, that creates a situation where you have an area of the body that your blood flow cannot reach, where your immune system cannot readily reach, and very importantly, where postoperative antibiotics cannot reach. You can give somebody oral antibiotics or you can give somebody IV antibiotics, but if they do not have a vasculature to a particular area, those antibiotics are not going to flow there. And this is what sets up the very unique problem that we see in breast reconstruction. And that is what leads to these exceedingly high infection rates. As I said, one in three women suffer a serious complication, but 15% to 20% experience infection. This is not one paper. This is not some esoteric citing. This is the registry. This is what all of the data says. In fact, put it into real specific numbers. The registry data says it is 12% to 37%. You want to put the real numbers about it. So when we say 15% to 20%, we are not exaggerating. On that number, if anything, we are being conservative. And this is validated every time we go out and talk, particularly with the academic centers where they really track these numbers very, very closely. That leads up to one in five implant loss, so they have to go back and this whole thing comes out. It leads to a massive economic burden for the hospital, a $48,000 economic burden to the hospital. So the hospital certainly should be highly motivated to address this problem. But I just want to keep in mind and go through our mission here in humanized medicine. We are also talking about a woman that started this journey because she was diagnosed with cancer. Not an augmentation. She was diagnosed with cancer. And the number one goal in that woman’s mind is curing herself from that cancer. And that involves chemotherapy. It involves surgery. It involves radiation sometimes. And when an infection pops up, all of that stops. None of that can go on until that infection is resolved. And so this is a significant problem on so many different fronts. And it is one that, if you cannot tell, we are very, very passionate and committed to solving. So the great thing about this anatomical problem that is set up during the mastectomy is it kind of creates a perfect environment for what we do. So what if we flip the script on this and instead of trying to deliver this antibiotic systemically, we delivered it locally. We actually delivered it where the breast implant and the drain are, through the mesh, which is naturally there anyway to hold the implant in place. Well, the exact opposite would happen. Instead of concentrations being very, very low of antibiotic, the concentrations would be very high. And they would stay high for a long period of time. And then the best part, they would not have any systemic effects. So you could have high therapeutic concentrations of antibiotics right there in the breast site without any of these systemic side effects that you sometimes get when you deliver systemic antibiotics. And this was the concept that we started out with a very long time ago. This was the premise behind EluPro, and when we started using EluPro in humans, we saw it was completely valid. And then we got more data on this specifically in breast reconstruction. So there is some really great data out there on what happens if you deliver antibiotics locally into the breast reconstruction spacers. Two different studies particularly that I will reference here. One of them uses a plaster antibiotic plate. Now that does not sound like a great way to treat a woman who is undergoing breast reconstruction, to put a piece of plaster in her breast. But when the risk of postoperative infection is 15% to 20%, desperate times call for some pretty desperate measures. So they gave this a shot. They impregnated this plaster with this antibiotic and they looked at it in just the general breast reconstruction population. What they saw was a 62% reduction in infection risk. We are talking about going from 12.6% to 4.8%. This is not a small study. We are talking about an n of 593 patients in here. So a significant proof of concept that if you deliver these antibiotics locally, you can do a really, really good job of preventing infection. Another version of this was tried, but in a much, much higher-risk setting. Here, what they were looking at is instead of using these big plates, they used these little plaster beads. Again, they are this plaster material. And they put those into the breast cavity. What they were looking at here were women who had very, very poor, in fact pathologically poor, blood flow to the anterior side of the breast, something we call mastectomy skin necrosis. And this is where there is just literally no blood supply to the front part of the breast, and that front sort of breast tissue starts to die. When that happens, your risk of infection skyrockets. And so here, they saw an 82% reduction in infection. We are talking about going from 36% down to 6%. Again, n of 75 here. You might say, well, I guess maybe this problem is solved. Not really. Even the authors, and these are friends and champions of Elutia Inc. who were behind these studies, will tell you this is a suboptimal solution to a very serious problem. No woman likes that plaster put in there. No plastic surgeon wants to make antibiotic beads off-label in the back part of their surgical center. They do not stay in place. They drop down into the inferior side and into the gutters of the breast. They do not provide uniform coverage, and they elute the antibiotic way, way, way too quickly. But it did show that this concept definitively works. And that is why we created NXT 41X. We are combining these powerful antibiotics, rifampin and minocycline. So these are antibiotics that specifically target the pathogens we know we see in breast infection. And it delivers them in a uniform field for an extended period of time. It might be 30 days. Wow. What is this 30 days about? The drains that are placed at the time of surgery stay in 17 days. And so you want a couple of weeks of extra coverage. That is what that is about. And we combine these powerful sustained antibiotics with an optimal biologic matrix. And that matrix I will refer to as 41. It is just the matrix by itself. And we put those two things together and we made something purpose built for the problem that we are trying to solve, which is postoperative infection in breast cancer surgery. So let us talk about the roadmap and how do we get from here to there. Right now, we have SimpliDerm, which I am going to talk about in just a second, but that is our current product that is used in the breast reconstruction space. It gives us a lot of practical, on-the-floor experience in this space. The real excitement starts with 41 and 41X. So 41 is our base matrix. So when I say NXT 41, I am talking about just the biological matrix alone, without antibiotic. It is a phenomenal matrix in its own right. If we were not a drug-eluting biologics company, we would be talking about this incredible NXT 41, but we cannot leave good enough alone, primarily because it does not solve the biggest problem in breast reconstruction. But what we do is we use 41, from a regulatory standpoint, to set the foundation for 41X. We announced today that we have already submitted to FDA NXT 41. Let me just sort of pause and reality check everybody. We know we are going to get questions from FDA. We know we are going to need to respond to them thoughtfully and professionally, and we know that is probably going to take a little while. So let us be patient. Let us give our incredible R&D team the time to do the professional job they need. If something significant happens, I promise we will update you on it. In the meantime, we expect clearance sometime in 2026 for 41. And that will serve as the platform for NXT 41X, which is the base matrix combined with the rifampin and minocycline. And if we put the timelines together, we expect clearance for NXT 41X towards the end of the first half of 2027. So we are looking at a second-half launch of that product. Okay. What is going on inside the company? Well, you can sort of divide it up into three major workstreams. The first one is obviously development. No surprise here. That group is focused pretty heavily on the approval of a highly differentiated product that significantly improves outcomes in plastic and reconstructive surgery. That starts with our 41 base matrix and rolls seamlessly into our 41X drug-eluting matrix. I said we are here in our beautiful Gaithersburg facility. Well, that allows me to introduce manufacturing, because this is our manufacturing facility here, where we have enough capacity to make 41X for the foreseeable future. I think we have something like $120 million in revenue-generating capacity for 41X with just one shift right now. We have this great manufacturing facility. And then, basically, I could sum up manufacturing’s job right now into two things. One, ensuring adequate supply of perfect quality tissue. And two, driving down cost of goods. So that is what they are working on. And then lastly, we now have Pete Ligotti coming in and heading commercial, building these KOL partnerships. I am going to tell you, we do not have a problem getting a meeting and building strong relationships with our KOLs. We have, and are continuing to build, a very robust KOL team of champions. And there is really no secret to it. We are able to do it not because we have great personalities, but because we are addressing their number one problem and the number one problem that their patients are facing right now. In addition to that, Pete is working on developing health economic models, obviously spending a lot of time on reimbursement strategies, and generally preparing for launch readiness of 41X. So now let us turn a little bit to SimpliDerm. We are exploring SimpliDerm strategic options. We announced that in the press release today. You might ask, well, why now? Well, we have gotten to the point where our confidence with the 41X program really dictates that this is now the time for us to focus all of our time, all of our resources, all of our energy on making sure we do a great job with that platform. SimpliDerm is a great product, and whoever gets this asset is going to get a really, really wonderful product. Acellular dermal matrix that is used in soft tissue reconstruction. It has great handling. It is sterile. It is hydrated and ready to use, which is what the plastic surgeons want. 100 million lives covered is a big deal. Some people think they could introduce their own acellular dermal product really quickly and just get it on the market. It turns out reimbursement in the acellular dermal matrix market is a really big deal. So we have 100 million lives covered across two of the largest payers, Anthem and UnitedHealthcare, as well as nine regional plans. Patent protected, obviously. It is completely standalone. So for us, it is a completely segregable business that does not cause any disruption. And whoever gets it, it is EBITDA accretive. So no incremental capital investment is required. It is really a beautiful plug-and-play technology. We will keep you updated on this, and we will see how that process goes. Lastly, I would not be able to say any of the great things that I am saying today, and we would not have been able to make any of the progress that we are making, without our incredible Elutia Inc. crew. We are proud to be recognized for something we already knew. Elutia Inc. is a great place to work, and we were certified by the Great Place to Work certification. The results, I thought when I saw them, I was really proud. It proved we are a mission-driven organization. We are also a merit-driven organization. 54% women, 62% of our leadership roles are occupied by women. 50% have advanced degrees. We are a brilliant group. Not me. But the team. An entire third of our organization has a doctorate. And we are a committed group. Our average tenure, 6.3 years. The advantages, if you are wondering, so what is the advantage of this Great Place to Work certification? Well, the certification is kind of nice. I guess you can hang it on the wall. But what it means is that, compared to our noncertified peer competitors, we tend to outperform on financial metrics by fourfold. We are able to attract job seekers because of the Great Place to Work certification with a 15 times higher attractiveness, and our turnover of certified workforces is about half that of the regular U.S. workplace. So I am going to end my comments there by thanking this tremendous team for frankly making my job such a joy. And with that, I will stop talking, and I will turn it over to Matt Ferguson. Matt Ferguson: Okay. Thank you, Randy. And before I start my remarks, I would just like to say I so appreciate the passion and the leadership that you brought to the organization, and I support all of the comments that you just made about our mission and our market, our opportunity, and probably most importantly, our team. And with that, we put out our earnings press release today with quite a bit of detail in it, and we will put out our 10-K in a couple of days. That will have even more detail in it. So I am just going to hit a few highlights and not take very long here. But moving into a summary of our fourth quarter financial results, from a revenue perspective, we did $3.3 million in revenue, and that compares to $2.8 million in the year-ago quarter. That is up 16%. So we were very pleased with that performance. That was really driven by the return to direct distribution for both our cardiovascular and our SimpliDerm product lines, as we have talked about. The return to direct distribution has also had a very positive effect on our gross margins. So on an adjusted basis, which is probably the better indication of how things are really performing from a business perspective, we had an adjusted gross margin for the fourth quarter of 66.8%. That was up 12 points from the prior-year quarter, when it was 56.5%. So really nice results there. Our net loss from continuing operations, so that is excluding the bioenvelope business that was divested on October 1, was $6.5 million, versus $7.2 million a year ago. And then probably a more relevant metric in terms of our operating performance, our adjusted EBITDA, which is a non-GAAP metric but excludes certain noncash, nonrecurring, noncore operational metrics, was a loss of $4.2 million in the quarter compared to $3.4 million in the year-ago quarter. On our balance sheet, a lot has changed in the last quarter. As you know, our total cash on hand plus the $8 million that we have in escrow is $44.4 million. So it puts us in a really nice position from an overall cash point of view. That is after having paid off all of our debt with SWK that took place at the beginning of the fourth quarter as well. That was about $28 million that went to pay off that debt. And then just from a share count point of view, we have 42.8 million common shares outstanding as of the end of the year. In addition to that, there are 4.5 million pre-funded warrants that are outstanding, so a total of 47.3 million. And all of those common shares outstanding now are Class A common shares. So what that means is that all of our Class B common shares, which were held by one entity, were converted during the quarter and sold into the market. So that, as you know, is essentially an overhang that is gone now, and we are very pleased to get that behind us. One of the effects that we have seen as that has gotten behind us is that we recently came back into compliance with all of Nasdaq continued listing requirements. We put out that release at the beginning of last week, and I would just like to thank all of our investors out there who have put their trust and their capital into Elutia Inc. and helped support that return to compliance there. So moving on, just to take a step back and at a big-picture level, 2025, and really all of 2025, represented a real strategic reset for the company. And the biggest event in that really was the $88 million sale of our bioenvelope business to Boston Scientific, which, again, allowed us to pay off all of our outstanding senior debt to SWK, left us with $44.4 million of cash on the balance sheet and in escrow that will come in later this year, and it really allows us to be completely focused and extremely well resourced for the continued development and the launch of NXT 41, which we truly believe will be transformational in the market starting next year. So I guess with that, the last thing I would like to mention is just that we have tried to be very active in getting this story out, which we truly believe in. We have been active in getting it out to investors, and we are going to continue to do that. We have two conferences coming up in the next couple of months. The first will be just next week, the Sidoti Small Cap Conference, which is an online conference, and then in May, we have the LD Micro Conference, which is a live conference in Los Angeles. So if any of you are attending those events, we would very much love to meet with you there. So with that, in summary, before turning it over to questions, I would just like to reiterate the three key points of our story. We have a validated technology platform, as has been proven by the sale of our EluPro product and our bioenvelope business last quarter to Boston Scientific for $88 million. We have a truly blockbuster pipeline underway, which is really starting with NXT 41 and a $1.5 billion market. And then we are in a great position from a resource point of view. We have a fantastic team. We have a great facility that we are sitting in here today. And we have a strong balance sheet, which will take us through that approval and into commercialization. So with that, I will open it up to questions, and back to you, Operator, to start that off. Thanks. Operator: Thank you so much. We will now open for questions. As a reminder, to ask a question, simply press 11 to get in the queue and wait for your name to be announced. To remove yourself, press 11 again. We have a question from the line of Frank Takkinen with Lake Street Capital Markets. Please proceed. Frank Takkinen: Great. Thanks for taking the questions. Congrats on all the progress. Congrats on 41 submission to the FDA. I was hoping to start with a few questions around that. I know it is a question along the lines of trying to predict the unpredictable, but as you are working internally, what kind of questions are you preparing for from the FDA, and how do you think about the challenges you might have to go through to get it to market, or if it should be a relatively streamlined process? And then secondly, once you do get 41 across the goal line, how quickly can you shift the filing to 41X and resubmit? Randy Mills: Okay. I am just making some notes, Frank. So, Frank, thanks for the questions. I think everyone should view the review process and respect the review process the way we do. The timelines that we have laid out for clearance are fairly conservative. And they are fairly conservative because we want to make sure that we do a really professional job. Now I would say, first and foremost, we submit a high-quality application with everything in it that we think is necessary for a clearance. We do retain a lot of backup data and supporting data on all the necessary points. But as a matter of sort of regulatory strategy and best practices in regulatory science, you do not over answer a question with FDA. You just be prepared to explain the rationale for the things that you did answer. And so that is really the strategy that we have going on. There is no question that biocompatibility for a product like this is a big question in mind, and a big focus right now in the Food and Drug Administration. We know that. We feel pretty good about our product there. We know that when we get into 41X, if we just remember back to the days from EluPro, that things like in vitro elution were a real big point with them. You probably remember the IVE days, Frank. And so we are prepared for any and all of it, but we are prepared for it in a very humble and respectful way. And that is the timelines we have set up that have that in place. And I would just sort of encourage everyone to just keep that in mind. I would not be pulling forward any timelines until we tell you that is probably a good idea. With regards to how fast we roll into 41X, I would say just to keep in mind the whole purpose of 41 is to improve the efficiency of 41X. We have no intention of commercializing 41. It is not a drug-eluting matrix, and so it does not fit with our high-level thesis. So, really, the only reason that we are doing it is for regulatory efficiency. And therefore, the team will learn from the 41 submission. They will call any audibles that they need to as a result of what we learned from the 41 submission. But clearly, their plan is to go pretty efficiently from 41 into 41X. And if at any point we think that that might not, that 41 might no longer serve that purpose, well then we might change the plan. Right? Even pull forward a 41X submission. But right now, we anticipate, in the timelines, an approval pretty efficiently after 41. Frank Takkinen: Got it. Very helpful color. I was hoping to ask a little bit more about commercial. Appreciate some of the comments you made there. But kind of related to SimpliDerm, I think we have talked about just having experience in that space via SimpliDerm could help the commercial readiness of the organization once 41X is approved. How do you think about balancing that readiness that SimpliDerm could have helped with versus the strategic process? And then at the same time, what are you maybe doing from a commercial readiness perspective in light of that transition that is occurring? Randy Mills: Right. So, Frank, let us go through this with the three things that really help us get ready for 41X. One is just the base understanding of this market, how it works, and that includes the reimbursement. Right? So we have done that. We do know and we do understand how this current market works, how reimbursement works here, who the players are, literally the logistics of a breast reconstruction product. So we think we check that. You will remember, by far, the most important thing in the commercialization of EluPro was the value analysis committees, like the VACs. And I will be completely honest here. We learned more about how to do that with EluPro than probably we learned or are learning from SimpliDerm. My 194 VACs in the time that we did that, I mean, that was so key to the explosive growth of that product. And we feel, and we have a team that understands that. We know what to do from a VAC package standpoint. We feel pretty