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Operator: Good afternoon, and welcome to the Petco Health and Wellness Company, Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Roxanne Meyer, Investor Relations. Please go ahead. Roxanne Meyer: Good afternoon, and welcome to Petco Health and Wellness Company, Inc.'s Fourth Quarter Fiscal 2025 Earnings Conference Call. Joining me on the call today are Joel Anderson, Petco Health and Wellness Company, Inc.'s Chief Executive Officer, and Sabrina Simmons, Petco Health and Wellness Company, Inc.'s Chief Financial Officer. In addition to the earnings release, we have posted a slide presentation on our website at ir.petco.com. I would like to remind everyone that on this call, we will make certain forward-looking statements which are subject to a number of risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties include those set out in our earnings materials and SEC filings. In addition, on today's call, we will refer to certain non-GAAP financial measures. Reconciliations of these measures can be found in our earnings release, presentation, and SEC filings. With that, I will turn the call over to Joel. Joel Anderson: Thanks, Roxanne, and good afternoon, everyone. Thank you for joining us to discuss our fourth quarter and full year results. I am pleased to share that Q4 sales were in line with our outlook and we performed better than our adjusted EBITDA quarterly goal. Looking back on 2025, we successfully delivered on our robust agenda to strengthen our economic model and improve retail fundamentals, which resulted in significantly higher cash flow and profitability year over year. Specifically, the year, we achieved a 21% increase in adjusted EBITDA, a 77% increase in operating cash flow. Our healthier EBITDA and opportunistic debt paydown drove a meaningful reduction in our leverage ratio at year end, allowing us to start the year with greater financial flexibility. This was no small feat, and I am exceptionally proud of our team. We collaborated across the organization. We strengthened our culture. We communicated expectations, and we acted with urgency and decisiveness. It is important to note that the majority of our senior leadership team, which is exceptionally well tenured and talented, has only been together for about one year. We enter 2026 with a running start, something we did not have in 2025. Some of the most recent additions to the team include Sabrina Simmons, CFO, who many of you already know; Michael Romanco, Chief Customer and Product Officer; and Joe Venizia, Chief Revenue Officer. The entire team's work has been transformative, and yet we are just getting started. In addition to strengthening our financial foundation in 2025 and rebuilding the leadership team, we completed our Petco North Star strategy, including a comprehensive customer segmentation and needs analysis. This work is already shaping how we prioritize assortment, services, and experiences, and it also informed our updated brand positioning: where the pets go to live their real life. One key takeaway from the segmentation work is the identification of who our most important engaged customers are. That segment we call Passionate Explorers. These are pet parents who are highly invested in their pets and seek innovation, expert support, and a welcoming shopping experience across the full pet journey. 2026 will be informed by this strategy work, and execution will center on four growth pillars I will review in detail later on this call. They are, number one, compelling product driven by increased newness, brand launches, and own brand expansion; number two, services at scale, leveraging our wholly owned vet, grooming, and training ecosystem; number three, trusted store experience, focused on driving traffic, engagement, and basket; and finally, number four, an integrated omnichannel model improving convenience, loyalty, and repeat behavior. With that, I will now turn it over to Sabrina to provide details on our fourth quarter financial performance and our 2026 outlook. Following her remarks, I will discuss the specifics of our growth strategy for 2026, and we will then open it up to your questions. Sabrina Simmons: Thank you, Joel. Good afternoon, everyone. As we have discussed, our primary goal all year was improving profit and cash generation through our economic model, namely expanding gross margin rate, leveraging expense, and expanding operating margin. We are glad to report that we achieved this goal each and every quarter. For the full year 2025, we expanded our gross margin rate 66 basis points to 38.7%, leveraged SG&A 124 basis points to 36.6%, improved our operating profit by $100,000,000 and expanded our operating margin by 190 basis points, increased adjusted EBITDA 21.3% to $408,000,000 with a margin of 6.8%, and we delivered positive GAAP net income for the year. Additionally, free cash flow improved 276% versus the prior year to $187,000,000. These results enabled significant progress in achieving our goal of lowering our leverage ratio. Our net debt to EBITDA improved from 4.2x when we entered the year to 3.0x at the end of 2025. Now turning to the fourth quarter results, which reflect another quarter in which we delivered on our commitments while building a stronger foundation. In line with our outlook, net sales were down 2.4% to $1,520,000,000 with comp sales down 1.6%. As expected, the decline reflects our decision to move away from unprofitable sales, which was our strategy throughout 2025. As a reminder, the difference between total sales and comp is driven by the 25 net store closures in 2024 and the additional net 16 closures in 2025. The number of 2025 closures came in a bit favorable to our expectations, driven by a combination of improved store performance and favorable rent negotiations that supported improved unit economics for those locations. We ended the quarter with 1,382 stores in the U.S. Fourth quarter gross profit dollars were $581,000,000 while our gross margin rate expanded 37 basis points to 38.3%, including the sequential increase in tariff impact, which we anticipated. Moving to SG&A, for the quarter, SG&A was $549,000,000 or 36.2% of net sales, leveraging 62 basis points. The $23,000,000 decline in year-over-year expenses was partially driven by lapping last year's consulting costs. Marketing expenses increased $7,000,000 in the quarter. For Q4, our expanded gross margin and expense leverage resulted in operating margin expansion of 98 basis points, and our operating profit increased $14,000,000 or 83% in the quarter. Adjusted EBITDA increased 10.6% or $10,000,000 to $106,000,000, and our adjusted EBITDA margin expanded 82 basis points to 7.0% of sales. Moving to the balance sheet and cash flow, Q4 ending inventory was down 9.7% versus our 2.4% decline in Q4 sales. We continue to manage inventory with discipline, which is one of the drivers of our improved cash flow profile. For the year, free cash flow was $187,000,000, an increase of $137,000,000 or 276% versus last year. Our ending cash balance was $257,000,000, an increase of $91,000,000 versus last year, including having voluntarily paid down $95,000,000 of debt. As many of you have heard me state, our approach to our debt refinancing was opportunistic, and we are pleased to have executed the refinancing with favorable terms. We replaced a fully variable debt structure with a more optimal mix of fixed and floating, and extended our maturities to 2031, providing us ample flexibility. On our first call together last March, we stated our goal of reducing our leverage ratio to 2.0x or less. We are thrilled with the progress we have made in just one year. As we said, we started fiscal 2025 at over 4.0x, and in just a single year, we have reduced that to 3.0x, enabled by our focus on driving improved profitability and cash flow. With our retail and financial fundamentals strengthened, we are well positioned to turn more of our focus to regrowing top line and driving sustainable profitable growth over the long term. Now turning to our outlook. We are starting the year from a position of strength while continuing to navigate a bumpy macro backdrop. Of note, our guidance assumes that fuel prices normalize by the end of the quarter. For the first quarter, we expect net sales to be down 1% to flat versus the prior year, with comp sales roughly flat at the midpoint of the range, as we begin to build into the growth initiatives Joel will outline in a minute. We expect adjusted EBITDA to be between $92,000,000 and $94,000,000. Now turning to the full year, we expect net sales to be flat to up 1.5% versus last year as our growth initiatives take hold and build over the course of the year. Of note, similar to 2025, we expect net store closures between 15 and 20 in 2026. As is typical, store closures are weighted toward the back half of the year. We estimate the full year spread between total sales and comp sales to be about 50 basis points, though it will vary somewhat by quarter. This expectation implies positive comp sales for the year. We expect adjusted EBITDA to be between $415,000,000 and $430,000,000, with an overall goal of delivering on the economic model for the full year. To provide additional color on other line items, for the full year, we expect net interest expense to be about $125,000,000, capital expenditures of about $140,000,000 with an ongoing focus on ROIC, which we improved in 2025 by three percentage points, depreciation and amortization to be about $200,000,000, similar to last year, and finally, to be helpful with your models, we expect stock comp to increase by a low double-digit percent versus last year. As a reminder, stock comp will remain well below years prior to 2025. In closing, I want to thank our teams for executing on our transformation with great discipline, resulting in our significant growth in profitability and cash flow. I will now turn the call back over to Joel. Joel Anderson: Thank you, Sabrina. With our foundation firmly in place, I am energized to walk you through the specifics of our 2026 strategy that will drive our expected growth. As you know, we outlined a three-phased approach to our turnaround. We laid the foundation in phase one and phase two, and we are now entering phase three, which is about driving sustainable top-line growth. Internally, this phase three strategy is called “Reach for the Sky,” which is all about looking up and driving forward, leveraging our competitive advantages, and capitalizing on the growth opportunities we see across our business. It is also about the opportunity I see for Petco Health and Wellness Company, Inc. to be reimagined and broadened beyond primarily being a commodity-driven business. This is about the blue-sky opportunities Petco Health and Wellness Company, Inc. has to engage with pet families through the ups and downs and the real-life experiences of raising a pet. Our team has tenaciously driven cost savings and now will continue with that same rigor while driving sales and reaching forward. Petco Health and Wellness Company, Inc. is the only national fully integrated and comprehensive pet care ecosystem. Our vision for the Reach for the Sky strategy is centered around leveraging our differentiated store-based model to bolster our competitive positioning, increase relevance, and improve store productivity. We plan to fuel our growth by offering product newness and differentiation as well as further strengthening our community of pets and their humans through our unique store experiences, integrated omnichannel model, and wholly owned services. We are in the early innings of capitalizing on the significant opportunities that we see to gain share of wallet across all our businesses. The groundwork in 2025 has served us well. We expect these initiatives to grow sales and become more impactful as they materialize throughout 2026 and beyond. Now I will outline the detailed framework of our Reach for the Sky plan to drive sales within each of our four pillars. I will begin with our compelling product offering, specifically within consumables. This is roughly half of our business today, and in the U.S. alone, it is a $54,000,000,000 market. I will talk about four key catalysts within consumables to jump-start growth beginning this year. First, fresh food is one of our biggest opportunities. We have been a primary destination for fresh food for a long time and are continuing to build on that foundation by expanding the assortment. This category at Petco Health and Wellness Company, Inc. experienced healthy growth in 2025, and we expect the momentum to continue in 2026. This is an example of a category that exemplifies a significant advantage our store ecosystem brings. Beginning in Q1, we are adding additional freezers amounting to over 1,000 incrementally over the course of the year, which will enable us to expand our range of offers meaningfully. Our focus on driving share of wallet in the fresh food category is intentional. Of note, those that buy fresh food from us make over four more trips per year and spend over 50% more annually than dry-food-only dog customers. Secondly, we will launch new national brands. This area starts with communication. I have personally met with the leaders of several of our key consumables partners. They are aligned with our goals and objectives and excited about the renewed energy and focus of growth at Petco Health and Wellness Company, Inc. At the center of our strategy will be infusing a high degree of newness, including a significant number of new brands and flavors being added this year. The majority of these are launching in the first half. We expect these to generate excitement and customer interest. We look forward to discussing these with you in future quarters. Third, we are increasing the frequency of product drops. Historically, we set consumables merchandise annually with one big cat and dog food reset. As you can imagine, this did not provide our customers with multiple reasons to see what is new at Petco Health and Wellness Company, Inc., and often, we are the last to roll out a new innovation or flavor. We are changing this approach meaningfully by continuously layering in product newness throughout the year, both in consumables and supplies. This is designed to create excitement and freshness of product and will entice our customers to walk our aisles more frequently. And fourth, we are ramping our own brands business. This is within consumables and supplies. Own brands account for about 20% of our sales today and have the potential to become more meaningful over time. As part of our own brand strategy, we will anchor our focus on our strongest seven private labels, which already account for a significant percentage of our own brand sales, therefore leveraging the strength of these brands and increasing their presence and relevance. This focus on owned brands is intended to allow us to go faster and fill in voids our national partners do not have visibility to. In terms of key initiatives in consumables, we plan to offer new formulas and packaging in dog food. In supplies, we will expand our own brands business across categories and offer newness and innovation more broadly, such as in beds, bowls, collars, leads, and toys. And as we have mentioned prior, the margins of owned brands are significantly above that of national brands. In the supplies and the companion animal category specifically, we are introducing new assortments that we believe will further differentiate us from competitors. An example is newness in insects, such as jumping spiders and tarantulas, which we see as a newer pet trend in the United States. This customer basket is also likely to include ancillary supplies and consumables. Additionally, we launched “gardening with your pet” this month, a new category for us in nearly all of our stores. It includes gardening products and plants that provide customers with pet-friendly options. Moving on to our services pillar, we also see abundant opportunities to continue growing our wholly owned services business, which is a key aspect of our differentiated model. Services include vet hospitals, vaccination clinics, grooming, and dog training. This business was a strong performer in 2025, and we are expecting continued growth in 2026. While we took a purposeful pause in constructing new vet hospitals last year, we have been laser focused on improving productivity of our existing locations. In 2025, we optimized a significant number of our approximately 300 hospitals, and we will work on increasing the productivity of the still roughly 25 underutilized locations this year. Know that even after we complete these, there is still a sizable runway for driving higher sales and productivity improvements from these 300, and we will be focused on maximizing their potential. Bottom line here is that we are committed to the vet business as a key growth engine and are in the early innings of assessing the longer-term opening cadence and growth opportunity. That said, you should expect us to start growing our hospitals in 2027. We will keep you updated on plans as they come together. I would like to emphasize that our key competitive advantage in this space is that our vet hospitals are wholly owned and are part of the store. We uniquely have the opportunity to capitalize on retail traffic and to share customer information. As we have discussed prior, the opportunity is twofold: grow the vet business, as well as become a full-service pet needs provider by cross-selling food, prescriptions, and supplies. I am pleased to announce that we are adding technology and functionality beginning later this year and into 2027 to better enable us. The goal is to drive incremental trips and increase sales per customer. We are now operating at a scale that gives us the depth of expertise, breadth of coverage, and overall respect of the industry to be a desired employer of choice for veterinarians and vet techs to grow their careers at Petco Health and Wellness Company, Inc. The third pillar of growth opportunity I want to discuss is our key competitive moat, our differentiated high-touch store ecosystem. Our stores represent a significant portion of our total sales, and so they remain a key focus for us. We have changed leadership, reorganized how we operate, and unified our center-of-store operations with our services. We have also physically brought our stores and services leadership together three times in less than twelve months so that communication can be cascaded with one voice and expectations are clearly aligned. Our goal is to leverage stores to build community, excitement, and customer loyalty through frequent newness, higher levels of customer engagement—such as holding fun events for families and pets—and