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Operator: Good afternoon, and welcome to OmniAb, Inc.'s First -- Fourth Quarter 2025 Financial Results and Business Update Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the call over to Kurt Gustafson, OmniAb Inc.'s Chief Financial Officer. You may begin. Thank you. Kurt Gustafson: Thank you, operator, and good afternoon to everyone. Thanks for joining our fourth quarter and full year 2025 financial results conference call. There are slides to accompany today's prepared remarks, and they're available in the Investors section of our website at omniab.com. Before we begin, I'd like to remind listeners that comments made during this call by OmniAb's management will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated results. These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast today, March 4, 2026. Except as required by law, OmniAb undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Joining me this afternoon is Matt Foehr, OmniAb's President and CEO. Matt is going to cover some business highlights, and I'll cover some financial information, and then we'll be opening the call up for questions. And with that, let me turn the call over to Matt. Matthew Foehr: Thanks, Kurt. Good afternoon, everyone, and thanks for joining our call. I'll start now on Slide #4. Our business built some nice momentum in 2025 that we sustained throughout the year. specifically related to broadening both our roster of partners and the number of active programs enabled by our technologies. By year-end, we're happy to report that we had 107 partners who are running 407 active programs. And as our partner pipeline advances, there are certain later-stage programs that are now coming into focus with the potential to drive meaningful milestone revenue and create value over time, headed towards the generation of significant future recurring royalty revenue streams. On the innovation front, we introduced OmniUltra at the Antibody Engineering Conference down in San Diego in mid-December. OmniUltra is the industry's first and only transgenic chicken platform to express ultra-long CDRH3 on a human antibody framework. We see OmniUltra as an important new growth driver that can help us gain additional partners, generate new program starts, create incremental near-term revenue opportunities and extend our reach into peptide focused discovery applications. Additionally, we're building a strong foundation for our xPloration platform, which brings our high-throughput single B-cell screening capabilities directly into our partners' labs. We think xPloration is very well positioned for significant growth with an expanding pipeline of high-quality prospects and increasing engagement as more partners are actively evaluating the platform for use in their labs. And we expect xPloration to be additive to the business and to contribute to our growth. And I note with the growth in our base of partners and our partner program portfolio, it's becoming easier to highlight that our differentiated platforms and business are highly scalable, allowing us to add new programs while maintaining operating efficiency, positioning OmniAb on a sustainable path to future growth. And as Kurt will describe in his section in a bit, we're on a trajectory to positive cash flow. Moving to our key business metrics, starting on Slide #5. As I mentioned, at year-end, we had 107 active partners, reflecting a continued growth and diversification of our business from that perspective. During Q4, we executed new license agreements with the Dana Farber Cancer Institute, Mabtrx Biosciences, which is a newly formed JV between, Arrowmark Partners and Viking Global Investors and with 2 global big pharma companies. The partner mix across discovery stage, commercials and academics continues to evolve and has remained relatively constant percentage-wise. A majority of our partners are headquartered here in the U.S. and the remainder are primarily in Europe and in Asia. We continue to broaden and diversify our partner base, which I think demonstrates consistent strong execution by our business development and scientific teams. 2025 was an especially strong year for us in terms of partner additions. I also note that we're proud of the strength of our partners as well, which I think says a lot about the quality of our technologies. 8 of the 10 largest pharma companies in the world are active partners of OmniAb. Now on to Slide #6, you'll see our active programs metrics. We exited 2025 with 407 active programs, representing a net increase of 44 programs during the year. We saw 84 program additions in 2025 with a significant share of additions originating from our newer technology offerings. Our number of program additions in 2025 was substantially higher than recent years and more than 20% higher than 2024. Now a attrition is obviously a natural and expected part of drug discovery and development. And I note that we had 40 program terminations during the year, consistent with the normal ebb and flow we expect as partners adjust portfolios and budgets and adjust technical priorities. And lastly, and I think it's important to note here that over 98% of our active programs have contracted future economics to OmniAb. We have over $3 billion in total contracted milestone payments for active antibody programs and an average royalty rate of 3.4% and across our portfolio. Slide 7 provides another look at our active programs and shows the strong advancement activity we saw across our partner pipeline throughout 2025. The figure here on this slide includes our entire partner program pipeline. And as you can see on the left side of this pyramid graphic, during the year, we added the 84 new programs I just referenced, demonstrating the continued strength of our technology platforms. And again, this was a very strong year from that perspective and substantially higher than recent years. In terms of active program progression, we have 25 advancement or progression events in 2025. 16 programs advanced from discovery into preclinical development, which reflects our partner's progress and the identification of promising therapeutic candidates to take forward towards human trials. We also saw some healthy advancement further in the development process. 4 programs moved from preclinical into Phase I clinical trials and a couple of programs advanced into each of the clinical phases thereafter. And notably, 1 program reached the registration stage during 2025. This slide shows each advancement event, and I note that a couple of programs advance through more than one level or stage during the year. On attrition, which is depicted on the right side of this pyramid graphic, we had the 40 program terminations across various stages and 4 program regression events during the year. Now program regression is far less common but does happen from time to time in a portfolio of active programs that has grown to the level that ours has in recent years. We see the level of attrition shown here is consistent with the normal dynamics of drug development. What's particularly encouraging and exciting are the 25 total program advancement events we saw as programs move from one development stage to the next. This progression demonstrates that OmniAb-enabled therapeutics are continuing to perform well for our partners in development and in the clinic and are moving closer to potential commercialization, which supports our milestone and royalty revenue opportunity over time and increases the value of the individual programs to our stakeholders. Slide 8 shows the growth in the post-discovery stage programs over recent years. This, again, I think, demonstrates the value that our technologies bring to our partners. And I know both the overall growth and the progression into the preclinical stage over recent years. Slide 9 shows the number of active clinical programs and approved products which totaled 32 at the end of Q4. These numbers are net of attrition and reflect new clinical entrants as well as attrition and a regression event during the year. The fourth quarter saw a very important milestone with the first OmnidAb-derived program advancing into human clinical testing. This program entered human clinical trials less than 2 years from when we introduced the OmnidAb single domain discovery platform. So having it generate a program that reached the clinic that quickly underscores both the technology's traction with our partners and its potential to drive future value for our stakeholders. We anticipate the potential for multiple new entries into clinical development for novel OmniAb-derived programs this year, including additional OmnidAb programs. We look forward to the continued progression of these active clinical programs, which have over $350 million in remaining contracted milestone payments to us. Turning now to Slide 10. Here, we're highlighting and only listing our active clinical and commercial stage partner pipeline programs that are active and that carry remaining downstream economics to OmniAb. The placement of each program in this graphic is based on its most advanced stage in any geography or indication. We found this figure can be a helpful visual for investors who follow some of our more visible partner programs. Turning now to Slide 11. I want to highlight a few recent updates for our partner programs that are leveraging our technologies. Immunovant continues to make what we see as strong progress and report clinical momentum in anti-FcRn space across a range of important indications with major unmet medical needs. Their next-generation candidate IMVT-1402 has a potentially registrational trial in difficult to treat rheumatoid arthritis that's fully enrolled with top line data expected in the second half of this year. Top line data from our proof-of-concept trial in lupus are also expected in the second half of this year. IMVT-1402 development is progressing across a range of indications with potentially registrational trials in Graves' disease, myasthenia gravis, CIDP and Sjögren’s disease, all remaining on track and with top line data for Graves' disease and myasthenia gravis expected in 2027. Immunovant also anticipate sharing top line data from its 2 Phase III studies evaluating batoclimab as a potential treatment for active moderate to severe thyroid eye disease in the first half of this year. In addition, Hanall reported ongoing preparation for an NDA submission in Japan for batoclimab as a treatment for myasthenia gravis. Moving across to the center of the slide here. At the time of the JPMorgan conference in January, Teva announced a funding agreement with Royalty Pharma of up to $500 million to accelerate the clinical development of their anti-IL-15 antibody, TEV-'408, specifically for vitiligo. Top line results from the Phase 1b trial in that indication are expected in the first half of this year and top line results of a Phase 2a trial evaluating 408 for celiac disease are expected in the second half of this year. With recent developments and disclosures, this is an asset in a program that is rightfully gaining more attention. Lastly, Merck KGaA indicated that based on Phase I data, it plans to advance M9140 directly to Phase III trials in metastatic colorectal cancer. This compound is a novel [ anti-CEACAM-5 antibody drug conjugate with a topoisomerase 1 inhibitor payload. It's been disclosed that the Phase III study is anticipated to start in the first half of this year which represents a pretty significant acceleration of the program's development. On Slide #12, we show some of the upcoming events that I just mentioned. 2026 is positioned to be a fantastic year for potential value-creating events. This calendar of near-term events is the strongest in recent memory. And in addition to the data and regulatory events highlighted here, we also expect new Phase I, Phase II and Phase III trial initiations this year. We'll talk more about this as we go through the year, but early views are that 2027 is also shaping up to be a year that will have some important events, including for some of the programs that I mentioned on the prior slide. Turning to Slide 13. I'd like to take a moment to highlight our 2 most recent technology launches, which we believe position us for substantial growth while reflecting our commitment to innovation, which we think differentiates OmniAb in the eyes of our partners. OmniUltra is the first and only transgenic chicken produced antibodies with ultra-long CDRH3 which is a structural feature of antibodies typically found in cows. These ultra-long CDRH3 are designed to reach binding pockets not accessible with other antibodies or modalities, potentially unveiling new therapeutic opportunities. What's particularly exciting about OmniUltra is the potential ability of these ultra-long CDRH3 to create novel picobodies. At roughly 1/3 the size of a nanobody, picobodies are the smallest functional antibody fragment and have a range of potential uses, including as building blocks for multispecifics, as binders for CAR-T and as a radiopharmaceutical therapies as well as in vivo generated peptides. OmniUltra, not only expands our antibody discovery capabilities, but it also creates a meaningful entry point into the peptide therapeutics space. As I think almost everyone knows by now, peptide therapeutics have experienced substantial growth and industry attention and investment, driven in large part by the success of the GLP-1s over the last couple of years. Moving to the right panel on this slide. Last May, we launched our xPloration partner access program. xPloration is our proprietary innovative high-throughput single B-cell screening platform that leverages machine learning and artificial intelligence. The xPloration platform includes a competitively priced instrument and proprietary single-use consumables as well as annual software subscriptions and maintenance contracts. As such, it has the potential for multiple revenue streams. Deployed instruments are performing extremely well for partners, and we're seeing strong continued demand for both on-site and virtual demos. Together, OmniUltra and xPloration represent important new engines that broaden our technology offering, expand our addressable markets and strengthen our competitive position in the discovery platform space. And with that, let me now turn the call over to Kurt for a discussion of our financial results. Kurt? Kurt Gustafson: Thank you, Matt. On Slide 15, I'll start with a review of revenue. Total revenue for the fourth quarter of 2025 was $8.4 million compared with $10.8 million in the same period in 2024. The decrease was primarily driven by a decline in license revenue, which was partially offset by an increase in milestone revenue. Royalty revenue increased, but this was due to an adjustment in the prior year period to reconcile royalties to actual product sales. And we also saw a small contribution from xPloration in the fourth quarter. Slide 16 shows our cost and operating expenses for the fourth quarter of 2025. As Matt mentioned, even with our growing program portfolio, we have a scale platform that has allowed us to be very disciplined with our cost structure. As you can see from the chart, our operating expenses in the fourth quarter decreased to $24.1 million from $26.7 million. Most of this decrease was due to lower personnel costs, but we also saw lower outside service costs, primarily related to reduced spend for our legacy small molecule ion channel programs. Q4 2025 also included a noncash impairment charge of $3.9 million, primarily related to certain small molecule ion channel property and equipment. Q4 2024 had a similar-sized write-off associated with intangibles. Turning to Slide 17. I'll focus on the bottom part of the P&L here and make just a few comments. If you focus on the tax line, as we previously guided for taxes, we recorded a full valuation allowance against the income tax benefit associated with our net loss, which is why our effective tax rate is close to 0%. Our net loss for the fourth quarter was $14.2 million or $0.11 per share compared with a net loss of $13.1 million or $0.12 per share in the prior year period. On Slide 18, for the full year 2025, revenue was $18.7 million versus $26.4 million in 2024. The difference related to both the decline in License revenue and Milestone revenue. Service revenue decreased as a result of the completion of certain small molecule ion channel programs. and these declines were partially offset by approximately $800,000 of xPloration revenue as a result of the launch of our xPloration partner access program. On Slide 19, we have our operating expense for the full year. Operating expense in 2025 decreased to $87.6 million from $100.9 million last year. R&D expense for the year was $47.8 million, down from $55.1 million in 2024 due to lower personnel costs and stock-based comp and external expenses. As I mentioned in Q4 of 2025, there was also a noncash impairment charge of $3.9 million related to legacy small molecule ion channel assets. G&A was $29.2 million in 2025 compared with $30.7 million in 2024, primarily due to lower legal fees and stock-based compensation. Moving to Slide 20, which shows our P&L for the full year 2025 versus 2024. I'll once again, focused on the bottom line here. The net loss was $64.8 million or $0.57 per share compared with a net loss of $62 million or $0.61 per share in 2024. Excluding the noncash impairment charge we took in the fourth quarter, earnings per share in 2025 would have been $0.54. Slide 21 shows the company's P&L for the year, broken out by quarter. As we've mentioned previously, and you can see in this table, our revenue is lumpy as much of the revenue comes in from the achievement of Milestones and one other thing I wanted to point out here is that you'll see a general trend of declining R&D and G&A expense, obviously, excluding the impairment charge we took in the fourth quarter. In 2025, we implemented workforce reductions of 22 employees, which resulted in savings in 2025 and going forward. On Slide 22, we've got the balance sheet as of December 31, 2025, and 2024. We ended the year with $54 million in cash, cash equivalents and short-term investments. You also see here the normal reductions to goodwill and intangible assets. These intangible assets relate to prior corporate and technology acquisitions, which are amortized over time. Property, plant and equipment is also lower due to normal depreciation as well as the noncash impairment charge we took in the fourth quarter. On Slide 23, we've got our financial guidance for 2026. The revenue guidance is based on information that our partners have disclosed to us as well as information they have disclosed publicly about their programs. And based on this information, we expect revenue in 2026 to be in the range of $25 million to $30 million. We expect operating expense to be in the range of $80 million to $85 million as we continue to realize efficiencies in the business. Cash operating expense is expected to be in the range of $50 million to $55 million. We define cash operating expense as GAAP operating expense less stock-based compensation, depreciation and the amortization of intangibles. We expect the combination of these noncash items to be about $30 million in 2026. In addition, the company expects to end the year with a cash balance in the range of $30 million to $35 million. And just as in 2025, the 2026 full year effective tax rate is expected to be approximately 0% due to the valuation allowance. Turning to Slide 24. In addition to providing 2026 guidance, we wanted to provide some thoughts on our longer-term financial outlook. The financial side of our business model is one that is highly scalable. As we look out into the future, our revenue is expected to transition from more milestone driven to more royalty driven. That being said, we've got over $3 billion of contracted milestones in our existing antibody programs and $350 million of that is for programs that are already in the clinic. The average royalty across our antibody portfolio is approximately 3.4%. These types of revenue streams don't have corresponding cost of goods or selling costs. We've also been realizing efficiencies in our operating costs in recent years. We have a focused business development team dedicated to bringing in new partners, while most of our R&D costs relate to maintaining our animal colonies with a small amount directed towards new technology development. This creates a highly leverageable business. As you can see from these charts, we have and will continue to control operating costs to capture that leverage that is built into our business model. Our maturing portfolio programs are expected to drive revenue higher. Combined with tight control of our operating expenses, we are driving our cash use lower, and this puts us on a trajectory to being cash flow positive. And with that, I'd like to open up the call for questions. Operator? Operator: [Operator Instructions]. Your first question comes from the line of Puneet Souda from Leerink. Puneet Souda: First one on the partner programs. Given the sort of the backdrop of the markets, fundraising activity that happened in the second half last year and it still is ongoing, one on the clinical assets. Just wondering if you're seeing any effect from that? And how should we think about the new program's growth this year despite the strong 2025 that you had. So maybe I know it's always hard to sort of outline that, but just wondering, how are you thinking about the new program growth this year and any feedback from the business element side? Matthew Foehr: Yes. Yes. Thanks, Puneet. This is Matt. So yes, 2025, we observed really nice momentum in program additions and also a really strong year in terms of partner adds as well. We noticed a shift beginning last year as I think the industry started to get some more winded in sales. We saw partners, both existing and new partners initiating new programs. Many of those are attracted to us because of our newer technologies. Some of the technologies we had launched that being OmnidAb, the year the prior or the prospect of OmniUltra coming, which we launched in mid-December. So we feel like we're very well positioned for this year with coming on the tail-end of new technology launches and are obviously really pleased to see partners actively progressing, looking at accelerating development and that sort of thing. So we feel very good about that element as we look forward. Puneet Souda: Got it. And then on xPloration, Nice to see some revenue there. I don't know if you can quantify it, but maybe, for the full -- I would love to know if you have a number in mind for the full year? What sort of growth you can see on that platform? It's a nice addition of revenue on top of the core animal models and programs that program growth that you're seeing. And then also wondering if you can provide anything on the pull-through side of the xPloration. Matthew Foehr: Yes, Puneet, I'll give a little color there. Obviously, we launched xPloration midyear last year with our partner access program, highlighted at the PEGS conference and sold an instrument right after that, obviously, deployed instruments now are performing extremely well for partners, xPloration obviously has the potential to contribute revenue in a variety of ways, not only from instrument sales, but also from the single-use consumables, which are at a nice -- very nice high margin as well as subscriptions and maintenance contracts. The flow of interest is very strong. It's with our, what I'll call our highest tier of partners, these are ones who are obviously doing a lot of discovery work and I think are attracted to xPloration because of its -- it's a throughput and ease of use, the ability to do multiple runs in a day and the ability to generate huge amounts of data, which I think is very well timed for some of the interests of the industry. So yes, we do expect it will be contributing this year. We're excited about that. We've not broken down the various parts of revenue guidance, but we do see significant growth for xPloration and contribution this year. Operator: Your next question comes from the line of Mike King from Rodman & Renshaw. Michael King: First is nice to see you guys are cattle light and keeping the expenses under control. But as a valuation metric, it would seem to me to be more important for you guys to be adding programs and advancing things in the pipeline. So I'm just wondering how sacrosanct the cash flow neutrality or positivity is relative to additional investments that you might want to make to generate additional partnerships? Matthew Foehr: Yes. Yes, Mike, good question. I mean we are obviously building this business to be differentiated from the perspective of technologies that we know the industry needs, right? But to do that in a really efficient way that benefits our shareholders and our stakeholders. We sit in a really, I'll say, envious and unique position in the industry, right, with 107 partners. Over 407 programs that partners are progressing through various stages of development gives us a really valuable perspective on the industry, right? We can see -- we understand the targets that are of most interest to the biggest and most valuable pharma companies in the world, right? And that informs kind of how we invest in our technologies, it informs kind of the work that we do and how we work with the partners. And I think you're seeing the benefit of that in many of our