good about that. The third piece, though, was KOLs, and, you know, key opinion leaders and who are the thought leaders in this space. And here is, Frank, where our thought process has really flipped, and it really started flipping when we were able to go last October to the big plastics and breast meeting in New Orleans and just cold call some of these marquee leaders in the field of plastic and reconstructive surgery and say, hey, would you mind having a conversation with us? We are trying to develop a locally delivering biological matrix for breast reconstruction, you know, deliver antibiotic, try to prevent infection. Our dance card filled. And it filled with some of the brightest, strongest thought leaders in this space, and that continues to this day. We have no problem getting meetings with these KOLs and engaging in very meaningful, very enthusiastic conversations with them on how we can best design, build, and deliver a product that is exactly what we need. And so when that last piece sort of started to happen was when we sort of made the decision we are probably pretty good here and can start moving up, particularly with the progress the R&D team is making with the filings. Frank Takkinen: Yep. Yep. That is perfectly clear. I got it. One last I wanted to ask, Randy. Obviously, the data is really impressive with plate as well as the powder with 60% and 80% plus reductions. How do you think, and it is a speculative question, but how do you think NXT 41X could compare from an infection reduction perspective in relation to some of these other techniques that are being used today? Randy Mills: Yeah. We would be thrilled with a 50% reduction. Anyone would be thrilled with something like that. We have some advantages, though, over those techniques that are delivering those results. Those advantages are uniform distribution. So as I said, with the plates and the beads, those things have mass to them and they notoriously sort of fall down into the breast gutters and do not provide uniform coverage. The second thing is the teams that were doing that work know that antibiotic comes out of that real fast, and therefore it does not provide a particularly long-term coverage. We targeted this 30 days, and we targeted the 30 days because the drains come out at day 17, and if the drains are still in, particularly with this, there is a pistoning that can happen with the drains from the outside to the inside, you are constantly introducing and have the potential to introduce bacteria back into that surgical field. So we felt pretty strongly that you needed to have antibiotic coverage that persisted after the drains were pulled. So we feel like we have probably built a better solution than the ones you are seeing with these really fantastic results. I cannot knock what they are seeing. But I think I want to caution everyone here again to a little bit of humility and perspective. There is a percentage of these cases that have such severe necrosis. This is where the vasculature to the breast is so compromised that it does not matter what you would put in there. The tissue just dies. And in that case, we can add antibiotics all day long, but we are not going to prevent what ultimately is going to become something more like a gangrenous infection and the complications from those. And that is really just an unsolvable, at least at this time, consequence of the base mastectomy. So does that help? Frank Takkinen: Yeah. That is perfect. Appreciate the color. Thanks, guys. Operator: Thank you so much. And ladies and gentlemen, this concludes our Q&A session and our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Velocity Financial, Inc. Fourth Quarter 2025 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I would now like to turn the conference over to Christopher J. Oltmann, Treasurer. Please go ahead. Christopher J. Oltmann: Thanks, Rocco. Hello, everyone, and thank you for joining us today for discussion of Velocity Financial, Inc.'s fourth quarter and full year results. Joining me today are Christopher D. Farrar, Velocity Financial, Inc.'s President and Chief Executive Officer, and Mark R. Szczepaniak, Velocity Financial, Inc.'s Chief Financial Officer. Earlier this afternoon, we released our results, and you can find the press release and accompanying presentation that we will refer to during this call on our Investor Relations website at www.bellfinance.com. I would like to remind everyone that today's call may include forward-looking statements, which are uncertain and outside of the company's control, and actual results may differ materially. For a discussion of some of the risks and other factors that could affect results, please see the risk factors and other cautionary statements made in our communications with shareholders, including the risk factors disclosed in our filings with the Securities and Exchange Commission. Please also note that the content of this conference call contains time-sensitive information that is accurate only as of today, and we do not undertake any duty to update forward-looking statements. We may also refer to certain non-GAAP measures on this call. For reconciliations of these non-GAAP measures, you should refer to the earnings materials on our Investor Relations website. And finally, today's call is being recorded and will be available on the company's website later today. I will now turn the call over to Christopher D. Farrar. Christopher D. Farrar: Thanks, Chris, and I would like to welcome everyone. I appreciate you joining our 2025 year-end earnings call. Pleased to report another incredible year of performance and very proud of what our team accomplished. Through hard work and dedication to our vision, we recognized record levels in originations, portfolio growth, new securitizations, book value, pretax ROE, and earnings. Credit belongs to my amazing team members who are talented and passionate about our mission. I believe they are our greatest asset. From a macro perspective, we see healthy activity in the fixed income markets as our deals are oversubscribed and spreads are tight. Our pipeline is growing, our end real estate markets are healthy, and we are optimistic about our prospects going forward. In terms of our specific results, core net income increased by 52% to $111,000,000, which also drove a new record level of pretax ROE of 26%. Importantly, we achieved this growth while maintaining our margins and credit discipline. With respect to originations, we increased volume by 49% to a record $2,700,000,000, driven by increases in productivity from our account executives. Increased volume also set a record for our capital markets team with nine new securitizations and $2,600,000,000 in new issuance. On a net basis, the portfolio grew by 28% versus the prior year, and our asset management team successfully resolved $331,000,000 in NPLs with net recoveries of $30,000,000. At year-end, we entered into a transformative partnership whereby we sold $129,000,000 of NPLs and retained the servicing rights for the entire pool of loans. This transaction drove significant earnings in Q4 but also freed up approximately $50,000,000 in working capital and will drive future earnings from the servicing fees earned. All in all, a great transaction as this team continues to impress and drive meaningful results to the bottom line. From a liquidity perspective, we have never been stronger, as we issued our first rated unsecured debt offering for $500,000,000 in January, which gives us greater flexibility and makes us less reliant on short-term warehouse lines. This new capital will help us execute our long-term plan of growing book value and maximizing shareholder returns. Looking forward, we have great momentum and are well positioned to continue our growth. That concludes my prepared remarks, and we will turn over to Page three in the earnings presentation. 2025 was really just a fantastic year for us. You can see growth across the board, 26% pretax ROE, grew book value by 21%, and maintained a very healthy NIM at 3.6%. Turning to Page four, digging into the fourth quarter, you can see core net income of $36,300,000, or $0.93 a share, up from $0.60 a share from Q4 2024. I mentioned that the NIM was very healthy and stable at 3.59%. In terms of production, dollars were $634,000,000 for the quarter, up 12.5% from the prior year. I mentioned the activity in both the portfolio and NPLs. As a result of that NPL sale, NPLs were down to 8.5% at the end of the year. Again, hitting on the asset management team, they continue to do a great job of realizing net gains, and we have expanded our disclosures in this year's 10-Ks and in these earnings materials. We are reflecting total revenue that we recognize from the NPLs, and that really just shows we have always made those fees and made that income, but it has been difficult to suss out in the financials. So we broke that out and showed the activity from regular accrued interest as well. As you can see for the quarter, that was a total of $7,600,000. So that team continues to do a great job for us. In terms of financing and capital, I mentioned that we have done a number of securitizations in the year. We did do our second private securitization where we had one investor taking down the entire transaction, and we like that execution and think it is a great diversification as we move forward. I mentioned the strong liquidity position, $92,000,000 in unrestricted cash and plenty of warehouse capacity. As I mentioned in my opening remarks, we are really proud of the NPL transaction we were able to close in the fourth quarter, recognizing $13,400,000 of net income as a result of that sale and releasing about $50,000,000 of working capital to fund future production. With that, I will turn it over to Mark for Page five. Mark R. Szczepaniak: Thanks, Chris. Hi, everyone. Another year is in the books for Velocity Financial, Inc., and as Chris had mentioned, Velocity Financial, Inc. is really ending the year strong. If we go to Page five and look at our loan production, total loan production for the fourth quarter was just under $635,000,000 in UPB. As Chris mentioned, that is a 12.6% year-over-year increase from about $563,000,000 in Q4 2024. The strong production growth in 2025 included the weighted average coupon on new Q4 held-for-investment originations continuing to come in strong at just a little over 10%. Originations in Q4 also continued at tight credit levels, resulting in a weighted average loan-to-value for the quarter just under 63%. 2025 total year loan production is $2,700,000,000 in UPB. That was almost a 47.5% year-over-year increase over the $1,900,000,000 in production for 2024. Over 6,600 loans were originated during 2025. The strong 2025 production was a result of continued organic growth of our borrower base and strong demand for our product. As a result of the continued strong growth in production, if you look at Page six, it shows the year-over-year growth in our overall loan portfolio. The total loan portfolio as of the end of the year for 2025 was $6,500,000,000 in UPB, which is a 28.4% increase over the $5,100,000,000 as of 12/31/2024. The weighted average coupon on our total portfolio at the end of the year was 9.7%, as Chris mentioned, a 21 basis point year-over-year increase. The total portfolio weighted average loan-to-value remained consistently low at 65% as of 12/31/2025, and the average loan balance remained consistent at about $390,000. On Page seven, it shows our recent quarterly portfolio net interest margin. You can see 2024 and 2025 have very, very consistent net interest margins. It is not on the slide, but on an annual basis, our portfolio-related net interest margin was 3.61%, about a 1.4% increase over our 2024 net interest margin of 3.56%. For the year, our portfolio yield increased 39 basis points year over year, while our portfolio cost of funds increased year over year by only 18 basis points. The portfolio yield increase is mainly driven by strong loan production during the year and higher loan coupons, and the increase in the portfolio cost of funds is mainly due to an increase in the securitization market yields. On Page eight, our nonperforming loan rate at the end of 2025 was 8.5% compared to 10.7% at the end of 2024, and the decrease, as Chris mentioned, was a combination of the sale of $129,000,000 in UPB of NPL loans sold during Q4 as well as a combination of continued strong resolutions during the entire year by our special servicing department. The table to the right of the page shows our loans held-for-investment portfolio, including both our amortized cost and fair value loans, and shows the total year-over-year net nonperforming loan valuation allowance we have for our nonperforming loans. As of 12/31/2025, the amortized cost loan portfolio had a $4,500,000 CECL reserve and the fair value portfolio had a $48,300,000 valuation adjustment allowance for a combined valuation allowance on the entire loans held-for-investment portfolio of about 81 basis points. Both of these valuation adjustments are required under U.S. GAAP. The unrealized valuation adjustment on our nonperforming fair value loans represents the value for which the loans, under U.S. GAAP, could be sold out in the secondary market. However, we do not plan on selling NPL loans since our in-house special servicing department has a history of producing net gains and very successful resolutions on these loans. Turning to Page nine, it shows our CECL loan loss reserve, which we said was at $4,500,000 for the end of the year, or 22 basis points of our outstanding amortized cost held-for-investment portfolio, and the CECL loan loss reserve does not include the loans being carried at fair value. For 2025, our net gain/loss from loan charge-offs and REO-related activities at the bottom of that table is a net loss of $3,700,000, mainly as a result of a couple of large legacy loan charge-offs. These were smaller loans; we wanted to clean those up. We do not have those types of loans in our portfolio anymore, so that loss is well above our historical loss experience. We do not foresee these types of losses going forward because of the continued favorable resolutions of our nonperforming loans and that significant loss allowance adjustment that you saw on the previous page for the fair value loans. Page 10 presents the enhanced disclosure that Chris was mentioning on our nonperforming loan resolution activity. So the first set of four columns there is what we have always shown in the past. We go up to the net gain or loss on NPL loan resolution, which brings in the amount of default interest and prepayment fee income over and above contractual principal and interest. But what we had not really shown was what is the contractual interest that we go back and pull in. Under GAAP, you have to reverse that out when a loan goes nonperforming. Once we resolve the loan, we are collecting all of that contractual interest in cash. We wanted to bring that in to show the total amount of revenue that we bring in when we resolve these loans. So in this table, we have added columns for net accrued interest and total recovered on the far right. We felt it was important to add the amount of contractual interest, net of any advance write-offs, that is also collected on resolutions for the efforts of our special servicing team. For 2025 Q4, NPL resolution total dollars recovered, including net contractual interest, was $7,600,000, or 9.8% over the UPB, compared to $7,500,000, or 10.8% over UPB, for 2024. Now if you look at the full year 2025 on this table, the total amount recovered on the resolutions of NPL loans was $30,000,000, or 9% of UPB, compared to $22,300,000 total recovered in 2024, or 8.8% over UPB. Page 11 shows our durable funding and liquidity position at the end of the year. Total liquidity as of December 31 was just under $117,000,000, comprised of about $92,000,000 in cash and cash equivalents and another $25,000,000 in available liquidity in unfinanced collateral. In addition, our available warehouse line capacity at December 31 was just under $600,000,000, with a maximum line capacity of $935,000,000. So there is plenty of capacity and available capacity on the warehouse lines. In Q4, we issued two securitizations, 2025-P2 and 2025-5, with a total of $646,300,000 in securities issued. As Chris mentioned, in January 2026, we completed a public rating process for Velocity Financial, Inc.—it is our first time getting a corporate rating. We were rated by both Fitch and Moody's, and we issued $500,000,000 in unsecured debt. That is a five-year term debt, fixed rate at 9.38% interest, due in 2031. The proceeds of the $500,000,000 debt were used to pay off $215,000,000 of corporate securitized debt that was set to mature in 2027, so we paid that off, and the balance of it was to pay down, as Chris mentioned, our shorter-term warehouse lines. And then in February, we issued the first 2026 debt, 2026-1, with $355,000,000 in securities issued. That concludes my 2025 financial recap. Chris, I would like to now give the presentation back to you for an overview of Velocity Financial, Inc.'s 2026 outlook and key business drivers. Christopher D. Farrar: Thanks, Mark. On Page 12, our markets are very healthy. We like the backdrop there. Credit is stable. We are not reaching to hit our targets or our volumes; we are remaining disciplined there. Capital markets are great. The securitization market in particular is very robust, and we have a deep bench of investors supporting us there. Then I think from an earnings perspective, we think NIMs should remain where they are, and we think we can continue growing the portfolios. We are very positive about the future in 2026. So with that, we will conclude our presentation and open it up for questions. Operator: Thank you. We will now begin the question and answer session. Today's first question comes from Steven Cole Delaney at Citizens Capital Markets. Please go ahead. Steven Cole Delaney: Good afternoon, everyone, and congratulations on an excellent year. We do appreciate Mark's comments on Page nine about the REO, and we may want to follow up with you on that. But, obviously, an outstanding performance. Chris, I am curious, looking ahead, one of the things, if you think about the broader financial markets—and let us talk about the rates market—God, I do not know how many times you turn on CNBC and they were talking the Fed and yada yada. We do not know what the Fed will do. But the futures market, as of a week ago when we updated our internal rate forecast, is showing somewhere between two and three 25 basis point cuts in 2026. Now who knows what we get? And more importantly, the ten-year is really being kind of cranky at 4.20%, and that is, what, 50, 60 basis points off the recent twelve-month lows. I guess what I am trying to say is you have performed the way you did in terms of origination volume, and your clients are obviously finding deals, and they can afford the current rates. Let us just say if we get some short-term rate relief, and if the ten-year were to come down 50 basis points or whatever, how impactful is that to the demand from your borrowing universe for additional loans? I am just curious what the mindset is. And I am curious if you have any material floating-rate loan concentration in your portfolio where, if we did get a break in the five- to ten-year range, is there the possibility of showing somebody some kind of a mini-perm type of a loan structure vis-à-vis just a SOFR-type floater? Thank you for commenting on that, if you would.