through wholly owned services that promote repeat visits. The end goal is to drive both traffic and basket. Our marketing efforts will be centered around driving traffic to our stores by building awareness for our product newness and in-store experiences. We will also capitalize on a more engaged customer in stores by focusing on increasing basket size. Specifically, we launched a major training initiative in February for all district and regional managers to promote cross-selling opportunities. This initiative is being cascaded to all stores this quarter. We estimate that successful cross-selling can drive one to two additional trips as well as a higher sales per customer over a six-month period. An example of this is a focus on converting grooming customers to purchase merchandise by giving groomers access to a customer's purchase history across the store. To give a sense as to how impactful this initiative could be, about half our dog customers currently do not buy dog food from us, so you can imagine the opportunity to capture a much greater share of their wallet. What backs our confidence in the long-term viability of the store model is that shopper demographics are also on our side. Industry data tells us that 34% of Gen Z customers shop exclusively in stores. Interestingly, this group's preference for an in-store experience is much higher than Gen X or millennials and is virtually in line with boomer preferences. We see this as a huge long-term opportunity, with the Petco Health and Wellness Company, Inc. model well positioned to capture Gen Z's desire for experiences and connections. Our field leaders are excited about these opportunities, and we will have more to share with you as the year progresses. The final pillar of our Reach for the Sky initiative is centered around integrated omnichannel. We call it integrated omnichannel because a significant portion of customer transactions leverage a combination of our digital capabilities and our stores. We made great progress in 2025 fixing our foundation, including minimizing unprofitable sales, improving e-commerce fill rates, fixing page load time, and adding new capabilities. While we will keep making improvements, it is time we start to grow our digital capabilities in 2026. One of the biggest opportunities we have is to turn up the dial in marketing. We have overhauled our media buying mix, which is taking hold in Q1, and our new branding, “Where the Pets Go,” will become more pronounced as our creative is reimagined to better support this fun-loving energy our physical stores bring to life. Additionally, we will relaunch the loyalty program later this year. Our goal is to offer a more personalized and relevant loyalty experience that is seamlessly integrated within our app. Our results from this initial pilot, which concluded in December, were encouraging. The next wave of our pilot began last week and will run through the spring season. We look forward to sharing an update on our Q1 call. A second key omni sales growth initiative we are excited about is visibility for our repeat delivery customers to now pick up their orders in store, which encourages our fresh food customer to visit our stores more often. This is an example of us leveraging the omnichannel model to maximize our growth opportunity. We believe this will aid in growing traffic, conversion, as well as basket size. In conclusion, I am proud of the long-term strategy we implemented last year to rebuild the foundation of our economic model, recruit an amazing team, and complete a comprehensive customer strategy to fully understand how we can win at Petco Health and Wellness Company, Inc. We delivered significant financial improvements. It is with this backdrop that I am confident in the actions we are taking to drive sustainable sales growth and profitability. We expect to start to see benefits beginning in Q1 and growing throughout the year. Specifically, the outlook that Sabrina provided implies a flat comp in Q1 at the midpoint. This would mark an inflection from the negative comp in Q4. For the full year, our outlook assumes our comps will be positive, with increases modestly above our total sales growth. Importantly, we believe our ability to gain market share is not entirely reliant on a cooperative macro environment or pet industry sales growth. Our Reach for the Sky initiatives are in many ways self-help in nature and designed to further differentiate Petco Health and Wellness Company, Inc.'s merchandise and services versus our peers. We are approaching 2026 the same way we did in 2025. We developed a strategy. We assigned leaders. We track milestones. And we execute. As the months go by, I am confident you will continue to appreciate how driven we are to deliver on our commitments, and I trust that 2025 is a great proof point for what is to come in 2026. I want to thank our teams for their dedication and hard work. While it is hard to single out any one team, the milestones our field teams achieved were truly incredible. We asked a lot of them, and they responded positively to every challenge. Our stores are the heart and soul of Petco Health and Wellness Company, Inc., and it is great to see them playing offense. Collectively, we are well positioned for our Reach for the Sky plan, and I am excited about its potential. Petco Health and Wellness Company, Inc. truly is where the pets go to live their real life. I would now like to open it up for your questions. Operator? Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Michael Lasser with UBS. Please go ahead. Michael Lasser: Good evening. Thank you so much for taking my question. I feel you have provided a lot of great information on the strategy, the focus. How are you thinking about what is going to lead Petco Health and Wellness Company, Inc.'s growth from here? Is it going to be consumables first, which will then translate to the other parts of the business? Is this going to be services-led, which will then translate to other parts of the business? And how have you thought about the need to make further price investments, promotional investments, and other discounts in order to generate same-store sales growth over time? Thank you very much. Joel Anderson: Yeah, thanks, Michael, and really great question. A lot to unpack there. I think it is less about which one is going to lead, and what I hope you took away from what I just took you all through is whereas last year we were telling you what we were going to do to deliver growth, on this call, I showed you how we are going to do it, and we gave, as you said, specific examples in all four pillars. We are working simultaneously, Michael, on all four of them. Having said that, product probably takes the longest because you have your existing product that you have to sell through, then the new product will begin to come in. I can tell you we have about 25 new brands or flavors coming this year, as well as resets throughout all of supplies and many of the other areas like companion animals. All of that will take time throughout the year, and it will happen actually starting this quarter. But I am really pleased that in all four of those pillars, you are going to begin to see change starting right now in Q1. As for your pricing comment, you know what? We started in on that back in 2024, and we really feel like we got our pricing right throughout 2025. It is something that is dynamic, and we are watching it closely, and we will continue to adjust as necessary, but we feel like we have got our pricing in good shape for now. Sabrina Simmons: Yeah, I would just add to that, Michael, that we are definitely focused on delivering healthy margins for the year. It is an important focus, and we will stay competitive, we will stay adaptable, but we have still, you know, nice levers at our disposal to deliver on the healthy margins. We will continue to look, as Joel just said, where needed, we will participate in promos for sure to help drive traffic where appropriate, and then remember, we have this whole initiative of mix, where we are moving toward our own brand, and that should also support delivering on healthy margins. Michael Lasser: Thank you so much. Operator: The next question is from Oliver Wintermantel from Evercore ISI. Please go ahead. Oliver Wintermantel: My first question is about the drivers of the increase of the gross margins. And then as a follow-up—so maybe the first one is for Sabrina—Joel, for you on the growth initiatives, so inventories were down this year, which obviously helped free cash flow. With all these, you know, four pillars of initiatives, do you expect inventories then to increase this year, and what is the impact of that on your free cash flow outlook? Thank you. Sabrina Simmons: Yes, so I will just go through the gross margin levers one more time. We are very focused on delivering healthy margins, and we are going to continue to use and review our pricing. We are going to deliver on promos where appropriate and they make sense and they help us drive traffic in, etcetera. And we are focused on mix. So those are the big levers that will help us deliver on our goal of keeping those gross margins really healthy. With regard to inventory, yes, we did a lot of cleanup in 2025 on inventory. Some of the silver lining, if you will, of the tariff imposition in the spring last year was that it kind of forced us to get very disciplined about cutting off the unproductive tail of SKUs. We are past that now. As we look forward to 2026 for growth, we definitely want to invest inventory behind that. The important thing to us is that we remain disciplined in managing that inventory. So even as we invest in inventory, we will look to keep the growth in inventory at or below sales growth and keep that relationship very tight. Joel Anderson: I think you captured it all. Yep. Thanks, Oliver. Oliver Wintermantel: Thank you. Operator: The next question is from Kaumil S. Gajrawala with Jefferies. Please go ahead. Kaumil S. Gajrawala: Hi. Thank you, first of all, for all the detail on, you know, the plans for 2026. I guess there has been some oscillation over the years between you being specialty and premium and being mainstream. You mentioned a lot of national brands, which sort of makes me imply perhaps more of a mainstream look. But curious, you know, when you think about the brand of PepsiCo and—or sorry, the brand of Petco Health and Wellness Company, Inc.—and what its assortment says about the retailer, how are you thinking about what that assortment is going to say from a branding perspective? And you said something fascinating earlier on, you know, Gen Z's preference to, you know, shop in person, looking similar to baby boomers. Do you have a sense of why that is or what has changed, that generation versus the generations prior? Joel Anderson: Yeah. Look. You are absolutely right. I think in prior years, we narrowed our aperture, and I think as I look forward, we have to be there for all customers. And as a new pet parent adopts a pet, they go through several stages of that life. And, you know, one of those stages might be, I just need to get my dog fed. And as that dog becomes part of the family, they might decide to, you know, upgrade what their dog is being fed for food, and they focus on health and nutrition. And so the focus we have done over the last couple years is really to widen the aperture, and so one of the unique advantages of being a specialty retailer is that we are able to carry that specialty, premiumization, unique product, but we are also there, you know, for the customer that, you know, affordability is their primary need. And so I think we really have widened, and I feel really good about where assortment is today. As for Gen Z, I mean, obviously that is a bigger statement than just as it relates to pets. But, you know, like any good retailer, you have to understand your core customer, and we did the research, and part of that research, we studied, you know, what the makeup was of the age of our customer, and then that, you know, coveted 18 to 34, that younger customer—we skew about five percentage points higher than some of the other pet retailers. And so that happens to work out nicely because what also is a characteristic of that demographic is they like shopping in stores. And so I think there has been more of a return to stores that serves us well with who our demographic is. And, you know, as we did the customer segmentation work, we took advantage of that, and that is something we are really focused on going forward. But it worked out to be a nicely nice fit with who our customer is. Operator: The next question is from Steven Forbes with Guggenheim Securities. Please go ahead. Steven Forbes: Hi, Joel. Given the goal of services at scale, I was curious—like you did with dog food—if you can frame what percentage of your customers today engage in services in some form or fashion. And then, given the customer segmentation work you did around the Passionate Explorer, curious if you can maybe expand on, you know, what you are sort of focused on in 2026 to make sure that specific cohort is engaging. Joel Anderson: Yeah, let me take that cohort first. What we really learned about the Passionate Explorer is that they value discovery, they look for expertise—which plays in nicely to our services side—they seek innovation, and they are also somebody that shops more frequently and spends more with us. So our new merchandise strategy is certainly going to resonate with them: frequency of newness, innovation, the store events, and it also acts as a halo for all the other segments. And services is a really important part of the Passionate Explorer. Obviously, we have a lot of room to grow in services. As an example, you know, the hospital side of it, the vet side of it, it is only in about, you know, 20% of our chain—roughly 300 stores—so lots of room to grow there. Grooming is in all our stores, and, you know, that is an area we talked about on a couple, three calls now, where we have been improving the technology, we have been making it easier to make appointments, and so I see a lot of growth opportunities there as well. But, you know, one of the reasons I have said it many times: services is our moat, a point of differentiation for us, and we are going to keep leaning in on services. Sabrina Simmons: And what I will add to that, Steve, is that what is really important to us is to leverage the whole ecosystem, because what we know is the NSPAC for a customer who engages in more than one channel or in services is five times higher than our other customers. So it is really just expanding our relationship with our customer wherever they want to shop and making sure we are getting that loyalty, retention, and higher spend. Operator: The next question is from Simeon Gutman with Morgan Stanley. Please go ahead. Lauren Ng: Hi, this is Lauren Ng on for Simeon. Thanks for taking our questions. First, you mentioned 50% of dog customers do not buy dog food from Petco Health and Wellness Company, Inc. Curious what parts of your strategy outlined today will capture these customers if they are already loyal to, you know, certain brands and platforms? Will you be able to leverage your private label for this? And just quickly following up, you talked about entering Phase III today. Can you share how much of Phase III is currently implemented versus maybe how much room there is to grow? Joel Anderson: Yeah, great pickup from our prepared remarks. Probably the main reason I shared that with you is, you know, it is always easier to grow if you start with your current customers. And as part of our, you know, deep dive into who our customer is, where they shop with us, how they buy from us, that was a real big insight for us. And so, as an example, you know, prior to just recently, our groomers had no knowledge of whether a customer—a dog customer—bought food from us. And now we have enabled our groomers with technology to see every customer that comes in: when is the last time they bought dog food from us, what type of dog food are they buying, is it helping their sensitive skin or problem they have? And so that is just one example of us being able to cross-sell. And we believe, you know, the first place we are going to see growth is, you know, as Sabrina just alluded to, you know, NSPAC, you know, really growing the net spend per average customer. And I think we have a real opportunity with our dog customers that are not buying food from us today. As for Phase III, I would say from what the customer sees, very little has been implemented yet. From a strategy and teamwork internally, we have workstreams on every one of those I outlined for you today, plus a few others. So they are in various elements of being lit up for the customers. You know, product may be being shipped right now. Some may not come till second or third quarter. But very little of it, and you can see from our guide that, you know, we expect comp store growth to gain as the year goes by. Operator: Again, if you have a question, please press star then one. The next question is from Peter Benedict with Baird. Please go ahead. Peter Benedict: Hi, guys. Thanks for taking the question. So I wanted to—well, two questions. One, I just—Sabrina, if you could expand on kind of the fuel cost comment you made. I think you said something about fuel costs normalized. Just maybe help us understand maybe the variability with all the macro stuff going on with oil, etcetera. And then my second question is on your expanded fresh effort. You mentioned more freezers. I am just trying to understand, is it you are expanding the frozen fresh product? How about the refrigerated or chiller-based fresh? And I am curious, is it new brands, or you are expanding with existing brands? Maybe just expand upon that effort around Fresh a little more, if you would. Thank you so much. Sabrina Simmons: Sure. I will start with the fuel comment. So it has been a bumpy ride the last week or so, so we were just trying to be helpful with regard to, you know, our base assumptions in our forecast. But here is how fuel impacts us, and it is similar to every retailer out there. We have our inbound ocean, and that sort of lags. It comes in later into our P&L through cost of goods sold. And then we have our outbound from our DCs to our stores, a lot of it trucking—that can impact more rapidly. And then we have our parcel shipping that can also be impacted. So we have incorporated in our scenarios in the range we gave absorbing some of the volatility we have seen in gas prices over the last week or so. But, you know, the base assumption is that things start to normalize after Q1. Joel Anderson: Good. And then, you know, as it relates to fresh and frozen, you know, we look at that as one, and it ebbs and