metrics, right? So for us to add incremental partnerships, we can do that quite efficiently in the model that we have. We talk a lot about the innovations that we choose to invest in, and we do it really with that knowledge of not only where the industry is right now from the perspective of discovery and innovation. But knowing where it's heading as well, right? And that's what informed our investments over past years and things like our Omni dab single domain technology. And then more recently, with the December launch of OmniUltra, which is -- it sounds [indiscernible] but it's a chicken that makes cow-like antibodies with fully human sequences. That was something that was -- we knew there'd be demand there based on our dialogue with partners. So for us, I think we can do that very efficiently. We think that benefits all of our stakeholders, and that's where we're going to continue to focus. Michael King: Okay. And then just real quick follow-up. Jumping to share count in the third and fourth quarter. What can we attribute that to? Kurt Gustafson: Yes. Thanks, Mike. We did raise some capital, and so that raising capital increased the share count during that period of time. Operator: Your next question is from the line of Matt Hewitt from Craig-Hallum Capital Group. Matthew Hewitt: Maybe to dig in a little bit more on the xPloration opportunity. It sounds like you're seeing strong demand. What was the number of systems that were placed or deployed exiting this past year? And given the pipeline, where could that go in '26? Matthew Foehr: Yes, yes. Thanks, Matt. Yes. So a quick answer to the first part of the question is 2, instruments deployed as of the end of 2025. And as we look to this year, as I said, we expect growth out of xPloration, we're excited about the flow of interest from our highest tier partners. These are obviously larger capital purchases for many companies. So there can be longer sales cycles, which we fully expected when we launched the technology. So they go through budget and capital approvals, et cetera. But the reception is quite positive. It's keeping our team very busy, which is great and the interest in demos and the performance in those demos has really been fantastic. So hopefully, that gives you the color you need. Matthew Hewitt: Yes. No, that's great. And then you talked about -- Kurt, I think you were talking about this a little bit during your prepared remarks as far as your trajectory towards a cash flow breakeven, given the pipeline and Matt, you spoke to this as well, given the pipeline of opportunity, things progressing through the channel, or through the clinic, I should say, this year and into next year, when do you think that you could hit breakeven? Is that something that you see potentially exiting '27, maybe a little bit longer? Just trying to get a sense for time frame is when you could get to that level? Matthew Foehr: Yes. Thanks, Matt. Great question. Our future revenue is largely based on clinical and regulatory advancements by our partners for our partner programs. And while we're not giving a precise date for when we achieve breakeven, the growing and maturing portfolio of our partner programs gives us confidence that we are on the right path and that our trajectory can take us there. So we see it coming, but we can't give you an exact date right now, but we do see it coming. Operator: Your next question comes from the line of Joe Pantginis from H.C. Wainwright. Joseph Pantginis: So on the flip side for xPloration, obviously, we see the opportunities there. So just curious, how would you describe -- I mean, it sounded like you placed 2 machines in '25. But looking forward, your manufacturing needs and investment on your end and impact on op expenses as the program gets larger. Kurt Gustafson: Yes, Joe, good question. This is an instrument that we use here for our own research. So we have a team of folks that understand the instrument is using it all of the time. And so there's not a large incremental investment in terms of staff that we need to make to go do this. This is a program that we've made available to our partners. For the most part, instruments would be built kind of to suit, if you will, or build for these folks when they order one. And so there's not even a large sort of investment in inventory, if you will, to go do that. So we're keeping this really lean right now as we want to make sure that this is something that is accretive to the business as we possibly can make it going forward. Operator: Your next question comes from the line of Brendan Smith from TD Cowen. Chad Wiatrowski: This is Chad on for Brendan. I'd like to kick it off with Ultra. How has the initial response from partners been? And have you seen the beginning of that ramp in demand that you kind of called out last quarter? Matthew Foehr: Chad, thanks. The Ultra launch is going fantastically well. I've been really pleased with the reception. Obviously, it's still very early days. We just launched it in mid-December. But we did really a massive amount of validation work around Ultra before we launched it. The presentations that were given at the AET Conference in December highlighted a broad array of therapeutic targets that we had assessed at the time of launch. We also had 3 partner programs already progressing at that time. That number has increased and we expect it will continue to increase. So we're seeing really strong engagement. The technology is performing extremely well. And so we feel real good about how it will impact the business going forward. Chad Wiatrowski: That's awesome. Are you seeing any like specific traction amongst other modalities that you would call out of interest? Matthew Foehr: Yes. I mean I think there's been a general trend in the industry, and I'll say, smaller is better, looking for smaller binding units, if you will, that can be strung together in multispecifics. There's obviously been a big growing opportunity in the radio pharma space. That's something that the industry has observed. And then, of course, we've opened up totally new opportunities and a completely new call file in the peptide space, right? So peptides are an area of growing and increasing interest. There's significant growth in that space and really opened up our call file, if you will, to well over 130 companies that are new potential targets for us. So for all those reasons, I think we're excited about it. Again, early days, but we're building some nice momentum and we're excited about it. Chad Wiatrowski: Totally. I'm going to be that guy. I'm -- one more question in. But for your fiscal year '26 rev guide, it's kind of hinting out a return to 2024 levels. Would it be safe to say you're seeing early signs of recovery in the market? And what kind of visibility do you have into your partner spend expectations that couldn't form that outlook? Kurt Gustafson: Yes. I think most of -- a big chunk of our revenue is milestone-based. And so as we talked about it on a quarterly basis, the revenue number is lumpy. It actually is for years as well. So it sort of is just really a function of what kind of clinical or regulatory events are going to be happening. And as we sort of project forward into 2026 based on what partners have said, we project out what those milestones might be. And so I'm not sure it's really sort of kind of whether the industry or the overall market is what's driving that as much as us taking a look at the very specific events that are happening with the programs that we've got. Any events that are sort of coming up for 2026. That's really more the driver of it. Operator: Your next question comes from the line of Srikripa Devarakonda from Tourist. Unknown Analyst: This is Anna on for Kripa. One question on xPloration. Could you kind of qualitatively describe how the interest in xPloration is shaping up in terms of interest from any new partners or kind of strengthening that existing partner relationship? Matthew Foehr: Yes. Great question. The answer is both. I mentioned that of our existing partners, the ones that obviously have the quick engagers in evaluating xPloration with strong interest have been that highest tier of partners, right? These are the ones that are doing a lot of antibody discovery work, have a thirst for more data, are attracted to the high throughput and ease of use of the instrument, it is also attracting others as well who are not current partners of our repertoire generation discovery technology. So that's one of the things I referenced when I generally say I think there are benefits and advantages that xPloration creates for the business is not only deepening those relationships with existing partners and building structures that allow us to create value earlier in a product's life cycle or a program's life cycle or the relationship, but also attracting others as well who we can also bring in as a more broader partner in the process. So I think that is another benefit of xPloration. Unknown Analyst: Great. And on OmniUltra, are there any milestones we should expect from OmniUltra in 2026? Matthew Foehr: Yes. I obviously will expect to continue to be adding partners and programs with OmniUltra. That's going to be our initial focus as we launch the technology. As those programs obviously go through development and graduate to later stages of development, we expect that will happen in due time, but the initial is going to be driving new partnerships and new programs and leveraging the technology in that way. Operator: Your last question comes from the line of Stephen D. Willey from Stifel. Stephen Willey: Just actually had a question about a footnote on Slide 24, where I think for programs with tier of royalties, you're making some kind of sales assumption and using a blended royalty calculation. Have you said or can you speak to what proportion of the programs that are active have either a tiered or fixed royalty structure? Kurt Gustafson: That's a good question, Steve. I don't think we've given that number out before. It's more than a handful, but I'm not -- I wouldn't say it's a majority. I don't know, Matt... Matthew Foehr: Yes, more than handful that have tiered -- majority of our deals are flat royalties. There are some instances in which they are tiered, but the majority are a straight royalty. Stephen Willey: Got it. And then just also curious where you think that average, I guess, it's 3.4% royalty rate could trend to over time and whether you're trying to command a higher royalty rate on some of the newer technology offerings like OmnidAb and OmniUltra? Matthew Foehr: Yes. I think for Discovery Technologies, Steve, there's always a dynamic there of how far you can push, right, on royalties. Obviously, the level of innovation allows us to drive better economics more generally, but those economics can be an interplay between upfront payments, service payments, milestones that are paid along the way in royalty. So it really depends in many instances on the negotiating dynamic, the soft points or the points of interest of the partner. But I will say that more innovative technologies do drive more value for our shareholders. And that's one of the reasons why we've launched new technologies like OmniUltra, like OmnidAb, but that kind of gives you a little color on the dynamic. Operator: There are no further questions at this time. I would now like to turn the call back to Matt Foehr for closing comments. Sir, please go ahead. Matthew Foehr: Great. Thanks. I'd like to thank everyone for joining today's call and for your questions and engagement. We look forward discussing our first quarter financial results in a few months. In the meantime, we'll be participating at the Leerink Global Healthcare Conference which is next week in Miami. So we hope to see some of you there. We also expect to be on the road likely in the spring with NDRs and the like. So thanks again, and have a great day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: We have reconnected with our speakers. Please proceed, Mary. Mary Chen: Thank you, Betsy, and welcome to our 2025 fourth quarter and full year earnings conference call. Joining me on the call today are Donald Dunde Yu, Tuniu Corporation's Founder, Chairman and Chief Executive Officer, and Anqiang Chen, Tuniu Corporation's Financial Controller. For today's agenda, management will discuss business updates, operational highlights, and financial performance for the fourth quarter and fiscal year 2025. Before we continue, please refer to our Safe Harbor statements in the earnings press release, which apply to this call, as we will make forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains our reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I would now like to turn the call over to our Founder, Chairman and Chief Executive Officer, Donald Dunde Yu. Donald Dunde Yu: Thank you, Mary. Good day, everyone. Welcome to our fourth quarter and full year 2025 earnings conference call. In the fourth quarter, our business continued to maintain solid growth momentum. Net revenues increased by 20% year over year, exceeding our previous guidance, while revenues from our core packaged tour products grew at an even faster pace, rising 35% year over year. At the same time, we achieved profitability for both the quarter and the year. This also marks the third consecutive year following the pandemic in which we have delivered a full year non-GAAP profitability. We have announced a long-term shareholder return plan totaling up to $50 million to be carried out during the three-year period from March 2026 via cash dividends and share repurchases. This plan reflects both our commitment to provide shareholders with sustainable returns and our confidence in the long-term outlook of the travel industry. The travel market continued to grow in a healthy manner in the past year. The extension of national holidays and other favorable policies further stimulated domestic travel demand, while the increasing number of visa-free destinations makes it easier for Chinese travelers to explore more destinations overseas. In 2025, we adopted a more proactive product strategy. By differentiating our products and product lines, we targeted distinct customer segments and offered a richer, more tailored portfolio based on customer needs. Meanwhile, we leveraged our supply chain growth to enhance price competitiveness and attract more customers. During the year, we continued to pursue an open and collaborative approach, attracting high-quality partners to expand new channels and enhance service quality for our customers. Contributions from channels such as live streaming, offline stores, and corporate clients continued to increase as a share of Tuniu Corporation's transaction volume. In addition, we actively embraced new technologies, leveraging innovation tools to further enhance our product and service and improve operational efficiency. Now I will walk you through our key achievements in more detail. First, our strong supply chain remains the foundation for delivering high-quality and price-competitive products. In 2025, we further enhanced our direct and centralized procurement strategy in order to lower purchasing costs. Moreover, based on customer needs and pain points, we consolidated flight resources and introduced several connecting flights for select long-haul travel products to niche destinations. This approach further expanded our departure city coverage, making it more convenient for travelers from lower-tier cities to travel abroad. It also enabled us to take advantage of airline discounts available in those hubs, allowing us to offer even more competitive pricing to our customers, and further boosted demand for related destinations. Many hub cities such as Chengdu are popular tourist destinations themselves, allowing travelers to combine stopovers with leisure visits. As a result, these products gained strong traction upon launch. For example, our Caucasus series using connecting flights recorded over 500% year-over-year growth in transaction volume in 2025. We will continue to expand these offerings by adding more departure points and destinations. In terms of products, we continue to adopt a differentiated strategy to better serve distinct customer segments. As the core customers of our New Tour products, experienced travelers and repeat customers tend to prioritize travel experience and typically have greater flexibility in both time and budget. In 2025, New Tour introduced a wider range of niche destination products, including the organizer tours to the Caucasus region in April and to South America in October. At the same time, we further enhanced the travel experience of New Tour products by implementing a zero-shopping policy throughout the trip and by including curated experiences such as Michelin-star dining and helicopter tours. In 2024, we launched our New Select series, offering a wider range of cost-effective products and further expanding Tuniu Corporation's price tiers. In 2025, we expanded our New Select offerings to cover a broader array of international destinations. With more competitive pricing, the New Select products have attracted a wider customer base, enabling travelers to either reduce their travel budgets or explore additional destinations within the same budget, an option that strongly appeals to travel fans, particularly younger ones. The New Select Singapore–Malaysia tour series launched in June recorded over 10,000 paid bookings during the summer holiday period. We also observed a continued rise in demand for self-guided tours, particularly in the domestic travel market. Last year, we expanded the supply of our Hotel Plus X products, with hotels at the core and supported by dynamic packaging technology. We broadened the coverage to all provinces in China's mainland and further penetrated lower-tier markets. During the 2025 Labor Day and National Day holidays, transaction volume for our self-drive tour products recorded triple-digit year-over-year growth. Going forward, we will continue this strategy by expanding the supply and destination coverage of our self-guided tour products. In addition, in 2025, we continued to explore and expand diversified channels. Live streaming is playing an increasingly important role for our sales. In 2025, both payment and verification volume through our live streaming channel continued to record double-digit year-over-year growth, while achieving profitability through a single channel. The live streaming channel contributed over 15% to our total transaction volume in 2025, compared to approximately 10% in 2024. On the product side, first, we expanded the range of live streaming offerings. Beyond the traditional hotel plus scenic spot packages, we added personalized service products such as travel photography as well as more high-ticket items like long-haul outbound travel products, enriching customers' choices. Second, we fully leveraged our supply chain advantages to ensure competitive pricing. For example, our New Select products are highly popular with live stream audiences due to their good value for money. In terms of format, we increased the number of our outdoor live streaming shows, including inviting live streamers to broadcast live from destination sites. In March, Tuniu Corporation partnered with multiple live streamers to conduct a 21-day on-site live streaming campaign across 10 islands in the Maldives, generating cumulative sales of over RMB100 million. On the service side, with more than a decade of experience in the travel industry, we provide professional tour guidance and comprehensive travel-related services. In addition, we have a dedicated verification team and specialized system support in place to deliver a smoother redemption experience for customers. Offline stores remain an essential part of our overall sales and service network. As of 2025, we operated more than 400 stores nationwide. We expanded our store presence in key cities, including major popular tourist destinations and transportation hubs such as Chengdu and Xi'an, building scale in local markets to enhance operational efficiency and reduce costs. In 2025, transaction volume from offline stores increased by nearly 20% year over year. We also continued to develop channels such as traffic platforms and corporate clients, tailoring our product offerings to the specific needs of each channel. On traffic platforms, sales of standalone products such as air tickets and hotel bookings grew rapidly. For corporate clients, in addition to providing business travel booking services, we leveraged our extensive experience in the leisure segment to offer customized group travel solutions as well as personal and family vacation products for employees. In 2025, transaction value from corporate clients increased by more than 20% year over year. In terms of technology, we are exploring the application of AI agents across various business scenarios. Last April, Tuniu Corporation officially launched our self-developed travel AI agent, AI Assistant Xiao Niu. The assistant integrates vertical travel application scenarios with large language models to provide customers with one-stop services, including smart search, automated price comparisons, personalized recommendations, and dynamic packaging. At the same time, we continued to integrate technological tools into our daily operations. These initiatives have improved efficiency and helped control operating costs. We are encouraged by the growing adoption of our AI tools among both customers and employees. In addition, we have adopted an open collaboration approach by gradually providing external AI agents such as OpenClaw with the same comprehensive travel booking capabilities available in our app via MCP interface, enabling them to search and place bookings directly. We will continue to embrace new technology to support high-quality growth. Over the past year, we have made steady progress while managing a range of challenges. Overall, the company continues to move forward on the sustainable development path. In the year ahead, we will remain focused on customer needs, continue refining our products and services, and expand our reach through diversified channels to support stable and sustainable growth. I will now turn the call over to Anqiang Chen, our Financial Controller, for the financial highlights. Anqiang Chen: Thank you, Donald. Hello, everyone. Now I will walk you through our fourth quarter and fiscal year 2025 financial results in greater detail. Please note that all amounts are in RMB unless otherwise stated. You can find the U.S. dollar equivalent of the numbers in our earnings release. For the fourth quarter of 2025, net revenues were RMB123.5 million, representing a year-over-year increase of 20% from the corresponding period in 2024. Revenues from packaged tours were up 35% year over year to RMB102.1 million and accounted for 83% of our total net revenues for the quarter. The increase was primarily due to the growth of organized tours and self-guided tours. Other revenues were down 21% year over year to RMB21.5 million and accounted for 17% of our total net revenues. The decrease was primarily due to the decrease of merchandise sales. Gross profit for the fourth quarter of 2025 was RMB70 million, almost in line with gross profit in the fourth quarter of 2024. Operating expenses for the fourth quarter of 2025 were million, down 16% year over year. Research and product development expenses for the fourth quarter of 2025 were RMB12.3 million, down 8% year over year. The decrease was primarily due to the decrease in research and product development personnel-related expenses. Sales and marketing expenses for the fourth quarter of 2025 were RMB44.1 million, up 3% year over year. The increase was primarily due to the increase in promotional expenses. General and administrative expenses for the fourth quarter of 2025 were RMB12.8 million, down 52% year over year. The decrease was primarily due to the impairment of property and equipment, net, recorded in the fourth quarter of 2024. Net income attributable to ordinary shareholders of Tuniu Corporation was RMB1.5 million in the fourth quarter of 2025. Non-GAAP net income attributable to ordinary shareholders of Tuniu Corporation, which excluded share-based compensation expenses and amortization of acquired intangible assets, was RMB3.5 million in the fourth quarter of 2025. As of December 31, 2025, the company had cash and cash equivalents, restricted cash, certain investments, and long-term deposits of RMB1.1 billion. Cash flow generated from operations for the fourth quarter of 2025 was RMB68.8 million. Capital expenditures for the fourth quarter of 2025 were RMB0.5 million. Now, moving to full year 2025 results. In 2025, net revenues were RMB578 million, representing a 13% year-over-year increase. Revenues from packaged tours were up 21% year over year to RMB493.5 million and accounted for 85% of our total net revenues in 2025. The increase was primarily due to the growth of organized tours and self-guided tours. Other revenues were down 20% year over year to RMB84.5 million and accounted for 15% of our total net revenues in 2025. The decrease was primarily due to the decrease in the commission fees received from other travel-related products. Gross profit was RMB335 million in 2025, down 6% year over year. Operating expenses were RMB323.7 million in 2025, up 10% year over year. Research and product development expenses were million in 2025, up 12% year over year. The increase was primarily due to the increase in research and product development personnel-related expenses. Sales and marketing expenses were RMB193.9 million in 2025, up 8% year over year. The increase was primarily due to the increase in promotional expenses. General and administrative expenses were RMB71.8 million in 2025, down 18% year over year. The decrease was primarily due to the decrease in general and administrative personnel-related expenses and impairment of property and equipment, net. Net income attributable to ordinary shareholders of Tuniu Corporation was RMB31.1 million in 2025. Non-GAAP net income attributable to ordinary shareholders of Tuniu Corporation, which excluded share-based compensation expenses, amortization of acquired intangible assets, and impairment of property and equipment, net, was RMB42.6 million in 2025. Capital expenditures were RMB4.4 million in 2025. For 2026, the company expects to generate RMB100 million to RMB131.6 million of net revenues, which represents a 7% to 12% increase year over year. Please note that this forecast reflects our current and preliminary views on the industry and our operations, which are subject to change. Thank you for listening. We are now ready for your questions. Operator: We will now open for questions. There are no questions at this time. I will now turn the call over to Tuniu Corporation's Director of Investor Relations, Mary Chen. Mary Chen: Once again, thank you for joining us today. Please do not hesitate to contact us if you have any further questions. Thank you for your continued support, and we look forward to speaking with you in the coming months. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.