Operator: Thank you for standing by, and welcome to Wealthfront Corporation's fourth quarter and fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. I would now like to hand the call over to Matthew Moon, Investor Relations. Please go ahead. Matthew Moon: Good afternoon, everyone, and thank you for joining us. Today to discuss Wealthfront Corporation's fourth quarter and full year fiscal 2026 financial results, reflecting the periods ending January 31, 2026. On the line are David Fortunato, our Chief Executive Officer and President, and Alan Imberman, our Chief Financial Officer and Treasurer. After prepared remarks, we will open the line for Q&A. During the course of today's call, we may make forward-looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance that they will prove to be correct. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Wealthfront Corporation files with the Securities and Exchange Commission, including our most recent Form 10-Q. Our discussion today will include certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. Reconciliations of non-GAAP financial measures to comparable GAAP measures can be found in our press release accompanying this call, which is posted to our Investor Relations website at ir.wealthfront.com. I will now turn the call over to David Fortunato. David Fortunato: Thank you, and good afternoon, everyone. Fiscal 2026 was another successful year in which Wealthfront Corporation continued to deliver on its long-term objective of becoming the leading tech-driven platform for digital natives to turn their savings into wealth. We believe we make the best practices of personal finance accessible at low fees through technology and intuitive and convenient through user-friendly design and automation. At scale, this drives high margins, allowing us to share savings with clients, creating and engendering trust, driving asset retention and low-cost word-of-mouth growth, which once again drives high margins. This flywheel enables us to offer feature enhancements such as our recent ongoing cash APY increases that I will describe in more detail later on, and more broadly, helps our clients save more on every paycheck, earn higher returns on their savings, and borrow at lower rates. We remain grounded in our belief that the best way to build deep, long-term client relationships is to continue to delight clients by offering them more value than anyone else and focusing on their long-term financial outcomes. This informs our product development strategy and keeps us focused on our roadmap regardless of short-term market conditions. At fiscal year-end, total platform assets grew 17% year over year to a record $94.1 billion, with investment advisory assets of $48.7 billion, up 29% year over year, and cash management assets of $45.4 billion, up 7% year over year. Funded clients ended the year at roughly 1,420,000, up 17% year over year, and funded accounts of roughly 1,840,000, up 16% year over year, reflecting 1.3 funded accounts per funded client. Total net deposits in the year ended January 31, 2026 were $6.7 billion, including $400 million in net outflows in the fourth quarter. Fourth quarter figures reflected a cash-to-invest transition environment that resulted in the second-best quarter of total investment advisory cross-product flows, including a second consecutive record quarter of net cross-account transfers from cash to invest. This helped drive annualized organic investment advisory growth to 11% in the quarter, the highest since the market enthusiasm post U.S. election in the quarter ended January 2025, with monthly annualized organic growth accelerating throughout the quarter, ending at 15% in January. Recall, annualized organic growth is calculated as total net deposits in a given period multiplied by an annualization factor based on actual day counts in that period, divided by prior period ending assets. As we will discuss further, cash management net flows began to normalize in mid-January, roughly four weeks after reducing the client rate on December 19 and prior to the five basis point increase to the client APY on January 30. Net outflows from cash management were $145 million in February, a significant improvement from the $840 million in net outflows in January. Since February 16, cumulative cash management net deposits have been positive. However, we expect withdrawals due to tax time seasonality to begin later this month and continue up until the April 15 federal tax deadline. On the product development side, we continue to accelerate our product velocity. For example, in the fourth quarter, we bolstered both our cash management and investment advisory offerings, enhanced interoperability between both, and began to offer early access to Wealthfront home lending. For cash management, we introduced automated dividend sweeps from investment advisory accounts to cash management accounts and increased daily withdrawal limits up to $1,000,000 for qualified clients. In December, we began a measured rollout of our proprietary Wealthfront Treasury Money Market Fund, or WLTX X. It offers an attractive after-tax yield alternative for clients and their cash, particularly for clients living in states with high income taxes, given the state tax exemption on U.S. Treasury interest income. As of February, prior to general availability, the money market fund had just over $85 million in AUM. For investment advisory, we expanded availability of fractional shares into automated investing accounts and automated bond portfolios, helping to reduce cash drag and tracking error relative to our target portfolios. We also introduced dividend reinvestment plans as well as a broader list of stocks and ETFs that can be traded in the stock investing account. We continue to see strong uptake, particularly among younger clients, in this investment account. In November, we launched early access to home lending starting in Colorado, and have since expanded to Texas and California, with a full rollout to these states as well as early access in additional states expected to come later this year. We believe we can use technology to deliver a better digital experience and a lower rate, and we are deliberately scaling at a measured pace in order to maximize learnings to optimize our long-term outcomes. We aim to provide our clients home mortgage rates at least 50 basis points better than the national average. While we are in early days, we are proud to have delivered on this objective on average in the states in which we operate today. Beyond new product initiatives, we have increased the base APY on all cash management accounts by five basis points to 3.3% on January 30. Over the course of the past several months, the effective federal funds rate gradually stabilized higher within its target range, allowing us to pass more savings along to our clients. We could have simply taken this benefit for ourselves, but consistent with our business model, we are constantly looking for ways to give back to our clients, deliver better financial outcomes, and build trust. Our focus for Wealthfront Cash is to offer the best cash account experience for young professional savers. In this vein, we launched an incentive in early March in which clients that direct deposit at least $1,000 per month who also have a funded investment account will receive an ongoing 25 basis point boost to their cash APY. We expect this incentive to deepen existing client relationships as well as drive cross-product adoption for those clients using one of the cash management or investment advisory accounts today. We also anticipate new clients to diversify into both of these account types more quickly. Closing with current trends, today we published February metrics. As discussed earlier, when looking at intramonth trends, cash management net outflows peaked in mid-January prior to our five basis point increase to the client base APY. Cash management net outflows significantly improved to only $145 million in February versus $840 million in January. Investment advisory net deposits were $416 million, implying an annualized organic growth rate of 11%. Total net deposits were therefore $271 million in February and, along with market appreciation, led us to another month-end record of total platform assets of $95.2 billion. In turbulent times like these, the time-tested performance of a low-cost diversified index portfolio with the added benefit of automated tax-loss harvesting becomes more apparent. Aggregate investment account returns, most notably our automated investment account, benefited in January and February from the relative outperformance of international equities, contributing to a 2.8% month-over-month growth in January, and 1.7% month-over-month growth in February. Crucially, this performance stands in stark contrast to the returns of speculative asset classes that often falter when market conditions tighten. While others chase fads, our automated investing account is engineered to mitigate volatility and maximize after-tax outcomes. We believe the value of this product is even greater when you consider the strong year-to-date tax losses we have harvested for our clients. February tax-loss harvesting dollars were the highest since the widespread market volatility realized immediately before, during, and after Liberation Day last year. With that, I will now turn the call over to Alan Imberman to go over the financials. Alan Imberman: Thanks, David. Starting with the income statement and a high-level overview for the year. Revenue for fiscal 2026 reached a record $365 million, up 18% year over year. Adjusted EBITDA for fiscal 2026 also hit a new record of $170.7 million, up 20% year over year, reflecting an adjusted EBITDA margin of 47%, up one percentage point year over year. Moving now to the fourth quarter, revenue came in at a quarterly record of $96.1 million, up 16% year over year. Cash management revenue was $69.7 million, up 12% year over year due to both higher average cash management balances measured as the average of beginning and end of quarter figures and a higher annualized fee rate. The average cash management balance in the fourth quarter was $46.2 billion, up 10% year over year, and the annualized cash management fee rate was 60 basis points, up one basis point year over year. When the Fed reduces the Fed funds target rate, we typically wait until the Friday of the following week to reduce the APY we offer our clients. This creates temporary fee compression because the interest rate we receive from banks reprices lower immediately while the interest rate we pay to clients remains constant for a one-week grace period. Additionally, in a declining rate environment, the fee rate is negatively impacted by the inherent mathematical impact of converting annual percentage rates (APR) to annual percentage yields (APY). The inverse of this is true in an increasing rate environment. As David noted, we launched a new incentive in early March in which clients who direct deposit at least $1,000 per month and also have a funded investment account will receive an ongoing cash yield increase of 25 basis points. As a result of both the direct deposit incentive and the five basis points passed along to clients at the end of January, we now expect our first quarter annualized cash management fee rate to be in the range of 57 to 58 basis points. Because April is tax season and our clients are net cash taxpayers, we anticipate significant seasonal cash management net outflows to begin in March and continue up until the April 15 federal tax filing deadline. For context, net cash management outflows in April 2025 were $537 million, and we would expect this figure to be larger this year given the increase in total cash management assets. It may seem counterintuitive, but we are delighted to see tax-related outflows because it reflects the highly attractive financial profile of our clients and also means our clients are comfortable using the cash account to meet near-term liquidity needs, indicating use of the account as a primary operating account that generally gets replenished over time and are typically stickier over the long run. Investment advisory revenue was $25.8 million, up 31% year over year, and surpassed $100 million in annualized revenue for the first time, due primarily to a 30% year over year increase in average investment advisory balances to $47.3 billion. Our annualized investment advisory fee rate was roughly flat at 22 basis points versus the same period last year. Asset growth was driven by both strong markets and net deposits over the trailing twelve months, with organic net deposit growth accelerating throughout the quarter, ending at 15% annualized growth in January. Net cross-account transfer from cash to invest in the quarter set a new record for the second consecutive quarter, reflecting the compelling combination of a broad suite of investment products, overarching platform incentives, and targeted lifecycle marketing campaigns currently in place. Gross profit came in at a quarterly record of $86.6 million, up 17% year over year, reflecting a gross profit margin of 90%. Total GAAP expenses of $310.7 million included $248.3 million in stock-based compensation expense, of which $239 million reflected dual-trigger equity award expense recognized in connection with our IPO. GAAP expenses also included $5.3 million in employer taxes related to these dual-trigger equity awards. Adjusted operating expenses, that is, expenses excluding share-based compensation and employer taxes due to IPO-related equity awards, were $57.1 million, up 15% year over year due primarily to higher product development and general and administrative expense, partially offset by lower marketing expense. Adjusted EBITDA of $44.2 million was up 22% year over year and reflected an adjusted EBITDA margin of 46%, up two percentage points year over year. As we continue to invest in incentives and scale home lending, we expect adjusted EBITDA margins to decline sequentially but remain above 40% for the first fiscal quarter 2027. We continue to demonstrate significant operational and financial discipline, delivering a Rule of 40 metric of 62 for the fourth quarter. This is our fourteenth consecutive quarter, or more than three years, exceeding the Rule of 40 and underscores a business model that has successfully and consistently balanced robust top-line growth with the structural efficiencies of our automated platform. GAAP diluted net income was negative $134.8 million and GAAP diluted earnings per share was negative $1.31, both of which include the one-time impact of dual-trigger equity awards in connection with our IPO of $239 million. We believe that our adjusted EBITDA is a strong proxy for cash flow. For the fourth quarter, net cash provided by operating activities was $33.3 million and free cash flow was $33 million. This results in a free cash flow conversion ratio, that is free cash flow as a percentage of adjusted EBITDA, of 75%. January, however, is a seasonally lower free cash flow period as we pay out the majority of our accrued annual cash bonuses to our employees in that period. For the fiscal year, net cash provided by operating activities was $152.2 million and free cash flow was $151.1 million. This resulted in an annual free cash flow conversion ratio of 88%. Note, both quarterly and annual free cash flow figures are not adjusted for IPO-related expenses; therefore, conversion ratios are lower than they otherwise would have been had the IPO not occurred. Driven primarily by this robust free cash flow generation over the course of the year and over $130 million in net cash proceeds raised in our IPO in December, we continued to strengthen our debt-free balance sheet, ending the period with cash and cash equivalents of $440.8 million. At quarter end, we had roughly 186.5 million diluted shares outstanding. In March, we received board authorization to implement $100 million in share repurchases. We believe repurchasing our stock is attractive at current levels given our robust free cash flow generation, our debt-free capital structure, as well as the multi-decade opportunity to compound wealth with new and existing clients. Over the long term, our excess capital priorities are: invest in organic growth, including infrastructure and automation while also comfortably exceeding minimum capital requirements; evaluate opportunities to repurchase shares; and assess M&A with a preference to build versus buy. Any remaining capital would be added to our surplus reserves in order to bolster resilience and durability. Regarding February metrics, total platform assets ended at another month-end record of $95.2 billion, consisting of $50.0 billion in investment advisory assets, and $45.2 billion in cash management assets. Total net deposits were $271 million, and recall, February only has 28 days in the month. Investment advisory net deposits were $416 million, reflecting organic growth of 11% annualized. We continue to successfully drive cash-to-invest flows, bringing asset-weighted cross-product adoption, that is, assets held by clients with both cash management and investment advisory accounts, to roughly 61.5% at February, up over one percentage point since December. Cash management net flows began to normalize in mid-January, four weeks after reducing the client rate on December 19, and prior to the five basis point increase to the client APY on January 30. Net outflows from cash management were $145 million in February, a significant improvement from the $840 million in net outflows in January. Since February 16, cumulative cash management net deposits have been positive. However, we expect withdrawals due to tax time seasonality to begin later this month and to continue up until the April 15 federal tax deadline. In closing, our business is designed to be aligned with the interest of our clients. Simply put, we succeed only when they do. We believe that as long as we continue to deliver products that truly delight our clients, they will engage more broadly with us, entrust us with more of their wealth, and recommend our platform to their friends, family, and coworkers. We are deeply committed to this long-term journey alongside them. With that, we will now open for questions. Operator: Thank you. To ask a question, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. You will be limited to one question and one follow-up to allow everyone the opportunity to participate. Our first question comes from the line of Ken Worthington of JPMorgan. Your question please, Ken. Ken Worthington: Hi. Good afternoon, and thanks for taking my question. I want to dig further into the rollout of mortgages and see how that is going. So what kind of reception are you getting from your customers in Colorado, where that offering is more seasoned? And can you see, based on the transfer of assets to title companies, how your penetration of eligible customers is looking thus far? David Fortunato: Hey, Ken. How is it going? Yeah. So we are progressing, I think, well. The thing that we are optimizing for—we talked a little bit in the prepared remarks—is less about directly trying to capture all of the volume that we reasonably can in Colorado and really maximizing the learning that we have both with our infrastructure and with the client experience. So as we have launched first in Colorado with the early access period and then in Texas and California, we are really focused on making sure that the experience that we are delivering to clients is good. There are things that we have to improve and we are working on. We have already rolled out a bunch of improvements with more to come. On the rate basis, we feel very good about underpromising and overdelivering on the quality of rate we are giving folks. We are still seeing significant home volume across the country. I think the stat that I saw was more than $400 million of wires to escrow and title companies in our Q4 went off the platform, which obviously is a significant chunk of the outflows that we saw. We have a bunch of things that we need to improve on the digital experience. We are making quick progress, but it is a huge area of focus for us. As we continue to expand the early access period, the real constraint that we have is that the experience that we are offering to clients is one that we feel good about, and we feel the clients will feel good about for the long term. We are not trying to build a transactional mortgage experience. We are trying to build a long-term relationship with clients, of which mortgages is just one step. Ken Worthington: Perfect. And then maybe to follow up, same topic. How do you see the ramp and the rollout to other states and the further penetration in existing states? How does that look as you move through the rest of the year? Is this really kind of an experimental year where you would not expect things to really ramp; it is just sort of getting the infrastructure? Or do you expect things to really ramp as we move throughout the year and as you get more comfortable with the offering? David Fortunato: So we certainly expect to go general availability in Colorado first. That will happen sometime this year. I would expect that we go general availability in Texas and California at some point this year. And I would expect that we launch early access periods in additional states. Exactly what percentage of our client base will be covered by general availability, I am less sure of. Our ability to roll out automation features and balance scaling headcount versus scaling through technology is the kind of core dance that we are doing, where we are trying to really scale with technology and limit headcount growth where needed, except where we are very confident in the volumes that we are seeing, and that is a credible strategy to be able to build sustainable volume over time. Alan Imberman: Thank you. Operator: Our next question comes from the line of Ryan Tomasello of KBW. Your question, please, Ryan. Ryan Tomasello: Hi, everyone. Thanks for taking the questions. Regarding the cash management fee rate guide for 1Q, I believe you said 57 to 58 bps. Is that a reasonable baseline for the remainder of the year, or how should we think about the potential for additional compression there to the extent these incentives you are offering continue to see strong uptake? David Fortunato: Hey, Ryan. Thanks. Yeah. The one thing I would say is the competitive environment has certainly evolved a bit over the last six months. And what we have seen is after the five basis point change and the direct deposit incentive, I think we feel much better about where we are in the competitive environment, and we are seeing that with the transition in cash net flows. As for how we think about the fee rate going forward, I will let Alan take that. Alan Imberman: Yeah, Ryan. So I would say the 57 to 58 is just the first quarter guide. It will really depend on the uptake as to how the rest of the year goes. The thing we like about incentives such as the direct deposit incentive is that we will only have to pay the extra rate when people give us more money or take on this additional incentive by performing the action of direct deposit and funding an investment account. And so as more people adopt it, we do expect to see potentially further degradation in the fee rate, but that would also signal that we have more clients building deeper relationships across the platform with us. And so that is the balance we are looking for there. Ryan Tomasello: Okay. Appreciate that. And then on the account growth, is it possible to isolate the specific trends within the investment advisory side of the business? Obviously, the trends on net deposit organic growth have been quite positive, but I would assume that there are also underlying positive trends on just the actual account growth side within investment advisory. Any color you can provide there? David Fortunato: Yeah. I mean, the investment account growth, as cash-only clients add investment accounts, is a key focus for us in any transition environment. And it has been probably the most significant focus inside of the company over the past three or four months. We focus on the flows because that is what ultimately leads to asset growth and, therefore, revenue growth because of our monetization strategy. But the way that we achieve that flow growth is both growing with clients over the long term and getting more clients to adopt investment products. It is too early to know exactly what the impact will be from the direct deposit incentive that we are trying. I think we are looking forward to being able to talk more about that as we get additional data in, but we have been pleased with the early response. Obviously, direct deposit takes some time to come through. There is a little bit of a lag. So we have not had a direct deposit cycle since that incentive launched. But the past incentives that we have run around investment account adoption, along with the macro environment in January and February being more conducive to investment, have helped our focus on investment cross-product adoption and new client investment growth as well. Operator: Our next question comes from the line of Devin Ryan of Citizens Bank. Please go ahead, Devin. Devin Ryan: Thank you. Hi, David. Hi, Alan. How are you? David Fortunato: Doing well. Thank you. Devin Ryan: Good. Question, another one just kind of cash account. And just some of the outflows kind of late last year, early this year, do you have a sense of whether that money was going toward other online banks paying higher rates, or was it going to brokerages or maybe just, you know, bill pay without kind of gross flows? I would love to get a sense of that. And then do you have a sense of the remaining balances that are maybe more pure rate chasers? And how much of that is remaining? I appreciate that is probably difficult to