flows, and some of it is dependent on when our vendor partners are bringing out new product. And I think the most important fact you should take away from that is I am not just telling you we are going to grow fresh. You are seeing that we are making capital investments, and in this case, the example was the additional freezer coolers. But we also expect fresh to grow as well, and there are several new lines coming out middle of this year. So that is a category that grew significantly in 2025, and we see more growth coming in 2026. And, you know, some customers use it as a topper, some customers use it as a full meal, and so, you know, sometimes you need fresh and sometimes you need frozen depending on how you are using it with your respective pet. But big growth area for us. We are really excited about it. Operator: The next question is from Zachary Fadem with Wells Fargo. Please go ahead. David Lantz: Hey, guys. This is David Lantz on for Zack. Thanks for taking our questions. I guess, first one for me, within the 2026 outlook for top-line growth, what are you assuming for the broader category, and how did your performance stack up to peers in Q4 from a share perspective? And then one more: within Q1 and the midpoint of the guide being flat comp, is there anything we should keep in mind that is embedded within that for stimulus and/or, you know, store closures from winter storms here quarter to date? Joel Anderson: Well, look. I am not going to break it down by, you know, specific areas. I think the focus on our end is to grow overall top-line growth, and some of that will come from consumables, obviously, because that is over 50% of our business. But, you know, we are really—as you can tell from my comments—we have got initiatives in all aspects of the business: services, consumables, companion animal, supplies. And, you know, obviously, with us intentionally reducing, you know, unprofitable sales last year, you know, we gave up some market share. And with our growth this year, we will start to gain that back. Sabrina Simmons: Yeah, and I would just add to that, you know, this year is really more about another self-help year as we look to grow sales. We are not overly reliant—we are not counting on big tailwinds from the sector. I mean, we feel like we have all of these opportunities that Joel outlined, and these initiatives are going to really support our outlook. And, you know, as for how we think about our share, even though, yeah, we gave up a little top line in 2025, we really grew a lot of bottom line. So we have cleaned up the business. We are coming from a strong foundation. There is an opportunity, as Joel said, to first grow share of wallet with our current customers. I think the next opportunity to pick off is sort of small independents and small chains who have about four percentage points of market share in the pet sector. So there are lots of opportunities for us to go after without being overly reliant on any tailwinds. And on Q1, you know what? We have taken into account—there are so many pluses and minuses in this kind of noisy macro we are living through. So, sure, I mean, on the plus side, you have got, like, the tax refunds coming in—all, you know, can only be a positive. On the minus side now, you know, as we just talked about, you have some fuel pressure. So we have kind of tried to bake those scenarios within our guidance, and we do not—we have not been overly reliant on any of those levers because, again, even with the taxes, one does not know how much will go to savings versus spending, etcetera. Now what we like about this environment—or what we like about our customers, I should say—is our customers skew to the higher end of the income spectrum. So that is good news for us because that end of the spectrum can obviously withstand macro changes without it being as large of a percentage to their overall well-being. Joel Anderson: Then as far as weather goes, you know, first quarter is always volatile. It was volatile last year, volatility in it this year. The way I think about it big picture is by the time the quarter is done, the volatility kind of evens out with pluses and minuses, and that is kind of how we thought about it in the guide for this year. Operator: This concludes our question and answer session. I would like to turn the conference back over to Roxanne Meyer for any closing remarks. Roxanne Meyer: Great. I want to thank everyone for joining the call today, and we look forward to updating you on our progress. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to Codexis, Inc. Reports Fourth Quarter and Fiscal Year 2025 Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the call over to Georgia Erbez, Chief Financial Officer and Chief Business Officer. Please go ahead. Georgia Erbez: Thank you, operator. With me today are Dr. Alison Moore, Codexis, Inc. President and CEO, and Britton Jimenez, Senior Vice President, Sales and Marketing. During this call, management will make a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our guidance for 2026, revenue, anticipated milestones including product launches, facility expansions, technical milestones, and public announcements related thereto, as well as our strategies and prospects for revenue growth, path to profitability, and successful execution of current and future programs and partnerships. To the extent that statements contained in this call are not descriptions of historical facts, regarding Codexis, Inc. are forward-looking statements reflecting the beliefs and expectations of management as of the statement date, March 11, 2026. You should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties, and other factors that are, in some cases, beyond Codexis, Inc.’s control and that could materially affect actual results. Additional information about factors that could materially affect actual results can be found in the Codexis, Inc. filings with the Securities and Exchange Commission. Codexis, Inc. expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. I will now turn the call over to Alison. Alison Moore: Thank you, Georgia, and thanks everyone for joining. At Codexis, Inc., our mission is to generate manufacturing solutions using biocatalytic enzymes. Building on our history of innovative enzymes, and our established relationships with the biopharmaceutical industry, we are now focused on RNA medicine. We have developed the ECOsynthesis manufacturing platform, which is short for enzyme-catalyzed oligonucleotide synthesis, and has been developed to address many of the challenges experienced with the current siRNA production technology. The number of siRNA medicines in development are growing at a rate of 5% to 10% per year, and current production technologies will not be able to keep up with demand. The impact of these powerful new therapies may be compromised if they cannot be produced at scale. It is not a medicine if you cannot make it. The total addressable annual market for production technologies in five years is estimated to be $2 billion, and we intend to establish Codexis, Inc. as a key technology provider in this market. Let's talk about how we are doing that. Last year was pivotal in both the focus and momentum of the company. We achieved a number of important milestones in 2025 in platform performance and industry engagement, demonstrating tangible and significant interest from our customers who are all invested in making powerful siRNA therapeutics, and demonstrating that we are at the forefront of biocatalytic enzyme innovation by developing technologies that can improve large-scale manufacturing of oligonucleotides, and potentially even deliver superior therapeutic asset activity. We reached an important technical milestone in delivering our platform, having synthesized 10 grams of a commercially relevant siRNA using full sequential ECOsynthesis. Importantly, we shared detailed product quality data from this synthesis demonstrating no quality barriers related to our production technology. We are continuing to scale up the production in 2026, currently operating at 100-gram scale in our Eco Innovation Lab, and heading toward half a kilo scale by the end of the year. In addition, we had a client utilize our ligase to manufacture a 3-kilogram batch of siRNA, a tremendous achievement in chemoenzymatic production, an important growth sector of our business. In terms of building a robust supply chain to support our ECOsynthesis, we made significant progress in production infrastructure. Our ECOsynthesis process involves a suite of purified enzymes. To enable efficient, high-quality supply of these enzymes, we have modernized our non-GMP production capability in Redwood City and achieved ISO 9001 certification. This certification provides confidence to our customers that we are operating under a particular quality standard. This milestone was reached in 2026, and since then, we have passed a facility and quality management system inspection by a large pharmaceutical customer, readying Codexis, Inc. for ECO enzyme supply. With respect to GMP production capability, we are fully engaged in our capital project to retrofit our new GMP plant that was leased in 2025. We will begin construction in the second half of this year and expect it to be fully operational by the end of 2027, further enabling the adoption of the ECOsynthesis platform and serving our customers with GMP siRNA. Innovation is a cornerstone of our company and our culture. In 2025, we introduced a new feature of our ECOsynthesis platform, which is the ability to generate siRNA with specific stereochemical control. We presented our first data demonstrating stereoisomer resolution at TIDES U.S., and we are building the ability to control stereoisomer configuration at both the 3’ and 5’ ends of the siRNA molecule. In addition, we are exploring the biological impact of this control, and believe this could be a tremendous asset to those customers who seek ways to improve the potency and purity of their product. We will always be striving to lead the industry in innovations that are meaningful and directly relevant to the needs of our customers. On the commercial front, at the start of 2025, our goal was to market our ligase and full ECOsynthesis products and services by contracting with a broad range of customers in siRNA product development. We saw engagement from a range of innovators, from large pharmas to emerging growth biotechnology customers. Britton will give a full update on our commercial activities later in the call. Our goal at the beginning of 2025 was to have one CDMO arrangement signed in 2025. We surpassed that goal by signing three agreements, one each with Bachem, Nitto Avecia, and Axolabs, highlighting the motivation from major providers who clearly understand the current limitation of standard solid-phase chemical processes. Each of these partnerships is initiated with feasibility work in our own labs using a specific therapeutic asset sequence. In 2025, we returned our heritage small-molecule biocatalysis business to a healthy profit margin, and have seen stabilization in revenue. The pipeline of drugs in late-stage clinical studies remains robust, and should fuel growth in this area for at least the next three to five years. This remains an important part of our business as it supports the investment that we are making in ECOsynthesis. Operationally, we paid close attention to our costs and made the hard decision to realign our work in the fourth quarter. The savings we expect to realize from these efforts will partially offset the cost of our GMP facility, allowing us to make this important investment with minimal increase in our cash burn. Georgia will give you a more detailed description of our financial expectations. We ended the year in a strong cash position fueled by the $37.8 million technology transfer agreement we signed with Merck in the fourth quarter, and we expect our current cash balance to fund operations and capital expenditures through 2027. It is remarkable that in just a short time we have moved enzymatic siRNA synthesis from an exciting idea to a reality. We are proud of the progress we have made in 2025 to achieve liftoff of the ECOsynthesis platform. We look forward to showing our customers and investors additional tangible proof of the value of the technology in 2026. To walk you through our commercial achievements and plans for 2026, let me turn it over to Britton. Britton Jimenez: Thanks, Alison. Broadly speaking, 2025 was the year we moved our ECOsynthesis manufacturing platform from an attractive concept to a promising and viable business. 2025 was also the year where our platform advanced from technical feasibility to being capable of supporting preclinical development as our customers progress towards IND and other regulatory submissions. And now I want to share more details on our revenue drivers for 2026. We spent 2025 building and refining our sales messaging and filling the customer pipeline for our ECOsynthesis services platform. We have 55 opportunities in the sales pipeline with 40 individual companies, demonstrating strong continued interest in our ECOsynthesis technology. The industry knows there needs to be a change, and we intend to be the best option for them, whether they are a drug innovator or a CDMO. I would like to spend a moment breaking down the stages of our agreements with innovators, what they entail, and offer a plan for how they could evolve. Our arrangements with CDMOs are slightly different, and I will review those as well. We announced last week a contract with an emerging biotech company. Under this contract, we will supply the innovator with 50 grams of siRNA material made using our ECOsynthesis manufacturing platform. To clarify, this is fully enzymatic synthesis of a siRNA drug substance. Once we deliver the material, they will be able to perform preclinical testing on the asset. Upon meeting the goals of this testing, the innovator plans to use our process to move their drug candidate into clinical studies. This is an exciting proposition for us, as it is the first time we have a line of sight to having a drug made from the ECOsynthesis platform move into human studies. Financially, this low 7-figure contract is fairly evenly split between services and product revenue, and is expected to be completed over the next 12 months. This contract is the prototype of how we enter into evaluation agreements with our customers. Once the customer decides to move their drug candidate forward, we enter into a new multi-year agreement that will incorporate licensing fees, milestone payments, as well as a clinical supply agreement. The dollar value of these contracts will vary based on the size of the clinical trial and the amount of material we must produce to meet the customer's needs. If the product is developed successfully, we will enter into a commercial supply arrangement. We will continue to provide updates throughout 2026 on examples of these types of contracts. We have also created relationships with CDMOs, all of which are currently in the technology feasibility assessment phase. Once this phase has been completed, we expect the relationship to move to an adoption phase where we will transfer our production-scale process to their facility. We expect to work under a commercial agreement that would consist of upfront licensing fees plus referral revenue-sharing arrangements. We expect referrals to be bilateral. We will refer our customers to our preferred CDMOs and likewise, our CDMO partners will refer customers to us who are looking to improve their manufacturing process. Our small-molecule biocatalysis business remains stable and profitable. As we mentioned on our last earnings call, we support 14 programs in late-stage clinical development. We have had data readouts on three of those studies, two of which were positive. Our customers are in the process of seeking commercial approval for those programs, and we are already seeing activity in preparation for supporting commercial launch. As we mentioned late last year, this is evidence that our historical business is starting to show sustained growth again for the next few years. We still have additional opportunities to add to this late-stage pipeline, and we will continue to service the needs of our customers who seek value-added enzymatic solutions to their drug manufacturing activities. As Alison mentioned earlier, we are focused on enabling technology innovation in the oligonucleotide market. We are already having conversations with customers about how to employ stereoisomer control to deliver improved productivity and potentially improved potency. With further technological development and demonstration of the importance of this approach, this has the potential to be an important offering in our commercial portfolio. In addition to product and service sales, I want to take a moment to note Codexis, Inc.’s rich history in business development and technology licensing. One of our strengths is identifying innovative ways for our customers to benefit from our technology. Whether it is exploring fields outside our core focus, or out-licensing our CodeEvolver technology, we have had a long practice of signing licensing deals. The agreement we signed with Merck late last year is evidence of the importance of this strategy, having provided us $38 million of non-dilutive capital. We remain committed to this practice and intend to sign a licensing-type deal in 2026. I hope you can appreciate the feeling of excitement we have for our prospects in 2026 and beyond. We are aligned behind our ECOsynthesis technology and are energized to truly make 2026 a demonstrable success. With that, I will now turn the call over to Georgia for a discussion of our financial results for the fourth quarter and full year 2025. Georgia Erbez: Thanks, Britton. Good afternoon, everyone. Today, I will provide a brief overview of our financial results here on the call and invite you to review our 10-Ks filed today for a more detailed discussion. Total revenues were $38.9 million for 2025, compared to $21.5 million in 2024. The increase was primarily due to the Merck Technology Transfer Agreement executed in 2025. We do expect a small amount of revenue under this agreement to be recognized in 2026. For the year ended 12/31/2025, revenue was $70.4 million compared to $59.3 million for the prior year. Product gross margin was 64% for 2025. For the year ended 12/31/2025, product gross margin was also 64% compared to 56% for the prior year. During both the three-month period and the full-year period, the increase was primarily driven by product mix, and declines in several low-margin products that were replaced with more profitable product sales. We expect gross margins to be stable in 2026 at the