Operator: Good day, and thank you for standing by. Welcome to Aquestive Therapeutics, Inc. Fourth Quarter 2025 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Faith Pomeroy Ward. Please go ahead. Faith Pomeroy Ward: Thank you, operator. Good morning, and welcome to today's call. On today's call, I am joined by Dan Barber, President and Chief Executive Officer, and Ernie Toth, Chief Financial Officer, who are going to provide an overview of the company's reported financial results for the fourth quarter and full year ended 12/31/2025 and a progress update on the company's key 2026 objectives, followed by a Q&A session. During the Q&A session, the team will be joined by Dr. Matt Greenhawk, Chief Medical Officer, Molina Chaffee, Senior Vice President, Regulatory Affairs, Sherry Korczynski, Chief Commercial Officer, and Dr. Matthew Davis, Chief Development Officer. As a reminder, the company's remarks today correspond with the earnings release that was issued after market close yesterday. In addition, a recording of today's call and related supplemental materials will be made available on Aquestive Therapeutics, Inc.'s website within the investor section shortly following the conclusion of this call. To remind you, the Aquestive Therapeutics, Inc. team will be discussing some non-GAAP financial measures this morning as part of its review of fourth quarter and year-end 2025 results. A description of these measures along with a reconciliation to GAAP can be found in the earnings release issued yesterday, which is posted on the investors section of Aquestive Therapeutics, Inc.'s website. During the call, the company will be making forward-looking statements. We remind you of the company's safe harbor language as outlined in today's earnings release as well as the risks and uncertainties affecting the company as described in the Risk Factors section and in other sections included in the company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on 03/04/2026. As with any pharmaceutical company with product candidates under development, and products being commercialized, there are significant risks and uncertainties with respect to the company's business and the development, regulatory approval, and commercialization of its products and other matters related to operations. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date made. Actual results may differ materially from these statements. All forward-looking statements attributable to Aquestive Therapeutics, Inc. or any person acting on its behalf are expressly qualified in their entirety by this cautionary statement and the cautionary statements contained in the earnings release issued yesterday. The company assumes no obligation to update its forward-looking statements after the date of this conference call, whether as a result of new information, future events, or otherwise, except as required under applicable law. I will now turn the call over to Dan Barber. Thanks, Faith. Dan Barber: Good morning, everyone, and thank you for joining us. Today, my message to you is simple and clear. This is a great moment in Aquestive Therapeutics, Inc.'s evolution, and I am filled with optimism for our future. I am filled with optimism because I believe our path has never been clearer. I believe our risk profile has never been lower. I believe our transparency allows all of you to see this as well. Let me walk you through where we are today on bringing ANNAFILM to market here in the U.S. as well as around the world. We believe we have a very clear and achievable set of from the FDA on resubmission of our NDA. We have submitted our Type A meeting request and expect to have a discussion with the FDA within the next 30 days. We have already selected our clinical research organizations for both the human factor study and PK study and continue to prepare for dosing. We are agreeing to everything the FDA requested with one minor clarification on the arms required for the PK study. We have already modified our packaging to make the pouch easier to open, and this has no impact on stability or durability. We are reiterating today our commitment to filing our resubmission in the third quarter of this year. You can also find more specific details on our program, including pictures of the revised packaging, in our supplemental materials found on our website. While it is great to have a clear path and plan, you also need the right team. And I am fortunate that we have a fantastic development team here at Aquestive Therapeutics, Inc. With the recent addition of Dr. Matt Greenhawk, a world-renowned allergist and this year's recipient of the prestigious Distinguished Clinician Award by the American Academy of Allergy, Asthma, and Immunology, or Quad AI, and the addition late last year of Dr. Matthew Davis, a seasoned development leader from large established organizations, we have the clinical expertise to efficiently conduct our development studies, interact effectively with the FDA, and appropriately inform the medical community of our clinical results. This is by far the strongest clinical team Aquestive Therapeutics, Inc. has ever had. In fact, it will be important that we get our scientific and medical information out to the community as broadly and deeply as possible this year. That is why, in addition to Dr. Greenhawk joining us, we are more than doubling the size of our medical affairs organization. This will allow us to attend more conferences, educate more physicians on our data, and provide the community with more scientific publications in the coming months. This clinical and medical prowess also aligns with our work outside the U.S. We remain on track to file in Europe and Canada before the end of the year. We also will be meeting with the U.K. Health Authority, known as MHRA, in the coming weeks. We are confident that ANNAFILM can benefit all humans, and we want to expand access to our product outside of the U.S. as rapidly as possible. Now, let us turn to the commercial side. Launching a prescription drug in the U.S. is extremely difficult. It requires considerable capital, patience to work through the complexities of the payer world, and significant marketing efforts across a variety of channels. Similar to development, this takes having the right people. As you may recall from my comments a month ago, Sherry Korczynski, our Chief Commercial Officer, and I made the decision to keep the core commercial leadership team intact following our CRL. That team continues to do great work and prepare for launch. This extra preparation time allows us to think bigger, and we are guiding today that we will launch with 50% more sales reps upon approval compared to our previous guidance. This means we expect to have 75 reps at launch versus the previous guidance of 50. Our planning process indicates we should be able to do this from a close to cash neutral position by 2027. Speaking of cash, as stated before, launching a drug takes tremendous amounts of capital. Accessing this capital means making sure you have the right investors who believe in your product, your story, and your team. That is why we were excited to announce today that RTW has extended their revenue-sharing agreement with us to consummate any time before 06/30/2027 and has also agreed to invest additional capital in the company. We appreciate the faith put in us by the RTW team, and like all of our investors and shareholders, take this responsibility seriously. This, along with our cash guidance that Ernie will discuss in a few minutes, we believe positions us well for a potential launch. In terms of the underlying allergy market, we continue to see overall prescription growth. EpiPen and generic auto-injectors grew by approximately 5% in 2025, and the overall market grew by just over 9%. Importantly, we also continue to see a market that seems to be waiting for the the first oral epinephrine product. Over 90% of prescriptions remain with auto-injectors. And obviously, the entire market continues to use medical devices. As I have stated in the past, we believe seeing is believing with our oral medication. When patients have the physical film in front of them, our data indicates they will almost always choose the film over auto-injectors and nasal sprays. Given the potential near-term launch of ANNAFILM in the U.S., if approved by the FDA, we will continue to both simplify and grow our overall business where possible. From a litigation standpoint, this means we will continue to seek ways to simplify our workload while also appropriately defending our business. In December, we reached a settlement agreement in a nine-year long defamation lawsuit brought by a competitor, and I am pleased to remove this distraction from the business. This marks the fourth lawsuit we have been able to have withdrawn, get thrown out of court, or reasonably settled over the last four years. We are also guiding that due to the timing of a potential ANNAFILM launch, our initial focus with Libervant will be licensing the product in the U.S. We have several parties already interested and actively engaged in discussions. We will keep you updated on this as the year progresses. We continue to believe Libervant is a tremendous product that can meaningfully improve patients' lives. We also note that the two nasal spray products available for the treatment of seizure clusters are forecasted to exceed over $400,000,000 in sales this upcoming year. We continue to progress nicely with multiple parties in Europe for a license of ANNAFILM and expect to use a licensing approach for that market. Finally, we also have our eyes towards the long-term future of the company. We continue to believe in the long-term multiproduct potential of Adrenoverse, our prodrug epinephrine platform. We successfully opened an IND for AQST-108 in December 2025, completed dosing of our initial safety study last month, and expect to have top-line clinical data in the near future. We will keep you informed on this program as we move forward. In summary, now is a great time for Aquestive Therapeutics, Inc. We have a clear path to market for ANNAFILM. We have a clear path to the necessary capital to launch ANNAFILM if approved by the FDA. We have the right clinical, regulatory, and commercial leaders to effectively execute on our strategy. We are focused on out-licensing activities for Libervant and ex-U.S. for ANNAFILM, and we continue to progress our long-term pipeline. I will now turn the call over to Ernie. Ernie Toth: Thank you, Dan, and good morning, everyone. By now, you have seen our financial results in our earnings release that was issued last evening. As we typically do, we will address most of the discussion related to the fourth quarter 2025 and full year 2025 results in the Q&A. During 2025, we made great progress in positioning Aquestive Therapeutics, Inc. for future success, including submitting the NDA for ANNAFILM, the first and only noninvasive, orally delivered epinephrine product, if approved by the FDA; closing an $85,000,000 equity raise from high-quality institutional healthcare investors; secured $75,000,000 in revenue interest financing from RTW upon approval of ANNAFILM; and ended 2025 at $121,000,000 with cash runway to support costs associated in preparing for the ANNAFILM NDA resubmission, including the new human factors validation study and supportive PK study; precommercial infrastructure costs to increase awareness of ANNAFILM through the execution of its medical affairs strategy, including presenting scientific data in medical forums throughout 2026; planned regulatory submissions in Canada and in the EU; and the 108 Phase 1 clinical trial. As outlined in the press release issued last night after market close, we announced an extension until 06/30/2027 of our agreement with RTW. This extension secures the availability of the revenue interest financing to support the commercial launch of ANNAFILM if approved by the FDA. RTW has also agreed to an additional strategic investment of $5,000,000 in Aquestive Therapeutics, Inc., showing continued confidence in the company. Now let us turn to the recap of our quarterly and full-year financial results. Total revenues increased to $13,000,000 in the fourth quarter 2025 from $11,900,000 in the fourth quarter 2024. This 10% increase in revenue was primarily driven by increases in manufacturer and supply revenue. Manufacturer and supply revenue increased to $12,000,000 in the fourth quarter 2025 from $10,700,000 in the fourth quarter 2024, primarily due to increases in Suboxone revenues and ONDEEF revenues. Excluding the impact of one-time recognition of deferred revenues during the full year 2024, total revenues decreased by $1,500,000, or 3%, to $44,500,000 for the full year 2025. As a reminder, the one-time recognition of deferred revenue in the prior year was due to the termination of a licensing and supply agreement. Including the deferred revenue recognized in the prior year, total revenues decreased to $44,500,000 for the full year 2025 from $57,600,000 for the full year 2024. Manufacturer and supply revenue increased to $40,200,000 for the full year 2025 from $40,000,000 for the full year 2024, primarily due to increases in ONDEEF revenues partially offset by decreases in Suboxone revenues. R&D expenses decreased to $3,200,000 in the fourth quarter 2025 from $4,900,000 in 2024. The decrease in R&D expenses was primarily due to a decrease in clinical trial costs associated with the continued advance of the ANNAFILM development program and a decrease in share-based compensation. R&D expenses decreased to $17,200,000 for the full year 2025 from $20,300,000 in the full year 2024. The decrease in R&D expenses was primarily due to lower clinical trial costs associated with the continued advancement of the ANNAFILM development program partially offset by increases in product research expenses and share-based compensation. Excluding one-time legal expenses, selling, general, and administrative expenses increased to $19,600,000 in the fourth quarter 2025 from $16,000,000 in 2024. Including the one-time legal expenses, selling, general, and administrative expenses increased to $32,800,000 in the fourth quarter 2025 from $16,000,000 in 2024, primarily due to higher legal expenses of approximately $13,600,000, higher commercial spending of approximately $3,700,000 in preparation for the launch of ANNAFILM, higher personnel expenses of approximately $800,000, and higher share-based compensation of approximately $200,000, partially offset by lower severance expenses of approximately $1,700,000 and lower regulatory and licensing fees of approximately $500,000. Excluding one-time legal expenses, selling, general, and administrative expenses increased to $66,600,000 for the full year 2025 from $50,200,000 for the full year 2024. Including one-time legal expenses, selling, general, and administrative expenses increased to $79,800,000 for the full year 2025 from $50,200,000 for the full year 2024. The increase primarily represents higher legal fees of approximately $14,300,000, higher commercial spending of approximately $9,600,000 in preparation for the launch of ANNAFILM, the ANNAFILM PDUFA fee of $4,300,000, higher personnel expenses of approximately $1,900,000, higher regulatory expenses related to ANNAFILM of approximately $1,000,000, and higher share-based compensation expenses of approximately $900,000, partially offset by decreases in severance expenses of approximately $2,800,000 and lower insurance expenses of approximately $600,000. Excluding one-time legal expenses, Aquestive Therapeutics, Inc.'s net loss for the fourth quarter 2025 was $18,700,000, or $0.15 for both basic and diluted loss per share, compared to the net loss for the fourth quarter 2024 of $17,100,000, or $0.19 for both basic and diluted loss per share. Including one-time legal expenses, Aquestive Therapeutics, Inc.'s net loss for the fourth quarter 2025 was $31,900,000, or $0.26 for both basic and diluted loss per share, compared to the net loss for the fourth quarter 2024 of $17,100,000, or $0.19 for both basic and diluted loss per share. The increase in net loss was primarily driven by increases in selling, general, and administrative expenses, and manufacturer and supply expenses, partially offset by decreases in research and development expenses and increases in revenue and interest income and other income. Excluding one-time legal expenses, Aquestive Therapeutics, Inc.'s net loss for the full year 2025 was $70,600,000, or $0.66 for both basic and diluted loss per share, compared to the net loss for the full year 2024 of $44,100,000, or $0.51 for both basic and diluted loss per share. Including one-time legal expenses, Aquestive Therapeutics, Inc.'s net loss for the full year 2025 was $83,800,000, or $0.78 for both basic and diluted loss per share, compared to the net loss for the full year 2024 of $44,100,000, or $0.51 for both basic and diluted loss per share. The increase in net loss was primarily driven by increases in selling, general and administrative expenses, and manufacturer and supply expenses, and decreases in revenue, partially offset by decreases in R&D expenses and increases in interest income and other income. Excluding one-time legal expenses, non-GAAP adjusted EBITDA loss was $14,100,000 in the fourth quarter 2025, compared to non-GAAP adjusted EBITDA loss of $11,000,000 in the fourth quarter 2024. Non-GAAP adjusted EBITDA loss, excluding adjusted R&D expenses and one-time legal expenses, was $10,800,000 in the fourth quarter 2025, compared to non-GAAP adjusted EBITDA loss, excluding adjusted R&D expenses, of $6,600,000 in the fourth quarter 2024. Excluding one-time legal expenses, Aquestive Therapeutics, Inc.'s non-GAAP adjusted EBITDA loss was $49,700,000 for the full year 2025, compared to non-GAAP adjusted EBITDA loss of $23,000,000 for the full year 2024. Non-GAAP adjusted EBITDA loss, excluding adjusted R&D expenses and one-time legal expenses, was $34,400,000 for the full year 2025, compared to non-GAAP adjusted EBITDA loss, excluding adjusted R&D expenses, of $4,000,000 for the full year 2024. As of 12/31/2025, cash and cash equivalents were at $121,200,000. As outlined in the press release issued last night after market close, our outlook for 2026 is total revenue of $46,000,000 to $50,000,000 and non-GAAP adjusted EBITDA loss of $30,000,000 to $35,000,000. We expect to end 2026 at approximately $70,000,000, excluding any additional proceeds from RTW or out-licensing transactions. Our non-GAAP adjusted EBITDA loss guidance for 2026 includes costs associated with the resubmission of the NDA for ANNAFILM, continued precommercial infrastructure spending for ANNAFILM, clinical trial costs for AQST-108, and regulatory applications for ANNAFILM in Canada and the EU. Current guidance does not include costs associated with the sales and marketing of ANNAFILM if approved by the FDA. I will now turn the line back to the operator. We will now open for questions. Operator: Thank you. To ask a question, you will need to press *11 on your touch-tone telephone. To withdraw your question, simply press *11 again. Please standby while we compile the Q&A roster. Our first question comes from the line of Roanna Ruiz with Leerink Partners. Your line is now open. Roanna Ruiz: So a couple for me, starting with the Type A meeting with the FDA. I just wanted to confirm I heard it correctly. It sounds like you submitted a request, but it has not been scheduled yet, but that could happen soon. And secondly, could you elaborate a bit on your main goals going into this meeting? And is there any additional information you need to prepare for the FDA for this meeting? Dan Barber: Sure. Good morning, Roanna. I will hand it over to Molina in a second here. Just a couple of basic things. We have submitted. We expect that meeting to happen shortly. I will let Molina walk you through the contract that the FDA has to uphold. From a goals perspective, we do not need a lot out of this meeting, and I will also let Molina elaborate a little bit on that. Molina Chaffee: Thank you, Dan. So in terms of the timing, the FDA guidelines state that the agency should meet with the sponsor within 30 days from the date that we submitted our meeting request and our briefing book. So if they go according to the timeline, we should be able to meet with them towards the end of this month or very early April. In terms of the goals of the meeting, we shared with them our briefing book that outlined our commitment to conduct the two studies that they requested in the CRL. And we also asked questions to ensure that we walk away essentially from this meeting with clear alignment on how best to execute for the purpose of the research. Dan Barber: Right. And Roanna, I would just remind you and those on the call, it has been 31 days since we received our CRL. And in those 31 days, we have not only written the protocols, contracted our CROs, changed our packaging, written a briefing book, resubmitted that briefing book to the FDA, but obviously also brought on a new Chief Medical Officer, and we designed our deal with RTW. So we feel really good that we are on track in every way. And the Type A meeting is just one part of that. Roanna Ruiz: Yep. And a follow-up on that, I think you mentioned doing a modification to the proposed protocol that the FDA mentioned in the CRL? Or could you just explain a bit more about that? Is it relatively straightforward? And, you know, how should we think about it moving with the FDA interaction with you coming up? Dan Barber: Yeah. That is in my view. So we will not get into the exact question. We will obviously be able to share that in a few weeks here. But that is literally the only question we have for the FDA, and we are fine with the answer either way. So the minor modification Matthew Davis and his team just want to make sure they understand how the FDA is thinking about it. And once we have the answer, there is nothing more we need. Operator: Okay. Great. Thank you so much. Our next question comes from the line of Kristen Kluska with Cantor Fitzgerald. Your line is now open. Kristen Kluska: Good morning, everybody. Thanks for taking my questions. I have a couple as well. First, on the RTW, great to see you extended that option. I noticed that the language was through June next year. You had told us that your expectation is that it would be a six-month review upon submitting. Is the timeline here just to give you a little bit of buffer room on the back end? And then, also, can you just confirm that it is still $75,000,000 and that those terms have not changed? Dan Barber: Yeah. The second question, I will turn over to Ernie in a second. But in terms of the timing of why 06/30/2027, that is easy, because it is easy to modify by one year. We in no way expect to need anywhere near that amount of time to bring our product to market, but it is just an easy way to update the contract. But I will let Ernie talk about any other changes. Sure. Ernie Toth: Hi, Kristen. Yes. We confirm that none of the terms have changed. I think the important thing is here, with the additional purchase of $5,000,000, you know, we appreciate their continued support as we move forward through the process this year of resubmission and, hopefully, an approval and launching the product next year. Kristen Kluska: Okay, thank you. And then I know Sherry and team have been doing a lot of work in terms of mapping territories this past year. So I wanted to ask a little bit more on this decision to add 50% more sales reps. Was this just driven by seeing new pockets where you think you would need more boots on the ground, or is there anything specific that led to the decision as well as the specific percent more that you will be adding? Dan Barber: Sure. I will let Sherry pick that. Sherry Korczynski: Hi, Kristen. How are you? Thanks so much for asking this question. We are very excited about our decision. Why did we do it? We