quantify, but would love to just get some thoughts on that and some of the behavior that you did see kind of late last year into early this year. David Fortunato: Sure. I am happy to give a high-level answer, and then if Alan has anything he wants to add, he can chime in. So what we saw, I think, is broadly consistent with what we had discussed previously, and that is that as rate cuts occur, the larger number of rate cuts that occur in consecutive succession leads to more folks evaluating what they are doing with their cash. So we had three cuts in a row. It takes several weeks for cash net flow activity to normalize post Fed rate cut, which I think we had talked about before. We normally have a really good idea sort of four to six weeks after a rate cut has gone through. One of the interesting things that we saw in January was both: January is a seasonal high period for investing, which I think amplified some of our desire to drive additional cash-to-invest adoption, because January is a great period for folks to reevaluate their finances and think about opening investment accounts. And so we did lean into that in January, and I think some of what you see in the January numbers is that. The other thing I would point out is that the gross versus net distinction in cash flows, especially because of the liquidity features that we offer—free wires, free instant transfers, the ability to send money to escrow and title companies to buy a home—we do a lot of gross flows for cash management. We did a calculation where we look at the recapture rate of those gross flows by client in the quarter, and we are recapturing a majority of the gross withdrawals. That is consistent with what we have seen in prior periods, that we saw from clients in our Q4, and we think it shows the value of the cash management account really sustaining even as clients reach goals. Maybe they are purchasing a house or putting a down payment down. Maybe they are buying a car. They come back to the account, and we do recapture a significant chunk of those assets. I think the sort of high-level question that you asked about what are folks doing with their money is: there are folks that are doing some of all of the things that you described with their money. It is our job to be the best place for our clients to invest for the long term, the best place to save for the long term. We want to deliver the best mortgage experience that they can get anywhere as well. It will take us time to do some of those things, especially the mortgage, but that is really what the focus of the business is—leading with product and delivering the best product and the best value to our clients across their broad financial needs. Devin Ryan: Okay. Great detail. Thank you so much. I guess a follow-up here on the repurchase authorization, $100 million buyback. Can you talk a little bit about expectations, pacing, and intent there? I think it is a strong signal. Obviously, the company has a lot of liquidity here, so in theory, even potentially more behind that. So just love to get a sense of how much is signal versus intent to actually step in and buy shares here down from the IPO price? Alan Imberman: Yeah. Hey, Devin. It is Alan. What I would say is that we think the shares are extremely attractive at the current price. We are in a position, as you mentioned, to have a very strong balance sheet and free cash flow generation such that we can make this investment, and we will compare our ability and our willingness to repurchase against, obviously, other opportunities that we have to invest in. But we do think that we will be purchasers of our shares, especially at the current levels. Operator: Thank you. Our next question comes from the line of Daniel Perlin of RBC Capital Markets. Your question please, Dan. Daniel Perlin: Thanks. Good evening, everyone. I guess I just wanted to kind of circle back a little bit on the home lending side. And I guess the broader context is, I heard everything you said in your prepared remarks, but how do you think that rollout, product reception, and expectations as you think about the ensuing year are going relative to when you kind of addressed investors around the IPO? I mean, it sounds pretty consistent, but it also sounds like there are some nuanced differences maybe. So I just want to make sure I understand that. Thank you. David Fortunato: Sure. So I think we know a lot more about the areas that we need to improve to deliver the best digital experience that we can to clients. And we are putting in focused work on those areas and gradually expanding as we go. We understand a lot more about the operational challenges and where we need to invest to drive operational efficiency so that we can do so as efficiently as possible with as digital a back-end experience as we can. The result of those things is we want to build, like we have with cash and like we have with investments, a sustained low-cost advantage in being able to deliver the products so that we are able to share the savings with clients and get them the best financial outcome. So there is a lot more that we understand with the volume of loans that we have done so far. We will continue to learn and prioritize both the operational efficiency and digital experience wins as we move along, continuing to let people off the early access list and go general availability in Colorado first. I think our understanding and our learnings are generally consistent with what we have communicated in the past. We obviously have a lot more detail now from operating in the space, operating in more states, and doing more loans than we have in the past. Daniel Perlin: Yep. That is great. Just a quick follow-up. So it was really good to see the net deposits turned positive in February. And this pivot, as you guys had telegraphed from cash management to investment advisory, was kind of taking place. I think the question that I have is, you have this weird dynamic right now where the environment may or may not produce lower rates in the near term. It might be sustained for longer. I am just wondering how you guys think about positioning yourselves maybe more in the near term in an environment where that might be the case. It might be an unfair question because it is impossible to answer, but it does feel like there is a lot more volatility around expectations for rates. So just how you are posturing maybe as we go through the next, I guess, couple of quarters. Thank you so much. David Fortunato: Yep. So I think we feel good about our competitive positioning after the five basis point change and the 25 basis point direct deposit incentive. Obviously, we do not know what the market is going to do in the future. We do not know what rates are going to do in the future. We do think that we are well positioned from the investment side because of our focus on global diversification. That has put us in a good position over the last few months, and what we have really seen resonating with clients is in uncertain environments, investing with global diversification is a real selling point. We sort of do not think about positioning ourselves based on what is going to happen over the next few months, but we feel good about our position because of the investments we have made over the last few years in cash, investment, and home lending also, that if rates come down, we feel like we are in a good position to help clients continue to invest or invest more. We feel like we are in a good position to be able to help them buy homes that have become more affordable at lower interest rates while also helping them continue to save for the long term and get access to liquidity as needed using tax-advantaged tools like the Wealthfront money market fund. As we have continued to build out our offering, our goal is really to help clients across the broadest range of financial situations be able to put their savings and investments to work. And that has been the focus, and we feel good about the position because of the diversity. We cannot predict the future, but we can prepare for it, and that is what we have done. Operator: Thank you. Our next question comes from the line of James Jarrow of Goldman Sachs. Your question please, James. James Jarrow: Good afternoon, and thanks for taking the question. Could you just update us on the success of the match programs in the invest business so far? How much has this been driving the flows in that side of the business? And perhaps if you could just also comment on the ROIs there and how you structure that to ensure strong ROIs. David Fortunato: Hey, James. So I would say we are constantly experimenting with incentives. The most successful incentives that we have done for cash-to-invest adoption have actually not been the deposit matches. It has been other types of incentives that we have run to encourage cash-to-invest adoption. We are happy with the initial response to the direct deposit incentive having driven a fair amount of investment account opening. It is still early, and so we will have to see how that evolves over time. We will have to see how that evolves with new clients and if the cross-product adoption rate early in the client tenure improves as we expect it to. I think, generally, our incentives have been successful with the second-best quarter in our history at cross-product flows of cash to invest and a second record quarter of net cross-account transfers from cash to invest. But I do not think that we have overly focused on match as the driver of those. We have looked at a variety of incentives and are pursuing the ones that we feel deliver the best overall outcome to the company and to our clients. James Jarrow: Okay. Thank you so much. That is super helpful. I just wanted to ask a bigger-picture one. So let us say we get to a terminal Fed funds of roughly 3%, which obviously there is uncertainty as to whether we will get there. But how would you think about the right way to model the mix of your client assets across cash versus investment advisory? In other words, what percentage of client assets would you expect to be cash versus investment advisory? Alan Imberman: Hey, James. It is Alan here. Yeah. I think it is a difficult question in the sense that there is more going on than just the level of rates. Clients are accumulating more wealth, and as we have shown in our prospectus, as clients obtain a certain level of cash, they start putting incremental dollars to work and investing, and so you start to see the investment account, which grows faster as well, really continue to grow. And that is what we have seen over the past few quarters. And did not discuss this last time, but investment advisory assets have now overtaken cash assets pretty clearly. And so when we are modeling it, I think it depends on, as well as younger clients coming in who start with cash because they are early in the journey in savings. So I think you have to have more variables than just the level of rates. I think you have to have variables around clients that are coming in and then our existing clients and their behavior. And, again, we have control over that in some of the incentives that we offer. And so that is probably how I would think about it. James Jarrow: Okay. Thanks a lot. Alan Imberman: Thank you. Operator: Our next question comes from the line of Alexander Markgraff of KBW, KBCM. Your question, Alex. Alexander Markgraff: Thanks. Hey, David, Alan, Matt. Thanks for the question. A couple here. I guess just first, David, from a product standpoint, if I look at the releases in 2025, pretty busy. Just sort of curious how you think about calendar 2026 or fiscal 2027 using the sort of digestion year versus carry-forward of velocity framework? And then, Alan, just as a follow-on to that, maybe just some comments on spend priorities in the context of David's comments would be helpful. Thank you. David Fortunato: Hey, Alex. I guess our focus as a product development and technical organization is to be able to build automated products so that we can continue to focus most of our technical talent on delivering new products to clients and improving our existing products. We have a lot left to build. I would say that one of the things that we have seen over the past couple of years is that our roadmap only ever gets longer of things that we want to focus on and we want to get out to our clients. As we continue to build a deeper understanding of our clients' financial situations through both the qualitative and quantitative research that we do into their financial lives, we continue to have new ideas and be excited about those ideas. And so the focus that we have really is on prioritizing and focusing on the things that we think will make the biggest impact to our clients' financial outcomes and have the biggest impact on our business, but we really want to continue to accelerate product velocity, if anything, to continue to get products out to clients and improve the existing product experience so that Wealthfront Corporation is delivering the best value of any provider in the space. Alan Imberman: Yeah. What I would say to add to that in terms of the spend, as I mentioned in the prepared remarks, the investment in home lending as well as our incentives are really where we are putting a lot of resources. We continue to work on incentives and really strengthening the core as well while we invest in home lending. And so that has not changed. We continually look at our business model flywheel and kind of prioritize around that. And so we are continually trying to figure out ways to automate to generate savings, share those savings with clients to help their financial outcomes, build that trust, get them to refer us, and grow with word-of-mouth. And some of that is used through incentives. And so we will continue to use that as our framework for how we invest. Alexander Markgraff: Awesome. I appreciate that. And then, Alan, maybe just a quick follow-up, more sort of model mechanics question on the money market fund. Understanding there are a lot of factors that determine the ramp of that, but just as we see that sort of mix into the model, just a reminder on how that sort of affects the revenue lines would be helpful. Alan Imberman: Yeah. So it will be inside of cash management. We are in a fee waiver period right now. I think starting March 1, the fee is a quarter of a percent on the management fee. And then in terms of, as David mentioned, it offers a really good after-tax yield for folks in states with high income tax. And so we will have to see in terms of the growth once we roll it out to general availability. But that is where it will fit, and that is the monetization on the product. Alexander Markgraff: Awesome. Thank you both. Appreciate it. Operator: Please press *11 on your telephone to ask a question. And as there are no further questions in queue, I would now like to turn the conference back to David Fortunato for closing remarks. Sir? David Fortunato: Thank you. I want to thank everyone for joining the call and for your continued interest in Wealthfront Corporation. We look forward to staying in touch and updating you on our progress in the months ahead. Thanks all. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Matthew Moon: Everyone else has left the call.
Operator: Greetings, and welcome to the CuriosityStream Inc. Fourth Quarter and Year End 2025 Results Conference Call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the call, it is now my pleasure to introduce your host, Tia Cudahy, Chief Operating Officer. Thank you. You may begin. Tia Cudahy: Thank you, and welcome to CuriosityStream Inc.'s discussion of its fourth quarter and full year 2025 financial results. Leading the discussion today are Clint Stinchcomb, CuriosityStream Inc.'s Chief Executive Officer, and Phillip Brady Hayden, CuriosityStream Inc.'s Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. But first, I will review the safe harbor statement. During this call, we may make statements related to our business that are forward-looking statements under the federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties, and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements. Please be aware that any forward-looking statements reflect management's current views only, and the company undertakes no obligation to revise or update these statements, nor to make additional forward-looking statements in the future. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website, as well as the risks and factors discussed in today's press release. Additional information will also be set forth in our annual report on Form 10-Ks for the fiscal year ended December 31, 2025, when filed. In addition, reference will be made to non-GAAP financial measures. A reconciliation of these non-GAAP measures to comparable GAAP measures can be found on our website at investors.curiositystream.com. Unless otherwise stated, all comparisons will be against our results for the comparable 2024 period. I will now turn the call over to Clint. Clint Stinchcomb: Thank you, Tia, and good evening, everyone. CuriosityStream Inc. was built on one timeless idea. Curiosity changes the world. That every breakthrough begins with a question. A thousand years ago, Leif Erikson sailed west into the unknown and discovered a new world. Nearly a millennium later, Neil Armstrong stepped onto the lunar surface carrying the same enduring message across time. Discovery belongs to the bold, and curiosity is our compass. From ocean waves to moondust, that spirit propels us forward today. In that same spirit of bold exploration, we delivered strong full year 2025 results. Revenue grew 40% to $71,700,000 from $51,100,000 in 2024. Adjusted free cash flow increased 46% to $13,900,000 from 2024. Q4 revenue rose 36% year over year to $19,200,000 from $14,100,000, and adjusted free cash flow climbed 33% to $4,300,000. These gains reflect the strength of our complementary revenue pillars: licensing, driven by high volume and heavily structured video fulfillments for AI model training; subscription sturdiness through operational execution and new partnerships; amplified by cost discipline that expanded gross margins to 60% in Q4 from 52% a year ago, and reduced nondiscretionary G&A expenses by 33% year over year. In 2026, we believe our annual licensing revenue will exceed our overall subscription revenue. We believe we will grow our subscription revenue by low to mid single-digit percentages because of three key drivers: new pricing, which we began rolling out March 1; new wholesale and retail partnerships; inorganic growth from existing partnerships. The recurring, reliable, and predictable revenue from subscription services cements our foundation. Why do we believe we will see licensing revenue eclipse subscription revenue in 2026? Why do we believe licensing will be robust and durable for the foreseeable future? What is the impact to top line, bottom line, and margin expansion? Well, we have covered some of this before. Many investors, analysts, and commercial partners tell us it bears repeating. CuriosityStream Inc.'s licensing business is durable because it is built on assets that are durable, that are scarce, rights-aware, difficult to replicate, and increasingly valuable across multiple end markets. We are not talking about a single opportunistic window. We are talking about a monetization model anchored in premium, unscripted, and scripted media, enriched structured metadata, flexible rights, and growing demand from AI developers and traditional media companies. CuriosityStream Inc. has built a large differentiated content library of rights to nearly 3,000,000 hours of premium factual content plus sports, plus news, plus general entertainment, animation, and film, finished and raw, supported by more than 200 content and data partners and flexible licensing rights. This is not commodity inventory. It is scaled, unscrapable, curated, a corpus that took years of capital, relationships, editorial focus, and dense work to assemble. Enduring revenue streams are almost always rooted in assets that are hard to replace and expensive to rebuild. Demand is broadening, not narrowing. Beyond repeat business from existing customers, we expect our overall roster of partners to more than double in 2026, and potentially increase five to six times in 2027 as the fine-tuning of open-source and certain proprietary models opens opportunities for hundreds of companies. Historically, licensing meant selling finished programs or package rights to broadcasters, streamers, and pay TV partners. That business remains alive and healthy. And in 2025, we announced new license agreements with linear broadcasters, educational platforms, digital-first outlets, global streaming services, and, of course, next-generation AI training developers. This diversification makes licensing more durable and cycle-resilient. Traditional media licensing is healthy and not going away, but AI licensing is accelerating much faster and driving the bulk of our growth here. Over the next five years, AI model development, model refresh cycles, geographic expansion, enterprise fine-tuning, education applications, systems, and multimodal search should all support continued appetite for premium licensed corpus. For AI licensed partners, as their model sophistication grows, so does the need for more video inputs. Developers require large volumes of high integrity, rights-aware training inputs. Premium broadcast video, clean audio, scripts, captions, study guides, metadata, and derivative assets have utility well beyond entertainment viewing. They help train, tune, evaluate, ground, and improve multimodal systems. The more advanced models become, the more they need high-quality, structured, legally licensable data rather than undifferentiated scraped material. So key to note that rights-cleared, structured media will become more valuable over time, not less. There is plenty of media on the open web, but much of it is noisy, duplicative, poorly labeled, low quality, or legally ambiguous. By contrast, CuriosityStream Inc.'s corpus is assembled, curated, and increasingly productized for commercial use cases. The premium quality of our video also helps us stand out, as we have video captured with top-tier equipment like RED cameras, HDR formats, and Blackmagic workflows, delivering cinematic excellence with real-world visual depth. This means sharp, high-resolution footage that captures subtle details from the textures of ancient ruins in history to the fluid motions in wildlife sequences. For AI training, this translates to superior data for tasks like object recognition, scene understanding, and generative video. Said plainly, we generate competitive escape velocity through our