levels we were able to sustain in 2025. Turning to operating expenses, R&D expenses for 2025 were $11.7 million compared to $12.1 million in 2024, largely driven by lower employee-related costs and lower stock-based compensation expenses. R&D expenses for the year ended 12/31/2025 were $52.3 million compared to $46.3 million for the prior year. The year-over-year increase was primarily due to higher employee-related costs, higher lab supplies expense, and the internal reclassification of certain employees to the research and development function, partially offset by a decrease in outside services related to manufacturing and regulatory expense. Selling, general and administrative expenses were $11.2 million for 2025 compared to $13.0 million in the prior year period. The decline was largely due to lower employee-related costs and reduced use of outside services. SG&A expenses for the year ended 12/31/2025 were $47.1 million compared to $55.1 million for the prior year. The decrease was primarily due to lower stock-based compensation expenses, lower legal expenses, and reduced use of outside services. The fourth quarter 2025 expenses also include a one-time restructuring charge of $3.4 million related to the reorganization announced in November 2025. Throughout 2025, we sought ways to reduce our operating costs and improve gross margins. The improvements I just mentioned were prior to the benefits realized from the reorganization. We anticipate our operating expenses will also show improvement in 2026. We intend to use these savings to partially fund the planned increase in capital expenditures associated with our GMP facility build-out. For 2026, the combination of operating expenses and capex should be similar to what we experienced in 2025. Net income for 2025 was $9.6 million compared to a loss of $10.4 million for 2024. Net loss for the year ended 12/31/2025 was $44.0 million compared to $65.3 million for the prior year. We expect 2026 revenue to be in the range of $72 million to $76 million. For the first quarter, we are comfortable with the current consensus estimates. Similar to quarterly trends we saw last year, we expect the 2026 revenue to be more heavily weighted towards the second half of 2026 versus the first half. Codexis, Inc. ended 2025 with $78.2 million in cash, cash equivalents, and short-term investments, which we expect will be sufficient to fund our planned operations and capital expenditures through 2027. With that, I will now turn the call back over to Alison. Alison Moore: Thank you, Georgia, and thank you, Britton. ECOsynthesis is a disruptive technology that can radically alter the landscape of oligonucleotide manufacturing. As with any potentially disruptive technology, the first step is to show that it can actually work. In 2025, we achieved that. The next step is to show that the technology is useful to our customers. We believe we also demonstrated that in 2025 by having success in multiple feasibility studies with our customers. The next step is to support the deployment of our technology into our customer pipeline. We intend to make significant progress in this regard with several customers in 2026. We also want to show the value of our approach in longer-term contracts with higher dollar values committed to each one. This is a lofty goal, but one we are determined to achieve this year. Our goals for 2026 are simple. Show our investors proof of success. We can do this by signing the types of contracts I mentioned above and also new innovative licensing deals. We will also be focused on financial performance, meeting our revenue targets while being mindful of our expenses, which is everyone's responsibility within Codexis, Inc. We want to continue to innovate in the field of RNA medicine using our skills and experience in biocatalytic enzymes. We will be presenting at the TIDES meeting this year and will showcase our work on stereoisomer control. This important new development has the potential to be our next product offering. We will also communicate our ongoing progress in scaling up our ECOsynthesis manufacturing platform and making progress toward achieving half-kilogram scale by the end of this year. Later this year, we will plan to begin the retrofit construction of our GMP facility, which is an important strategic asset for the company, and we will keep you updated on our progress there as well. 2026 is shaping up to be the year when ECOsynthesis is not just an alternative production technology, but the technology of choice for our customers’ RNA medicine. We are excited by our prospects and the dedication and achievements of our employees who have been instrumental in making the ECOsynthesis technology a reality. Now we will be happy to take your questions. Operator? Operator: Thank you. Our first question is from Allison Bratzel with Piper Sandler. Please proceed. Allison Bratzel: Hey, thanks guys and thanks for taking the question. I know of late you have been highlighting the potential value for stereoisomer control and the potential to yield a superior drug profile. Could you just talk to when might we see that validated either preclinically or clinically? And are any of your existing 55 opportunities actively exploring this? Thank you. Alison Moore: Thanks so much for the question. We are working very hard on this this year because we think that the opportunity may be very important. We are already examining the biological activity of some of the stereo configurations that we can generate using the ECOsynthesis platform. We are going to show more substantive data around those stereo configurations at the TIDES U.S. meeting. And over the whole course of this year, we will be doing further work to associate those stereo configurations with the possibility of improved potency. This is based on a published precedent. In addition, we have had several conversations with customers who have pipelines that include siRNA assets, and they are also interested to collaborate with us to elucidate the opportunity for their particular assets. So we have a lot of activity in this area for 2026, and we expect beyond. Operator: Our next question is from Kristen Kluska with Cantor Fitzgerald. Please proceed. Richard Miller: Hi, this is Richard Miller on for Kristen. Just a quick question. Could you help us kind of understand the general process of how you got to the recently announced deal? Thank you. Alison Moore: Are you referring to the deal in the recent press release? Richard Miller: Yes, that is correct. Alison Moore: I think I will ask Britton to speak about the history of that relationship and how we think about that deal and the potential for the future progress in that relationship. Britton Jimenez: Yeah, Alison, thanks. This deal in particular is very, very exciting. This is, as we mentioned in the press release, a small organization that has a cardiovascular asset that are looking and understand that what they are trying to achieve, the current industry cannot meet their needs. And so from very early on in their development of this asset, they have been in discussions with us because they know they have a challenge and they need to figure out a way to address that challenge and be able to bring their product to market. So these discussions have been going on for many, many months with this organization, and they are very, very excited working with us. We are very excited working with them because we both believe that the ECOsynthesis manufacturing platform can meet their needs and deliver the materials that they need for their clinical asset that eventually will get into commercial production as they work their way through the different clinical trials they need to go through. Operator: Our next question is from Matthew Hewitt with Craig-Hallum Capital Group. Please proceed. Matthew Hewitt: Afternoon and congratulations on your progress. Maybe just to dig in a little bit more on the 50-gram contract. Could you walk us through, so this initial agreement is for low 7 figures. Walk us through the process. So this is preclinical work. What happens next? Assuming the data comes back positive, where do they go to, what, you know, what phase do they move into? What does that contract look like? I am assuming it is much larger than 50 grams. So help us extrapolate what this could ultimately become as this moves from a preclinical study into maybe, at some point, a commercial product. Alison Moore: Yeah. I will start with that, Matt. Thank you. So we like this prototype, and we hope that we would fill our book of business with a pipeline of these. So the example is that we commit to feasibility studies. We have been talking about that over the last year, where we determine if our technology and the particular sequence and construct that a company is interested in progressing, if there is a good match. We have seen that across numerous molecules now and are really starting to build a database and also build credibility across our current customers about the capability and power of the platform. So this contract that you are referencing was also initiated as a feasibility study, so a service-type contract. And as we continue sharing data with this particular client in this contract, we will be completing this component of this contract with the delivery of 50 grams of material that this customer will then use to do preclinical studies with, and they will start to create their early-stage comparability assessment of our product. Beyond this preclinical work, one would expect that if the data continues to look successful, that the company will be interested in progressing product generated using the ECOsynthesis platform into an IND submission, and they would be generating toxicology material and GMP material suitable to start a clinical trial. If our production platform continues to be their designated manufacturing process, then our aspiration is that we will become their manufacturing partner and provide ultimately commercial material to them, assuming that their asset proceeds through development. Matthew Hewitt: That is helpful. Is there a way for us to—and I am not asking for specific numbers—but how do we think about as that scales through development from, you know, preclinical to tox studies and beyond, how do we think about that low seven figures? Does that become mid seven figures? Does it become multiples of that? I am just trying to figure out what can this become if you and your partner are successful with this specific program. Alison Moore: Well, I think, one way to think about it, I am going to—you know, this is just an example that we wanted to share. And like I said, what our aspiration is to build a portfolio of such customers. And I also referenced that we have been doing feasibility that we think has been incredibly valuable with multiple customers over the last, you know, 15 months or more. And we have provided those services in a way that has been very easy for those customers to try to use the ECOsynthesis technologies to test them out. But we are moving forward with a powerful technology that is more and more recognized, and we absolutely would expect that licensing deals associated with technology, the opportunity to commit to this technology, would be much more significant in terms of the kind of revenue that they would earn for Codexis, Inc. In addition, as you know, after our GMP facility is operational, we will be selling product. In addition, we think that some of these things will go hand in hand. Some customers may want to license the technology completely and bring the technology in-house, in which case we will supply enzymes. Smaller companies may want to purchase GMP siRNA from Codexis, Inc. direct, and we will be able to do all of those. Certainly, if our technology delivers a superior asset and we can prove that, then again, we would expect that that could generate increased value for Codexis, Inc. and our shareholders. Matthew Hewitt: Got it. And if I could sneak one more in, and this one might be a little more geared towards Georgia. But what type of visibility do you have into the $72 million to $76 million revenue guidance that you have this year? I guess, how much of that do you feel like you have got line of sight or contracts in hand versus how much of that is still something that you expect to receive over the remainder of the year? Thank you. Georgia Erbez: I mean, it is a good question. And, you know, we are sitting in the early part of 2026. So the way that we build our projections is to look at historical buying practices of our clients and make assumptions moving forward. As you said, at the beginning of the year, you always have a certain amount of your projections that are speculative, that are unknown, and this year is not any different. But the base of our business is from what we look forward to from our past buying practices of our customers. So we do have line of sight on quite a large percentage of this business, but, you know, it is still early in the year. Matthew Hewitt: Got it. Thank you very much. Operator: Our next question is from Dan Arias with Stifel. Please proceed. Dan Arias: Yes, hi guys. Thanks for the questions. Alison, maybe a high-level one here. You guys are entering a new phase with what you can do. So I guess I am just curious where you think the industry finished 2025 when it comes to total siRNA demand? I mean, I remember when you first talked about this pivot towards ECOsynthesis back in 2023, I believe. You had a slide that said that it was like a thousand kilos a year and that by the next decade, it could be 30,000 kilos. So I know these big picture questions are sort of tough to answer, but for those that are kind of trying to keep tabs on this scale-up journey, where does it feel like we are at the industry level right now? Alison Moore: Yeah. That is a great question. I think that the siRNA therapeutic pipelines seem very vibrant at the moment. Of course, we can look right at the end of that, we can look at commercial assets. There are several commercial assets now, so that total number is growing. You can see that the commercial asset revenue line is growing. We also know that there are a couple of very large indication-size siRNA assets sitting in some large pharma pipelines. And then, through those types of customers and our interactions with them, we also understand that there is an extremely large number of siRNA assets in preclinical and early-stage clinical trials. So I myself look at the clinical trial numbers on fda.gov, and I count them sometimes, and those are growing very nicely. To your point about demand, you are correct that the estimates on demand, you know, they vary significantly, but we are, I think, confidently looking at something like—I will give you a broad range—10 to 30 tons, 10 to 30 metric tons of oligonucleotide material required by 2030. So I think that there is a very significant addressable market there, and we intend to have a significant piece of that. Dan Arias: Yep. Okay. Very helpful. And maybe just a follow-up. Georgia, how much gross margin variability do you see when you think about that mix of outsourced business versus partners that are taking ECO in-house directly over, say, the next 12 to 24 months? Is that something that represents a mix question, and so therefore a profitability question? Or do you not see it that way? Georgia Erbez: No. We do not really see it that way. The ECO business right now has been primarily services, so there is not a lot of gross margin you can calculate off of ECO, that side of our business right now. So the gross margin is really calculated on product sales only, and so that right now, the majority of that is our historical biocatalysis business. And the gross margins are pretty stable there. We were able to sustain a 64% gross margin for the entire year. I mean, there was some quarterly variability, but we got 64% gross margin in the fourth quarter plus for the whole year. So we feel pretty good about having that margin, or close to it, with some margin of error around that through 2026. We see that as being pretty stable now. Dan Arias: Okay. Thank you. Operator: Our next question is from Brendan Smith with TD Cowen. Please proceed. Brendan Smith: Great. Thanks for taking the questions, guys. I wanted to actually ask about the revenue mix from here and maybe just gut check a few modeling assumptions. I understand your color around the legacy biocatalysis business. But is it fair to assume at least kind of incremental or modest growth of that segment over the next two years? Or should we interpret kind of this broader strategic pivot to mean ultimately winding down in biocatalysis revenues as some of these newer partnerships take more and more share of revenue growth? Just kind of checking in on how we should think about the split of your growth over the next few years. Thanks. Alison Moore: Yeah. Please, Georgia. Georgia Erbez: The bulk of our growth is—we really do expect that to come from the ECO side of the business. Our base business, the small-molecule biocatalysis business, has stabilized, and we do—we mentioned that we had a pipeline of products that are in late-stage clinical testing. We have had data readouts on three of those. Two were successful. We do expect that that side of that pipeline of opportunities will continue to fuel growth for the next few years. But it is more—the higher growth rate we expect to come from the ECO side of the business. I hope that answers your question. Brendan Smith: Sure. Yep. Sounds good. Thank you. Operator: There are no further questions at this time. I would like to turn the conference back over to management for closing remarks. Alison Moore: Thank you so much, everybody. I hope you can tell we are so excited about what is ahead and really appreciate you joining for our call today. Thank you. Operator: Thank you. This will conclude today’s conference. You may disconnect at this time and thank you for your participation. Dan Arias: Goodbye.