went back, as we have been doing with all of our commercial work that we were preparing for launch, to say how many more reps would we need to cover much deeper, penetrate much deeper into the allergist market, and in the same regard ensuring that the reps will be calling on the pediatricians that are the high-decile pediatricians. We took a look at the reach and frequency that we are able to achieve by moving towards approximately 75 reps. There are a couple reasons why that made sense. One was obviously, with smaller territories, it allows our reps to have greater efficiency, as that will allow them not to have to travel hours to see all the important physicians. So one, it is greater efficiency. Two, it closes white space. So as I am sure you can imagine, with 50 reps, we would have had a lot of white space. We would have handled that through inside sales reps. However, again, by moving to the 75 reps, it gives us much greater coverage. Dan Barber: And, Kristen, I think you can see that our investment in the allergy community is growing in general, so it is not just the reps, but with Matt Greenhawk and the medical affairs team getting bigger as well, our ability to be out there with publications. You saw our presence at Quad AI last week. We are the furniture. We are front and center as being ready to launch. Operator: Thanks, everyone. Dan Barber: Thank you. Operator: Our next question comes from the line of David Amsellem with Piper Sandler. Your line is now open. David Amsellem: Thanks. So just a couple for me. One is maybe taking a step back, can you talk about how you settled on the trial design and are you prepared to make any modifications to the design coming out of the meeting with the FDA if necessary? Just wanted to get a window into your thought process in terms of how you designed the trial. So that is number one. Number two is, with the Salesforce, the bigger Salesforce, I wanted to ask how you are thinking about DTC. Are you going to take a more expansive approach to DTC? And that is particularly in the context of your competitor being fairly aggressive here. So I wanted to get your thoughts on that. Then lastly, on 108, real quick question. I think you made a comment in the press release about indication selection. So just want to be clear. Is it going to be alopecia areata, or are you thinking about other indications or maybe pivoting to something else? Just wanted to clarify on that. Thank you. Dan Barber: Sure. Good morning, David. So let me take the Salesforce DTC question first, and then I will hand it over to Matthew to talk about trial design, especially on the PK side, and how we can be ready for any modifications if necessary. So from a DTC perspective, we still believe that DTC is best served once you have a reasonable market share. And we also have a competitor, to your point, who is spending a lot of money on DTC, which we see growing the overall market. So it is growing the auto-injector market. So we continue to believe, let the competitors spend money in that area, we focus on our touches directly with reps. But let me pass it over to Matthew on your question number one, which was how we settled on our trial design and if we have to make modifications. Matthew Davis: Thank you very much for the question. We have the optionality of doing two things at the same time. So upon looking at the FDA's request, we have a trial design that is in line with what the information they want to seek. And we also believe, based on our 11 other PK trials that we have done, we have enough information to categorize some of that information and, with the updated human factors research that we are going to do, believe that maybe not all the arms are going to be necessary. But if the FDA at the meeting provides these trial designs to be exactly what they asked in the CRL, we are also ready to do that. So at the end of the FDA meeting, we are going to have the clarity for the trial design. We already have protocols to take optionality into account, and we will meet our commitments that Dan has already stated for the finishing of the trial and the resubmission of Ativan. And I will actually stick with Matthew here for the third one, which is the indication selection for 108. I will say alopecia areata remains the indication we are focused on. But Matthew can give his thoughts on, as we go through the development process, if there are other opportunities we might see. Matthew Davis: Now I am going to elaborate more once we have got the results of the current trial that we have done. But in a 50,000-foot view, not only do we look at alopecia areata, we also looked at healthy patients. And looking at the product's pharmacokinetics and safety, and other factors like proteomics. This will help inform us of future indications. So more to come on that, but we are making sure we have optionality to continue on with alopecia areata and also look at other topical indications that 108 would be designed for. David Amsellem: Okay. That is helpful. Thank you. Dan Barber: Okay. Thank you. Operator: Our next question comes from the line of François Brisebois with LifeSci Capital. Your line is now open. François Brisebois: Hey. Thanks for the questions. I was just wondering, in terms of the added reps here, the 50% more reps, can you remind us the timing of the hiring here? Is this kind of a post-approval or pre-approval? Or just remind us of your thinking? Sherry Korczynski: Yeah. Thanks for the question. Yes. We will continue to follow the same path that we were prepared for for a launch this year. We will be interviewing and going through the process so that once we do have approval, then we would flip them immediately to full-time employees. So think about it the same way. Contingent offers go out, and we are ready to go upon launch. Dan Barber: And, François, I will just add to Sherry’s comments. Just like before, that does not delay our launch at all. So there is a natural period of a few weeks after approval, as you know, where the supply chain has to kick in, and Sherry and her team have done a great job of being ready to strike during that period and make sure we have all of our reps ready to go by the end of that supply chain work. François Brisebois: Okay. Great. And then if I can follow up, just any updates on this citizen’s petition? Where does that stand? And then maybe if you can also touch on, you know, you were just at Quad AI. I assume it was a busy weekend. I am just wondering any takeaways from your perspective on how Quad AI went for Aquestive. Dan Barber: Sure. Yes. So the citizen petition that was filed by a competitor was denied by the FDA last week, which to us obviously was what we expected, but it is another validating point for our data package. So, in addition to the strong outcome and the de-risking event you saw out of the CRL where it is focused on human factors, we also now see, just a matter of a couple of weeks later, a moment where the FDA is once again validating the strength of our package. So we feel really good about where we are with the FDA, especially from a clinical perspective. As you heard from the team, we are on track, and we are ready to go. In terms of Quad AI, which was last weekend for those who are not familiar, and that is the biggest allergy conference in terms of attendance in a year, my biggest learning, and I will toss it over to Sherry in a second too—you know what, let us actually let Matt Greenhot join in as well. So in a second, I will pass it over to Matt instead of Sherry. But from my perspective, what I heard consistently were two things. One, the allergist community believes in our ability to get to approval given what was in the CRL. And two, they cannot wait for our product. So, very excited on both those fronts. Matt, maybe you could give a couple of your thoughts. Hi. Good morning. Matt Greenhawk: As usual, the Quad AI is a very busy and intense meeting. There are a lot of allergists, not only from the U.S., but globally, so it is a good draw. What I observed was a lot of excitement and curiosity about a new option for treating patients. As a practicing allergist, something like this adds a lot of potential to how we can help serve patients. So to be able to interact with allergists and other people coming up to the booth and seeing us walking through the halls, the feedback is very consistent with what Dan just said, that there is excitement, there is curiosity. So it is exciting. In a year from now, I think it will be even more exciting. Operator: Excellent. Thank you. Thank you. Our next question in queue comes from the line of Andreas Argyrides with Oppenheimer. Your line is now open. Andreas Argyrides: Good morning, and thanks for taking our questions. A couple from us here. So how are you viewing the requirements of the PK study as diverging from previous PK studies, including chewing and with or without water intake? How are you thinking about addressing the FDA's concerns around tolerabilities despite what you point to are minimal cases? And you recently presented additional data at Quad AI around diastolic blood pressure, citing no dip there. Can you elaborate on the importance of these data with regards to the FDA? Thanks so much. Dan Barber: Sure. Good morning, Andreas. So I will spread the wealth with these three questions. I will have Matthew in a second talk about the requirements from PK prior, including chewing. I will ask Matt to talk about diastolic blood pressure, and then I will finish up on tolerability. But Matthew, why do you not start? Matthew Davis: So this would be our twelfth trial on this product. So like the other studies, we are going to use the same vendor that we had excellent experience with. We are going to use the same laboratory that we had excellent experience with. We are going to, as the FDA requested, have all patients have healthcare-administered ANNAFILM. Like the FDA requested, we are going to have all patients also have an injection of intramuscular epinephrine, and we have done this for our other pharmacokinetic drugs. As the FDA requested, we are also going to have patients, some patients, receive self-administered epinephrine ANNAFILM that is going to follow the new updated Instructions for Use that are going to be tested and validated in the human factors form. In addition, the FDA has requested top of tongue, and that was by far our largest observation in the last human factors trial. Of course, we will be doing this. We will have a discussion with the FDA on your other question on chewing. We believe that this information can already be informed in the labeling by the fact that patients have already been tested and swallowed ANNAFILM with eight ounces of water, and those patients did reach a therapeutic level of above 100 grams per milliliter. So we will have that discussion with the FDA. If the FDA believes that we have enough information to inform the label, as we believe, then we will proceed with the design that I just stated. If the FDA would like us to continue with the design that they stated, we also will do what they request. Either way, we are ready for this trial. Matt Greenhawk: Diastolic blood pressure is one of these interesting things clinically. You need your diastolic blood pressure to help maintain feeding blood to your coronary arteries during the shock. So one of the things that has been observed now for a number of years, with additional data with auto-injectors, is that with the injectable route you see a slight dip for a couple of minutes where the diastolic blood pressure goes down and then comes up. And film operates a little bit differently than that, in that there is no initial shift. So what that may lead to is potential improvements in something called mean arterial pressure, which in shock, it is a distributive shock. You think about your plumbing system. There is runoff downstream, and there is low pressure. You want to increase your mean arterial pressure. It will help perfuse your coronaries. It will keep the system running at a higher pressure. When you are resuscitating a patient, that is really what you are aiming for. So you seem to see fairly ideal properties that one would want on paper for how you would resuscitate somebody. And, you know, it is exciting to be able to report those data. These are very interesting studies. You learn a lot about the epinephrine space with each of these studies that gets reported. Dan Barber: And, Andreas, let me take the tolerability piece. One of the things we did not overly focus on in our original submission is what tolerability looks like across all of the products. So it is interesting when you step back and you look at the experience with the medical devices, there are multiple tolerability issues that occur, and we do not need to go into the specifics for each product on this call. But in our resubmission, we will definitely be making sure we characterize our product versus the alternatives that are available. And then, as we stated in the supplemental material that you can see, if you go back to our study, there are very few cases. There are four individuals who had any ability to point to tolerability, one of the individuals who said unprompted, well, if my life was at risk, I would leave the product in as long as I needed to. So I think on this issue, I would put it at much ado about nothing. And we will make sure that we better characterize the current state in this space in our resubmission. Andreas Argyrides: Great. Thanks, guys. Operator: Thank you. Our next question comes from the line of Raghuram Selvaraju with H.C. Wainwright. Your line is now open. Raghuram Selvaraju: Thanks so much for taking our questions. Firstly, I was wondering if you could comment on any fundamental changes in your anticipated promotional campaign for support of ANNAFILM as and when the product gets approved in the context of the revised Salesforce sizing. And if you see any recent moves by the folks promoting Nessie that would guide promotional decisions that you are making in advance of the ANNAFILM launch? Dan Barber: Sherry, you want to take that? Sherry Korczynski: Sure. Thanks so much for the question. As Dan mentioned earlier, our commercial infrastructure has mainly stayed intact. And so because of that, it is giving us time to go back and really refine our launch plan, aligned with having 75 reps and being well positioned if ANNAFILM is approved by the FDA. I do think, though, that it continues, as you know, to be—there is a significant unmet need in what continues to be a growing market. And as Dan had mentioned, with the competitive DTC, they continue to grow the market. And so that is a really positive thing. But there is still a need for an oral, easy to carry, easy to use, non-needle, non-device. We heard it over and over again this weekend at Quad AI. So what I would say, there are not fundamental changes in the work we are doing or the messaging, but we are taking the time, Ram, to really refine our positioning and refine all of the tactics that our reps will take to launch. As it relates to the competitors, look, we are always looking at the tactics and the promotional efforts, and it is informing us, looking at their share of market, and evaluating what is working and what is maybe not working as well. And so that is all going to inform our launch plan. Raghuram Selvaraju: Very helpful. Thank you. Secondly, I was wondering if you could just clarify how you are thinking about the timeline for future clinical development of AQST-108 relative to the timeline for the ANNAFILM NDA resubmission and potential approval and launch timing for ANNAFILM. Are you thinking about these two things completely independently? If they are connected in any way, can you give us a sense of how? And maybe just provide some granularity regarding the timing with which you expect to conduct the next stage of clinical development with AQST-108. Thank you. Dan Barber: Yeah. No, thanks, Ram. And look. Given the size and the focus of our organization, the only answer to this one is they absolutely are linked. And ANNAFILM is always going to win when there is a competition between ANNAFILM and 108. I am lucky to sit in this room with some great executives, as you have heard this morning, but they are the same executives who are over 108. So we will prioritize ANNAFILM, both from a resource perspective and a monetary perspective in the short term. Having said that, we do have the ability to keep 108 moving, to keep learning, as Matthew talked about, around what we have got on our hands and how many different ways we can use it. And to keep progressing it clinically once we get past the ANNAFILM resubmission and we really hand over ANNAFILM to the commercial side, I think that is when you will see the workload on 108 pick up with our development team. Raghuram Selvaraju: Okay. Great. And then just two very quick ones. Can you indicate perhaps, through the commercial evidence with regard to at least one or more of the diazepam-based formulations that are currently available on the market, if this provides any kind of market intel or foreshadowing, as it were, of what the future peak sales potential could be for Libervant in the United States? And then also, if you could just clarify for us whether the specific amount of the settlement with Norellis was actually disclosed. Thank you. Dan Barber: Yeah. I will start with the second one. Unfortunately, as tends to happen with these litigation settlements, it is confidential, so we cannot disclose the settlement terms. Obviously, you can see our financial disclosures and make your own assessment. What I would say is we put into our press release what we were happy about and what led us to getting to the settlement is from a 2026 perspective, we believe it is cash neutral. So whether we had done the settlement or not, same place on cash. In terms of Libervant and looking at that opportunity and what peak sales could be for Libervant, this one is bittersweet, Ram. I would love to launch Libervant. And we have put our heart and soul into what we believe is a great product that will help patients in this space. But we cannot launch Libervant and ANNAFILM within a month of each other, it is just not humanly possible for companies even much larger than us. So we have made the decision that ANNAFILM is the priority. We do have some great potential partnerships and licensing opportunities that our team is looking at. I do think that if you look at how Valtoco and NAYZILAM have penetrated in that market, there is still a great opportunity, especially where portability, convenience, speed of use are important, for this product to become an important component in that space. Operator: Thank you. Our next question comes from the line of Thomas Flaten with Lake Street Capital Markets. Your line is now open. Thomas Flaten: Good morning, everybody. Thanks for taking the questions. Are there any current analogs that give you some faith in a potential accelerated approval? I know FDA in its current incarnation can be a little bit confusing. Dan Barber: Sure. That is an easy one—our competitor. Our competitor got a CRL and resubmitted with a six-month clock and got their approval in four months. So we will do it nicely, but we will definitely be reminding this review division that they did that. And that our expectation is we are hitting in a very thin package to meet their requests. And it should not take six months to review. Now whether they act fast or not, Thomas, to your underlying point, is completely up to them. Thomas Flaten: Got it. And then is it safe for us to assume that any submissions outside the U.S. will be after the full package has been resubmitted to FDA, just timing-wise? Dan Barber: Yes. Yes. We are guiding that Europe and Canada will be in 2026, but they will come after the U.S. Canada literally, we could put in whenever we get it done. But it has just got to come after the U.S. So some of this is just making sure we prioritize the U.S. over everything else. Thomas Flaten: Got it. And then, I guess, regardless of approval time, can you clarify a little bit? Because I know there are a few things going on, including hiring reps and some of the product-related work you have to do. So from approval to full commercial launch, can you give us a sense of what that timing will look like? Dan Barber: Yeah. Approval to—if by full commercial launch you mean reps in the field and product in distribution—I think it is the same timeline we guided to this last go around, which was, if you think about it, around an eight-week window. So precisely, it is under eight weeks. It is all dependent on how much we lean forward ahead of approval. So call it zero to eight weeks. Thomas Flaten: Got it. Appreciate that. Thank you. Operator: Thank you. I am showing no further questions in the queue at this time. I will now turn the call back over to Dan Barber for any closing remarks. Dan Barber: Thank you, operator, and thank you, everyone, for joining us today. As you heard, we are on track in every way right now. The epinephrine market continues to grow. And we are excited for patients to have access to ANNAFILM as soon as it is approved by the FDA. We look forward to keeping you updated on our progress in the weeks and months to come. And with that, operator, let us end the call. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Abigail: Good day, everyone. My name is Abigail, and I will be your conference operator today. At this time, I would like to welcome you to the Kura Oncology, Inc. fourth-quarter 2025 financial results 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 this time and if you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. To allow everybody the opportunity to participate, we ask that you please limit yourself to one question and then reenter the queue for any follow-ups. At this time, I would like to turn the call over to Greg Mann, SVP of Investor Relations and Corporate Affairs of Kura Oncology, Inc. Please go ahead. Greg Mann: Thank you, Abigail. Good morning, and welcome to Kura Oncology, Inc.'s fourth-quarter 2025 conference call. Joining the call today are Dr. Troy Wilson, President and Chief Executive Officer; Brian T. Powl, Chief Commercial Officer; Dr. Mollie Leoni, Chief Medical Officer; and Tom Doyle, Senior Vice President, Finance and Accounting. We remind you that today's call will include forward-looking statements based on current expectations. Such statements represent management's judgment as of today, and may involve risks and uncertainties that cause actual results to differ materially from expected results. Please refer to Kura Oncology, Inc.'s filings with the SEC, which are available from the SEC or on the Kura Oncology, Inc. website for information concerning risk factors that could affect the company. With that, I will turn the call over to Troy. Troy Wilson: Thank you, Greg, and good morning, everyone. 