expanded data structuring and metadata capabilities that are designed to meet partner volume requirements and bespoke specifications. We are not merely selling files. We are not merely selling clips. We are selling usable datasets. That distinction is critical. In AI, a rights-cleared file has value. A rights-cleared file with strong metadata, taxonomy, provenance, segmentation, and packaging has much more value. That creates pricing power and maintenance. Further, our licensing model benefits from operating leverage and the fact that the standard industry licensing practice in the AI space is one of nonexclusivity. I cannot emphasize enough the value of this dynamic. As our critical-mass corpus is now assembled and the infrastructure is largely in place, each new partnership carries attractive incremental economics, as our hard costs to create or license in content are largely de minimis. We will continue to increase our volume through rev-share constructs that minimize cost and risk. We can now monetize the same video multiple times in multiple forms across multiple geographies and buyer classes. Of course, durability does not mean inevitability. We have to execute. We have to move the ball forward every day. We need to continue acquiring and negotiating sufficient scopes of rights, enriching metadata, segmenting our corpus intelligently, protecting quality, and packaging assets in ways that map directly to buyer workflows. We need to stay disciplined on pricing and avoid treating the library like an undifferentiated commodity supply. We also need to manage legal and policy developments thoughtfully. But all of these are execution challenges. These are not reasons to doubt the model. In fact, a market that increasingly values provenance, trust, and rights discipline should favor CuriosityStream Inc., not hurt it. Our view is informed. Our view is straightforward. CuriosityStream Inc.'s licensing of video, audio, images, scripts, and related data products is durable because it rests on scarce assets, diversified demand, strong reuse economics, and a market shift toward high-quality licensable content. It can continue to grow significantly because we are still early in the monetization curve. It will be lumpy over three- and six-month tranches. But as Warren Buffett often said, we would rather have a lumpy 15% than a smooth 12%. Traditional licensing is meaningful. AI licensing is scaling rapidly. And the strategic value of curated, rights-aware, metadata-rich premium media compounds over time. This is why we believe licensing will remain a critical and durable growth engine for the long-term, foreseeable future. In summary, we believe that we will continue double-digit growth in both revenue and cash flow driven by subscriptions and licensing expansion. We intend to pay 2026 dividends from cash generated by operations as we did in 2024. Our balance sheet remains strong with over $27,000,000 in liquidity and no debt, which we believe gives us financial flexibility. I will now hand the call over to our CFO, Phillip Brady Hayden, who I am sure will emphasize that, among other attributes, at today's share price, we are a growth company that also offers a dividend yield of 10%. Thank you, Clint, and good evening, everyone. Our full financial results are presented in the back of the press release that we just issued a few minutes ago as well as the 10-Ks that we will file in the next few days. But let me quickly go through some of the results that we want to highlight for the fourth quarter as well as full year 2025. In the fourth quarter, we reported revenue of $19,200,000 at the high end of our guidance and a 36% increase compared to $14,100,000 a year ago. For the full year, revenue was $71,700,000, a 40% increase from last year. Likewise, we reported another quarter of positive adjusted EBITDA, which came in at $1,100,000. This was an improvement of $3,100,000 from a year ago, and also our fourth sequential quarter of positive adjusted EBITDA. For the full year, adjusted EBITDA was $8,200,000, a $14,300,000 improvement from 2024. Adjusted free cash flow exceeded our guidance in the fourth quarter at $4,300,000, which is also our eighth consecutive quarter of positive operating cash. For the full year, adjusted free cash flow was $13,900,000, a 46% increase from $9,500,000 in 2024. Licensing revenue was $9,800,000 in the fourth quarter, an increase of $6,100,000 from last year, while subscription revenue came in at $9,100,000. For the full year, subscriptions were $37,000,000, while licensing came in at $33,200,000. This was an increase of over $25,000,000 from 2024 and driven by continued growth in AI training fulfillments. Fourth quarter and full year gross margins were 60% and 57%, respectively, each of these improving from last year. Within cost of revenue, storage and delivery costs increased during the year in light of the high volume of video we put into AI licensing agreements. For the full year, combined costs for advertising and marketing plus G&A were higher by 24% compared to last year, although this increase was the result of noncash charges for stock-based compensation of $14,400,000, or about $0.24 on a per-share basis. G&A also included an adjustment to payroll costs for incentive compensation, as well as a number of one-time expenses associated with our August secondary stock offering. Were it not for the noncash SBC, the incentive comp adjustment, and the common stock sale, G&A would have declined by over $1,000,000 in 2025. For the full year, net loss was $6,400,000 compared to a net loss of $12,900,000 in 2024, representing an improvement of over 50% in net loss. While our revenue was up materially from last year, the 2025 net loss was driven by the one-time charges, incentive comp adjustment, and noncash SBC. Were it not for these specific charges, we would have posted positive earnings for the year. And as we said earlier, adjusted EBITDA was $1,100,000 in the fourth quarter compared to a loss of $1,900,000 a year ago. And for the full year, adjusted EBITDA was $8,200,000 compared to an adjusted EBITDA loss of $6,000,000 in 2024. For the full year, adjusted free cash flow was $13,900,000, a 46% increase from $9,500,000 in 2024. This totals well over $20,000,000 in operating cash that we have generated over the last two years. On October 14, 6,700,000 of our warrants expired unexercised. While these warrants have been trading well out of the money for some time, this expiration of all of the company's outstanding warrants reduces potential dilution and should eliminate any lingering share overhang associated with these instruments. In December, we paid $4,700,000 for our fourth quarter dividend. Including our $0.10 special dividend paid in June, this brings our total dividends paid to $22,000,000 for all of 2025. We ended the year with total cash and securities of $27,300,000 and no outstanding debt, and we believe our balance sheet remains in great shape. Based on yesterday's share price, CuriosityStream Inc. is generating an adjusted free cash flow yield of over 8% and a current dividend yield of over 10%. Given where our shares have recently been trading, we just announced that our Board has increased our share repurchase authorization to $6,000,000, and we plan to selectively resume our repurchase activity in the coming weeks and months. Moving to guidance. For 2026, we expect revenue in the range of $38,000,000 to $42,000,000 and adjusted free cash flow in the range of $6,000,000 to $9,000,000. For the full year, we continue to believe we will achieve double-digit growth in both revenue and cash flow in 2026, and that a full year of positive GAAP earnings is achievable. With that, we can hand it back to the operator and open the call to questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. This is Brent. We are ready to take questions. Go ahead. We are experiencing some technical difficulties. Thank you for continuing to hold. We will be with you as soon as we can. Again, appreciate you continuing to hold. Thank you again for your patience. This is the CuriosityStream Inc. year end 2025 earnings call. We are still having technical difficulties. If you are in the question queue right now, would you please email your questions in reply to the email that you are about to receive, and we will take questions over email shortly. Thank you so much, and thank you for continuing to hold. Thank you for holding. This is the CuriosityStream Inc. 2025 year end earnings report. Our first question today comes from Dan Medina from Needham. Dan Medina: Could you please update us on whether LLM licensors are renewing their deals with you and how the nature of second contracts is different from the earliest LLM contracts you licensed? Clint Stinchcomb: Thank you, Dan, for that question. Really appreciate it. The answer is yes. Virtually everyone has renewed or will renew. And the beauty of the second agreement is it is always easier because you have the paper in place. Same thing with the third agreement. Same thing with the fourth fulfillment. So without a doubt, we are seeing repeat business. At the same time, we are seeing a lot of new potential partners express interest and express either very high volume and specific requirements that we are working aggressively to fulfill right now. Thank you, Dan. Dan Medina: Any change in the pace of adding other companies' libraries to your ability to license hours to the LLMs? Clint Stinchcomb: We are like the Golden Gate Bridge there, Dan. We are constantly in acquisition mode. We have built and amassed, I think, an extraordinary library. We have been told just this week by the most valuable by market cap companies in the world that we have the best video corpus for AI training. So we have video in place. We have paper in place with the world's biggest companies. We have enhanced our human talent. We have done the necessary things to ensure the sturdiness of our subscription services, and feel really, really good about the year, Dan. Dan Medina: Can you give us some cases of how LLMs are using the information you licensed to them in the market to make money, tools, and apps? Clint Stinchcomb: I think it is a great question, and I think that if you look at the evolution of what our technology partners are looking for and are working toward, if you start with 2020 with large language models, there was a lot of text that started there. And that was designed to help teach the models to read, to help create document summarizers, knowledge Q&A, support bots, act as coding copilots. We transitioned up the scale to kind of multimodal AI, which is text, which is images, which is audio, which is video, and that led to video summarization, camera assistance, text-to-image, text-to-video, and agentic AI. Obviously, that is part of the spectrum now, and that is where systems plan, use tools, and act autonomously. And the use cases there are research agents, travel booking assistants, code agents, data ops agents, CRM bots. There is almost an infinite number of use cases. And then I think certainly an exciting stage that we are in the early stages of right now is physical AI where the content is being used to embed AI into robots, into cars, into drones, into devices. And similarly, I think, an infinite number of use cases here with warehouse robots, self-driving cars, home robots, delivery drones, factory arms, all kinds of things. So extraordinarily exciting, difficult to stay up with all of the use cases, but the good news is we have such a variety, such a strong scope of video and data, that we are able to fulfill a large scope and scale of requirements. Jason Kreyer: Clint, you called out 2026 as the greatest year in company history. Can you unpack that from a metrics standpoint, perhaps with some more clarity on your goals for the base streaming business and then the licensing opportunity? Clint Stinchcomb: Thank you for that question, Jason. So we made a lot of progress in 2025. We talked about the increases in cash flow and top line revenue, in the size of our library, and the quality of our library. And so as it relates to our subscription business, and that includes wholesale and retail subscriptions, we are confident that we are going to grow that at low to mid single digits, and we are really confident in that because we have new partnerships coming on every month with channel stores around the world for CuriosityStream Inc. for CuriosityStream Inc. You, and even for CuriosityStream Inc. Catholic Stream. We have new wholesale relationships that are rolling out over the next several months, and even now. And we took a price increase March 1. That is going to take a while to roll through our financials. But with those three things and with the marketing money that we are spending, we are very confident that we will grow our subscription business in the low to mid single digits. And so, based on what Phillip shared, that is off a base of $3,637,000,000 a year. On the subscription side, we are confident that, or I am sorry, on the licensing side, we are confident that we are going to eclipse our subscription revenue because of the work that we have done to date. We are experiencing and anticipating a lot of repeat business from existing partners and customers. And at the same time, I think that our new Chief Commercial Officer, John Belaid, has brought an extraordinary amount of velocity to our efforts right now. And so in working with our key people here, our ops team, we are going way beyond the obvious top six to eight companies that are in the space and anticipate expanding our roster really significantly this year. Now, again, that will be choppy, but the opportunities are big. I am glad that I lived to work through this period of time because we have the goods. We have really unique advantages. We need to execute, but I have never in my career been so close to so many big opportunities at the same time. Thanks, Jason. David Marsh: On the subscription front, how many new platforms are you expecting to launch during FY26? And how many new countries do you think you could launch with existing partners? Clint Stinchcomb: Great question, Dave. Thank you. Well, I think just this year alone, we have already launched with Apple in Canada as one of many examples. And we anticipate that over the course of this year, probably 12 to 20 new platforms. Some of these are not all created equal. Some are larger than others. Some deliver more opportunity than others, but certainly 12 to 20 over the course of this year. And the beauty of all of that is the partners that we are working with are good at growing subscribers. So I feel really confident about our ability to grow that side of the business, and it is sturdy. David Marsh: If I heard you correctly, it sounded like SG&A would have been down $1,000,000 year over year without the nonrecurring charges. So would mid $20 millions be a good expected run rate for fiscal year 2026? Phillip Brady Hayden: Good question, Dave. We do not provide guidance on the expense side, but I think those are fair numbers. Obviously, with stock-based comp, that is a little bit of a wild card because of the way we award our grants and the way the accounting treatment is applied to those. It can be somewhat difficult to predict. But I think if you take out stock-based comp, we are actually looking at G&A other than SBC below $20,000,000. I think your range is certainly fair. David Marsh: Any M&A opportunities you might consider? Clint Stinchcomb: Thanks for that question, Dave. We will always do what is in the best interest of our shareholders. I think that the M&A environment will be exciting this year, will be ripe. If you look at some of the deals that have been done most recently with the big companies, those are a lot more around synergies. But we believe that if we continue to execute, continue to post good increases, continue to show the value of our subscription business and our licensing business, that we will have the opportunity to consider whatever combinations are in the best interest of our shareholders. Patrick Sholl: Could you provide any additional color on the market for content to license for AI training and how your partnership with Versus Video Training Library supports these efforts? Clint Stinchcomb: So Versus is a really good company. They are a technology partner of ours. We have worked with them for a long time. They help us to organize our content, for the most part, help to clip our content, and they help us manage an increasingly large volume of content as we are organizing fulfillments there. Now, we did a lot of licensing agreements before we started working with Versus, but I think they are helping us by handling some of the work on the organization side, helping us to do even more. As far as the content that we offer today, a lot of people rightly think of CuriosityStream Inc. as a company focused in the factual media space. And certainly, we are. And certainly, we have a whole variety of content there. We have a corpus today that is a collection of content from not just ourselves, but from over 200 partners. And so in addition to the full range of factual content—crime, heist, historical crime, espionage, travel, food, culture, home—we also have a good corpus of scripted content, which is really hard to acquire for a variety of reasons—dramas, comedies, westerns, action films, adventure films, mystery, family faith films, etc. And we also have a broad collection of sports—American football, soccer, surfing, tennis, basketball, billiards, boxing, drifting, lots of combat sports. So we have a full corpus there. That is something that gives us a unique advantage and enables us to engage with virtually everybody on the planet who has video licensing needs for training and other purposes. Patrick Sholl: With the price increase implemented March 1, what is the timing of it being fully implemented and expectations on churn? Clint Stinchcomb: It will take a year to fully implement just because we have so many people on annual subscriptions. I think what you will see in the first month is probably 3% to 4% of all of our customers, 5% maybe, who become part of that, and so that will roll out over time. With our pure direct customers, obviously, it will not roll out fully until everyone has renewed their agreement. On the partner side, most of those subscribers are monthly, and it takes some of them a little bit longer to roll out the pricing increase, but we anticipate that over the next handful of months, everybody will. So we will get significant benefit this year, and we will continue to get benefit through February next year. Patrick Sholl: Any additional commentary on the cadence of guidance and expectations on the full year? Clint Stinchcomb: I will speak to that for a minute, and then I will hand over to Phillip for his point of view as well. We got into the half year because many of the partnerships that we are working on are large and have the potential to be very large, and they are a little bit lumpy. The benefit to working with the biggest companies in the world is you know you are going to get paid. You are not chasing people to get paid. However, sometimes the payment schedules can be a little different than certain other companies. So the cash revenue can be a little bit lumpy in light of these big licensing opportunities. And so we are extremely confident in the year that we are going to have this year. Without giving specific year-end guidance, like we said, our intent is to pay our dividend from cash from operations. And our belief is that our licensing revenue will exceed our subscription revenue. So we feel good about where we are going to end up. We have said double-digit increases in both cash flow and top line revenue, and that is what we are working toward every day and are confident that we will achieve. Phillip Brady Hayden: The only thing I will add is the revenue cycle for these deals, and we have talked about this before, but it is generally between four and six months. We are delivering content. We are then recognizing the revenue. We go through an acceptance process. We are not issuing our POs until we are actually getting paid under most of the contracts that we are doing. So the entire cycle can last as long as six months, and it has just become very difficult for us to predict with much precision exactly when the numbers are going to hit. I will say, as we get closer to midyear, I think there is a good chance we will narrow our guidance and revise it into Q2. We know it is a little bit broad, having the $38,000,000 to $42,000,000 and $6,000,000 to $9,000,000 on the cash flow side. But our plan would be to narrow that to the extent that we can here during the second quarter. Clint Stinchcomb: And I know that it is March 11, and people are probably wondering what we are going to do in the first quarter. And what I will say is the good news about much of what we are doing today is it is not seasonal. Our intent is to do the best deals that we can, and obviously for the company, but for our partners, because we believe that those will lead to additional opportunities. We said double-digit increases in cash flow and top line revenue for the year. That may seem a little conservative to people or a little lukewarm in light of the fact that we did 40% to 46%, but our intention as we give guidance is to beat that guidance. And that is the approach that we are taking, and we believe that over the year, that will yield the best results for us. Thank you for that question, Patrick. Tia Cudahy: Clint, Phillip, thank you. This is the end of the CuriosityStream Inc. Q4 and year end 2025 earnings call. Thank you again to all of the participants on the line staying with us through the technical difficulties. Have a nice evening.