Operator: Hello, everybody, and welcome to the Bumble Inc. Fourth Quarter 2025 Financial Results Conference Call. My name is Eliot, and I will be your coordinator today. If you would like to register a question during today's event, I would now like to hand over to William Paul Taveras, Investor Relations. Please go ahead. William Paul Taveras: Thank you for joining us to discuss Bumble Inc.'s fourth quarter and full year 2025 financial results. With me today are Bumble Inc.'s Founder and CEO, Whitney Wolfe Herd, and CFO, Kevin Cook. Kevin Cook: Before we begin, I would like to remind everyone that certain statements made on this call today are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on the beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of factors and risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in today's earnings press release and our periodic filings with the SEC. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for, or in isolation from, our GAAP results. Reconciliations to the most comparable GAAP measures are available in our earnings press release, which is available on the Investor Relations section of our website at ir.bumble.com. With that, I will turn the call over to Whitney. Whitney Wolfe Herd: Hello, everyone, and thank you for joining us. We have a lot to cover today. I would like to recap what has been a very productive first year in our transformation and the excitement building inside Bumble Inc. as we work toward our platform and app relaunch in just a few months. I do not want to sugarcoat the challenging process that we are working through, but I am proud of our team, their pace of execution, and early accomplishments. Starting with performance, we closed out 2025 with fourth quarter revenue and EBITDA at the high end of our guidance ranges as we continue to emphasize financial discipline, balancing investment and sustainable long-term growth with healthy margins and cash generation. Kevin will provide perspective around the financial strides that we have made in just a moment. Turning to our transformation, the headline today is that we believe the heavy lift of our quality reset is behind us, and we are full steam ahead on product innovation. Before getting into the details, I want to set context. When I returned as CEO about a year ago, I came back with a clear focus: to rebuild this company from the inside out and return to what originally made Bumble Inc. so successful. What people come to Bumble Inc. for is to find love and make in-person connections, and they favor us for a simple but powerful reason: we build trust with women. We believe that when women feel safe, confident, and intentional about who they meet, the entire ecosystem works better. You get healthier interactions, a more balanced member base, and better outcomes for everyone. Our goal is to continue to lead in this area and to build the most woman-centric dating product in the market across features, design, and outcomes—one that solves real pain points women face in dating today. In 2025, we accomplished our most important goal: putting trust, authenticity, and member outcomes first. We also are running the company with sharper discipline so we can invest where it matters most and execute faster. We knew that doing this the right way would create near-term pressure, and it did. The choices we made were intentional. We began by raising standards across the platform and fundamentally changing how we approach acquisition. Performance marketing was reduced by well over 80% year over year. That was a deliberate shift away from volume-based acquisition and towards higher-intent, organically driven growth as we return to our roots of brand organic marketing. Despite raising the bar on new members and dramatically limiting marketing, Bumble app registrations and active users have stabilized. We proved two things through this exercise. First, demand for what we offer—the promise of human connection, relationships, and potentially love—is strong and enduring. Second, we believe the Bumble Inc. brand has tremendous affinity with our target audience. As we tighten trust and authenticity standards, user metrics behaved as expected. Although trust and safety is a competitive advantage and the work never ceases, we believe Q4 marks the completion of our quality reset. As we move into early 2026, trends suggest the rate of sequential member base decline is slowing, consistent with the expectation we shared with you on our last call, and the quality reset is working as designed. We have talked on previous calls about our internal framework improving the mix of our member base by emphasizing approved members, and removing accounts that were not here for the right reasons. Members who are truly here to find love and connection will be more engaged, and that is what we are in fact seeing as our mix improves. Engagement quality is improving significantly, with Bumble app week one in the U.S. up materially and monthly retention trending higher as well. These progress points demonstrate that the member experience is getting better due to the nature of the quality reset, even before we innovate the product. At the same time, we have improved the quality of our monetization base. Payer penetration for Bumble subscribers has increased, and the portion of payers choosing subscriptions has risen from 80% to 89% as we reduced certain promotional activities related to consumables. We anticipate that this shift reflects stronger intent and a greater alignment between value delivered and value paid for. Taken together, these improvements likely signal that we are building a healthier funnel from registration to engage to monetization. The data shows that our foundation is now stronger, with a higher-quality, higher-intent member base and a more sustainable payer mix. But this essential foundational work can only take us so far. To fully recover and return to growth, we must focus on product and technology innovation, which is where our efforts are now. Since the beginning of the year, I have personally spent 90% of my days with our tech and product teams reimagining what finding love looks like in the era of AI. We are rearchitecting the entire Bumble experience from start to finish, and I am taking a very hands-on role in shaping the core user experience across onboarding, profiles, and matching. As we rebuild the experience, one thing is clear: we cannot deliver the innovations we are creating on our legacy tech stack. That is why we are building the new Bumble experience on our cloud-native technology stack built with AI productivity at its core. The launch is targeted for Q2 this year. What we are calling tech stack 2.0 is not just a back-end upgrade. It is a fully new platform that will transform how we build and ship product. We expect it to allow us to deliver member experience improvements more quickly and intelligently, deepen personalization, support how our monetization model evolves over time, and serve as the foundation for more potential product launches in the future. These are all things that we have been unable to execute effectively on with the current tech stack, a fact that has limited our ability to deliver the innovations that our members should expect from us and compete better with other offerings in the category. Given the significant tech debt, the fact that we have been able to execute a major member base reset without being able to deliver the innovation that we need is a testament to the enduring strength of our core product and our brand. This makes me excited to show what we can do once our new platform is live. The platform development is currently being executed by our newly consolidated product and technology organization, led by our Chief Product and Technology Officer, Vivek Sagi, and supported by the engineering-led innovation hub that we built in Austin over the last six to nine months. The buzz in the building is strong, and our renewed energy is already accelerating our pace. We are working more tightly across teams, putting member satisfaction and product at the center of our daily work, and building with clearer accountability and execution. Our new tech stack will enable us to deliver an experience built around people, not just profile. Across the industry, members are dissatisfied with being reduced to images and potentially dismissed with a swipe. Bumble 2.0 introduces a chapter-based structure designed to help members tell their stories more authentically and understand one another more deeply. This will enable them to see matches with stronger compatibility signals, build confidence in the experience, and get to meaningful in-real-life dates more quickly. Before the rollout of the new Bumble Date, we are continuing to deliver updates on our legacy 1.0 tech stack that improve outcomes and address the most consistent pain points that we hear from members. We are addressing global member feedback, particularly women's feedback. One example is a new “Really Into You” tab, which we began testing last month. While results are early, they have been positive, showcasing the importance of strong signals of intent. We also rolled out tests of Profile Guidance and Suggested Date. Profile Guidance delivers personalized, actionable feedback on bios and prompts, guiding members step by step to help truly reflect who they are. Suggested Date is a new feature designed to make expressing date intent effortless, and to get people offline as quickly and confidently as possible. Beyond the major updates that we are making to Bumble Date in the near term, we are also actively infusing AI into the core Bumble experience and recommendations algorithm. Our objective is not simply to layer AI features onto the product, but to build the underlying system that reflects how people actually meet, connect, and form relationships so AI can operate within that structure. Done right, AI helps the network function better by prioritizing fewer, more relevant matches over volume, combating swipe fatigue, and moving members more efficiently towards real-world connection. What differentiates our approach is not just the AI technology, but the depth of the proprietary data that we have built over more than a decade. AI on its own is neither a moat nor disruptor to online dating. Its effectiveness depends on high-quality, scaled interaction data, and the hardest part of building a successful dating platform is earning trust and building that member base at scale. We believe that we have one of the largest and most nuanced datasets of real human connection in the world, leaving us uniquely positioned to use AI in ways that are more personalized and effective than any potential new entrant. To that point, we have talked in the past about building a standalone AI experience. What we learned in the development process is that the best way to launch a standalone product is to start with enabling it on preexisting datasets. We formed a team to focus on a standalone product feature. We call it “b,” that is integrated in the core member base to accelerate development and iteration. “b” is designed to become a personal dating assistant and matchmaker, learning members' values, relationship goals, communication style, lifestyle, and dating intentions through private conversations, then using those insights to identify mutual compatibility to find better dates with a higher degree of confidence and relevance. Importantly, this work is grounded in our longstanding commitment to privacy and trust, ensuring members remain in control of their data. A pilot of these core functionalities is testing internally and will be launched in beta soon. In addition to reimagining the dating experience, we continue to expand how people connect through Bumble BFF. We recently launched an important update that makes groups discoverable, allowing members to find and join communities based on shared interests. Early response has been encouraging, with a 17% increase in the number of active groups in just two weeks since launch. Looking ahead, we have a series of product updates planned as fast follows, including the introduction of functionality designed to bring members together in curated, real-world settings. And these are not just BFF initiatives. Ultimately, they extend into dating. We see an exciting opportunity around group dating as we reimagine the Bumble experience. While the millennial dating experience was more one-to-one, Gen Z searches for love differently, and group socializing is a big part of that. The event capabilities that we are introducing take us firmly in this direction. They create more pathways from digital interaction to in-person connection, and can further strengthen engagement. We see significant potential here both in deepening engagement within BFF and in creating new on-ramps into Bumble Date as members move fluidly between friendship, community, and romantic connection within our broader ecosystem. Our goal with all of this work is to transform people's expectations of what a dating application is. We plan to deliver a product people actively choose and want to use—one that reestablishes Bumble Inc. as the most culturally relevant and trusted dating brand. I am highly focused on realigning with the cultural zeitgeist and being the dating app of choice for our core audience, which is women and men, ages 21 to 35 predominantly. To get there, we are doubling down on our unique playbook of hyperlocal organic marketing and community-driven growth, rather than broad, undifferentiated spend, to really reposition Bumble Inc. to the center of dating culture. It is already working. We are seeing Bumble Inc.'s woman-first positioning strengthen as awareness among single women in the U.S. has increased, and Bumble Inc. continues to lead in favorability among scaled dating apps among women. And we continue to see that influencers and other relevant people in culture want to work with Bumble Inc., despite a highly competitive environment. This is the equity that we are building as we bring Bumble Inc. back to the center of dating culture. We are energized by the innovation underway and the clarity of the roadmap ahead. The products that we are bringing to the market this year represent a meaningful evolution for Bumble Inc., and we believe that they will redefine how people experience connection on and off of our platform. Brand and member experience are central to our foundation, and equally so is our operating health. We have strengthened our business on both fronts. Over the past year, we have added key leaders and resized and reshaped our organization to increase execution velocity and the pace of innovation across product, engineering, and go-to-market. We have improved focus, aligned teams more tightly to outcomes, and accelerated progress on our turnaround roadmap. We have gained efficiency across the company to fund targeted investment in our strategy, and we have streamlined and focused our marketing approach on reinforcing what our brand stands for and emphasizing organic, high-quality acquisition channels. We expect the moves we have made will help preserve our attractive cash flow profile. To summarize, 2025 was a successful year in executing our transformation. We believe we are well on our way to rebuilding Bumble Inc. around what has always made us different: listening to women and delivering a trusted, high-quality experience that drives real-life connection and love. We are clear-eyed about the work ahead, but confident in our ability to unlock a step change in the member experience beginning in 2026, which in turn should enable us to monetize more effectively over time. By resetting the foundation of the business—how we acquire members, how we engage them, and how we monetize—we believe we have positioned the company to grow again as we restore Bumble Inc. to what has always been at the heart of our success. With that, I will turn it over to Kevin to walk through the financials. Thank you again. Kevin Cook: Thank you, Whitney, and hello, everyone. In the fourth quarter, we delivered results at the high end of our guidance ranges. Revenue reflected the expected impact of our trust and safety initiatives— a deliberate reset of the member base—while profitability and cash flow demonstrated the underlying resilience of our model. Over the past year, we have managed the business with discipline, balancing targeted investment in product with careful cost control and a focus on strengthening our financial foundation. I will walk through our quarterly and full-year results before turning to our outlook. Unless otherwise noted, my comments are on a non-GAAP basis and comparisons are year over year. Total revenue for the fourth quarter was $224 million compared to $262 million in the year-ago period. Bumble app revenue was $181 million compared to $212 million a year ago. Adjusted EBITDA was $72 million, representing a margin of 32%, compared to $73 million and 28% in the prior-year period. The quarter reflected what we believe was the most acute top-funnel pressure associated with our quality reset actions. For the full year, total revenue was $966 million compared to $1.07 billion in 2024. Adjusted EBITDA was $314 million, representing a margin of 32%, compared to $304 million and 28% in the prior year. Selling and marketing expense was $161 million, representing 17% of revenue, compared to $259 million, or 24% of revenue, reflecting a more focused and efficient approach to member acquisition with greater emphasis on targeted and organic channels. We expect to maintain disciplined marketing spend in 2026 while incrementally increasing investment to support the rollout of our new products and in select member acquisition. Development expense was $96 million, representing 10% of revenue, compared to $84 million, or 8% of revenue in 2024, consistent with our plans to increase investment in core product innovation, AI capabilities, and platform modernization. General and administrative expense was $115 million, representing 12% of revenue, compared to $108 million, or 10% of revenue, reflecting disciplined cost management as we navigate the reset, offset by indirect taxes. We believe this balanced approach—containing overhead while prioritizing product investment—supports both operational efficiency and long-term value creation. I will now turn to the balance sheet and cash flows. For the full year, we generated $250 million in operating cash flow, $239 million of which converted into free cash flow. As discussed on our last call, we are taking active steps to optimize our capital structure. We completed the buyout of all our outstanding TRA liabilities in the fourth quarter for $186 million in cash. We ended 2025 with $176 million of cash and cash equivalents and have continued to generate substantial cash flow throughout the first quarter. Similarly, we are currently in discussions to refinance our existing debt obligations due January 2027, totaling $588 million as of December 31. Consistent with our intention to deleverage the business, we repaid $25 million of our current Term Loan B in August 2025. In addition to eliminating the full TRA liability from the balance sheet, we expect to repay a portion of our outstanding debt and refinance the balance. Turning to guidance, we believe the most challenging portion of the quality reset is behind us, and we have turned from adding incremental friction at the top of our member acquisition funnel to improving the experience with product innovation. We expect a lag between these product improvements and