2025 was a defining year for Kura Oncology, Inc. Marked by FDA approval of Comzifty and initiation of a successful commercial launch. As we enter 2026, our priorities are clear. Execute commercially, move aggressively into frontline AML and combinations, and build long-term leadership in menin inhibition while advancing a data-rich pipeline. Comzifty generated $2.1 million in net product revenue in the final weeks of 2025. Although it is early, the launch is off to a strong start. Feedback from physicians, pharmacists, and payers has been consistent. Comzifty delivers meaningful efficacy with differentiated safety, simplicity, and combinability with concomitant medications. In medically complex AML patients, that matters. We believe leadership in relapsed and refractory NPM1-mutant AML will be determined by preference, not by who enters the market first. Importantly, Comzifty is now listed in the FDA's Orange Book with patent protection through July 2044. That runway strengthens the long-term value of the franchise, particularly as we expand into frontline AML and combination settings. Our strategy extends well beyond the initial approval. Enrollment is underway in our pivotal COMET-017 frontline trials, and 2026 will bring important data in both the frontline and relapsed/refractory settings. We are positioning ziftomenib as a foundational combination partner in AML, including with FLT3 inhibitors and standard backbone regimens. Across relapsed/refractory and frontline AML, we estimate the total U.S. opportunity at approximately $7 billion. Beyond AML, we are advancing a focused solid tumor strategy. Our ziftomenib combination with imatinib in gastrointestinal stromal tumors, or GIST, is progressing in dose escalation, and our next-generation menin programs are advancing. Darlafarnib, our farnesyl transferase inhibitor, is designed to address resistance mechanisms across multiple oncogenic pathways. Its combination flexibility, including with cabozantinib, KRAS inhibitors, and PI3K inhibitors, gives it potential to impact more than 200,000 patients annually in the U.S. We expect multiple clinical updates this year. In short, we are executing commercially, expanding development of ziftomenib across the AML treatment continuum, and advancing a pipeline with meaningful catalysts in 2026. With that, I will turn it over to Brian. Brian T. Powl: Thank you, Troy. Good morning. Our commercial objectives for Comzifty are straightforward. Establish clear differentiation in the menin inhibitor class, deliver strong quarter-over-quarter growth, and achieve leading class share in relapsed/refractory NPM1-mutant AML. The early launch is exceeding expectations. I could not be happier with the execution of our world-class team, which has been laser-focused on delivering a strong launch. Prescription trends are strong, and the qualitative feedback has been consistent and encouraging. Physicians, both academic and community-based, consistently cite Comzifty's clinical activity and ease of use. Once-daily dosing and lack of required azole dose adjustments are meaningful advantages in real-world AML practice. Institutional pharmacists firmly echo this. In complex patients on multiple medications, safety and predictability drive confidence. We also hear clearly that the safety profile matters. Comzifty carries a single boxed warning for differentiation syndrome compared to multiple boxed warnings for a competitor. That difference is resonating. Importantly, Comzifty was added to the NCCN Guidelines as a Category 2A recommendation within a week of Kura Oncology, Inc.'s submission. That rapid decision reflects enthusiasm and strong alignment among clinical thought leaders. Operational execution has been strong. Comzifty was shipped within days of approval, and our experienced sales force, which brings an average of more than 20 years of industry experience and deep hematology expertise, was trained and fully deployed in partnership with Kyowa Kirin, targeting more than 4,000 hematology professionals. Our message is simple. NPM1 mutations are now actionable, and Comzifty offers a differentiated profile. Access has been a major strength and highlights a powerful leading indicator early in the launch. We engaged payers covering approximately 90% of insured lives prior to approval. Within 90 days, approximately 84% of private payers had established coverage aligned with the label and without additional restrictions. That speed of coverage surpasses both industry benchmarks and our internal expectations. We are also thrilled to report that certain Blue plans are now requiring patients to go on Comzifty before allowing coverage for the other approved menin inhibitor. It is our understanding that their decision to implement this step edit was based on the efficacy, safety, and predictable price per patient. Step editing is uncommon in oncology. We view this as a meaningful independent validation of Comzifty's profile and competitive advantage as the class evolves. Comzifty is distributed through a focused network of specialty distributors and pharmacies. Through KuraRx Connect, the average time from prescription to payer decision is two days. Patients are getting rapid access. We estimate the initial U.S. market for NPM1 relapsed/refractory AML at approximately $350 million to $400 million annually. This is our starting point. On top of our enthusiasm about our early launch, we strongly believe that long-term leadership across the AML continuum will be determined by breadth: by who can combine effectively with venetoclax, 7+3, and FLT3 inhibitors, and take the lead in frontline disease. Comzifty's profile, particularly its safety, combinability, and simplicity, positions us to maximize the efficacy benefit across settings and drive class leadership. In the near term, we will remain focused on quarter-over-quarter growth, net revenue, and new patient starts. Over time, we anticipate providing additional metrics to track progress. I will now turn it over to Mollie to discuss our pipeline. Mollie Leoni: Thank you, Brian. FDA approval in relapsed/refractory NPM1-mutant AML was a major milestone, and it is just the beginning. We are building a durable, expanding franchise backed by the most comprehensive development strategy. Our goal is clear: make ziftomenib the foundational therapy across AML. We are executing the most comprehensive development strategy in the category. We expect to deliver multiple updates this year across key programs at major medical meetings, supported by an expanding publication plan. Relapse rates in AML remain high, up to 70% within three years. We believe deeper and more durable outcomes require moving therapies earlier in treatment. This drives our first-to-frontline strategy. We are rapidly advancing our registrational COMET-017 program in newly diagnosed AML, which will recruit patients at approximately 200 global sites. The program includes two independently powered trials, intensive and non-intensive chemotherapies, each designed to support potential U.S. accelerated approval and full approval. Data from the Phase 1 COMET-007 trial support this strategy. In newly diagnosed patients treated with 7+3 or venetoclax plus ziftomenib, we observed high CR rates and deep MRD negativity. Importantly, the addition of ziftomenib did not meaningfully delay platelet or neutrophil count recovery in either combination. We expect to present updated intensive chemotherapy data from COMET-007 in 2026. In parallel, we are preparing a manuscript detailing ziftomenib in combination with venetoclax in the relapsed/refractory NPM1-mutant AML setting. Data presented last December showed encouraging safety, tolerability, and clinical activity in this population. The combination was generally well tolerated without additive toxicity and meaningfully improved overall response rate, composite CR rate, and overall survival relative to ziftomenib alone. We view this as an important component of our strategy. We believe it has the potential to significantly improve outcomes in patients with relapsed/refractory NPM1-mutant AML. FLT3 co-mutations present another significant opportunity and one where we are well ahead of competitors. We are evaluating ziftomenib in combination with gilteritinib in the relapsed/refractory setting and with quizartinib in the frontline setting. If we can demonstrate the ability to combine ziftomenib safely with FLT3 inhibitors, we believe that will be a key differentiator. Outside AML, COMODO-15 is evaluating ziftomenib plus imatinib in patients with advanced GIST. Dose escalation continues without dose-limiting toxicities across a broad range of doses. We remain very encouraged and plan to provide an update when appropriate. Turning to darlafarnib, we are advancing this FTI in combinations to address resistance biology across solid tumors. We announced today the initiation of the Phase 1b dose expansion of FIT-001 with cabozantinib in advanced renal cell carcinoma. The Phase 1b portion comprises a randomization into three arms, in line with Project Optimus, including one cabozantinib monotherapy arm. This third arm provides a control benchmark and enables us to evaluate the combination in patients who are not responding to or just beginning to fail cabozantinib therapy. Phase 1a dose escalation data from FIT-001 showed encouraging safety and tolerability as well as antitumor activity, including in patients previously treated with cabozantinib. Updated data will be presented in the second half of this year. We also plan to present preliminary data from our Phase 1a study evaluating darlafarnib with adagrasib in patients with KRAS G12C-mutated lung, colorectal, and pancreatic cancers in 2026. Finally, our menin inhibitor programs continue to advance, including preclinical work in solid tumors as well as diabetes and cardiometabolic indications. In summary, we are working to move ziftomenib earlier in the AML treatment paradigm, expanding our combination strategies, and advancing a second growth pillar with the FTI platform with multiple catalysts this year. And with that, I will turn it over to Tom for a financial update. Tom Doyle: Thank you, Mollie. I am happy to provide a brief overview of our financial results for 2025. As we preannounced in January, our net product revenue from Comzifty sales was $2.1 million compared to none for 2024. The first commercial sale triggered a $135 million milestone payment under our collaboration agreement with Kyowa Kirin. Collaboration revenue from our Kyowa Kirin partnership was $15.2 million compared to $53.9 million for the same period in 2024. Research and development expenses were $64.4 million compared to $52.3 million for 2024. The increase was driven by ziftomenib combination trials, including the start of enrollment in our COMET-017 trial in 2025. Sales, general and administrative expenses were $39.1 million compared to $24.1 million for 2024. The increase was driven by the commercial launch of Comzifty. Net loss for 2025 was $81 million compared to a net loss of $19.2 million for 2024. This includes non-cash share-based compensation expense of $11.3 million compared to $8.6 million for the same period in 2024. As of 12/31/2025, Kura Oncology, Inc. had cash, cash equivalents, and short-term investments of $667.2 million compared to $727.4 million as of 12/31/2024. Our $667.2 million balance at year-end 2025 reflects fourth-quarter 2025 receipts of $195 million for the first commercial sale of Comzifty and COMET-017 enrollment milestone payments. Kura Oncology, Inc. is providing guidance for collaboration revenue, which reflects non-cash-based accounting recognition of performance obligations under our collaboration agreement with Kyowa Kirin. We expect this to be $45 million to $55 million in 2026, $90 million to $110 million in 2027, and $90 million to $110 million in 2028. Current cash, cash equivalents, and short-term investments as of 12/31/2025, together with anticipated milestones of $180 million under our collaboration agreement with Kyowa Kirin, are expected to fund our ziftomenib AML program through the first top-line Phase 3 results from COMET-017, anticipated in 2028. With that, I turn the call back over to Troy. Troy Wilson: Kura Oncology, Inc. enters 2026 with strong momentum. We have a launched product which is performing well. We have the broadest frontline AML development strategy underway. We have multiple data readouts ahead, and we have a second platform advancing in solid tumors. Our priorities are clear. Accelerate uptake of Comzifty in relapsed and refractory NPM1-mutant AML, deliver strong quarter-over-quarter product revenue growth, advance and execute on our first-to-frontline strategy, generate and publish combination data which guides treatment decisions, and deliver clinical updates across our FTI platform. 2026 will be a year of execution, expansion, and data. We are building a durable franchise in AML and a broader oncology pipeline with both breadth and depth. Everything is moving forward commercially, clinically, and operationally, and we are focused on converting that momentum into long-term value for patients and shareholders. With that, Abigail, we will conclude and open the call for questions. Abigail: We will now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. When you are called on, please unmute your line and ask your question. Our first question comes from Li Watsek with Cantor Fitzgerald. Li, please unmute your line and ask your question. Li Watsek: Hey. Good morning. Congrats on the progress. Maybe a commercial question for Brian. You made a very interesting comment about step editing, that some payers may require use of Comzifty before the competitor product. I just wonder if you can give us a little bit more information about that. What percentage of payers have implemented this step-through policy? And any specific feedback you can share from payers regarding the status? Troy Wilson: Yeah. Thanks, Li, for the question. I am going to, just to remind everyone, we are going to try to limit to one question per analyst so that we can get through everyone. But, Brian, I will let you—you know, there are two or three questions tucked in there. I will sort of let you speak to them. Brian T. Powl: Alright. Thanks, and thanks, Li, for the question. As we shared in the remarks, we think that this news of a step edit required from some payers that has just come forward is a powerful leading indicator that supports our overall assertion about Comzifty being differentiated. I will say that our market access team has done a phenomenal job securing access and working with payers so broadly to get this access so early. What I can share around the step edit, and as you know what that recommendation from some of these payers is, is that a patient would be recommended to receive Comzifty before receiving any other menin inhibitor. Our understanding is the basis of that is built on a report from a group called IPD Analytics. It is an independent consulting firm that is influential to many payers. And their recent reports evaluating Comzifty in relapsed/refractory recommended this step edit for adult patients with relapsed/refractory NPM1-mutant AML. We know that there are some payers that have started to implement that, as I shared. The biggest driver, from what we can understand from the consulting summary from IPD, is that the four pillars we talked about around the differentiation of Comzifty stood out, particularly because of the predictability of the cost. If you look at, based on their assessment, the annual WAC for Comzifty in this setting is just under $600,000 a year, but with our competitor menin inhibitor, because of the different dosing schemas and SKUs that come forward, it comes up to almost $1 million a year. And I think that is where we see they are driving the difference when you also add in the safety profile, the combinability, and the predictability of that. So I cannot really give you an overview of how many plans—there are a handful—and we cannot predict how many other plans may do this in the future, but it is encouraging for us as we look to become the class leader here in the NPM1 space. Thank you. Abigail: Next question comes from Roger Song from Jefferies. Please unmute your line and ask your question. Roger Song: Congrats for the update and the very encouraging early launch signal. So the step edit is certainly very interesting. Maybe just given the access is very rapid and broad, can you comment on the patient demand side versus the revenue generation? If anything you can comment on the trend for the rest of the year, that would be helpful. Thank you. Brian T. Powl: Thanks, Roger. I am happy to do that. We are not going to be giving guidance specifically on the trend. What we can tell you is that the launch has been off to a very strong start. We are seeing patient demand. The feedback we have heard from physicians has echoed back the differentiation pillars that we have talked about. Payers, physicians, and pharmacists have all given us similar feedback. So what we anticipate, as we get into our next quarters, we will start to see a little bit more data we will be able to share around new patient starts and other things. I can tell you that the demand has been strong and that we have been pleased with the direction that the launch has gone so far. Action. Thank you. Abigail: Our next question comes from Jonathan Chang with Leerink Partners. Jonathan, you may now unmute and ask your question. Albert Augustines: Good morning. This is Albert Augustines on for Jonathan Chang. Thank you for taking my question, and congratulations on all your progress. So my question is, what do you see as the biggest hurdle now for Comzifty to gain market share in 2026? Is it just prescriber inertia or something else? Thanks. Brian T. Powl: Thanks, Albert, for that. We anticipate that the NPM1 market is a market that is really going to be driven on new patients coming forward and incident patients, as they are diagnosed into or progress into second-, third-, and fourth-line settings. So it really will come down for us to getting those patients into our queue. One element of this market that is a bit unpredictable for us, as you well know, is that we are approved in a monotherapy setting. That is where our teams are going to be promoting. But we have heard a lot from physicians that they are looking to use menin inhibitors and Comzifty in combination. That will be one of the questions for us to understand—how that uptake comes up in the combination setting. That will be something we will be able to see coming forward in the future. We do not see payer hurdles; the payer hurdles have been really nonexistent. We are very pleased with how quickly our uptake has been getting on policies. So we do not really see any major hurdles other than just getting those incident patients onto therapy. Troy Wilson: Yeah. Albert, this is Troy. I might just add a comment or two to Brian’s response. This is why we have laid out, in our milestones for 2026, the significance of the publication in relapsed/refractory NPM1-mutant AML with venetoclax that Mollie mentioned, as well as the combination with gilteritinib. As Brian mentioned, this is a very different market than KMT2A. We are obviously going to have the sales team promoting on-label with monotherapy. But what is clear, and I think will continue to be clear, is the ability to combine—the ability to drive better outcomes for patients—is ultimately going to be of great value. And it is what we see. It is why we feel confident that we are going to take leadership not only of the NPM1-mutant class, but ultimately of the much larger opportunity. Because it is going to be about combinations. Those attributes that Brian mentioned that were highlighted in the IPD Analytics report become ever more important as you move into combinations. Just to make an example, we are well ahead of the competition in terms of combining with FLT3 inhibitors. As you know, that is half of the NPM1 population. So it is an important part of our leadership strategy. Thank you. Abigail: Your next question comes from Salim Syed with Mizuho Securities. Please unmute and ask your question. Salim Syed: Great. Thanks so much, guys. Congrats on the progress. Just one from us on the 50% that you noted here, Troy. Market feedback suggests you get up to 50% of AML patients here. We are targeting just—what are the assumptions that you put in front of these doctors when you are doing your market feedback work? Is it just based on the existing data, or is there something that you are still planning to get to that leads you to that leading share, as you put it? Troy Wilson: And, Salim, I take from your question you are referring to the relapsed/refractory segment—is that where your question is? Salim Syed: Correct, correct. Troy Wilson: Yeah. I will ask Brian to speak to that. Thanks for the clarification. Brian? Brian T. Powl: Absolutely. We have gotten feedback both from physicians and from physician market research as well. We basically provide the profiles of the products. It is blinded. We do not ask them which company; they do not know who is asking the questions. Of those who have had familiarity with the menin class, the profile that we have outlined has come back as the preferred profile, across efficacy, safety, simplicity, combinability, and compatibility of working with other agents. That is the feedback we have heard that gives us confidence that as we build into this market, we will have an opportunity to become the market leader and take the lead share in the menin class. Troy Wilson: And I will just add to that, Salim. At this point, we are not really talking about FLT3 in terms of doing the market research. This is really focused on the monotherapy. But one of the differences between this market and the KMT2A market is, obviously, if you have an FLT3 mutation, gilteritinib has a survival advantage. And so it is reasonable to assume a menin inhibitor is going to be sequenced after gilt. If you can demonstrate, as Mollie indicated, that you can safely combine and that that is beneficial to the patient, that is going to ultimately drive a next leg within that relapsed/refractory segment. We are not really yet there with the physicians because we obviously have to do that with data. But that is what gives us the encouragement. Today, it is monotherapy. Tomorrow, it is the combination with venetoclax. The day or two after tomorrow, it is the FLT3 combination. And it just builds one after the other. Salim Syed: Got it. Super helpful. Thanks so much, guys. Sure. Abigail: Your next question comes from Reni Benjamin with JMP Securities. Please unmute and ask your question. Reni Benjamin: Hey, good morning, guys. Thanks for taking the question, and congratulations on the early launch. Hopefully, it is going well for 2026. You talked a little bit—Mollie talked a little bit—about the combination of quizartinib and gilteritinib and the FLT3 opportunity. Can you talk a little bit about what you are hoping to see in your FLT3 data and how important is maximizing the FLT3 opportunity when we are thinking about the potential $7 billion TAM for ziftomenib? Thanks. Mollie Leoni: Yes. Thanks for that question. The most important thing you can see when you look at our combination data is going to be safety—safety indicating that you actually can combine. And obviously after that, looking to improve upon the agents in isolation. As I said, we will be presenting our relapsed data towards the end of the year. We will be presenting both the dose escalation and the expansion, which should tell you that we were able to combine the drugs successfully and safely for these patients. With the frontline, we are in the process of dose escalation with quizartinib in combination with ziftomenib plus 7+3. And again, that continues to advance. Overall, we expect to be able to show you not just the fact that we can combine, but that we can improve upon the outcomes of these drugs in isolation. Troy Wilson: And, Ren, just to build on Mollie’s comments, we have seen commentary recently from Astellas that has identified gilteritinib as one of their blockbusters, one of the five sort of emerging blockbusters. They have a frontline trial that was conducted with HOVON that is expected to read out any day now. As we said, FLT3 is a third of all AML patients. It is hard to imagine you can have a market leadership strategy without including FLT3. That is why we are combining with both quizartinib and gilteritinib. You will see us over the next quarter or two move more aggressively into the FLT3 frontline setting, because we have not really yet broken it out, but that will be a major driver in that $7 billion TAM as you look across all lines of therapy. Reni Benjamin: Perfect. Thanks very much, guys. Abigail: Your next question comes from Charles Yu with LifeSci Capital. Please unmute and ask your question. Charles Yu: Hey. Good morning, everyone. Thanks for taking our questions, and congrats on all the progress. I will ask one on a slightly different topic, regarding RCC. We had a lot of updates from the recent ASCO GU conference, particularly in renal cell carcinoma, and some of the emerging HIF-2α—or emerging and approved HIF-2α—inhibitors in that space. Maybe could you help contextualize your upcoming second-half data for darla plus cabo, not only within the current standard of care, but also amongst the potential emerging standard of care as well? Thank you. Mollie Leoni: Sure. We are following that data very closely as well, and it is looking very good for patients. In fact, I think, as you are referring to, it is looking so good that it probably will end up moving up in line of therapy for these patients. We, as we announced, have just started our Phase 1b, which is a randomized Phase 1b, so that we can both contend with Project Optimus but also set some baseline data for ourselves with cabozantinib in this particular line of therapy. And we will be able to also see if patients that are randomized to the cabo monotherapy can cross over and successfully either gain or regain responses when you combine it with darlafarnib, which I think is an important demonstration of our mechanism of action. We do think that our data, as they are progressing—and we have limited follow-up time compared to some of these other studies—are still competitive with a lot of these data that are being presented, and we look forward to sharing that updated information with you. What we do think is, again, that these good outcomes for patients with HIF-2α inhibitors will move them earlier in lines of therapy, so you will see them in the frontline, and ultimately it can open a rather big vacuous space in the second line that we could then jump right into with this cabo–darlafarnib combination. Charles Yu: Got it. Thanks. Abigail: Your next question comes from Jason Zemansky with BofA. Please unmute and ask your question. Jason Eron Zemansky: Good morning. Thanks so much for taking our question, and congrats on the progress. Brian, I was hoping you could share some of the early feedback from your prescribers that are new to Comzifty, maybe that have not been associated with any of your clinical programs or at least minimally associated. Recognize this is a small community and it is early days, but for those especially who have not participated in a trial associated with your rival or who do not have a large AML population, how has the product profile resonated? Thanks. Brian T. Powl: Thanks for that question, Jason. I would speak to it both from physicians we have heard from, but I would also point to pharmacists—the pharmacists that have maybe not been involved so much with treating the patients in the trials. The feedback that we have heard is that they recognize there are multiple menin inhibitors available. The efficacy, we have heard, seems to be table stakes, essentially. I think both products have similar efficacy. What really does stand out are the questions around how to manage QT, understanding what monitoring for QT prolongation means, and the potential implication of higher risk of cardiac issues, as well as the simplicity of treating