Chris Merkel: Hi, everyone. Welcome to Exodus Movement, Inc.'s fourth quarter 2025 earnings call. I am your host, Chris Merkel, and with us today are Exodus Movement, Inc.'s Co-Founder and CEO, JP Richardson, and CFO, James Gernetzke. During today's call, we may make forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may vary materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in forward-looking statements in our earnings press release and our most recent Form 10-K filed with the Securities and Exchange Commission, available on the investor relations portion of our website. We do not undertake any obligation to update forward-looking statements. As always, feel free to visit our social media accounts on X or Reddit to submit questions for our investor relations team after our call. I will now turn the call over to JP to discuss Exodus Movement, Inc.'s fourth quarter and full year 2025. JP Richardson: Thank you everyone for joining. We want to try something a little different today. I have been told multiple times that my opening on earnings calls just does not sound like me, and I think that is a fair criticism, so we are going to keep this more conversational, a lot like how I speak publicly on interviews or even internally in company all-hands calls. So often, I love to tell stories, and today is going to be no different. A couple weeks ago, I took my kids skiing for the first time. My little boy, he is seven years old. And so we are on the bunny slope, where they teach the young kids, and he could barely stand up. He kept falling over and over again. And I am sure many of you with kids can relate to this. But he kept getting up over and over again. Ultimately, he asked about going up on a lift on the mountain to actually go down. His mom looked at him and she goes, son, you are not ready yet, and your dad does not think that you are ready yet. He said to her, he is like, I am going to show him. Meaning me, of course. So me admiring his determination I said, okay. Well, let us go. Go to the top of the mountain. Let us check it out. So we all went up, and he is going up and he went down, and, yeah, he fell a couple times, but he made it down without any issue. It was actually really impressive. Thinking about this moment with my kids and heading into this call today, it is kind of a lot like what 2025 felt like for this company. The market kind of knocked us around. Stock price and Bitcoin price just tested everyone's patience, and every single time the team just kept building. Even when we get knocked down, we just kept building. Focused. We are building the infrastructure that makes us less dependent on market conditions, these very market conditions in the first place. We will walk you through what we built and where we are headed. Let us do a brief look back into 2025. 2025 was the most consequential year in the history of Exodus Movement, Inc. This is because of what we built while the market has been pulling back. As you remember, early 2025, it seems like an eternity now, we rang the bell on the New York Stock Exchange. Ultimately, being on the New York Stock Exchange opened the door for more investors that could not touch us in the OTC markets. We announced Exodus Pay, one of the most important products in the company's history. In November, we closed the Grateful acquisition, and this gave us a live payment sandbox in Latin America, where every lesson in Grateful is making its way back into Exodus Pay. In the same month, we signed the W3C acquisition—I am going to come back to that in a moment. We expanded ExoSwap to more signed partnerships—I am going to talk about that even later. We expanded our tokenized equity to Solana through Superstate's Opening Bell platform. For full-year revenue, we grew 5% to $121.6 million. That growth came from improved monetization and B2B expansion, even as retail activity softened all the way toward the end of the year. Now for ten years, Exodus Movement, Inc. was built on speculation. When crypto is up, we thrive. When crypto pulls back, we feel it, much like what we are seeing in the markets today. As a public company, the stock reflects this reality directly. This model has served us well for a decade, but it is not enough anymore. Everything we did in 2025 was in service of one goal, and that is creating more revenue streams—revenue streams that do not depend on where crypto trades tomorrow. We are becoming a payments company—one that serves people whether Bitcoin is at $30,000 or $130,000. One that earns revenue from the daily financial lives of real people, not just trading activity. The product at the center of the shift is Exodus Pay. Most people use at least three financial apps—I am guessing many of you on this call are going to be very familiar with this. No doubt you have a banking app. You have a payments app like Venmo or Cash App. And you probably have a brokerage app like Robinhood or Fidelity. Exodus Pay makes it one. We are building the product that lets people send, spend, invest, and earn from a single interface. No seed phrases, no blockchain jargon, no L1, L2—which, later on, nobody cares about that stuff. No complexity. Self-custody should feel as easy as tap to pay. And at its core, Exodus Pay is built on stablecoins. Stablecoins are the dollars that move at Internet speed. You may have heard of them. We are making stablecoins usable for everyday payments—groceries, rideshare, restaurants, anywhere Visa or Mastercard is accepted. Again, from speculation-driven swap fees to revenue built on daily utility. What is going to power Exodus Pay is the product of W3C. So let us talk about the W3C acquisition. It remains the centerpiece of our vertical integration strategy. Let me remind everyone why this deal matters in the first place. The first reason this deal matters: we get to own the full payment stack from self-custodial wallet to the spend card at the terminal. No other wallet owns end-to-end payment rails. The second reason is revenue diversification. Our revenue today is heavily tied to swap volume. The third reason is the B2B2C infrastructure for partners. W3C already powers MetaMask, Ledger, OKX, and Kraken in their cards. Owning this infrastructure means Exodus Movement, Inc. can provide card programs and payment rails to other wallets and apps. This means more revenue from partners without acquiring those end users directly. We remain confident in the ability to close in 2026 and are working diligently toward closing. Switching to what seems these days like everybody's favorite topic, AI, because it is reshaping both how we build and what we build. Let us first talk about how we build. I actually write code every single day using Claude Code. Tasks that used to take me months now take me just hours. It is that wild how good these tools are these days. What is true for me here is true for our entire engineering organization. We are pushing hard toward a model where AI ultimately writes all of our code. We are not there yet, but the productivity gains we are seeing so far have already been quite significant. Now with what we build—how we think about the future here—is that we think AI agents represent an entirely new class of customer for Exodus Movement, Inc. These agents are going to need wallet infrastructure. They are going to need to send money, check balances, and make purchases. It is easy, when you think of payments apps like Exodus Pay, to think of the total addressable market as just 8 billion people of the entire world, right? But with AI agents, it will potentially be in the trillions because each one of these agents is going to need a wallet. Exodus Movement, Inc. aims to be the default wallet layer for this world. Let us hit on ExoSwap. ExoSwap continues to be a meaningful volume driver. In Q4, we signed—or in total, have—18 signed partnerships, 11 that are producing, $416 million in Q4 volume, 26% of our quarterly total. This strength shows that our infrastructure is trusted by other major platforms like Ledger and MetaMask. MetaMask just went live in December with Solana. Following the close of W3C, we are going to be able to offer card issuance as well to a lot of these partnerships that are using ExoSwap, especially a lot of the new ones. I want to leave you with this. Our revenue today does not yet reflect the magnitude of what we have built. We have invested significant resources—capital, talent, time—into infrastructure, acquisitions, and product development that have not yet hit the top line. I understand this. I understand the patience it requires from you, our shareholders. I want you to understand what is on the other side. We are shifting from a company built on speculation to a company built on payments—on daily utility, on infrastructure that earns revenue every time someone taps a card, invests into their future, saves for a rainy day, or buys their groceries. That is the company we are building. 2025 laid the foundation, and 2026 is where it starts to come to life. With that, I am going to hand it over to James to walk through our financial results. James, thank you. Let us start with Q4 and full-year revenue and swap volumes. James Gernetzke: Full-year revenue was $121.6 million. That is up 5% from 2024. Q4 revenue was $29.5 million, which represents a 3% decrease from Q3 and a 34% decline from the record Q4 we had a year ago. To put that year-over-year comparison in context, Q4 2024 was our highest revenue quarter in company history, in a quarter where we saw major industry catalysts like the U.S. election and Bitcoin topping $100,000 for the very first time. As a recent industry backdrop, digital asset prices were also in decline for most of Q4 2025 after briefly enjoying early October highs. Full-year swap volume was $6.89 billion, which is a 21% increase from 2024. This is a meaningful increase that demonstrates the underlying growth in the platform, even as digital asset prices declined. Q4 swap volume of $1.59 billion was down 9% sequentially and down 32% year over year, tracking the broader market pullback. ExoSwap, our B2B swaps platform, continued to be a significant volume driver for Exodus Movement, Inc. at $416 million of volume in Q4, or 26% of our total quarterly volume. Our growing B2B swap volume demonstrates that Exodus Movement, Inc. is increasingly a critical piece of infrastructure for the broader ecosystem. With regard to staking and other non-exchange revenue, full-year revenue from staking reached over $4 million for the year, nearly doubling 2024's total. Our improvements to Solana staking in particular drove this acceleration. This is recurring revenue that can be compounded for as long as the assets remain under stake. Fiat onboarding also saw a 28% increase in revenue versus 2024. Quarterly funded users—users who have actually put their money into Exodus Movement, Inc.—finished the year at 1.7 million. That is down 6% from last quarter and 11% from a year ago, reflecting the broader retail environment. Monthly active users at the end of Q4 were 1.5 million, down 35% from the previous year and unchanged sequentially. While monthly active users declined year over year in line with broader retail activity, our funded user base remained resilient, demonstrating the stickiness of our wallet. To pursue ownership of a full payment stack, during 2025, we funded $80 million of debt related to the W3C acquisition. While we initially used the Galaxy credit facility, we made the decision to pay off that debt prior to the end of the year. This resulted in the first reduction of our Bitcoin treasury in quite some time, and during 2026, we have continued to sell digital assets as we prepare for the next disbursement related to the W3C acquisition. As we have stated in the past, we believe that our treasury, including our Bitcoin treasury, is available to fund M&A and other growth initiatives, ultimately growing our Bitcoin treasury. On a related note, we continue to evaluate ways to demonstrate the power of tokenized equity. However, we are pausing our Bitcoin dividend plans as we are prioritizing M&A and other growth initiatives at this time. We remain committed to exploring opportunities afforded to us and our shareholders through tokenized equities as their use continues to grow. Finally, expanding on JP's earlier note regarding ExoSwap, MetaMask is a notable name that we signed towards the end of last year. Their wallet launched support in the final days of 2025 for Bitcoin. Initial results are slowly ramping up as MetaMask users gain familiarity with the new multichain functionality. Chris, with that, let us get back over to you for questions. Chris Merkel: Thank you, James. We will now open for questions. It is time for our analyst questions, and I see we have Andrew James Harte from BTIG. Go ahead, Andrew. Andrew James Harte: Hi. Can you hear me okay? Chris Merkel: Yes. Andrew James Harte: Great. Thanks for taking the question. JP, I thought your comments about agentic payments were really interesting. I think the idea was that agents are going to need the wallet infrastructure to operate out of. I guess, can you just expand on the steps needed to go from where we are today, both in terms of capabilities or potential partnerships or integrations, to make that a reality? That would be very helpful. Thank you. JP Richardson: Yeah. Great question. Ultimately, when you want to enable agents to be able to transact with wallets and send stablecoins, what you want to be able to do is have a world where the company or individuals that are using or leveraging these agents can maintain control over their wallets. I mean, I suppose what you could do, you could just set up an OpenClaude on your Mac mini, right, and have it go hog wild with Exodus Movement, Inc., then that would work today or should work today, right? But, again, what you want is to be able to say, okay, I have this mass amount of agents. Maybe I am a company in the travel industry, right? I am going to have an AI agent doing travel on behalf of consumers. Well, I need to be able to basically either give the consumer the ability to give access to, say, Exodus Movement, Inc. in that AI agent or, as a business, be able to give an AI agent access to a number of wallets that I have full control over and can control the keys as well. Effectively, what that means is that from the consumer perspective—again, I am just going to step into the shoes of an Exodus Pay customer—that means having Exodus Pay or Exodus connect directly to, like, a ChatGPT or a Claude. Actually, that is something that behind the scenes we have had working for a while, but we just want to make sure the user experience works really well. When it comes to the business side—again, that travel agent example—what that ultimately means is that we would have to produce back-end software for these agents to be able to, again, view all these separate wallets. There are a number of angles that we are looking at here. The one that we are most interested in in the short term is empowering consumers that have, again, just Exodus Movement, Inc. on their phone and are able to connect to, again, like, ChatGPT or even, in some cases, maybe even an OpenClaude as these agents become more commercialized and say, go ahead. Spend up to $500. I want you to go look for a flight, the best flight to, I do not know, Florida, right? Whatever it is. That is going to be critical, and to make all that work well and to make sure that the limits and restrictions are in, because, again, you do not—like, the worst-case scenario is if you say, okay, AI agent, you have full access to my wallet, be good with it, and then you find out it went and speculated and bought a bunch of Dogecoin from your entire wallet. You would be pretty upset about that. So there are a lot of security controls that have to come in place as well. Chris Merkel: Alright. Ed Engel from Compass Point is next up. Go ahead, Ed. Ed Engel: Hi. Thanks for taking my question. I just wanted to ask some questions about the cost structure here. Do you mind going through the costs or some of the one-time expenses we might have had in the fourth quarter related to M&A or anything else to call out? And then would it be fair to assume that might continue into the first quarter or maybe into the second quarter until the transaction closes? James Gernetzke: Yes. Obviously, we had the legal costs. There is the interest associated with the Galaxy loan. The interest, obviously, since we paid it off, is not going to continue. There are some legal costs as we go through the regulatory process. There are certainly going to be some legal costs, but my assumption would be that it would be slightly less as we go through that process. But there still will be some for sure. Ed Engel: Let us see. And sorry. And then you said some other one-time costs— James Gernetzke: Yes. And then we have our standard, similar one-time costs that we have seen for non-M&A items from previous quarters. So yes, to answer the question, the M&A continues. We are still out there looking for other businesses and other opportunities. Obviously, we do not have anything to report at this time, and we are very focused on getting W3C closed and integrated. But that does not mean that we are not still working on a pipeline. I would say that in general, I would expect over the next quarter or so that the costs should be slightly lower than previous quarters, but not zero. Chris Merkel: Alright. We have Gareth Gaceta up next. Hi, Gareth. Gareth Gaceta: Hi, guys. Can you hear me alright? Chris Merkel: Yes. Gareth Gaceta: Awesome. I was wondering if you could provide some detail on the drivers to the improved monetization in the ExoSwap in the quarter. Do you guys think that there might be future opportunities for similar expansion, or was it maybe more of a one-time event? James Gernetzke: Yeah. Let me start. I would say that in terms of ExoSwap, we have grown the book of business in terms of the number of partners that we are working with. As we grow that book, you will see different areas, different cost structures, etc., that come with it. Over time, as that product matures, we will start to get to a steady state. We do expect changes in the short term as the book continues to grow. We are pleased with the amount of new deals that have been signed and the work that is going on in that area. Now there are some—because this is a B2B2C, we are relying on the partners, and there is one partner that looks like it is probably going to stop operations over time. You will have those pluses and minuses, but I would say that we are definitely pleased with the direction and the amount of new contracts that have been signed and new partners that have come on. JP Richardson: Alright. Thank you, James. Chris Merkel: We have Michael John Grondahl from Northland. Go ahead, Mike. Michael John Grondahl: Thank you. So sort of two questions, guys. One, I think you mentioned 18 signed ExoSwap partners and 11 operating. When do you think the next, I do not know, the next wave, the next seven, are going to ramp up, and any significant partners in that next wave? And then secondly, I would like to understand better kind of the go-to-market with Exodus Pay. Is that only going to be within sort of ExoSwap and the trading customers, or help us understand how we are going to see that Exodus Pay offering in the real world. James Gernetzke: Let me start with the 11 and the 18. I think that we are seeing steady growth, and it is steady growth right now. In terms of significant names, we are pleased with the mix and the size of different clients that we are getting. Unfortunately, it is a B2B product. We need the client's consent to share the names, and I do not have any larger names that have shared consent to offer you, unfortunately, right now. But I could definitely say—again, just to reiterate—we are pleased at the growth that we have seen in that, and we are looking forward to that continuing for the rest of the year. So JP, on Exodus Pay— JP Richardson: Yeah. Let me hit a little bit more about the partners with ExoSwap here. Even though we cannot announce the names yet, the reality is that yes, we have signed other big partners, and we will be able to announce that in the future, which is going to be great. In addition to that, I think James had mentioned something that is really important: with the ExoSwap partnerships, we have to rely upon the partner's timeline. Often what you see is that the partner in some scenarios might just enable, say, one asset, so you can swap from one pair to the other, and it does not have support for other assets and other blockchains. As we march forward and they get one going—like, oh, wow, this thing is working really well—now let us enable it for these other blockchains and make it work really well there and keep that train going. We are going to see more and more of that, and we already have seen that, with timeframes that we will be able to announce in the future. I anticipate that will be the pattern moving forward: we will sign the partners, then there is the time to integrate, they go live on one blockchain, and then they expand out on additional blockchains. As we mentioned, we have some very big names in the industry that we have been working with for quite some time, and that becomes quite a strong testimonial as we start working with other partnerships. I think that is really important to call out. Now related to the question of—so you referred to it as ExoPay. I am assuming you were talking about Exodus Pay. So ExoPay—now, this is getting confusing—ExoPay is our fiat on-ramp, off-ramp. We have recently renamed that to ExoRamp to separate the confusion. To be very clear here: think of ExoSwap as allowing people to swap from crypto to crypto. ExoRamp allows people to onboard into crypto via a bank account or a debit card, or off-ramp in time. So it is basically fiat on-ramp/off-ramp. Exodus Pay, again, is our initiative to, as earlier in this conversation I had mentioned, bring the world of all these disparate financial apps into one single app, right? The biggest is banking, a payments app like Venmo or Cash App, and then a brokerage app—Robinhood or Fidelity, E*TRADE, whatever you use—all into one application with no crypto complexity whatsoever. Now, when you ask about go-to-market, we had a very early test group that we experimented with, and we had conversations with people at events at ETHDenver. Initial feedback was really good. We are marching forward. In fact, you are going to see something this week that is going to come out about another event that Exodus Pay is going to be a part of. Again, it is about mainstream payments, allowing people to easily use assets like stablecoins anywhere in the world that Visa or Mastercard is accepted, right? That is really important. The big aspect of go-to-market and how we think about Exodus Pay is that we want to align to big cultural moments. I am going to say that again. We want to align with big cultural moments. I wish some of you were not thinking, like, oh, does that mean he is going to go out and pull the trigger on a Super Bowl ad or something like that? We do not have any plans for that, but you never know. No, but we have no plans for that whatsoever. But who knows? When it comes to big cultural moments, there are things that you will see this year that will answer that question. It is about being a part of mainstream conversations, mainstream payment experiences. There is a lot more that we will be able to unpack in future conversations. It is going to be great. Chris Merkel: Alright. Kevin Dede from HC Wainwright. Hi, Kevin. How are you? JP Richardson: Kevin, we cannot hear you if you are