our reported financial performance metrics. As such, the sequential stabilization in our business metrics, including active users and payers, has not yet been reflected in our year-over-year revenue growth. For 2026, we expect total revenue in the range of $209 million to $213 million, including Bumble app revenue of $171 million to $174 million, and adjusted EBITDA of $76 million to $80 million, representing a margin of approximately 37%. As we move through 2026, we expect our revenue headwinds to moderate as the impacts of recent trends in our operating metrics flow through the financials. Improvements in revenue will be primarily a function of new product adoption, and further retention, payer penetration, and average revenue per paying user gains based on enhanced functionality as well as incremental monetization opportunities. An important contributor to our margin performance will be the continued implementation of alternatives to in-app purchases in the U.S. In the fourth quarter, direct payments contributed approximately one percentage point of year-over-year gross margin expansion. We currently expect the benefits to increase through 2026, as we are already seeing increased adoption in January and February. We believe this shift in billing methods meaningfully enhances the long-term profitability of the business. In closing, the actions we have taken over the past year have been made to support our financial and operational foundation in light of our transformation work. We are entering this next phase supported by a highly efficient, cash-generative business model and a cost structure better aligned to our strategic priorities. Operator, we will now take questions. Operator: Thank you. When preparing to ask your question, please ensure your device is unmuted locally. We will now open for questions. First question comes from Nathaniel Feather with Morgan Stanley. Your line is open. Please go ahead. Nathaniel Feather: Thanks for taking the question and congrats on the quarter. I guess first, thinking through a pretty ambitious product roadmap over the course of 2026, when you say registrations and active users have stabilized, as we look out over the course of the next year, what is the path to get those to start to accelerate and really improve? And of all of these kinds of changes you are talking about, help us think through the timing of when that might potentially happen. And then on the profitability side, adjusted EBITDA margin showing a really nice step up quarter over quarter—can you help us think through what are the puts and takes that are leading to that improvement? Thank you. Whitney Wolfe Herd: Thanks, Nathaniel, for the question. I will take the first part of the question, and we will talk about returning to user growth. I think it is important to just reemphasize that we just undertook something incredibly difficult without any product innovation to support us. Let me explain what I mean by that. We just underwent a membership overhaul, essentially, where we went in and we said quality is the goal—quality and safety and authenticity—which are the three most important things to women in dating, particularly when they date online, and we are going to take this on while we are still essentially under construction because we are still operating on our legacy tech stack. The fact that we were able to have registrations and active members stabilize during a transformation with little product innovation to support is actually quite remarkable, which is exciting for the next phase of this, which we said in the remarks, which is rolling out, to your point, a very ambitious but very doable 2026 product roadmap. Once 2.0 back-end infrastructure is up and running, and once we have migrated the 1.0 system to the 2.0 system, innovation becomes a lot more seamless, a lot quicker. The volume at which we can innovate becomes so much more plentiful than what we have seen in the past, and we have a very long roadmap covering what I said in the prepared remarks of solving women's pain points but also delivering these really incredible innovative features, tools, and ways of connecting that we believe will accelerate these cohorts. I think it is also important to note the oldest Gen Z right now are 28 years old, so we are just entering this peak intentional dating window, and when you look at our roadmap, it is extremely focused on reengaging this next generation who are stepping into intentional dating. On the timing front, what we said in our prepared remarks is exactly the way to think about things. This starts as soon as 2.0 is in flight, and it will be a very consistent drumbeat of innovation. We are super inspired and committed, and we are building with innovation at the core. I hope that answers the question, and I will kick the profitability piece over to you, Kevin. Kevin Cook: Thanks, Whitney. Hey, Nathaniel. On profitability for Q1, we continue to be committed to operating discipline, so we are pleased to see continued adjusted EBITDA margin expansion. I will say Q1 is probably slightly elevated. We are expecting—as Whitney highlighted, and you heard from our prepared remarks—to launch significant new product beginning in Q2 in market, so you will see a slight increase in marketing to support new product innovation and some very specific product marketing around new enhancements to product. You will also see product development costs increase midyear slightly in order to support 2.1, 2.2, and the fast follows that Whitney was describing earlier. I do believe that structurally, our margin profile is higher than it has been historically. We are much more efficient today than the business has been in the past. We are not guiding the year here, obviously, but we do see the opportunity for sustained very high adjusted EBITDA margin throughout the year, and, to the extent that we inflect growth in the business, there is enormous operating leverage in the model. Nathaniel Feather: Helpful. Thank you. Operator: We will now turn to Shweta Khajuria with Wolfe Research. Your line is open. Please go ahead. Shweta Khajuria: Thank you for taking my questions. First is on these product revamps. Whitney, how are you thinking about measuring progress, and what will be some of your milestones as you track that the revamp is going well and how you measure it? And is there something that you plan to share with us in terms of metrics, whether it is either top of the funnel or some internal metrics that you are following that would help us get a sense of how it is going? Because we may not see the impact on monetization just yet, but if engagement is improving, that would be a good sign. The second is on investment on the tech replatforming. Is there additional investment that you are expecting, or how should we think about that? Thank you. Whitney Wolfe Herd: Shweta, nice to hear from you, and thanks for the questions. You know, Shweta, can you hear me okay? Shweta Khajuria: Yes. Whitney Wolfe Herd: Sorry about that. We were having challenges with the microphone. The way we think about outcomes, or KPIs—how we measure this—is really about member outcomes. What we have started to share with you today, as you saw, is that the deeper-funnel improvements are really what measure the health of this business and how it is performing for members. If you have really good top-of-funnel results but negative bottom-of-funnel results, you do not have a healthy consumer business, and this industry and this product are inherently dependent on the outcomes that we drive for our members. The way we are thinking about 2.0 outcomes is not dissimilar to the way we think about it right now, but ultimately it is: are our members satisfied? Are they getting what they came for, which is high-quality dates with people they actually want to meet? Are those dates safe? Are they reliable? And are they converting into what they came to look for? This is precisely how you drive top of funnel, because when people come, have a good experience, go on great dates, they tell their friends, and that is the flywheel. That is everything we are focused on. In order to arrive at that outcome, we had to really enhance the way in which people discover one another. We had to focus on quality. Quality in this instance is about helping people show up better. How do we get you to showcase yourself in a way that is actually driving curiosity from members so that you can create matches and go out on great dates? You will see this come to life in 2.0, but ultimately it is all about the outcomes and the success that our members find. Alright. Kevin Cook: Hello, Shweta. You had a question, I think, about the tech stack and the investment required. Recognize 2025 was an investment year from a product development point of view, and we are continuing with that investment in 2026. Over the course of 2025, we built a new, modern AI-oriented engineering organization primarily in Austin, Texas, and so much of that investment is behind us, including both on product and on the platform. You will see some additional investment throughout 2026, of course. Things to recognize: there is a lot of efficiency in our engineering efforts currently, and we are benefiting substantially from the application of AI in our product development. In terms of appreciating the level of investment required, there are some infrastructure costs based on the existing set of offerings—primarily data center costs—that we continue to maintain while at the same time we are building this cloud-native, AI-led tech stack that you have heard a lot about already. There is some duplication of costs for a portion of 2026 in that respect. Longer term, you will see a continued modest level of product development expense increase tied to revenue, just to continue to produce the sort of innovation that we are expecting, but you should see some efficiency—some operating leverage—in that line once we have got the duplicate costs taken out of the system. Whitney Wolfe Herd: Okay. Thanks, Shweta. Thanks, Kevin. Operator: We will now turn to Steven Zhu with UBS. Your line is open. Please go ahead. Moore Robley: Hi. This is Moore Robley in for Steven. Thank you for taking my question. Appreciate the color on direct billing, and I was just curious if you could frame how big of a potential this could be for you all this year, given how much of a contributor this is to the EBITDA guide. I understand there are some trade-offs between efficiency and causing user friction. And then a second question: how should we expect the new product initiatives to be rolled out globally across the Bumble-affiliated apps? Additionally, do you see any opportunities with respect to international expansion? Thanks. Kevin Cook: I will take the direct billing question. You are right. We saw in Q4 a full percentage point of gross margin expansion as a result of alternative billing. In Q4, we implemented our Apple Pay program, and what we have seen is a very, very rapid adoption by users of Apple Pay. In fact, as of today—quarter to date—we have already got more than half of our U.S. iOS payments being made through Apple Pay. It is a very cost benefit, or improvement, to gross margin. We believe it is mostly sustainable based on our understanding of the various cases and settlements to date. There are, as you know, some changes that are occurring in that regard, so we have not built all of the long-term benefit into our model. Clearly for Q1, we are far enough into the quarter that we have great confidence in our adjusted EBITDA guide there. But as I think about the year, we have hedged that number slightly. We have not seen, by the way, any friction. When we built plans, we did think that there could be some impact on revenue. There has not been to date, and we are about three months into the program. We have noted too that there seems to be an improvement in renewals as a consequence of using these alternative billing methods, which was somewhat unexpected but obviously welcome. Whitney Wolfe Herd: On the other portion of the question, the back-end infrastructure—what we are calling tech 2.0—that will be applied to the entire portfolio, with the exception of BFF, because that lives on the Geneva infrastructure. As you will recall, we acquired Geneva largely due to how great their tech, their team, and that infrastructure is that they have, which was super enabled for groups and beyond one-to-one, which is going to be a huge part of our focus in 2026 and beyond. We really believe— not to go on too much of a departure—but we really believe that one of the largest opportunities for us is bringing people together in groups of people. Really taking this beyond one-to-one is inherently how a lot of the Gen Z cohort chooses to socialize and meet and date. To put a pin in this, tech 2.0 will be rolling out to all products that are on legacy infrastructure, and will be enabled globally. That will be replacing any legacy systems. Thank you. Operator: We will now turn to Eric Sheridan with Goldman Sachs. Your line is open. Please go ahead. Eric Sheridan: Thanks so much for taking the questions. Maybe two that build on some of the answers so far and just trying to take it a little bit further. When you look at the current competitive landscape of investments against growth and investments against product that you see across the dating horizon, how are you thinking about positioning yourself competitively in a 2.0 world of where you think the biggest opportunity for both incremental growth of new users or reengagement of existing users or legacy users sits for the company when you think about that competitive landscape? And then second question would be—and maybe it is qualitative more than quantitative at this point—how are you thinking about the incremental margin structure of the company in a fully deployed 2.0 world relative to 1.0 on the other side of the investment cycle? Thanks so much. Whitney Wolfe Herd: Thanks so much, Eric, for the question. I will take the first part, and then I will make one comment on long-term investment strategy, and then I will kick it to Kevin for the particulars. This is really an important topic. First and foremost, let us back up and actually look at what makes Bumble Inc. so unique and sets us apart inherently from any of our competitors. The most important part of our differentiator has been core to us since I started this company in 2014, and that is our obsessive focus on women. We have become a trusted women's brand. This stands true even today on, quite frankly, somewhat outdated technology and product offerings. We are not up to par with our product right now, but we will be, and our brand is so resonant and our brand carries us in such a way that this is a strong driver for us in 2.0. When you see the rollout of 2.0—and I know I mentioned this in the prepared remarks—I have been in every pixel, every meeting, so deep in the details, reimagining what the dream women's app would look like in 2026 to reengage women, both Gen Z and millennial alike, and Gen X, frankly, because this is a highly monetizable cohort. They are also equally looking for love and connection. How could we reimagine this and innovate our way to be the preferred dating platform and connection platform for women? I want to reemphasize that women and the trust that we have with women, and the authentic design system of putting women first—beyond just a function of who goes first or who does not—this is inherently what sets us apart. The second thing is I am a firm believer that the future is beyond one-to-one in any sense of exclusivity. Do I believe that there is still a huge demand for intentional one-to-one dating? Absolutely. Please do not misunderstand me there. I think we have not seen our potential through with one-to-one dating, and we are very excited about that opportunity globally. But what is really exciting is using Bumble Inc.'s brand and leveraging this brilliant new technology infrastructure to really go beyond just this small dynamic of one person seeing one person, connecting with one person—bringing people together in groups of people, whether that is a small group, a mid-sized group, or even a large group—and getting people in real life. This is such an opportunity for us, and we know that we have a right to win because of the strength and the favorability that our brand brings. That leads to my final point, which is the number one thing that women want when it comes to dating, particularly online, is trust and safety. This has been at the core of our DNA for years. We have been a leader in the category, even passing laws to drive safer initiatives for women online, and we are going to be doubling down on this in every sense of the word. We are going to be getting out there much more broadly. I am going to be putting myself out there for a 2.0 relaunch in a way I have never been before, and we are going to reignite this trusted, safe, women-first dating product and brand so that we can bring people together in the real world as quickly and efficiently as possible. Kevin Cook: Hey, Eric. On the operating cost point with respect to the updated platform, the way to think about it is we are operating from these very old data centers today. When we cease reliance on the data center and have a true cloud platform, operating costs will be substantially lower. With respect to innovation, innovation will become much less expensive and more rapid. We will be able to iterate in a way that is not possible today. That should unlock—separate question, but it should unlock—some incremental monetization or revenue opportunity as well. With the modern platform and what is contemplated in terms of new product introduction, you will see a greater reliance on AI. You will see an offset perhaps in token costs associated there, but there should be a net benefit to operating margin from our move to the modern platform. Eric Sheridan: Great. Thank you. Operator: We will now turn to Cory Carpenter with JPMorgan. Your line is open. Please go ahead. Cory Carpenter: Hey. Good to talk again. You alluded to the chapter-based structure—curious if you could elaborate on your vision there and then the role that you see the swipe playing on the 2.0 platform. And then just bigger picture, once 2.0 is out, how radical the change will users see and how quickly of a change will they see in the app once you roll it out? Thank you. Whitney Wolfe Herd: Hey, Cory. It is great to chat again. It has been a while. Yes, let us talk about the chapter-based profile. We basically took the stance that the last decade has reduced people down to profile, and this has happened across the internet. Ultimately, dating only works when you really understand the story of someone. This is where chemistry and connection really