patients once a day without having to do a lot of dose modifications based on the complexity of other therapies they have. So we have heard that. Of course, a lot of early scripts are probably going to be those for people who have had a lot of experience with us. But we have received feedback from physicians who are new to the menin class, and we have been spending our time educating them around Comzifty. As we said, it is early days, but we are pleased with what we are hearing so far, and it seems to be consistent with what we have heard from those who do have experience. Abigail: As a reminder, if you wish to ask a question, please use the raise hand button which can be found at the bottom of your Zoom screen. Our next question comes from Gustav on for Etzer DeRoute with Barclays. Please unmute and ask your question. Gustav: Hi. Good morning. This is Gustav on for Etzer. Thank you for taking our question. I would like to ask about COMET-008, guided to showing data in combination with gilteritinib in the back half of this year. Could you remind us where you stand with regards to combination of ziftomenib with FLAG-IDA and with low-dose cytarabine? Thank you. Mollie Leoni: Sure. As you said, we have been guiding to release the gilteritinib data because, in large part, we think that is very informative to physicians on how to treat the relapsed/refractory NPM1 mutants co-mutated with FLT3 as well. But also within that study are our FLAG-IDA combination, which sees mostly second-line patients, and our LDAC combination, which allows for an easy combination with ziftomenib that gives time for this differentiating agent to really take effect while keeping disease control simultaneously. We have not guided to when we will be releasing that data. But I do think that we will do it in pieces at a time to keep the information coming, and also be writing a publication. But again, we have not guided as to when those additional cohorts will be shared. Abigail: Your next question comes from Philip Nadeau with TD Cowen. Please unmute your line and ask your question. Philip Nadeau: Morning. Thanks for taking our question, and it was great to see the team this week in Boston. We have one commercial question. I think you suggested that the relapsed/refractory NPM1 market is about $300 million to $400 million in revenue. We are curious to hear how quickly you think the menin class can penetrate the market. Seems like the value proposition is pretty clear today, but we are wondering if there is any gating, like combo therapy data in particular, that could be necessary to fully penetrate the opportunity. Thank you. Brian T. Powl: Thanks, Phil, and thanks again—good to see you yesterday. As we have said, this TAM of $350 million to $400 million represents that relapsed/refractory space. We think, because of the dynamics of the NPM1 population, where physicians have previously had choices for their patients to either get venetoclax or an FLT3 inhibitor for those who are co-mutated, we anticipate that early on there will probably be more in the relapsed/refractory third- or fourth-line setting. Combinations will help to drive that into the second line, where you would be able to see more patients get therapy and benefit earlier. Our expectation is that there will be a lot of use as a monotherapy, but physicians are very excited about using in combination. It is not something we can promote on actively, but we will educate based on publications, like the venetoclax publication we plan to publish based on COMET-007. We anticipate there will be a ramp based on incident patients coming forward, probably starting more in the third/fourth line, but we will see, and we are starting to see, those second-line patients as well. We will need a little bit of time to get an understanding as to how Comzifty is being used in combination relative to monotherapy. Abigail: Your next question comes from David Dai with UBS. Please unmute and ask your question. David Dai: Great. Thanks for taking my question, and congrats on the quarter. Just one question on the duration of therapy. I understand early innings, but any thoughts on duration of therapy for Comzifty so far? And as you are thinking about combination with venetoclax or gilteritinib, how do you think the duration of therapy could evolve over time? Brian T. Powl: Great. Thanks, David, for that question. Obviously, we are sharing five weeks of data. We cannot really give you a lot of detail around duration of therapy at this point. Our expectation is that patients will be able to get therapy for, on average, six months. Our label suggests that patients are treated for up to six months to maximize the depth of their response. And for those patients who do get a response, we have seen duration of response of five months, and oftentimes it takes three months or so for them to achieve that deep response. We are not seeing any signs yet because it is too early. We are seeing repeat prescriptions, but it is too early to talk through any duration right now. To your question around FLT3 inhibitors, I think that any combination is expected to give a longer duration of treatment than you would expect as a monotherapy. Abigail: There are no more questions at this time. I would now like to turn the call over to Troy Wilson for closing remarks. Troy Wilson: Thank you, Abigail. Thanks, everyone, for joining the call today, and thanks for all the questions. We will see many of you next week in Miami at the various events and conferences. If you have any additional questions, please reach out to Greg or me. We wish all of you a good morning and a good rest of the day. Thanks again.
Operator: Good day, and welcome to today's conference call to discuss Stratasys Ltd.'s fourth quarter and full year 2025 financial results. My name is Donna, and I am your operator for today. A question-and-answer session will follow the formal presentation. As a reminder, I would now like to hand the call over to Yonah Lloyd, Chief Communications Officer and Vice President of Investor Relations for Stratasys Ltd. Mr. Lloyd, please go ahead. Yonah Lloyd: Good morning, everyone. And thank you for joining us to discuss our 2025 fourth quarter and full year financial results. On the call with us today are our CEO, Dr. Yoav Zeif, and our CFO, Eitan Zamir. I would like to remind you that access to today's call, including the slide presentation, is available online at the web address provided in our press release. In addition, a replay of today's call and access to the slide presentation will be available and can be accessed through the Investor Relations section of our website. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including without limitation, those regarding our expectations as to our future revenue, gross margin, operating expenses, taxes, and other future financial performance, and our expectations for our business outlook. All statements that speak to future performance, events, expectations, or results are forward-looking statements. Actual results or trends could differ materially from our forecast. For risks that could cause actual results to be materially different from those set forth in forward-looking, please refer to the risk factors discussed or referenced in Stratasys Ltd.'s annual reports on Form 20-F for the 2024 year and for the 2025 year, the latter of which will be filed with the SEC on or about today. Please also refer to our Operating and Financial Review and Prospects for 2024 and 2025, which are included as Item 5 of our annual reports on Form 20-F for 2024 and 2025. Please also see the press release that announces our earnings for 2025, which is attached as Exhibit 99.1 to a report on Form 6-K that we are furnishing to the SEC today. Stratasys Ltd. assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. As in previous quarters, today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance. Non-GAAP to GAAP reconciliations are provided in tables in our slide presentation and today's press release. I will now turn the call over to our Chief Executive Officer, Dr. Yoav Zeif. Yoav, Yoav Zeif: Thank you, Yonah. Good morning, everyone, and thank you for joining us. Our fourth quarter performance caps a year in which we successfully maintained our operational discipline, delivered solid cash flow generation, and protected our margin profile. We demonstrated once again the resilience that distinguishes Stratasys Ltd. Importantly, even in a market environment marked by macro spending constraints, we continued to improve our position in our focused target areas, as we drove positive cash flow and profitability, setting us apart from our industry peers. To that end, as we share each year, in 2025, we generated 37.5% of our revenues from manufacturing, up from 36% in 2024 and from just over 25% when we started tracking in 2020. We expect to see this percentage continue to grow every year, which we see as a key driver of consumables utilization to help deliver increased margins. Throughout 2025, our focus on additive manufacturing delivering compelling solutions relative to conventional production resulted in robust customer engagement that was strategically focused. We have made meaningful progress building on the foundational infrastructure of our highest-value target use cases, which notably grew in revenue year over year, led by aerospace and defense, as well as automotive tooling, dental, and medical. These are not transient opportunities. They represent durable competitive advantages that position us for sustained leadership as market conditions normalize. Our long-term value strategy continues to center on the powerful megatrends reshaping global manufacturing: increasing aerospace and defense budgets, the corporate drive for efficiency, cost optimization, supply chain localization and onshoring, next-generation mobility platforms, advancing sustainability mandates, and mass personalization. These secular forces have intensified, and they align directly with additive manufacturing core trends. Our commitment to innovation remains unwavering. Supported by a strong balance sheet and continued R&D investment, our cutting-edge product, materials, and software capabilities cement our industry leadership. As we enter 2026, we do so with proven operational excellence, strategic clarity, and the technology portfolio to capitalize on the inevitable return of customer spending. Importantly, in the fourth quarter, we delivered $9.2 million in adjusted EBITDA, a 6.6% margin, and $0.07 in adjusted EPS. We remain confident that when capital spending constraints ease, our operational efficiencies will result in sustainably higher profitability in coming years. We continue to maintain a healthy balance sheet of $244.5 million in cash and equivalents and no debt. This provides stability and optionality that will support our growth through both organic investments and accretive acquisition opportunities. Stratasys Ltd. is a world leader in industrial polymer 3D printing for high-requirement use cases. We provide comprehensive solutions that include innovative, reliable hardware, the largest portfolio of materials in the industry, award-winning software, post-processing, and a full suite of services and support for complete end-to-end workflow solutions. Our leading example of our requirements is aerospace and defense. It is our largest contributing target sector, highlighted in the fourth quarter by the announcement of our transformational partnership with Airbus, which produced over 25,000 flight-ready parts last year using our ULTEM 9085 filament. This brings the total certified Stratasys Ltd. parts in active service at Airbus to more than 200,000 across the A320, the A350, and A400M aircraft. This collaboration demonstrates true production-scale additive manufacturing, delivering 43% weight reduction, 85% lead time reduction, and eliminating minimum order quantities while enabling distributed manufacturing that reduces aircraft downtime and supply chain risk. Beyond Airbus, we are seeing comprehensive solution adoption across the commercial sector. Boeing 737 Innovation Center purchased two of our newest F3300 printers for production tooling in the fourth quarter, and another leading aircraft manufacturer acquired two more F900s for flight-grade parts, increasing their fleet to nine Stratasys Ltd. systems. We also secured strong sales to several major U.S. drone companies for applications such as power production and wind tunnel testing, with expanded demand from traditional defense primes in unmanned and space sectors. In fact, in 2025, our top three customers at our SBM parts manufacturing division are all large military drone suppliers, and our fourth quarter sales spanning from startup to traditional primes across multiple F3300 and F900 systems for flight-grade parts, supported by high adoption of premium service contracts position us at an inflection point where certified additive manufacturing is becoming mainstream across aviation globally. Automotive continued to demonstrate strong momentum, highlighted by major wins with leading manufacturers deploying our advanced technologies for production applications. Subaru of America became among the first customers to implement our new T25 high-speed head for the F770 printer, achieving over 50% reduction in tooling development time, 70% cost reduction in prototyping and tooling, and nearly twice the printing speed on large parts compared to standard heads. This breakthrough enabled Subaru to consolidate production in-house, improving repeatability while reducing reliance on outsourced manufacturing with eight to twelve weeks lead times. Additionally, Rivian’s extensive deployment of 28 Stratasys Ltd. systems demonstrates our technology’s scalability, with the F900 system operating at over 90% utilization and newer F3300s delivering nearly twice the printing speed, processing 6,000 requests annually, equaling tens of thousands of parts used in product development, tooling, and production. And we are proud to congratulate our performance partner McLaren Formula One on winning the 2025 Constructors’ and Drivers’ Championships, where they leverage our SLA, FDM, and PolyJet technologies to support race-winning innovation. These partnerships exemplify how our automotive manufacturers are integrating additive manufacturing into production workflows, from Formula One racing innovation to electric vehicle manufacturing, positioning us strongly within the rapidly evolving automotive market. Now let me touch on some recent partnership updates. Evidencing our progress in workflow solutions, we have partnered with nTop, a leading generative modeling design and simulation software company, to integrate their nTop simulation technology into our GrabCAD Print Pro. This creates the industry's first complete validated workflow for FDM that no other 3D printer manufacturer offers. This eliminates costly trial-and-error testing, reducing validation time from weeks to hours, with early customers achieving up to 35% weight reductions on load-bearing parts. The solution positions Stratasys Ltd. as the production-ready additive manufacturing leader, with early access launching in Q2 2026 for our F3300, F900, and Fortus 450mc systems. We also recently announced two new partnerships. We launched our post-processing partnership program with PostProcess Technologies, a company revolutionizing additive manufacturing with the only automated end-to-end post-processing solutions for 3D-printed parts. As the first partner in this area of focus, they enable customers to purchase validated post-processing equipment through a single Stratasys Ltd. order alongside our systems. This simplifies procurement, reduces sales risk, and addresses the complexity of manual post-processing by providing an integrated solution, guaranteeing compatibility across our FDM, PolyJet, SLA, and P3 technologies. This alignment positions us to capture more value across the entire additive manufacturing workflow. And on the go-to-market front, we recently partnered with Oak Ridge Systems, a leading award-winning provider of additive manufacturing engineering and manufacturing tools, technology, services, and training in the U.S. and Canada. The collaboration will expand market reach by adding our PolyJet, SLA, and P3 technologies to their portfolio as we target aerospace, automotive, medical, and industrial customers. This collaboration leverages Oak Ridge's application expertise and customer proximity to accelerate adoption of our industrial printer suite, strengthening our American sales capabilities and driving industrial additive manufacturing momentum. Building on the success of our industrial customer advisory board, which has brought together 14 manufacturing leaders such as Boeing, Toyota, Lockheed Martin, and TE Connectivity to advance additive manufacturing at scale, Stratasys Ltd. has also established a new medical advisory board. Both are focused on strengthening collaboration with industry leaders to drive innovation and to accelerate the adoption of 3D printing in their respective industries. This new medical-focused board convened clinical and med-tech experts in healthcare. The board is focusing on the unique requirements of medical-grade applications, regulatory alignment, and patient outcomes. Initial members include eight senior executives from leading medical technology companies such as Medtronic, the world's largest medical device manufacturer, and Edwards Lifesciences, global leader in structural heart disease and critical care technologies, alongside other organizations spanning pharmaceutical, cardiology, orthopedics, and clinical education. To sum up, time and again, some of our most exciting use cases are in the most demanding environments and under the most unforgiving conditions. This includes aerospace and defense applications and advanced manufacturing workflows across a multitude of industrial sectors. We continue to deliver differentiated products and solutions to customers as we further penetrate production applications at scale, supported by strategic partnerships that provide complete end-to-end additive manufacturing solutions, including simulation, post-processing, and expanded channel reach. The stage is set for sustained growth based on accelerated adoption of additive manufacturing in mission-critical applications where customers are achieving measurable operational improvements and moving beyond prototyping to true production-scale manufacturing. I will now turn the call over to Eitan to share the financial results and our initial outlook for 2026. Eitan? Eitan Zamir: Thank you, Yoav. And good morning, everyone. Our fourth quarter results underscore the operational discipline and financial resilience we have built throughout 2025. Despite persistent revenue headwinds and margin pressures that characterized the year, we delivered positive adjusted operating income and adjusted EBITDA, strong operating cash flow generation, and solid adjusted earnings per share for the full year. This performance reflects the sustained benefits of the cost-control initiatives implemented in mid-2024, which are now fully embedded in our operating model, as well as our team's continued focus on execution and efficiency. The diversification of our revenue streams continues to provide stability through the cycle and distinguishes our financial profile relative to peers in the sector. As we look to 2026, we remain committed to maintaining this operational rigor while preserving the strategic investments necessary to sustain our technology leadership position. For the fourth quarter, consolidated revenue of $140 million was down 6.9% as compared to the same period last year. Product revenue in the fourth quarter fell to $97.6 million compared to $105.1 million in the same period last year. Within product revenue, system revenue was $37.8 million, 18% higher sequentially from the third quarter. This compares to $46.7 million in the same period last year, as constrained capital budgets continue to impact customer buying behavior for new systems. Consumables revenue in the fourth quarter was $59.8 million, up 2.4% as compared to the same period last year. Service revenue was $42.4 million for the quarter, compared to $45.3 million in the same period last year. Within service revenue, customer support revenue was $29.6 million, compared to $30.6 million in the same period last year. For the full year 2025, consolidated revenue was $551.1 million, compared to $572.5 million in 2024. Product revenue in 2025 was $380.3 million, compared to $392 million in 2024. Within product revenue, system revenue in 2025 was $131.6 million, compared to $140.3 million in 2024. Consumables revenue was $248.7 million in 2025, compared to $261.7 million in 2024. For the full year 2025, service revenue was $170.8 million, compared to $180.5 million in 2024. Within service revenue, customer support revenue in 2025 was $119 million, compared to $124.7 million in 2024. Now turning to gross margins. GAAP gross margin was 36.8% for the quarter, compared to 46.3% for the same period last year. The results reflect higher restructuring charges, the tariff impact, lower revenues, and change in mix. Non-GAAP gross margin was 46.3% for the quarter, compared to 49.6% for the same period last year. The year-over-year change in gross margin was the result of the tariff impact, lower revenues, and change in mix. GAAP gross margin was 41.2% for the full year 2025, compared to 44.9% for the same period last year. Non-GAAP gross margin was 46.9% for the full year, compared to 49.2% in 2024. The full-year decline in non-GAAP gross margin was a result of the tariff impact, lower revenues, and change in mix. GAAP operating expenses were reduced to an improved $72.2 million for the quarter, compared to $79.4 million during the same period last year, and non-GAAP operating expenses were reduced to an improved $60.8 million, compared to $65.2 million during the same period last year, reflecting the impact of cost-saving initiatives previously discussed. Non-GAAP operating expenses were flat at 43.4% of revenue for the quarter, compared to 43.4% for the same period last year. For the full year, non-GAAP operating expenses were 45.4% of revenues, as compared to 48.4% in 2024, primarily due to the cost-saving measures associated with the restructuring plan we announced in August 2024 that had a full-year impact in 2025, as well as the additional cost initiative we introduced in 2025. In absolute dollar terms, non-GAAP operating expenses were $26.7 million lower in 2025 as compared to 2024, due in part to the cost-saving measures from our restructuring plan. Regarding our consolidated earnings for the quarter, GAAP operating loss for the quarter was $20.8 million, compared to an operating loss of $9.7 million for the same period last year. The change was due primarily to the lower gross profit, partially offset by the lower operating expenses. Non-GAAP operating income for the quarter was $4.1 million, compared to $9.4 million for the same period last year, reflecting the lower gross profit, partially offset by the lower OpEx due to the cost-saving measures associated with the restructuring plan. GAAP net loss for the quarter was $18.9 million, or $0.22 per diluted share, compared to a net loss of $41.9 million, or $0.59 per diluted share for the same period last year, which included the non-cash impairment charge of $30.1 million, or $0.42 per diluted share, related to the investments we made in UltiMaker as part of the merger with MakerBot. Non-GAAP net income for the quarter was $6.2 million, or $0.07 per diluted share, compared to net income of $8.5 million, or $0.12 per diluted share in the same period last year. Adjusted EBITDA was $9.2 million for the quarter, compared to $14.5 million in the same period last year. This equates to 6.6% EBITDA margins, compared to 9.6% in 2024. Regarding our consolidated earnings for the full year 2025, GAAP operating loss was $72.5 million, compared to a loss of $85.7 million for 2024. Non-GAAP operating income for the year was $8.3 million, compared to $4.9 million in 2024. This equates to 1.5% non-GAAP operating margins, compared to 0.9% in 2024. GAAP net loss for the year was $104.3 million, or $1.28 per diluted share, compared to a net loss of $120.3 million, or $1.70 per diluted share for last year. Non-GAAP net income for the year was $12.7 million, or $0.15 per diluted share, compared to $4.2 million, or $0.06 per diluted share last year. Adjusted EBITDA of $28.5 million, 5.2% of revenue, compared to $26 million, or 4.5% of revenue in 2024. The 9.6% increase reflects the improvement or decrease in operating expenses that more than offset the lower revenues and gross margins. We generated $4.8 million of cash from operations during the fourth quarter, compared to $7.4 million in the same quarter last year. For the full year, we generated $15.1 million of cash from operations, compared to $7.8 million in 2024. We ended the year with $244.5 million in cash, cash equivalents, and short-term deposits, compared to $255 million at the end of 2025. Our balance sheet and cash generation profile remain strong, supporting our ability to capitalize on value-enhancing opportunities. Now let me turn to our outlook for 2026. We expect 2026 revenue to be in the range of $565 million to $575 million, with revenues growing sequentially each quarter through the year, resulting in higher revenues in the second half of the year as compared to the first. For the year, we expect