speaking. Chris Merkel: Okay. Nope. Still cannot hear. Still cannot hear. Still cannot hear, Kevin. Kevin Darryl Dede: Can you hear me at all now? Chris Merkel: Okay. JP Richardson: Hi, Kevin. Sorry about that. It is tough being a tech analyst and keeping your tech working. Kevin Darryl Dede: So, JP, sort of a two-parter. I am going to think I am going to ask Mike's question in a different way. The progress you are making with ExoSwap clearly indicates that you are embedding yourselves with complementary businesses, right? It is proving the B2B model that you have developed at Exodus Movement, Inc. But with Exodus Pay, it seems to me that—I mean, I hear what you say about leveraging big cultural moments. I get that. But you are taking on a sizable amount of risk in spending versus trying to build a consumer-facing app. I am wondering how you are going to approach that risk, how you plan to allocate capital to it, and how you expect it to roll out. And then I would also like to hear about the roadblocks you have to seeing W3C complete, and the timeframe to that. You did not offer much detail there. JP Richardson: Kevin, can you just unpack the risk bit a bit more? I just want to make sure I really capture your question clearly. Kevin Darryl Dede: Well, in my mind, there is a little bit of controversy over Exodus Movement, Inc.'s development in the B2B world versus a consumer-facing app. And Exodus Pay, I think, is the culmination of your consumer-facing initiatives, and that is clear through today's call. What is not clear is the resources you will dedicate to building a consumer-facing business—arguably the most difficult thing to do in business. So I am just wondering how you are assessing the risk and allocating capital, and developing that capability. JP Richardson: Got it. Okay. You are probably going to hate this answer, but I am going to say it anyway. Exodus Pay is the evolution of what Exodus Movement, Inc. is today. We were born—and the way that we thought about Exodus Movement, Inc. from the early days—was all about empowering consumers to control their wealth. That was the piece of it. From 2015, there was actually—I had a conversation with our cofounder, Daniel, just recently, and he was like, JP, do you remember in the early days when we put our phone number inside the software? I am like, yeah, I do. Is that not crazy? People would call. I am eating dinner with my family, and my kid has got spaghetti pouring out of his mouth, and then the phone is ringing nonstop. I am trying—I am like, oh my gosh. I am eating? I share these stories because Exodus Movement, Inc. was always a company focused on consumer needs. Always. At that moment in time, the technology was not quite where we needed it to be. Regulations were not quite where we needed them to be. Mastercard and Visa were not quite where we needed them to be. The technology has now caught up where you do not have to think about the complexities of secret phrases and which layer you are on. You do not have to care about any of those things. The regulations have now started to catch up, especially with the Genius Act, in embracing stablecoins, right? That is really key and critical. Visa and Mastercard see what is happening, and that is why with W3C—which will be a good segue to talk about W3C in just a moment, per your other question—they see what is happening. That is why there is starting to be the rise of these crypto cards that allow you to connect the card directly to your wallet, your self-custodial wallet, so you have full control and you can go and you can tap to pay anywhere. Again, Exodus Movement, Inc. was always a company built on the consumer experience. I think it is really important to highlight and call out. Now related to W3C, as mentioned in the opening statements, we are very committed to getting this done. Anybody that has been through acquisitions knows there are all sorts of complexities that come with it. With this acquisition, there are a number of subsidiaries that blend into what we are buying as a company, and each one of these subsidiaries has different levels of complexity that we have to ultimately address. James, I am sure you can—you have been a big part of this as well along with me—you can probably add some additional color to this. James Gernetzke: Yeah. I think on the W3C front, we are in front of the regulators right now, and we are progressing toward it on the timeline that we brought up when we signed the deal. In terms of capital allocation, to put a finer point on JP's comments, because Exodus Pay is the evolution of Exodus Movement, Inc., that capital allocation, you should expect it to follow a similar path and the things that we said about our consumer business going forward in different fronts. Obviously, we have allocated a lot of capital to W3C and the B2B side. We still maintain that Amazon AWS playbook, even with the W3C acquisition. JP Richardson: It might be important to mention too that per capital allocation, one aspect that is going to be important here is that because Exodus Movement, Inc., even though we were focused as a consumer app early on, it was more about those in crypto. You are going to allocate capital and think, oh, we are going to target crypto people. Uh-oh, there is a bear market. Better pull back and not think about how to reach the mainstream. That was historically the thought process. But now shifting closer to the mainstream, bear or bull market, it does not matter, right? Because Joe Plumber does not think about the price of Bitcoin. Joe Plumber does not actually even care about the price of Bitcoin. Actually, Joe Plumber may not be our ideal target use case; it is going to be maybe a younger demographic. Let us say some 19-year-old watching college basketball on a Saturday or whatever it is, right? They may not really care about the price of Bitcoin, but they definitely care about how they spend money and how they think about the future. We still have to be thoughtful but yet bold when it comes to capital allocation when reaching that demographic. Chris Merkel: Thank you. There are no more questions. Thanks, JP, James, and all of our analysts for submitting your questions. Please visit our social channels on X and Reddit to submit your questions for management. Our investor relations team is standing by. Thanks for joining us today, and we will see you next quarter.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Fossil Group, Inc. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all parties are in listen-only mode. This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. I will now turn the call over to Christine Greany of the Blueshirt Group to begin. Christine Greany: Hello, everyone, and thank you for joining us. With me on the call today are Franco Fogliato, Chief Executive Officer, and Randy Greben, Chief Financial Officer. Before we begin, I would like to remind you that information made available during this conference call contains forward-looking information, and actual results could differ materially from those discussed during this call. Fossil Group, Inc.’s policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company’s Form 8-K, 10-Q, and 10-K reports filed with the SEC. In addition, Fossil Group, Inc. assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During today’s call, we will refer to constant currency results as well as certain non-GAAP financial measures. Please note that you can find a reconciliation of actual results to constant currency results and other information regarding non-GAAP measures discussed on this call in Fossil Group, Inc.’s earnings release, which was filed today on Form 8-K and is available in the Investors section on fossilgroup.com. I will now turn the call over to Franco to begin. Franco Fogliato: Hello, everyone, and thank you for joining us. 2025 was a transformative year for the company, defined by operational excellence and financial performance that exceeded our expectations. We took bold steps to advance our turnaround plan, delivering strong execution against the three pillars we laid out just one year ago. Those include refocusing on our core, rightsizing our cost structure, and strengthening our balance sheet. We built a brand-led, consumer-focused operating model, assembled an exceptional management team, and established a culture of accountability. We recently appointed a new Chief People Officer, who will be a valuable part of our efforts to continue strengthening our organizational capabilities, culture, and customer-first mindset. I am incredibly proud of our teams and want to thank everyone across the organization for their energy, passion, and hard work, and for upholding our commitment to keep the consumer at the center of everything we do. Our turnaround efforts gained traction quickly, enabling us to end the year ahead of our initial plan. We delivered full-year performance above the updated guidance we provided halfway through the year. Net sales totaled $1.0 billion, gross margin expanded 380 basis points to 55.9%, and we reduced SG&A by over $100,000,000. This drove a positive adjusted operating income of $11,000,000, a year-over-year improvement of $48,000,000. Now I will turn to the operating highlights and key accomplishments of 2025. First and foremost, we created a positive brand platform for the future. We accomplished this by improving the customer journey and delivering a robust pipeline of product innovation, all supported by powerful heritage brand storytelling. At the same time, we successfully established a full-price selling model by radically transforming our promotional cadence across channels. This enabled us to return the business to healthy gross margin in the mid-50s and improve the profitability in both our wholesale and direct-to-consumer channels. Importantly, this has strengthened our wholesale partner relationships, creating a powerful flywheel effect that is delivering benefits across all channels. Next, we reenergized our core licensed brands Michael Kors, Emporio Armani, Armani Exchange, and Diesel. Most notably, strategic investment in point of sale and a renewed focus on specialty watch retail enabled us to improve our in-store presentation and performance in the wholesale channel. We also drove momentum in our traditional watch business by prioritizing our most scalable markets in the wholesale channel, including the U.S. and India. This resulted in wholesale traditional watch growth in our core brands of 2% globally for the full year in 2025. At the same time, we took clear action to rightsize our cost structure and instituted a culture of strict cost control. Lastly, and as importantly, we transformed our balance sheet. We now have the runway and flexibility to support the next phase of our turnaround, build a sustainable, profitable business model, and deliver long-term value creation. We have entered 2026 well positioned to leverage our foundational assets, including our 40-plus-year heritage, iconic brand, innovative design, global reach, and talented teams. Also notable, the industry is experiencing strong momentum across markets and demographics. At the same time, our comeback is capturing increasing attention from consumers, partners, and the press. Just last month, I was at the Inhorgenta watch and jewelry show in Munich, where many of our brands were center stage. In 2026, we will be making more bold moves on our journey to reinvent Fossil Group, Inc. and lead the industry. It is an exciting time for the company, as we continue to foster a collaborative, creative, and energetic culture, accountability, and a stronger commitment to win. We are turning the page to a new chapter and evolving our three strategic pillars as follows: returning to profitable growth, optimizing our operating model, and building shareholder value. Over the next three years, this evolution of our turnaround is expected to generate a return to top-line growth, high single-digit adjusted operating margin, and positive free cash flow. More on our financial outlook shortly. But first, let us talk about the initiatives we will be executing against to further advance our turnaround. Within our first pillar, returning to profitable growth, our teams will be focusing on defined initiatives across the positive brand platform to fuel innovation, deepen consumer engagement, grow the traditional watch business, and reinvigorate our jewelry and leather categories. In 2026, we will be fueling innovation through design, technology, and storytelling. This includes reigniting key icons, continuing to delight our customers with culturally relevant collaborations, reviving one of Fossil’s most sought-after Y2K innovations, and introducing a selective group of premium products. Let me take you through the roadmap. Starting with our watch icons, which make up a significant portion of our business, we will be innovating and expanding upon key collections including our Everett, Arlo, Machine, and Raquel platforms and our watch rings. Additionally, we will be doubling down on our Minis collection across all of our top women’s platforms. Following the success of 2025 collaborations such as Fantastic Four, Galactus, Minecraft, Xiaobai, and Superman, we will continue activating culturally relevant partnerships with both new and returning properties in 2026. These collaborations deliver highly engaged audiences, customer acquisition at scale, and meaningful earned media. Importantly, as we anniversary successful 2025 partnerships, we are focusing on converting collaboration shoppers into long-term Fossil customers, improving retention and lifetime value. One of our most significant introductions this year is the return of Fossil BigTick, a bold animated movement that combines analog craft with digital innovation. Originally introduced in the late 1990s, BigTick is one of Fossil’s most recognizable and emotionally resonant designs. The designs are geared towards the millennial watch consumer nostalgic for Y2K, Gen Z consumers seeking an analog-forward accessory, and the male watch enthusiast looking for a big, bold watch to match his style. Earlier this month, we launched a nostalgic, limited-edition Y2K capsule, quickly followed by a reinvention of BigTick Machine. Initial response from consumers and acclaim from the press have been tremendous thus far. Our BigTick marketing campaign reflects the evolution of our creative strategy, featuring a dynamic animated concept built around the idea that everything BigTick touches becomes larger than life. Its bold storytelling reinforces product distinctiveness while driving momentum in real events. We have a lot more exciting BigTick innovation coming and anticipate the momentum will continue to build as we roll out additional collections throughout the year. Another significant innovation coming later this year is the introduction of Signature, Fossil’s first premium platform in more than a decade. Rooted in craftsmanship and timeless design, the collection represents an important evolution for the brand and is designed to resonate with watch enthusiasts and collectors alike. Signature will also introduce a new level of technical sophistication and assembly that reflects Fossil’s continued commitment to quality and innovation. We look forward to sharing more details in the coming quarters. While we are first and foremost a watchmaker, our jewelry and leather offerings expand our expression as an accessories brand. Our strategy for this category focuses on staying true to our brand DNA of quality, value, and timelessness. We are positioning the business with modern designs, including jewelry introductions inspired by our most important watch collections, and increased personalization through engravable offerings. We will be supporting all of this product innovation with a focused, high-impact marketing roadmap. In 2025, we concentrated our investments in priority markets, and the results validated that disciplined, brand-led investment drives stronger engagement and return. This year, we will continue scaling this approach, deploying our resources to opportunities where we can build further brand equity and accelerate growth. Our 2026 storytelling is designed to celebrate Fossil heritage, reinforce our quality and design credentials, and elevate cultural relevance. A great example of this is our exciting partnership with brand ambassador Nick Jonas. Nick has proven to be an authentic and highly engaged partner, currently anchoring campaigns across Nick Jonas Collection, Machine, and BigTick. Moving now to our omnichannel initiatives, which are designed to modernize our brand expression in wholesale, improve our e-commerce business, and optimize our Fossil store portfolio. In the wholesale channel, we are focusing on our top customers in must-win markets, including the U.S., France, Germany, and India. For example, in the U.S., the strength of the Fossil brand, our robust product pipeline, and engaging campaigns are driving growth with key partners. Additionally, we are expanding distribution to specialty and energy retailers that can help build brand awareness and create excitement among the younger demographic. In the e-commerce channel, we have reshaped our business through two major actions over the past eighteen months. First, we dramatically reduced our discount posture by more than 50%, establishing a full-price selling model. Next, we implemented a comprehensive redesign of the Fossil site, featuring richer storytelling and a more seamless customer journey. The result is a smaller but more profitable sales channel with higher AUR across the entire marketplace. As we pursue long-term growth, we will continue to deliver consistent price and promotion while investing in personalization, inspiration, and more cohesive brand representation to drive customer engagement and strengthen brand perception. In the retail channel, we are optimizing our store portfolio and deploying our Store of the Future strategy in the U.S. and EMEA. We are very pleased with the initial results from our Store of the Future concept, which blends lifestyle selling, data-led decision-making, and a purpose-driven strategy. Importantly, it is shifting our selling culture to proactive clienteling and outreach, personalized service, and community focus. This has resulted in improvement across key performance indicators, including AUR and conversion. Turning to our core licensed brands, we are focusing on initiatives to return the brands to sustained sales growth. We believe there is a significant opportunity to unlock potential in Michael Kors jewelry and men’s watches. Our strategy for Kors jewelry is centered on modern, wearable design while leaning into one of our strongest assets, the MK logo. We have recalibrated our pricing architecture to improve accessibility and enhance our competitive position. In men’s watches, we are returning to proven Michael Kors design codes and investing behind hero platforms that have historically driven scale. We will do this by focusing on bold, confident styling, recognizable attributes, and strong perceived value within key price tiers. For the Emporio Armani brand, we are pursuing opportunities in select markets outside of China, where there is strong local demand for premium products and additional runway in the wholesale channel to broaden assortment and leverage long-standing partnerships. We are also continuing to drive the Armani Exchange brand, which is experiencing strong momentum across major markets, including the U.S. and India. Key initiatives include elevating our retail presence, expanding distribution, building on the success of our icons, and delivering localized product offerings. Turning now to the final area of focus under our growth pillar, we see a significant opportunity in India, which has been the fastest-growing large economy in the world for the past four years. It is an important strategic market where our brands have category leadership, strong momentum, and secular tailwinds. I was in India last month with other members of our executive team as part of our focus on unlocking the full potential of this geography, where we are experiencing growth across all channels and brands. In 2026, we will be building further brand heat across our portfolio by broadening our assortment, entering premium price points, and introducing limited editions, all supported by dynamic storytelling. We will also be increasing our footprint to expand distribution, opening additional wholesale doors with both new and existing partners, and opening new Fossil retail stores. We have a highly seasoned team in India who is committed to driving continued growth and rapidly scaling the business. Moving now to our second turnaround pillar, optimizing our operating model. We made significant progress toward rightsizing our expense structure in 2025. With this improved baseline and an emphasis on stricter cost control, we are well positioned to continue to drive optimization across the organization. We will be focused on initiatives to strengthen our omnichannel strategy and go-to-market execution while prioritizing operational investment and infrastructure improvements. Key areas of focus include sharpening our go-to-market execution to elevate point-of-sale engagement, reducing complexity and improving business agility, enhancing our digital and technology infrastructure, delivering best-in-class supply chain performance, and prioritizing high-impact projects and key performance indicators. I will now turn to our third and final pillar, building shareholder value. The rapid progress we made in year one of the turnaround, our accelerating profit profile, and our strengthening balance sheet give us the conditions to create lasting value for all of our stakeholders. We expect to continue improving profitability, affording us the optionality to strategically invest for growth and value creation. Building on the strong execution and financial performance we delivered in 2025, we are pleased to be raising the financial targets we introduced one year ago. As a reminder, we previously communicated a 2027 sales target of at least $800,000,000. We now expect to surpass that benchmark one year earlier than planned. In 2026, we expect sales in the range of $945,000,000 to $965,000,000, highlighted by a return to top-line growth in the fourth quarter. Additionally, we expect positive adjusted operating margin of 3% to 5% and breakeven free cash flow. Our commitment to operational excellence and returning the business to profitable growth is grounded in a focus on disciplined accountability and performance. I am grateful to our teams, partners, and shareholders for their continuing support of Fossil Group, Inc. and look forward to reporting to you on our progress throughout the year. Before I turn the call to Randy, I would like to acknowledge the current geopolitical climate. As a global company, we are disheartened by the events occurring in the Middle East, and we are closely monitoring the safety and well-being of our employees and partners in the region. Now I will turn the call to Randy to discuss the financials. Randy Greben: Thank you, Franco. 