happen. It is the intersection of someone going from just a stranger that you dismiss to someone you are genuinely interested in. As we reimagined the profile, we thought, why not bring people to life as a story? Everyone has a story to tell, and this is where people become interesting. What you will see in this chapter-based approach will not be just your standard, flat, non-interesting profile that everybody has become so used to across platforms. This is really an opportunity to capture the essence of who you are so that you go from being Cory of whatever town you live in with whatever age you have listed and just some photo—you turn into who you truly are—and this will ignite curiosity from the people that are exposed to your story. This is also a gateway to allow people to interact more dynamically. Today, on the current Bumble app, you can either broadly swipe right or broadly swipe left, which is a no, on someone’s profile. You are saying, “Yep, Cory is in,” or “No, Cory is out,” in one swift go, and this reduces the options for people to actually get better matches. We will be introducing more dynamic ways for somebody to express interest in your story, rather than just your profile, and this is going to drive more dynamic engagement, spark better conversation, and ultimately drive better KPIs across the board—like engagement and chances to get better conversations going. You will also see us take a much more deliberate approach to getting people offline versus just in what people refer to as dead-end chat zones. We are really trying to chip away at member complaints like, “I have all these chats that just sit,” or “They expire,” or “These matches never went anywhere.” We are trying to get people to understand who each other are and get them out in the real world as confidently, quickly, and safely as possible. On how big of a change this will be when members start interacting with 2.0, this has been top of mind for the product team. We are going to piece-by-piece expose members in very controlled groups to different portions of the new 2.0 experience. We are going to rigorously test every single portion of the experience, make sure that no KPIs are damaged, that monetization is strong, and that we do not accidentally hurt anything. Once we have tested and, if needed, iterated, and once we feel that this is safe, we will start to roll it out slowly in very controlled market expansion. Once we get to a certain place where we feel that everything is going in the direction we want, that is when it will start to migrate to the entire world. You can expect that to be a multi-week thing, not a multi-month thing. As far as our confidence in getting 2.0 out the door in our projected timeline, we are very confident. Teams and systems are all in a great place, and we are very excited about this next chapter. Kevin Cook: Awesome. Thank you. Operator: We will now turn to Robert Coolbrith with Evercore ISI. Your line is open. Please go ahead. Robert Coolbrith: Great. Thank you very much. I just wanted to ask a follow-up on Cory’s question. As I think there was a second part there about swipe mechanic, is that still going to be a core part of the user experience? And then as you move into these more detailed, chapter-oriented profiles, two questions there: what is the strategy for getting existing users to fill those out and engage with the more fulsome profile? And secondarily, is there any trade-off or impact on paid user conversion versus user retention as you make some of those changes? Does it slow down people’s consumption of profiles, which has, I think, historically been a way that you have driven paid user conversion? Thank you. Whitney Wolfe Herd: Thanks so much for the question. The good news is we have thought about all of these things top to bottom, left to right, for a very long time, and we have teams making sure that revenue and monetization mechanics have been thought through and that there is a do-no-harm approach to revenue and monetization with the 2.0 experience. I want you to take some consolation in that—that we are not going to just roll something out that topples our monetization strategy. We are being very modest and very conservative with that. In fact, we have set up and positioned the new profile to have new gateway opportunities for better monetization over time. On the swipe piece, the way we are phrasing this internally is: what does life look like beyond the swipe? That does not necessarily mean this binary situation of it is either there or it is not. It is much more nuanced than that. We are testing several iterations of engaging opportunities of how you would get to a match. The swipe is the way you get to a match. If the match is the goal, the swipe is the mechanism. We are testing several mechanisms to get you to a wanted and mutual match as quickly, efficiently, and in the most compatible way as possible. The mechanism of swiping may dynamically shift, and in certain markets, we may test with no swipe. In other markets, we may preserve the swipe. We have multi-mechanism tests that we are going to be running to make sure that we do what the members want the most, that serves our members best, that is in line with the KPIs that suggest we are getting people to the best outcomes, and, of course, that does not disrupt revenue and preserves the strength of the revenue side of the business. I hope that has answered the question. Robert Coolbrith: That is great. Thank you very much. Whitney Wolfe Herd: Oh, sorry—there was a second part of that: how do we get people to fill in the more robust parts of the onboarding? This has been a long game. When I came back a year ago, I knew that this is where we would be this year, but I needed a year to get to the quality transformation. What was a huge part of that quality transformation overhaul? It was trying to drive more of what we called approved members. What constitutes an approved member? Someone who has adequate information in their profile—enough intel that we have to work with to drive compatibility on the back end—enough photos, selfie verification, and, hopefully, ID verification. We have already been planting the seed for this moment for the last several months by trying to drive people to fill in more information. We have made a ton of progress there, so it is not a cold start situation where all of a sudden we have a brand-new profile and we have no information. We are being really thoughtful in how, what, and where we ask you to fill in more information. It is not going to feel punitive, stressful, or exhausting. It is going to be dynamic and fun. As we talked about with “b,” our AI assistant, down the road we are going to be able to get much more robust information about who you are and what you are looking for, and really understand your story through more engaging mechanisms—whether that is voice or typing—but in a conversational format like an AI product. This is going to be the long game of how we get more dynamic information. It is a step-by-step plan, but the good news is we have already made a lot of progress. Operator: As another reminder, if you would like to ask a question, please press 1 on your telephone. Ladies and gentlemen, we have no further questions, so this concludes our Q&A and today's conference call. We would like to thank you for your participation. You may now disconnect your lines.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sonida Senior Living, Inc. Q4 and full year 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star then the number 1 on your telephone keypad. I would now like to turn the call over to Jason Finkelstein, Investor Relations. Jason, please go ahead. Jason Finkelstein: Thank you, operator. All statements made today, March 11, 2026, which are not historical facts, may be deemed to be forward-looking statements within the meaning of federal securities laws. The company expressly disclaims any obligation to update these statements in the future except as required by law. Actual results or performance may differ materially from forward-looking statements. Certain factors that can cause actual results to differ are detailed in the earnings release that the company issued earlier today, as well as in the reports that the company files with the SEC, including the risk factors contained in the Annual Report on Form 10-Ks and Quarterly Reports on Form 10-Q. Please see today’s press release for the full Safe Harbor statement, which may be found in the Form 8-K filing from this morning or at the company’s Investor Relations page found at investors.sonidaseniorliving.com. As further described in the company’s current report on Form 8-Ks, filed with the SEC this morning, the company completed its previously announced acquisition of CNL Healthcare Properties, Inc., or CHP, through a series of steps ending with a forward merger of CHP within into a subsidiary of the company, with such subsidiary surviving the CHP merger, as a result of which the company now indirectly owns all the assets of CHP. Unless otherwise specifically noted, or the context otherwise requires, the information presented on today’s call does not reflect the closing of the CHP acquisition. Please also note that during the call, the company will present non-GAAP financial measures. For reconciliations of these non-GAAP measures to the most comparable GAAP measure, please see today’s earnings release. If you would like to follow along during today’s call, you can find Sonida Senior Living, Inc.’s fourth quarter and full year 2025 earnings presentation in the Investor Relations section of the company’s website. In addition, we have included supplemental information within our presentation, consistent with prior quarters’ releases. I will now turn the call over to Sonida Senior Living, Inc. President and CEO, Brandon M. Ribar. Brandon M. Ribar: Good afternoon, and thank you for joining us on our fourth quarter and year-end earnings call. This morning, we announced the completion of our previously announced merger in which Sonida Senior Living, Inc. has acquired CNL Healthcare Properties, or CHP, for a total consideration of $1.8 billion. The transaction closed on an accelerated timeframe with the overwhelming support of shareholders from both Sonida Senior Living, Inc. and CHP. More than 95% of votes received supported the transaction, a reflection of the significant value proposition delivered to shareholders of both companies. I am thankful for the substantial effort put forth by both parties and our respective advisers. The transaction significantly enhances the company’s competitive positioning, including benefits of scale with additional accretive investment opportunities, increased trading liquidity, and balance sheet strength, accelerates our growth profile, and is expected to deliver earnings accretion to Sonida Senior Living, Inc.’s shareholders. It is worth pointing out that based on the accretive asymmetrical collar structure that was put in place, we have issued approximately 8 million fewer shares than originally anticipated based on the reference price at the time of the announcement, resulting in material additional value creation for both legacy Sonida Senior Living, Inc. and CHP shareholders. Further, based on yesterday’s closing price, which is above the high end of the collar range, CHP shareholders received $7.22 of total consideration, which compares favorably to the $6.90 of value they would have received had the stock remained in the collar range. We are excited to welcome all of the CHP shareholders to Sonida Senior Living, Inc. We assure you that every day we strive to create significant value and returns to our investors. The company has been on quite the journey over the last three years. Including this transaction, we have added 93 communities to our portfolio of owned real estate since 2024, nearly all of which are high-quality assets in growth markets that are newer than most of the competition in the market. We will continue to strive for excellence in our operational capabilities and customer service across each community we manage. I will provide additional color on the integration work completed since the transaction was announced last November later in my remarks. Switching to the performance of our business, I am pleased with the progress and continued momentum in the fourth quarter, which continues into 2026. The impact of investments in our labor model and the restructuring of operations were evident in our fourth quarter results and continue to trend well in the early months of 2026. Growth in both our same store and acquisition portfolios accelerated in Q4, and we are optimistic that with Q1 results, we will continue the trend of year-over-year and sequential quarterly improvement in top-line and bottom-line metrics. For the full year 2025, Sonida Senior Living, Inc. net operating income increased more than 22% and adjusted EBITDA at share improved 28%, a testament to both the earnings potential of assets purchased in 2024 and our operating team’s ability to drive organic asset growth while limiting our incremental G&A. We continue to see improving trends in the first quarter based on occupancy improvement in the same store portfolio alongside an accelerated recovery in newly purchased communities. Additionally, for the full year 2026, we are targeting growth in our revenue per occupied room at or above our same store growth achieved in 2025. Our portfolio top line continued to deliver sequential growth and year-over-year improvement driven by both occupancy and rate, highlighted by accelerated recovery in our acquisition communities. I would like to quickly highlight the accelerated recovery in our acquisition communities. The 19 communities acquired in 2024 performed exceptionally well, with a sequential occupancy improvement of 290 basis points from Q3 to Q4. Comparing Q4 2025 to Q4 2024, for these communities total occupancy improved 820 basis points, revenue increased more than 22%, and NOI margin expanded from 21% to 28%. This further demonstrates the growth potential in 2026 and beyond and is a reflection on the caliber of real estate we acquired and our team’s operating capabilities. Given both the scale of the CHP transaction and Sonida Senior Living, Inc.’s track record of successfully integrating communities into our operating platform with minimal periods of disruption, we are extremely optimistic that this merger will continue to drive improved performance trends and significant upside in a combined platform. Heading into 2026, our operating team will place added emphasis in two specific areas: the consistent delivery of excellent clinical care and services that support the health and well-being of our residents, and the continued development of a labor model that rewards our strongest employees and furthers our retention efforts. We are proud of the work done in recent years to reduce our turnover by more than 30 percentage points. However, we still have room for improvement. Kevin will provide additional detail on our efforts across the labor side of the business, as well as progress across key operating metrics in Q4. I will quickly touch on the work completed over the previous four months on post-transaction integration and our updated view on synergies, corporate and operational. We have spent considerable time working with the operators across the existing CHP portfolio to understand areas of opportunity and assess potential strategic relationships. Our first priority is minimizing operational disruption for residents and community team members. Two key components to the effort are creating additional incentives for strong ongoing performance at the operator level and maintaining continuity within the CHP asset management function in the pro forma Sonida Senior Living, Inc. platform. Performance at the CHP operator and asset level has continued to trend favorably post announcement, with strong results in Q4 and positive trends as well early in 2026. We previously identified value-creating synergy in three components: the reduction in the cost associated with managing the 54 SHOP assets and the operational benefits communities will experience as part of the Sonida Senior Living, Inc. platform. Kevin will provide further detail in his comments, in addition to our plans for reporting changes in Q1 consistent with real estate-heavy peers, including the REITs. The addition of high-quality real estate located in strong growth markets further enhances the near- and long-term earnings power of our portfolio. On the combined portfolio, we will also accelerate deleveraging through strategic asset dispositions, enabling Sonida Senior Living, Inc. to recycle capital into higher growth, higher quality assets. This approach will apply to approximately 10% of the portfolio based on community count and subject to operational trajectory and market dynamics. We also expect the company’s free cash flow generation post transaction to provide significant capital for reinvestment in both internal ROI projects and new acquisitions. The commitment of a new upsized $405 million revolver at close of the transaction will further increase our available capital to capitalize our robust investment pipeline during the remainder of 2026. Finally, I will touch briefly on the company’s capital structure. We are pleased to have reached an agreement with Conversant Capital for the early conversion of its Series A convertible preferred stock into common equity. As disclosed earlier today in our Form 8-K, the convertible preferred originated in 2021 with the Conversant recapitalization and, as of 12/31, had an outstanding balance of $51.25 million carrying an 11% coupon, which we have been paying in cash. Under the terms of the new agreement, the Series A will be converted into common equity at $32 per share, thereby eliminating a high-cost and onerous remnant of the company’s legacy capital structure. This more than $5 million of additional annual free cash flow savings will be used to reinvest in opportunities in excess of the current 11% cost of capital. Pro forma for the conversion, Conversant will be fully aligned with all shareholders, with all exposure via common equity. The transaction simplifies our capital structure, reduces our cost of capital, accelerates our deleveraging, and improves the pro forma free cash flow profile of the business. Note that the impact from this subsequent event is not reflected in the financial information being shared in today’s earnings presentation. These operating results and the continued value-creating growth of our platform, including the CHP transaction, depend on the strength and capabilities of our local and regional leadership. We are proud of the compassion and commitment to results delivered every day in