consumables revenue in 2026 to increase over 2025. We also expect the first quarter to have the lowest revenue and profit margin profile on a relative basis to the rest of the year. Non-GAAP gross margin for 2026 is expected to be in the range of 46.7% to 47.1%, with the second half stronger than the first half, based primarily on the expected growing revenue over the course of the year. In 2026, we expect our operating expenses to range between $260 million to $262 million. This outlook includes anticipated adverse impact from foreign exchange rates as compared to last year. Specifically, if these current exchange rates hold for the full year, we expect approximately $10 million of adverse impact on our operating expenses. Absent this factor and the full-year impact of increased tariffs, both of which are beyond our control, we would expect to deliver continued improvement in profitability for 2026. We expect operating income to be in the range of 0.7% to 1.5% of revenue, with the second half stronger than the first half, based on the anticipated rise in revenue throughout the year. We expect a GAAP net loss of $67 million to $83 million, or $0.76 to $0.95 per diluted share, and non-GAAP net income of $8 million to $12.5 million, or $0.09 to $0.14 per diluted share for 2026. Adjusted EBITDA for 2026 is expected to be in the range of 4.5% to 5% of revenue, or $25 million to $30 million. This range includes approximately $17 million of combined adverse impact from FX and tariffs, and therefore is not reflective of the higher profitability we would otherwise expect to deliver, particularly as we grow the top line. We expect our capital expenditures for 2026 to range between $20 million and $25 million. Finally, we expect to deliver positive operating cash flow for the full year, subject to uncertainty around FX and tariffs. With that, let me turn the call back over to Yoav for closing remarks. Yoav? Yoav Zeif: Thank you, Eitan. As we begin 2026 and look toward the future, we do so with confidence in our strategic positioning and the fundamental underpinnings of our industry. Throughout 2025, we maintained the disciplined execution necessary to navigate challenging conditions while preserving our capacity to lead and increase profit when market dynamics improve. The progress we are making in our target industries of aerospace and defense, automotive tooling, dental, medical applications, and precision industrial components reinforces our conviction that we have built the infrastructure for durable, profitable growth. Customer engagement remains substantive and strategically focused, and we continue to see encouraging signals that adoption timelines, while extended, are advancing toward inflection. Our margin discipline and operational resilience have enabled us to protect profitability through the cycle. Combined with our strong balance sheet, this positions us to capitalize on inorganic opportunities that we continue to explore, to sustain our technology leadership through continued strategic investment in the innovations that will define the next era of digital manufacturing. As the industry leader with a comprehensive portfolio spanning systems, materials, and software, we have the capability, the customer relationships, and the financial foundation to capitalize on the significant opportunities ahead. Our penetration into high-value production applications continues to deepen, and we remain committed to maximizing long-term shareholder value as additive manufacturing’s role in global production expands. I want to close by acknowledging our global team. Their dedication, professionalism, and relentless focus on customer success continue to drive the engagement and trust that position Stratasys Ltd. for sustained leadership. We are excited about what 2026 and beyond holds for Stratasys Ltd. With that, we will now open for questions. Operator? Operator: Thank you. The floor is now open for questions. Limit yourself to one question and one immediate follow-up. Again, that is star one to register a question at this time. First question is coming from Gregory William Palm of Craig-Hallum. Please go ahead. Danny Eggerichs: Hey, thanks. This is Danny Eggerichs on for Greg today. Appreciate you taking the questions. Maybe we could just start with aerospace and defense, kind of the market that everyone wants exposure to right now. Any way to size up how big that market is for you? And kind of think about the growth outlook moving forward, especially with everything going on, increased spending, and like you said, some of these drone opportunities really starting to develop. So just feels like a really big opportunity there and just curious on how you are thinking about it on a larger scale? Yoav Zeif: Thank you, Danny. Well, you know, we do not like wars. But over the years, Stratasys Ltd. developed the best polymer position in aerospace and defense by far. And what do I mean by position? It is all about having the right certifications to have parts, line parts, and parts that are being used in the field with a lot of experience, customer relationships, and programs that we are running with those customers. Just to give you a ballpark, aerospace and defense, before we talk about the future, is the highest contribution in 2025 to our use cases and to our vertical. This is the largest vertical and this is a great example of a high-requirement vertical where only companies like Stratasys Ltd. can do it. Because coming from the bottom with good-enough machines and printers is not good enough for qualified flying parts. And we have many trusted customers, and only on this call we mentioned Airbus, we mentioned Boeing, the two leaders in aviation. Now let us look at the future, what happened with the defense budget. It is a step-up change. It is a bit different across the globe because we are selling to defense both in Asia, in EMEA, and America. I would say that when we look at the opportunity, the U.S. is more advanced, and then Europe is committed to one ERDOF budget, but they are not there yet with programs. But it is coming. So I will take as an example the drones. We have experience with companies that are leading this industry like General Atomics. We are not coming to this new era of defense and trying to build our credibility and trust. We are already there. And when you look at the U.S., and just take the drone program, and our capabilities, both, by the way, in printing parts with Stratasys Direct Manufacturing, but also with certified parts, it is a major, major future for us, and we put all our resources on it and develop unique end-to-end solutions that will put additive as the main tool to build weekly drones both online, but also in the field. And this is sustainable. This is not something that is, okay, we do it now, and maybe tomorrow it will not be in place. It is a very sustainable, growing market for us because it comes from the high requirements, from the qualifications, from the certifications that we already have. As to the fact that unfortunately we have also a lot of experience with Israeli defense tech—successful experience—this is also another advantage, that we are bringing real field experience with parts, with additive parts, for a new era of defense. Danny Eggerichs: Okay. Yes. That is all good stuff. Appreciate the color there. Maybe if I can just hit one last one on the guide here. It is good to see a return to growth expected for this year. But maybe specifically as relates to kind of the FX and tariff impacts, I think you said what was implied in the FX is kind of the exchange rates you are seeing today. But I guess both lumped in, are those both kind of assuming levels you are currently experiencing? Or is there any maybe worsening baked into those to provide a little level of conservatism? Just trying to get a feel for what to assume here if either of these kind of dynamics changes throughout the year? That is great. Yes. Eitan Zamir: Thank you, Danny, for the question. Listen, I will relate to the question about FX and tariffs and just want to make sure that our investors and analysts understand. We wanted to explain, to touch on these two elements, because they are changes in 2026 relative to 2025, and we wanted to make sure that, you know, we separate between the fundamentals of the business and items like FX, specifically the shekel, that change over time. And in 2026, we see a very strong shekel that has a negative adverse impact on our results. But we wanted to also help you model how our results look like absent or excluding those items. With respect to the shekel, first, I will say that as part of our strategy, we hedge certain currencies, mainly the shekel and the euro, that are more significant to our financials, to our operations, with the Israeli shekel naturally depending on the levels of that currency at the point of time that we try to hedge it. For 2026, if you check very quickly online, you will see that the shekel is at the strongest and the highest level for quite many years. So it is not the time to hedge it. During 2026, as the shekel weakens relative to the dollar, we will consider and may put hedges in place that will improve 2026 relative to the guidance that we provided you today. And we wanted to share with the audience to be able to model its properties. Operator: Thank you. The next question is coming from James Andrew Ricchiuti of Needham & Company. Please go ahead. James Andrew Ricchiuti: So appreciate the detail on the manufacturing business for 2025. Yes, it looks like that business, the manufacturing business, based on the percentages you gave, was flat year over year versus 2024. And just given the use cases you highlighted, I would have thought it would have been a bit better. So how do you see that going forward? Yoav Zeif: Thank you, Jim, for the question. So what we are experiencing here—and by the way, you are right—when we are looking at overall, we are a bit higher than flat. But what we are experiencing here is practically a change in the market. So we are investing with programs with our customers, high-end customers, in those high-end, high-requirement applications like aerospace and defense, like dental, like medical, like tooling, and those customers, except for aerospace and defense, have a whole portfolio. Part of the portfolio is our key use cases. All of them grew. When I am saying use cases, it is a specific application, like tooling for automotive. Drones—we have a set of things for aerospace and defense. Aerospace and defense, as I said, their whole vertical grew. But there are also other parts that are not part of the use cases, but they are part of manufacturing and part of the vertical. Capex constraints, by the way, mainly in industries like automotive. And when you have some that the uncertainty did not do good for them, then you see some type of balancing. But overall, the target markets, all of them grew. And then you have the whole portfolio, manufacturing, and if it is enough—when we have a large installed base, in some part of the installed base there is less utilization or less capex—but it is not the mainstream, it is not the target market. But still, we grew. Not a lot, but we grew. So I am very optimistic. We will keep consistently growing the ratio of our sales to manufacturing, I have no doubt about it. Because we are focusing on the right thing, and we have the right programs with our customers. Another significant effect that was on our sales to manufacturing was the shutdown of the government. The shutdowns of the government in H2 had an impact on the pipeline; all those large deals were to manufacturing. And we also mentioned those large deals in previous calls. But I have no doubt that they will come back. They were only pushed forward, nothing was dropped. Even despite the macro headwinds, despite the shutdown, despite some industries with challenging capex constraints, we grew. Not a lot, but we grew. James Andrew Ricchiuti: Okay. So we are about, what, a little over two months into Q1. I am wondering if you could give us a sense as to the demand trends you are seeing, and maybe just how to think about the sequential, the seasonal—normally you see some seasonality in Q1—any color on that? Eitan Zamir: Yes, for sure. So as we wrote in the guidance, we are seeing sequential growth over this year. And the sequential growth—by the way, in general, our Q1 is the weakest quarter of the year. This is historically right because Q4 usually is a stronger one. When we decided and we planned the year and we reflected it in our guidance, it is clear what is going to happen over the year from our perspective. Of course, you never know about uncertainty and things like tariffs and wars and all this. But when we look forward, we see better government and defense demand. We see it now; we started to see it in Q1, by the way, but there was this small shutdown, and probably we have some type of impact. We also see the plan of launching new products, most of them in H2, so you will not see significant effect in Q1 and Q2, but those are really promising products addressing our use cases. And we have some new businesses that we acquired, the most important one is XSTRAND and the Forward AM portfolio. We bought them from insolvency. Practically they were not operational, but we ramp them up during the year. So when you combine all this, you will see sequential growth quarter over quarter over quarter, with Q1 solid, but most of the growth will come as we move through the year. Operator: Thank you. The next question is coming from Brian Drab of William Blair. Please go ahead. Brian Drab: Hey, good morning. Thanks for taking my questions. First one, just—I think you made this clear, but I just want to really make sure—the midpoint of guidance implies about 3.5% revenue growth and the midpoint of the guidance ranges implies about 4.5% growth in OpEx in 2026. And is that increase in OpEx related—can you kind of break down what that incremental OpEx is associated with? Is it mainly the shekel and the tariff impact? Or are there other modest series of, you know, like, areas of modest investment that are happening in '26? Eitan Zamir: Thanks, Brian, for the question. So the answer is quite simple. As you may recall, we introduced in the last couple of years a few cost-saving programs that saved significant—two, three, four years ago—OpEx levels. If you go back to 2020, you know, we were a company of, you know, close to $300 million OpEx a year, and we are down in 2025 to actual OpEx of $250 million. The main increase, almost the only increase year over year for 2026, is driven by the shekel. That is why we also highlighted this today. And that is something that we consider naturally as temporary in nature relative to the FX cycles over time. Brian Drab: Got it. Thank you. And can you just clarify exactly what you mean by mix when you talk about mix in the context of margin headwind that you saw in the quarter? Eitan Zamir: Sure. So mix can be driven by two elements. It could be a mix within hardware revenue—we have systems that come with very high gross margin, and we have systems that are still in the ramp-up or less mature than others that come with slightly lower gross margin. So that is one type of mix. And it is also the mix between hardware, consumables, and services that come with different gross margins. Now, as you may recall, we have a huge portfolio of hardware, consumables, and as well the services. So it is a matter of changes within the products, but nothing significant. Brian Drab: Okay. Okay. Thank you very much. Operator: Thank you. The next question is coming from Troy Donavon Jensen of Cantor Fitzgerald. Please go ahead. Troy Donavon Jensen: Hey, gentlemen. It is actually Cantor, FitzGerald, as you know, but congrats on the good execution here in 2025. Maybe a quick follow-up on Jim's question earlier just about the production applications. I have always been told that material pricing is just the biggest variable. I would just be curious if you guys feel like that is any type of a headwind in the adoption of additive or FDM in production. And tie it into material sales where, you know, down year over year this year and, you know, is that a function of utilization or pricing? Yoav Zeif: Maybe I will start and then Eitan can add on the material sales. But let us start with a bit of perspective, and thank you for the question, Troy. Our strategy is very clear. We go and we are growing in high-value, high-requirement use cases. We have five like those, within verticals that we believe are the verticals where Stratasys Ltd. is shining. Shining means we are the leader, to be honest. And our key manufacturing use cases are the aerospace and defense, dental, medical, tooling, and some industrial applications. And we grew significantly in those key four that I mentioned. Significantly. In 2025. Now add to it our execution capabilities and any change in the market, we are ready. Because we have the leadership position in terms of the technology and the solution and the ability to deliver to our customers. And, also, by the way, when you talk about execution capabilities, it is a good time for capturing value-creation opportunities. And once we see those, and this pent-up demand exists—how do I know? Because what we see, and I did not mention it to Jim, but it is important. For the last three quarters, we see a decline in our sales cycles. What does it mean? That when we look at closed-won, the deals that we closed, and we ask ourselves, on average, how long it took us to close those deals, there is a decline in the sales cycle, which, by the way, till mid-2025 from 2022 were just increasing. So there is a demand there. It is coming. We are well positioned to be there. And the fact that we kept our position in manufacturing and growing it in the key use cases is also being reflected in our guidance because we are saying this year we will move from decline to growth. And look at our history, when we are saying something, we do everything to meet it. Because our guidance is saying there is a shift in our industry from rapid prototyping to manufacturing. We are leading this shift. We are improving profitability, and I will relate to your question about profitability and materials. And as a result, we will have better EBITDA. The fact that we are adjusting for $17 million for tariffs and FX, this is really an exception because of the situation, the geopolitical situation, and what we are experiencing now. But it is not sustainable. It is not the real value of the shekel. And tariffs will be different long-term. When I am looking at those use cases and I am asking, okay, what is the future? The future is significantly higher utilization. A machine that is standing in one of our large corporate customers like GM—or choose any—or Boeing or any manufacturing customer, is consuming between seven to twelve times more than an average rapid prototyping printer. And we have the data because we collect the data. So, and maybe we need to sell it a little with lower prices. But to be honest, there is no pressure there because those applications are so unique. They are coming with the part of certified—you need to go through sometimes three or four years of qualifications—and then there is no alternative. The customers know about the price, and the price if you print a part in a missile is not a real factor. And we are the leader in those areas, especially in aerospace and defense. And our secret weapon, going back to how we are penetrating there, is the customer relationships that we have in those areas. Customer relationships, I mean trust and credibility. From their perspective, we are the most reliable provider. Just lately, with the customer advisory board, one year of work together with our customers will increase our reliability by 22% of our largest machine. Because we are focused on manufacturing. And the other factor of our secret weapon is our teams. Because no doubt the industry is going through a change—this shift to manufacturing. But we have the right teams to adapt on time. Back to your question, material—if you focus on the high-performance material, higher utilization and all the value is there. Maybe another important data point: you look at the material, the overall additive manufacturing polymers, 70% of the volume of material is low-end consumer entry-level machines. But it is only 20% of the value. We are a value player. We want to capture the 80% of the value. I hope it was comprehensive enough. Troy Donavon Jensen: Yeah. Thank you very much, gentlemen. Good luck this year. Yoav Zeif: Thank you. Operator: Thank you. The next question is coming from Alek Valero of Loop Capital Markets. Please go ahead. Alek Valero: Hey, guys. Thank you for taking my question. My first question is, last quarter you mentioned the large tech company purchased four F3300s for prototyping with plans to move to production. Have they placed any follow-on orders? And have they started the transition yet? Any update there? Thank you. Yoav Zeif: That is a great question. Thank you for the question. Unfortunately, we cannot share because this is confidential. I can just say that they are very happy with the solution. And we cannot share anything that they are not approving in advance. Alek Valero: Got it. No, understood. I guess my follow-up, on SaaS, I saw that you launched the PA12 qualification with Boeing, Raytheon, and a few others last month. I just wanted to ask, what is the time to completion there? And how do you size the revenue opportunity? Yoav Zeif: It is a large revenue opportunity. We usually do not disclose exactly. It is a large revenue opportunity. Those are the programs, and this is only one out of many programs that we have with those large customers, because we listen to them, we sit with them, they share with us their needs, and then we launch a program. Some programs are more on software, some on materials, some on hardware. And it is a large opportunity, and the qualification also depends on the class of the part. So there are different classes of parts, and it takes different timeframes, durations to qualify the part. It can go from one year to three years. Alek Valero: Got it. Yoav Zeif: Thank you. Operator: Thank you. At this time, I would like to turn the floor back over to Dr. Zeif for closing comments. Yoav Zeif: Thank you for joining us. Looking forward to updating you again next quarter. Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