2025 was a year of tremendous progress on multiple fronts. I am pleased that we gained strong traction on our turnaround initiatives, delivered financial results ahead of our expectations, and transformed our balance sheet. Our 2025 performance reflects the strength of our brands, strategies, and teams, and demonstrates that we have the right building blocks in place to drive long-term growth and profitability. Now I will turn to the specifics of our fourth quarter and full-year performance. Net sales for Q4 totaled $274,000,000, reflecting a decline of 20%, including four points of impact from store closures. For the full year 2025, net sales were $1,000,000,000, including 330 basis points of impact from store closures and 80 basis points of impact from the exit of connected watches. Fourth quarter gross margin came in at 57.4%. That is up 350 basis points from last year and reflects the ongoing strength of product margins as well as our focus on full-price selling, which allowed us to drive structurally higher margins over the past 12 to 18 months. Indeed, full-year gross margin for 2025 was 55.9%, representing 380 basis points of expansion versus 2024, even with the continued and compounded headwind of minimum royalty guarantee shortfalls, which, as previously shared, are expected to be materially abated in full-year 2026. In 2025, we executed against several initiatives that drove a meaningful improvement in gross margin. Specifically, we substantially lowered our discount rate, strengthened our supply chain, negotiated better terms with key suppliers, retooled our open-to-buy processes, and implemented targeted price increases. I am pleased to note that all of these actions not only improved our underlying gross margin profile but also enabled us to largely mitigate tariff headwinds throughout the year. The fact that we were able to absorb the impact of tariffs in 2025 while delivering a return to healthy gross margins demonstrates the agility of our supply chain and is a testament to our teams around the globe. Looking at 2026, we expect to continue to offset the current rate structure through our mitigation strategies and have not embedded material rate changes or any tariff refunds into our forward-looking guidance. Moving now to operating expenses. Strict cost control enabled us to lower SG&A expenses by 16% versus prior year. The improvement is attributable to 49 fewer stores in operation versus a year ago, as well as lower compensation and administrative expenses. During Q4, we closed six additional stores, ending the year with 199 locations globally. All 49 closures in 2025 occurred at natural lease expiration with minimal closing costs. Given the improving performance of our fleet, we expect to reduce our number of store closures down to approximately 15 locations this year. As we continue to focus on improving our cost structure, our teams are acting with financial discipline and rigor. I am pleased to note that on a full-year basis, we slightly over-delivered on our full-year SG&A savings target of $100,000,000. Zooming out, the successful delivery of 2025’s SG&A savings target was a key follow-on to work that began in 2023. In total, the company’s SG&A levels have been rightsized by more than $250,000,000 over the last 36 months. And while the lion’s share of this work is behind us, we are never done. As Franco mentioned, in 2026, we expect to further optimize our operating model by capturing efficiencies throughout the organization. We will be directing resources toward go-to-market execution, operational investments, and infrastructure improvements. Looking now at our bottom-line performance in Q4, strong gross margins north of 57% and exceptional expense management translated to a profitable quarter, with adjusted operating income totaling $11,000,000. We also achieved positive adjusted operating income for the full year, also at $11,000,000. This is notable after two consecutive years of losses on the bottom line and is another very tangible demonstration of our turnaround taking root. Turning to the balance sheet. We ended the year with $96,000,000 in cash and cash equivalents, $67,000,000 of availability under our asset-based revolver, and no utilization of our ATM program. Year-end inventory was $152,000,000, down 15% from last year, consistent with sales and in line with our expectations. It is worth noting that we have brought inventory levels down by more than $200,000,000 over the last three years. The reduction in inventory, particularly in the last year, has not only seen us become more appropriately balanced in terms of weeks of supply and churn, but, as importantly, it occurred as we rebalanced our overall inventory position to include far more full-margin products. Strengthening the balance sheet was a key pillar under the first phase of our turnaround, and we delivered on that in spades. We are pleased to have entered 2026 in a healthy position with the right combination of liquidity and debt maturity horizon. Now let us take a look at our outlook for 2026 and beyond. We are incredibly proud of the work our teams are doing and believe we are poised for another year of strong execution as we embark on the next evolution of our turnaround plan that Franco just laid out. Provided there is no significant disruption in the macroeconomic environment, we expect our turnaround pillars to deliver the following outcomes for full-year 2026: worldwide net sales of $945,000,000 to $965,000,000, including approximately $21,000,000 of impact related to retail store closures. That is down 4% to 6% and represents a significant improvement in the rate of decline versus last year. For added context, the impact of store closures and the extra week in 2025 is worth about 360 basis points. And it is worth reiterating the point that Franco made a few minutes ago. Based on the guidance we are providing today, we now see 2026 as the sales low point under our turnaround, one year earlier than previously planned, and materially higher than the approximately $800,000,000 in revenue we indicated for 2027 one year ago. As we look at the cadence of the year, we anticipate that 2026 will be second-half weighted, with year-over-year declines slowing through the year and an expected return to top-line growth in the fourth quarter. This is in line with seasonal trends but, more importantly, reflects the compounding benefits of our turnaround initiatives. This includes the lapping of last year’s store closures and selected further closures this year, the sunsetting of some noncore small licensed brands, and our watchstations.com website, and the comping of last year’s inventory reset as we shifted our focus to full-price selling. Importantly, we anticipate that gross margins will remain healthy in the mid to upper 50s. Further, we expect that the intra-quarter volatility we have experienced, particularly in Q3 of previous years, should be largely abated with the benefit of our minimum guaranteed royalty relief. Additionally, expense control is expected to drive another year of meaningful SG&A reduction and enable us to achieve SG&A leverage. While we will be investing in marketing to support the robust pipeline of innovation that Franco spoke about, total marketing dollars are expected to be down slightly versus 2025. We are positioned to achieve improved profitability in 2026 and expect adjusted operating margins to be in the range of 3% to 5% on a full-year basis. Additionally, our focus on improving cash conversion is expected to result in breakeven free cash flow as we drive the business to be cash-generating in 2027 and beyond. With innovative product offerings, favorable watch industry dynamics, and talented teams, we are looking forward to building upon the foundation and track record we established in year one of our turnaround. To that end, we are rolling forward our previously communicated three-year outlook by one year. In 2028, we expect our turnaround plan to be driving mid-single-digit sales growth, high single-digit adjusted operating margins, and positive free cash flow. Looking further ahead, we believe our brand-led, consumer-focused, and increasingly optimized operating model will deliver benefits well into the future. Now I will ask the operator to open the call to Q&A. We will now open for questions. Operator: We will now begin the question and answer session. Our first question comes from the line of Tom Forte with Maxim Group. Tom, please go ahead. Tom Forte: Great, thanks. Franco and Randy, congrats on the strong quarter and year. I have three questions. I will go one at a time. I apologize to the extent that you may have commented on these during the prepared remarks. Question number one, what were the drivers of gross margin in the quarter, and what gives you confidence the improvements are sustainable? Franco Fogliato: Hi, Tom. Thank you. We are excited. Look, we made significant progress. I think you remember, we always said that the fourth quarter last year was the beginning of the new strategy toward the end of the fourth quarter. We wanted to build a smaller company, more profitable. We wanted to change the model from very promotional into a full-price selling model. And we are continuing with this strategy. We are very excited. I am thankful for the work the teams have done globally to drive this strategy, and the strategy is paying very much shareholder value. Not only have we seen a better gross margin with our DTC, but we have seen incredible AUR increases across the marketplace as we become less promotional through the marketplace. We are excited. We are a product and marketing company. We built greater relationships with our partners. And I have just got back from the trade show, as I mentioned in my earlier remarks. There is great momentum. We have seen customers that we have not done business with for years. They are coming back to us now because we are leading by example. So very, very encouraged. Randy Greben: Thank you, Franco. And, Tom, wonderful to hear from you. The only thing that I would add is, while Franco likes to say 2025 is in the past and we are now living in 2026, if you look at 2025, our gross margin performance was actually quite sustainable and consistent, other than the dip that we took in the third quarter, which, as we have spoken about, was related to royalty shortfalls. As we have successfully renegotiated our minimum guarantees for 2026, that third-quarter divot should not be in place, and you should see that continued sustained performance. So, really, the past is a very positive indication. We have already locked in the improvement that we were seeking for 2026. Tom Forte: Alright, wonderful, and I appreciate both of you answering all my questions. Alright, so question number two. It looks like you are guiding to an inflection point in sales and a return to growth in 2026. What gives you confidence you will be able to achieve that goal? Franco Fogliato: Yeah, look. The last eighteen months have been a transformation of the company. We are in the middle of the journey. We see the light at the end of the tunnel, a smaller company returning to growth. And we are excited about the opportunities. I keep saying I am excited about what we have done, but that is history. I am excited about what we are delivering to the market now in terms of innovation. But I guarantee you, we are more excited about what is coming next. You know, the pipeline takes eighteen months to get there. We are so excited about the opportunities. We think as we are driving a smaller DTC, we have seen a very good return from our wholesale channel, beyond our expectations in 2025. Consumers are very resilient. They love our portfolio of brands. Customers have a long-term relationship with the company. We are driving the company to get back into growth because the company has incredible assets and incredible brands. Tom Forte: Alright, excellent. Alright, so third and final question for me. It seems like you have already made a number of adjustments to manage expenses. In the next evolution of your turnaround plan, you talk about further improving the cost structure. What more can you do that you have not already done? Franco Fogliato: Yeah, it is a great question. Let me take the lead, and then I will have Randy jump in, and he is driving that. Look, as an organization, we are driving continuous improvement that we are really anchoring into the discipline of managing the company. We will constantly evaluate what we do and constantly find a better way to do that. It is all about the innovation, the way we bring the product to market, the focus on driving the business. We are so pleased because, honestly, since we refinanced the business in November, this is a different company. Everything we do is about how we grow and become more efficient. We are very, very pleased. I think there are plenty of opportunities still there. We are looking at store performance, market performance, channel performance. This is really part of what we want to drive—accountability and focus on driving shareholder value. Randy Greben: So a few things that I would like to add, if I could. If you think about the work that we have done to manage expenses, it has been very broad, and we are quite proud of the breadth and depth of where we have made adjustments to our business. One of the things that is important as we look into the future is the continued optimization of the business. And if you think about ways that that may play out, we have lots of opportunity as it relates to the simplification of our technology stack, places in which we can leverage automation or AI. And then, as you move forward into the more medium-term horizon of our turnaround, that is when we start to play a little bit of offense as well, and we get the benefit of sales leverage as we return to growth. Tom Forte: Thank you for taking my questions. Franco Fogliato: Thank you very much. Operator: Your next question comes from the line of Owen Rickert with Northland Capital Markets. Owen, please go ahead. Owen Rickert: Hey, guys. Congrats on a great quarter, and the outlook is pretty solid here. I have about four questions for you. I guess, firstly, you know, deepening consumer engagement is cited as a key growth driver going forward. Can you just maybe elaborate on what that means tactically? Is that more marketing spend in the first half of the year? And, I guess, how are you measuring an engagement improvement? Franco Fogliato: Yeah, great. Hi, Owen. Thanks again. Look, we are excited that we are a product and marketing company. Part of the strategy in the turnaround plan was to refocus the company on the fundamentals. When I joined the company and we assembled a world-class management team, we clearly said product takes time. And we saw some of that coming through fall 2025. Really, spring 2026 is very exciting. You have seen we launched BigTick with Fossil. It is an incredible success, and we are just at the beginning. So we think innovation in product and the way we bring storytelling to the market will be the key differentiator. Think about the animation we just launched with BigTick. This is, to us, just the beginning. When I think about our core licensed brands, which is really the second pillar of returning to growth—think about Michael Kors, Armani, Diesel—those are world-class brands that consumers are shopping every day. We see good momentum. We are investing in jewelry. We are investing in traditional watches. We see great momentum there. And the third pillar we are really, probably to some extent, proud of is really our Indian market that has been overperforming the company. India is the fourth-largest economy in the world and has been one of the fastest growing in the last few years. It is an industry that is growing. We are very well positioned there. We have seen strong growth, and we think that market will continue to grow for us. So very excited. It is early days. Look, we are here for the long run. We think that as we get the company back to the fundamentals, the opportunity is there, and we are really focused on driving these performances going forward. Randy Greben: The only thing that I would add is, Owen, you suggested in your question that we would be spending more on marketing. Our anticipation is actually that we will be spending slightly less on marketing in 2026. We will certainly be spending the marketing dollars that we do spend better. We will be more optimized in terms of the way we deploy our funds—smarter media mix modeling, smarter use of ambassadors. We have got a robust pipeline of initiatives that we expect to really drive efficiency as we work through this year and into the next. Owen Rickert: Got it. Thanks, guys. Next for me, you mentioned those three pillars of the next evolution—profitable growth, optimizing the operating model, and building that shareholder value. I guess, how do you think about sequencing those? Is profitable growth the prerequisite for everything else, or are the three pillars running in parallel? Franco Fogliato: Look. Let me take this, and then I will leave Randy to dig in and give you more visibility. Look, we always said that returning the company to growth is a priority. We think the reason why we have done everything we have done so far is because we believe the company has an opportunity to return to growth. We also see the industry coming back, which is very encouraging. And it is very pleasing to see younger generations coming back into traditional watches. All of this is very exciting. The first eighteen months for me with the company have been simply fantastic. They have been exciting. And I look every day at all the opportunities, and I think, we are doing the right work to focus on what matters, which is really profitable sales. And once we are really driving this and we see our DTC stabilizing because we are less promotional and we continue to invest in our wholesale channel, there is no reason why the company should not grow given the strong assets we have here. Randy Greben: Owen, I do not necessarily view them as sequential. There really should be a flywheel effect. If you think about the third pillar, building shareholder value, that should be borne through an improvement in profitability, our ability to grow and then strategically invest for growth, and, of course, to generate cash, all borne through efficiencies in the operating model and growing the top line. So much less about sequencing, more about getting all three to fuel each other. Owen Rickert: Got it. Got it. Super helpful, guys. And then we are seeing some pretty nice tailwinds with consumer adoption. I guess, as you think about the consumer you are trying to target, has your view of that target consumer for, I guess, the Fossil brand and licensed brands evolved through this transformation process or this turnaround process at all? Franco Fogliato: Owen, thanks for the question. This is probably the most impressive thing I have seen in my career: the resilience of our consumer. Literally, we moved from a model that was highly dependent on promotional sales into a model highly dependent on full-price sales. And we have seen no slowdown. We have seen consumers coming back, buying our product. We saw that we lost some consumers in our Fossil brand, and, to be honest, I am not even sure we wanted them because they were looking for deals. And we got back some of the consumers we lost because we were very promotional. And there is only one way of defining that: the resilience of our brand. So we are very pleased with this. So thanks for asking the question because every time we discuss internally, that is probably the biggest and best surprise we had. I would have thought we would have been impacted more, but it did not happen. The consumer came back, and they were, “We love what you guys are doing for Fossil.” And the BigTick response is just a phenomenon, as we are capturing not only the cohort of consumers that saw BigTick in the 1990s, but we are catching this new generation that wants a real brand. So very exciting. Thanks for asking. Owen Rickert: Great. Great. And then last for me, guys. When you talk to your wholesale partners today versus, let us say, a year ago, how has that conversation been evolving? Are they leaning in more, asking for more products, more marketing support? What is the qualitative feel of those relationships right now? Franco Fogliato: It is a great question. Look, we are on the phone with them, obviously, weekly. Some of them are decades-long relationships. They are impressed. They are impressed with the speed of change we have driven with the company. They love the consistency. And I recall—I think I said this in the previous call—the first time I met with them, in October or November 2024, they said, “We love your story, but we have heard the story before.” When I met them again in Q1 2025, they said, “Well, you have been consistent. Keep going this way.” And now they recognize we are walking the talk. And they love it. And, to be honest, the results are paying. They are seeing more sales support for our brands. They are seeing more margin because they are less promotional. And suddenly, from being probably not very inspiring, we went to leading by example. And we have great relationships. I was in Munich, in Germany, for the trade show—jewelry and watch trade show—and, literally, a year ago, they were happy we were back, but this year was really surprising. They are coming, and we literally had customers that had not done business with us for years. They are back and want to deal with Fossil Group, Inc. You know, this company has got a great reputation, and it was one of the reasons I thought this company had an opportunity to have a much stronger future. And I think the first indications from our partners are very encouraging. Owen Rickert: Great. Thanks for taking my questions, guys. Franco Fogliato: Thank you, Owen. Thank you so much. Operator: That concludes our question and answer session. I will now turn the call back over to Franco for any closing remarks. Franco? Franco Fogliato: Thank you, everyone, for listening to today’s call. We are excited about where we are headed and look forward to talking with you after the Q1 results. Operator: That concludes today’s conference call. You may now disconnect.