our Sonida Senior Living, Inc. communities. Our focus will intensify further on retaining, developing, and recruiting new talent as we grow. Employee turnover and leadership turnover within our communities continue to trend favorably. Kevin will share additional details on companywide trends, and I am confident these retention levels are a result of the investments we have made in wages, benefits, and the positive and supportive culture at Sonida Senior Living, Inc. We continue to attract high-level talent in the operating and support functions due to elevated interest in career opportunities with Sonida Senior Living, Inc., and I am confident we will continue to attract top-notch talent with a commitment to providing high-quality care and services to our residents. Our near-term strategy and focus remain consistent as we accelerate our growth trajectory. Our mission is to continue building a best-in-class real estate portfolio with geographic purpose that enables our owner-operator model to deliver differentiated FFO and NOI growth. Operational performance based on retention and development of strong local and regional leadership, combined with advanced technology platforms to improve resident outcomes and operating efficiency, remain the linchpin to our success. Continued acquisitions in our primary geographies, along with strategic expansion into additional markets, will create further benefit operationally, including additional product offerings and pricing options, efficiencies in sales and marketing costs, and labor efficiencies. I will now turn the call over to Kevin for a detailed discussion of our Q4 financial performance. Kevin J. Detz: Thanks, Brandon. I will pick up on slide 16 with some commentary on Q4 and full year 2025. For our total portfolio at share for Q4, the company realized a 5.9% increase in REVPOR when comparing to the same quarter in the prior year. Annually, the year-over-year REVPOR growth was 8.8%, which reflects an elevated rate profile from our acquisitions and outsized rate increase on our same store portfolio during the year. On an annual basis, adjusted EBITDA grew 28% through a combination of our same store portfolio’s steady growth and the high-paced growth of our 2024 acquisition cohort. The same store portfolio picked up an additional 20 basis points of sequential occupancy gains in Q4 on the heels of growing our Q3 occupancy by 90 basis points to close out a strong second half of overall occupancy gain. With the 19 communities from the 2024 acquisition cohort moving into the same store portfolio in 2026, we anticipate accelerated occupancy gains as these communities achieve full stabilization. Moving to our acquisition portfolio in more depth on slide 18, the company realized an annual 680 basis point occupancy jump from 2024. Just as significant, most of this top-line performance flowed through, with the acquisition portfolio’s community NOI margin expanding 550 basis points to 24.7% from its 19.2% average. This one-year look at our 2024 and 2025 acquisitions validates the company’s strategy of acquiring underoperated quality assets in strong submarkets at significant discounts to replacement cost. Further, due to the timing of the four community acquisitions that came online in 2025, this year’s NOI margin success was largely driven by the 2024 acquisition. Because of this, we believe there is a similar significant runway for outsized KPIs on the 2025 acquisition cohort in the upcoming year. Moving to total portfolio highlights on slide 19, the company grew its year-over-year total portfolio NOI at share by 22%, or $15 million on an annualized basis. Note that the overall year-over-year occupancy and margin percentage for the total portfolio at share is unfavorably impacted due to the acquisitions coming in at lower starting average occupancy and margin levels. Moving ahead to slide 20, where I will briefly touch on our new reporting portfolios for 2026 and beyond, going forward our communities will be presented in one of three portfolios: same store, non-same store, and triple net lease. This simplified grouping aims to create more meaningful comps to our peer set and more closely aligns with how management thinks about the business and the company’s core portfolio. Earlier, Brandon referenced our strategy to upgrade our portfolio to a higher quality and younger community composition. To support this strategy, the company anticipates pruning its portfolio by approximately 10% based on community count, both legacy Sonida Senior Living, Inc. as well as CHP communities, and recycling capital out of communities with limited long-term growth prospects. Note that these communities represent significantly less than the 10% of NOI as they are less profitable than the company’s core assets. These noncore assets will be reported in our non-same store portfolio, along with our four stabilizing communities that came online in 2025 and other communities where targeted reinvestments and/or care conversions are in flight. The pro forma impact of bifurcating these noncore assets out of our same store portfolio yielded a 16.2% year-over-year NOI growth rate when comparing Q4 2025 to Q4 2024. The related pro forma NOI margin percentage on this future-state same store portfolio of 27.8%, coupled with the recent execution of another successful annual in-place rate renewal campaign, positions the company for near- to mid-term achievement of breaking the 30% NOI margin threshold. Hitting once more on occupancy on slide 21, our same store occupancy gained 20 basis points sequentially in the last quarter of the year, which is typically the softest quarter of the year in terms of resident demand and tours. Despite this, we believe the widened sales funnel from our investments into digital marketing during 2025 allowed us to convert an outsized percentage of tours to move-ins, particularly in the second half of the year. We also believe that with similar strong demographics and our increased submarket density, the CHP portfolio will be favorably impacted by the overlay of Sonida Senior Living, Inc.’s digital marketing and SEO capabilities. On to the same store rate discussion on slide 22, looking ahead to 2026, the average annual rent renewal rate on in-place leases for the recent March 1 renewal was 7.9%, which was applicable to 96% of the total same store residents. For context, the same percentage one year ago on a similar resident lease count was 6.8%. Additionally, the level-of-care revenues for 2025 increased 11.4% compared to prior year. Both these KPIs confirm that our thoughtful and detailed approach to rate setting, which is anchored by our investments in technology and close collaboration with community leaders on market rate analysis, is sustainable and will position us to continue to expand margins. We believe our pricing power will also benefit from the pruning of a handful of under-earning communities and increasing overall demand as occupancy levels continue to rise. On the CHP portfolio, we are excited to see how the investments made in our clinical technologies will expand the capture of more timely and accurate care reassessments-related ancillary revenues. Diving into margin drivers and NOI more broadly, we will move ahead to slide 23 to discuss same store operating expense trends. As a percentage of revenue, total labor excluding benefits decreased 40 basis points from the previous quarter and also decreased slightly from the same quarter in 2024. In our Q3 earnings call, we discussed several communities’ labor not being flexed timely amidst a rapid spike in occupancy during that quarter. Using our proprietary labor tools, we identified the drivers of the labor misses and implemented more stringent labor controls and close monitoring oversight through our corporate support center. These measures took root and supported reduced labor levels towards the end of Q3 and fully into Q4. For the fourth quarter, hours relative to occupancy decreased 2%. Additionally, absolute direct labor and overtime decreased approximately, and on the non-labor expense front, $200,000 from Q3 to Q4. Absolute operating costs decreased slightly from Q3 2025 to Q4 2025, resulting in a favorable expense trending over the same period. Based on the structural changes to our labor control program in 2025, and positive early trending in 2026, we are encouraged by a solid foundation of unit economics around overall labor dollars. On the G&A and synergies front, we will revisit slide 11 for some of the merits of the CHP acquisition. We previously identified value creation in three distinct and separate areas: first, the reduction of total company G&A; second, the reduction in costs associated with internalizing management of a portion of the 54 SHOP assets; and third, the operational benefits CHP communities will experience as part of the Sonida Senior Living, Inc. platform, not necessarily limited to communities for which Sonida Senior Living, Inc. will start to operate directly. Our initial guidance contemplated only the reduction in G&A, with a range of $16 million to $20 million per year-one run-rate synergy. Based on our diligence, this synergy estimate continues to be appropriate, largely in part due to the immediate termination of CNL’s advisory fee in connection with the close of the transaction. Beyond this initial guidance, we have identified further opportunities for future synergies tied to the latter two areas. Since November’s acquisition announcement, the initial discussions we have had with CHP’s third-party operators and our combined company deployment structure analysis have provided us with clear visibility into both top- and bottom-line upside that should gradually be realized through planned integration activities. Starting with our first full combined reporting period in Q2, we will introduce additional reporting metrics such as normalized FFO, consistent with real estate peers. Closing out my prepared comments, we will move to the balance sheet on slide 24. The CHP acquisition has allowed the company to take a significant stride towards its short-term leverage target of 6.0x to 6.5x. The capitalization includes two term loans totaling $525 million at S + 195 bps, with the ability to push down to S + 130 bps as the company further reduces its leverage levels. Beyond the upsizing of the company’s revolver to $405 million that Brandon referenced earlier, the accordion feature provides for an additional $320 million of debt capacity to support the company’s growth initiatives. In total, the bank debt provides for total capacity of $1.25 billion and was led by blue-chip banks, including seven first-time lenders to Sonida Senior Living, Inc., as well as the re-upping from our two legacy corporate lenders, BMO and RBC. We are extremely pleased with the execution of this syndication and the support that the bank group can provide to our ongoing growth. Back to you, Brandon. Brandon M. Ribar: Thanks, Kevin. 2026 is off to a strong start on all fronts. The combination of organic growth across our 96 communities, coupled with the addition of high-quality assets within the CHP portfolio, provides opportunity for accelerated growth. On the people front, our leadership team across the community, regional, and central support level has never been stronger or more motivated to create great outcomes for our residents, team members, and key stakeholders. Plans are in place for the successful integration of new communities on a responsible and productive timeline, and further strategic relationships with select new managers offer additional growth opportunities. We welcome our new shareholders as of today, and the additional institutional investors seeking a differentiated owner-operator platform. We are truly excited about the future ahead and thankful for the consistent support from our existing investors. This Sonida Senior Living, Inc. team remains fully dedicated to the successful execution of our organic and inorganic growth objectives. This concludes our prepared remarks. Operator, please open the line for any questions. Operator: At this time, if you would like to ask a question, press star and the number 1 on your telephone keypad. To withdraw your question, simply press 1 again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ronald Kamdem with Morgan Stanley. Please go ahead. Ronald Kamdem: Great. Congrats on closing the merger. I am sure that was a lot of work to get done. I guess my first question, and I can appreciate I think you mentioned normalized FFO guidance is coming in Q2, but I think the presentation had $1.20 sort of on a run-rate basis and so forth. I was just wondering if you could talk through, at a high level, what the adjusted EBITDA and interest cost and any other assumptions that were going into that number post merger. Thanks. Brandon M. Ribar: Yeah, Ron. Thank you for the congrats. The team did a ton of work over the last handful of months, and I think in terms of what is going to go into the calculation, we will continue to get that information out as we release in Q1 and all the various components that are going to go into it. Our goal has been to make it comparable with the other large-scale reporters on the REIT side, so you should expect that there will be consistent puts and takes around those numbers as we convert them over to providing that additional information. Ronald Kamdem: Great. And then my second question was just on the 10% of the portfolio that is to be pruned. Any idea of the speed of that? Is that over the next six to twelve months, or how are you thinking about that? And is that capital going into more acquisitions in the pipeline? Is it paying down debt? Is there more development CapEx to spend? Just how are you thinking about those sources and uses? Thanks. Brandon M. Ribar: Yeah. I would say that we do want to make progress on that front right out of the gate, so I would expect, in the six- to twelve-month timeline, that we will be in the market on a handful of those assets. As Kevin mentioned in his script, they are not really high NOI contributors in terms of the percent of the total portfolio. Dollars from those transactions would first go to delever the company and then would be available for recycling into assets that we feel reflect what the go-forward portfolio represents, which are high-quality, newer-vintage assets in strong growth markets that have a really good growth trajectory. So think about it in terms of reducing the low-growth assets and recycling that into higher-growth, newer, long-term hold assets. Ronald Kamdem: Great. And then my last one, if I may, is just on the portfolio changes. I think you said 16% plus—16% to 17%—same store NOI pro forma for the new same store pool. Is that a good run-rate number? Is there any puts and takes in terms of comps or anything like that? Because I think the reported number was sort of 6.5% for Q4, so that is a big delta. Just wondering if there are any other puts and takes around that. Thanks. Kevin J. Detz: Hey, Ron. This is Kevin. I appreciate all the comments. We think about that number as just a jumping-off point from 2025 in terms of how that new bucket, that redefined bucket of assets, performed, not necessarily relative to the peer set. As we release the blocks to model this out and then normalized FFO metrics, you will get more insight as to what we think that NOI growth percentage would be. But right now, what we are seeing, particularly on the rate environment and the stabilization of rate hours and labor, we think that is a pretty good number in terms of what we can expect from that new same store portfolio. Ronald Kamdem: Great. Thanks so much. That is it for me. Operator: Your next question comes from the line of Wes Golladay with Baird. Please go ahead. Wes Golladay: Hey, everyone. Congrats on getting the merger completed. Follow-up on Ron’s question: when you look at your new same store pool, it looks like there is going to be a lot of occupancy gain and also some pricing power in the legacy portfolio. But that 6% or 7.9% rate increase, is that for the legacy pool or the current pool? Kevin J. Detz: That is for the legacy pool that just got pushed through last week, March 1. Wes Golladay: Okay. And then you talked about working on your labor model, boosting retention. Do you think that will be all completed within this year? Brandon M. Ribar: I do not think we will ever be fully complete on optimizing our labor model. The reality is we are always going to be working on it. I think we feel really good about the market right now in terms of being able to retain our people at levels of wage increases that are in line with our expectations and inside of what we experienced last year. So I think that the areas in the middle of last year that we saw a challenge in or invested in additional labor costs, we feel confident that trends we saw in Q4 are continuing in the early part of this year. We have a significant amount of resources dedicated to ensuring stability on that front, and then also working, as we bring new communities into the fold, on areas of opportunity within their labor models. So that will be a heavy focus for us this year. Wes Golladay: Okay. And then on the disposition front, you did mention selling lower income-producing assets, but can you talk about what is your long-term plan with the net lease assets? Will those be any part of the dispositions this year? Brandon M. Ribar: I would say that, right out of the gate, clearly there is a very attractive profile from a cash flow perspective that we have shared in terms of our expectations around stabilized free cash flow. So there is a really strong component to that. It is not our core business, but I think that we will conduct ongoing evaluation of how the market is looking at those types of assets and opportunities. So no immediate plans. I think that we will be thoughtfully considering how that continues to look in the market and whether or not there is an opportunity that makes sense to sell and recycle the capital. But, realistically, immediately we are going to see the benefit of two really good operators in there that are delivering really stable cash flow through those leases. Wes Golladay: Great. Alright. Thanks a lot. I will hop back in the queue. Operator: That concludes our question-and-answer session. We will now turn the call back over to Brandon M. Ribar for closing remarks. Brandon M. Ribar: Thank you all for participating in the call today. We appreciate all the support. We are excited around the announcement this morning of the completion of the merger and look forward to continued discussions next time we chat around results. Take care. Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.
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.