Operator: Hello, everyone, and welcome to the BJ's Wholesale Club Holdings, Inc. Fourth Quarter Fiscal 2025 Earnings Call. My name is James, and I will be your operator for today. If you would like to ask a question during the presentation, the conference call will now start, and I will hand it over to Diana Raschow. Please go ahead. Diana Raschow: Good morning, and welcome to the BJ's Wholesale Club Holdings, Inc. Fourth Quarter Fiscal 2025 Earnings Call. Joining me today are Robert W. Eddy, Chairman and Chief Executive Officer; Laura L. Felice, Chief Financial Officer; and William C. Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the risk factors section of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted on our investor website for our cautionary statement regarding forward-looking statements and non-GAAP reconciliations. I will now turn the call over to Robert W. Eddy. Robert W. Eddy: Good morning, and thank you all for joining us. We are pleased to share that we closed out fiscal 2025 with strong momentum, delivering solid comparable club sales growth and strong profitability. Throughout the year, we navigated a dynamic environment marked by a more cautious, value‑seeking consumer, tariff‑related and geopolitical uncertainties, and broader macroeconomic volatility. Even with these challenges, our team remained focused and resilient, consistently delivering value, convenience, and quality for our members. We also achieved several meaningful milestones in 2025 that strengthened our business and reinforced the momentum we are carrying into the year ahead. We grew our membership base by more than 500,000 members, the largest annual increase in recent years, underscoring the relevance of our value proposition and the loyalty of the families who rely on us. We successfully opened 14 new clubs, the most we have ever opened in a single year, expanding our reach into new markets with sales, membership, and profit performance all well above expectations. We also advanced our digital capabilities, with digitally enabled sales penetration reaching 16% as more members embraced the convenience of omnichannel services. All of these are material accomplishments that create a structurally higher lifetime value for both members and shareholders. Ultimately, these achievements helped drive record full-year earnings per share, reflecting the strength of our model and disciplined execution across the business. As always, our team demonstrated an incredible commitment to our purpose: to take care of the families that depend on us. This purpose guided our decision-making and enabled us to deliver the dependable experience our members count on, no matter the conditions. That was especially evident late in the quarter when winter storm Fern, one of the largest storms in recent years, brought significant snow and ice across much of the U.S., impacting nearly our entire club footprint. We pride ourselves on being open and in stock for our members when they need us most. In the days leading up to the storm, we set a daily record for gas volume that was 20% higher than our previous daily record, reinforcing that we are a destination in times like these. Our team worked tirelessly to keep our clubs open and ensure that our members had access to the essential supplies they needed, from groceries and household goods to ice melt and emergency items. Their remarkable efforts really showed our purpose of taking care of the families that depend on us. I am incredibly proud of the way that they showed up for our members and communities. Turning to our fourth quarter sales performance, we delivered merchandise comparable club sales growth of 2.6%, reflecting our 13th consecutive quarter of market share gains and 16th consecutive quarter of traffic growth. Our perishables, grocery, and sundries division grew comps by 2.3%, driven by solid unit growth supported by improvements in assortment and merchandising. Even after lapping the chain‑wide rollout of Fresh 2.0, we are still seeing strong, steady comp performance in perishables, clear proof that this is not a onetime lift but a real, lasting shift in how our members shop with us. These results reinforce the importance of our core consumables franchise, which continues to demonstrate consistency even in a volatile operating environment. In general merchandise and services, comps increased by 4.3%, which outperformed our expectations for the quarter, driven by changes in merchandise mix. While we are pleased with our progress, it is important to note that general merchandise can be variable quarter to quarter, given the discretionary nature of many of these categories. As such, we would not expect performance at this level every quarter, but we are encouraged by the traction we are seeing as our broader transformation efforts take hold. Turning to membership, the foundation of our business and one of our greatest strengths, we ended the year with over 8,000,000 members, a new high for our company. In comp clubs, this growth reflects strong acquisition, continued loyalty from our long‑tenured members, and the ongoing relevance of our value proposition. Our growth was also the result of opening our 14 new clubs this year. Growing both the comp and total member bases is incredibly important to our future success. For the fourth consecutive year, we achieved a 90% tenured renewal rate. This level of loyalty is rare in retail and speaks directly to the consistency of the experience we deliver and the relevance of the BJ's Wholesale Club Holdings, Inc. membership model. We also saw continued strength in our higher‑tier memberships. Penetration increased to 42% this year, demonstrating strong adoption of the enhanced benefits in our higher‑tier offerings. These members are among our most engaged and the highest-spending cohorts, and we see meaningful opportunity for continued growth here. What stands out this year is not just the growth of membership, but the quality of that growth. The combination of more members, exceptionally high renewal rates, and deeper engagement among our most loyal tiers reinforces the health of our model. It also gives us tremendous confidence as we look ahead, because strong membership is the engine that powers everything else: traffic, share gains, and long‑term profitable growth. As our membership base grows in both size and quality, we continue to make it easier for members to shop with us whenever and however they choose. Digital engagement remains a major unlock for convenience, and this quarter, digitally enabled sales grew by 31%, driven by strong adoption of BOPIC, same‑day delivery, and Express Pay. These services have consistently been among the most meaningful drivers of digital growth, with more than 90% of digital orders fulfilled directly from our clubs—an efficient and member‑friendly model that has contributed significantly to our momentum. Our digital business also achieved a milestone this quarter, posting its highest sales day ever on Black Friday, and then surpassing that record again on Cyber Monday. This performance reflects not only high engagement, but the continued maturation of our digital portfolio. We are increasingly seeing members tap into our digital conveniences for different shopping occasions, underscoring how ingrained these capabilities have become. For example, a member stocking up in club ahead of a winter storm may be more inclined to use Express Pay to make that shopping trip faster and easier. We are also continuing to lean into AI to create even more seamless and intuitive experiences for our members. Our AI shopping assistant, Ask Bev, is designed to enhance the member experience through more personalized, intuitive, and efficient product discovery and support. And behind the scenes, AI is enhancing our merchandising enrichment and platform reliability. Value remains foundational to how we serve our members, and we continue to see that resonate across all income levels, particularly in a period where many consumers are becoming more selective with their spending. A strong pricing position is central to our model. Our advantaged structure allows us to consistently deliver meaningful savings—up to 25% better than traditional grocery. We are relentless about maintaining that edge for members. This commitment to value is one of the reasons we continue to see steady renewal rates, strong traffic, and healthy unit growth in our core businesses. Our own brands are another important way we help members manage their budgets without compromising on quality. In fiscal 2025, own brands represented 27% of our merchandise sales, and we remain on track toward our long‑term goal of 30%. These products offer significant savings and are an increasingly important part of how families shop our clubs. That loyalty, combined with higher margins, makes this effort powerful for our company. We also create value through compelling discounts and promotions. A recent example is our Big Game event, where members who spent over $150 received a $15 digital bounce‑back coupon, providing members with a high‑impact way to save during a key seasonal moment. At a time when members are making careful decisions with every dollar, our focus on great prices, quality products, and highly curated assortments ensures we remain a trusted destination for families looking to get more value out of every trip. We continue to make meaningful progress on expanding our footprint and bringing the BJ's Wholesale Club Holdings, Inc. model to more communities. In the fourth quarter, we opened seven new clubs, a great finish to a year that saw us open 14 new clubs. We are so proud of our 2025 class of club openings, which saw us open clubs in eight different states. These clubs as a whole are delivering sales, membership, and profit that are well above expectations, and we are very excited for our continued accelerated club growth. The success in our new clubs and new markets is a testament to the team working on new clubs, whose mission is to make the next opening even better than the last. The team is ready for our first‑half‑of‑the‑year openings in the Dallas–Fort Worth area, and I have a tremendous amount of confidence that we will deliver for these new members and communities, as we have proven time and again in our new club program. We remain on track to deliver our commitment of 25 to 30 new clubs over 2025 and 2026, and as we look out at the new club pipeline, we would expect this pace of openings to continue over coming years. Our sustained expansion reflects our confidence in the relevance of our model, our ability to serve more members across more geographies, and our long‑term commitment to profitable growth. Before I hand things over, I want to take a moment to recognize our team members across our clubs, our supply chain, and our club support center. Their commitment to taking care of the families who depend on us is what enables our performance quarter after quarter. Their hard work, especially in dynamic environments like this one, continues to inspire me every day. As we look ahead, we remain confident in the strength of our model and our ability to execute on our long‑term priorities. Our business is built to win in both stable and uncertain environments, and the investments we are making today put us in a strong position to continue delivering value for our members and sustainable growth for our shareholders. With that, I will now turn it over to Laura L. Felice to walk you through the financial results in more detail. Laura L. Felice: Thank you, Bob. Before I dive into the numbers, I want to acknowledge the exceptional work that our teams across our clubs, distribution centers, and support functions. Their continued focus on serving our members and strengthening our operations played a major role in delivering our fourth quarter results. Now let me walk through the financial highlights for the quarter. Net sales for the fourth quarter were approximately $5,400,000,000, an increase of 5.5% over last year. Total comparable club sales, including gasoline, rose 1.6%, with fuel prices continuing to run down mid‑single digits year over year. Excluding gas, merchandise comparable sales increased 2.6%, and we were pleased to see growth in both traffic and units. Traffic strengthened as the quarter progressed, helped in part by members stocking up ahead of the late‑January winter storm. Within our grocery, perishables, and sundries business, comps were up 2.3%, supported by strong performance in categories like nonalcoholic beverages, candy, and snacks. Unit growth was approximately 1.5%, and price remained up year over year as we have seen inflation continue to moderate. Our general merchandise and services division comp increased 4.3% in the fourth quarter, driven by strength in consumer electronics and apparel, even as home and seasonal remained a drag on the business. Membership fee income rose 10.9% to roughly $129,800,000, supported by healthy acquisition and retention trends across the chain as well as an annual fee increase in January 2025. Our membership base remains vibrant, and we continue making progress in improving member mix quality. As we look ahead, we expect membership fee income growth to moderate as we fully lap the fee increase and return to a more normalized run rate. Turning to our gross margins, excluding gasoline, our merchandise margin rate was down about 50 basis points year over year, driven by changes in merchandise mix. SG&A expenses totaled $818,200,000, representing slight deleverage as a percentage of sales, primarily due to new club openings and continued investment in our key strategic initiatives. Our gas business outpaced the broader industry. Comparable gallons were up 0.1%, significantly better than the low‑single‑digit declines seen elsewhere. Fuel margins were generally stable during the quarter, resulting in profitability modestly ahead of expectations. Adjusted EBITDA for the quarter increased 1% to $266,500,000, supported by steady cost discipline. Our effective tax rate for the quarter was 25%, slightly below our statutory rate of roughly 28%. Altogether, fourth quarter adjusted EPS of $0.96 increased 3.2% year over year. For the full fiscal year, we delivered adjusted EPS of $4.40, reaching the high end of our revised guidance range. Looking at the balance sheet, inventory levels increased 3.1% year over year in absolute terms and were down 2% on a per‑club basis, reflecting strong execution by our teams. In‑stock levels improved about 40 basis points versus last year and reached record highs, a testament to better merchandising alignment and operational efficiency. Our capital priorities remain unchanged. We continue to invest in areas that drive long‑term value: membership, merchandising, digital capabilities, and real estate. We ended the quarter with net leverage of 0.4 times, giving us substantial flexibility. During the quarter, we bought back approximately 1,300,000 shares for $117,700,000, bringing the full‑year repurchases to roughly 2,600,000 shares for $252,400,000. This accelerated pace of repurchases underscores our confidence in the long‑term strength of the business and our ability to generate consistent cash flow. We ended the year with approximately $750,000,000 remaining under our current authorization, and expect to remain thoughtful and opportunistic with future repurchases. Looking ahead to fiscal 2026, we expect comparable sales excluding gas to grow 2% to 3%, and we are guiding to adjusted EPS of $4.40 to $4.60. Our multiyear focus on building a stronger, more efficient, and high‑quality business is yielding real progress, and we remain confident in our ability to deliver sustainable long‑term growth. We expect slight deleverage in our SG&A driven by accelerated new club openings, particularly with continued outsized growth in depreciation. We will also continue to invest to ensure our new market growth performs at or ahead of our expectations, as well as making sure we deliver unbeatable value to our members every day. We plan to further invest in our supply chain network to support the long‑term growth and are excited to open our automated distribution center in Ohio in 2027. We are planning for an effective tax rate of approximately 27% for the year, with the lowest rate in the first quarter when we typically experience a windfall from stock compensation. Given the evolving landscape, we are not contemplating the impact of recent tariff news and evolving macro uncertainty on our current assumptions. Tariffs may shape the trajectory of inflation and broader consumer demand, and ultimately influence our results this year. We continue to believe we are well positioned to offer our members the value that they are seeking every day. Before I hand it back to Bob, I would like to thank our team members for their continued dedication to our company, purpose, and communities, and their contributions to another great year of delivering in a dynamic environment. Bob, back to you. Robert W. Eddy: Thanks, Laura. Before I wrap up, I just want to take this opportunity to reflect on the incredible progress our team has made on behalf of our shareholders. Looking back over the last three years, we have grown our member count by 1,500,000 members—that is over 20%—and increased our annual MFI run rate by more than $100,000,000, while delivering 90% tenured renewal rates. We have driven digital penetration from 9% to 16%, generated $3,300,000,000 in adjusted EBITDA, and produced more than $2,600,000,000 in operating cash flow, including over $1,000,000,000 this year. We have opened 29 clubs as part of a $1,700,000,000 capital investment into our business, with returns on new clubs well into the double digits. We have accelerated the pace at which we are expanding and have a pipeline to support this level of growth going forward. As part of this effort, we have also added about $500,000,000 of owned real estate onto our balance sheet. On top of this capital investment, we paid down well over $300,000,000 of debt, bringing our net debt ratio down to 0.4 times, and repurchased well over $500,000,000 worth of shares, retiring about 5% of our share count in the process. The club business is a long‑term share gainer and a great business to be invested in because value wins. By delivering the assortment, value, convenience, and membership experience our members love, we will be rewarded with growth in the lifetime value of our members. This lifetime value is the foundation of the equity value that accrues to our shareholders. As we look out towards this year and beyond, we are more excited than ever for both the progress we have made and for the opportunity to create even more value for our shareholders by investing for the long term and delivering value to our members in everything we do. We are at a unique moment in time as it relates to the growth of the club channel. Now more than ever, we are here to play to win. Operator: Thank you, Bob. As a reminder for our audience, please press star followed by the number 1 on your telephone keypads. We will now open for questions. Our lines are now open for questions. We now have Michael Allen Baker from D.A. Davidson. Go ahead, please. Your line is now open. Michael Allen Baker: Great. I wanted to ask about merchandise margins, down 50 basis points. In the press release, you said mix. I guess I heard strength in consumer electronics and TVs; I suppose that was probably part of it. But what else drove the lower merchandise margin? Can you talk about sort of inflation—cost inflation versus price inflation? I know one of the hallmarks has been trying to give value back to customers. Just how that whole pricing dynamic is playing out, please? And what should we expect for 2026? Thank you. Mike, I will ask one more. You talked about continuing the pace of openings—25 to 30 every two years. You are only in 21 states right now. How long can you grow 25 to 30? I guess what I am getting at is have you looked at the art of the possible? Could this be a nationwide concept? How many stores could you have over time? Robert W. Eddy: Maybe I will take the lead here, and Laura can fill in behind me. We are pretty proud of our quarter. You brought up margins in your question and our pricing stance and a few other things. So let me talk a little bit about it in the broadest sense, and Laura can add in some details if she sees fit. The largest contributor to our margin performance against our expectations during the quarter was the mix of the business, and it is mix towards general merchandise. You remember that for us, general merchandise is slightly lower margin than some of the other parts of our business, and within general merchandise, consumer electronics tends to be the lowest gross margin within general merchandise. You remember when we talked about how Q4 might roll out for us, we had restricted buys in a lot of our general merchandise categories to try and manage exposure to tariffs and markdowns and things, and that played out exactly the way that we thought it would. So within the four big businesses in general merchandise, we had a good quarter from a CE perspective. Our apparel business continues to grow. It has been growing for a few years now pretty steadily and had another good quarter there. And then, as expected, we had a tougher quarter in our home and seasonal businesses. Those were more subject to tariffs. That is where much of our inventory cuts happened, and those two businesses had negative comps. So the mix issues associated with that were the predominant cause of the 50 basis point decline in merchandise margins. We also made considerable investments in value during the quarter in our grocery business, and we will continue to do that in the future. As you know, value is the most important thing that we provide our members every day. We take our pricing gaps very seriously. They improved during Q4 because of these investments that we made, and we will continue to do that as we can to provide our members the best value every day. You know we always try and spend into the beat. We saw that we were having a quarter where we could do that and decided to take that option on our members' behalf. So we are very happy with our quarterly performance and made all the numbers work out on our shareholders' behalf. Yeah. On your question about store growth, let me start out, and then William C. Werner can fill in. He obviously runs our real estate portfolio. This year was a fantastic year for us from a real estate growth perspective—opening 14 new clubs, a bunch of new states, a bunch of existing markets for us as well. I would tell you that this new class of clubs is the best class of clubs we have opened in any of the years since we have gone public. Just a couple of data points: our membership in these clubs is up over 30% versus what we planned; our on‑time renewal rates in our new clubs are about 900 basis points higher than our chain average at this point; and I talked about in our prepared remarks that our new clubs are well into double‑digit return on capital. So we are really excited about the performance we have had so far. The team has done a fantastic job getting these clubs open on time this year. We have got another 12 or so to go in this new year and a really robust pipeline. I will hand it over to Bill, and he can address the rest of your question. William C. Werner: Yeah. Mike, maybe the one simple idea I will give you and the investment community to think about as it relates to our growth is as we continue to take share, the models continue to update the viability that we have to open up in new markets. We have seen that this year with markets like Selma, North Carolina, and Sumter, South Carolina. They probably would not have been on our radar a handful of years ago, and in pretty short order, not only were they on our radar, but we were able to go there, execute, and those clubs are both off to amazing starts, which gives us a lot of confidence in terms of going into new and different markets into the future. I would tell you that we enter the Dallas–Fort Worth market later next month. Our team is confident, but certainly not complacent, as we go into these in terms of how we execute with the success that we have seen. If anything, the early engagement and the hustle of the team on the ground there in the Dallas market has been pretty awesome. I was down there last week and spent some time with the team and with some community leaders, and we heard feedback across the board that the way that we have engaged with the community down there is something that they have never seen before. We are really excited to get those clubs open. It will be a nice milestone for the company as we show the success that we will have down there, and that success creates opportunity for the future. As we sit today, we are really excited, we are really confident, and more to come. Michael Allen Baker: Thank you. Robert W. Eddy: Thanks, Mike. Operator: Thank you, Michael, for that question. Next up, we have Peter Sloan Benedict from Baird. Go ahead, please. Your line is now open. Peter Sloan Benedict: Hey, good morning, guys. Thanks for taking the questions. First, just around the merchandise comps, any way to quantify maybe how impactful Fern was—maybe some of the stock‑up activity that happened at the end of the quarter in 4Q? And then, as you are thinking about the year ahead here, any cadence we should think about? I know there is a lot of puts and takes. Maybe your view on SNAP and the changes there. Just anything that you are contemplating that we should be aware of in terms of the cadence of comp in 2026? That is my first question. And, again, my follow‑up is just maybe a little longer‑term picture. You know, the return to kind of the algo that you guys have. This year there is obviously a lot of puts and takes. You have the investments that are going on. I am just curious, as you get a bunch of these new clubs up and running, when do you start to kind of maybe return the business model to the algo? Is that something that could occur in 2027? Is it 2028? Just conceptually, how does that work in your mind? Thank you. Robert W. Eddy: Thanks. Good question. Obviously, winter storm Fern was a big deal, particularly in our footprint along the East Coast. I would start out with our feeling that largely storms are a net push. You get the buildup on the front side of it—and that can be a little buildup or a big buildup depending on the size of the storm and how well forecasted it is—and then you obviously suffer the downside of storm effects: closing stores, power losses, people not driving, and deloading the pantry that they just loaded up. So on the whole, storms are generally a push. Fern was very big and impacted most of our footprint, and it was certainly very well forecasted—a week out, everybody was saying we were going to get a big storm. We did have a pretty large buildup in front of the storm, and, obviously, it was big and impactful, and so we had a pretty large fall‑off after the storm. The thing to think about is the net impact, and I would say it was a slight positive to the quarter. The downside of the pantry deloading and the travel effects and such, and the supply chain effects, actually crossed the fiscal year a little bit, and so we saw some of the downside leak into February, and I think this is a normal effect. We have seen some weather in the Northeast in February as well, and so February's comps were a little lower than our plan, but all of that is normal weather stuff. Our team did a great job serving our members. Certainly, we proved our destination status—that stat that we put in the prepared remarks of beating our daily fuel volume record by 20% was pretty insane to do that. Our supply chain team really was pretty heroic, beating records of how many cases we moved day after day as the buildup happened, and our club teams did a wonderful job staying open when we could and keeping everybody safe and serving our members. Overall, a very slight impact to the quarter, and I would say a slight impact to Q1 on the negative side as well. From a guidance perspective, there is certainly a lot to balance in the stacks and what is going on, so I will give that question to Laura. Laura, what do you say about guidance? Laura L. Felice: Yeah. Hey. Good morning, Pete. From a comp perspective, we put out a range of 2% to 3% for the full year. What we did not talk about in the prepared remarks is the cadence of the two‑year stacks, and those accelerated slightly in Q4, as they did in Q3. When we look at the year coming up, I would point towards the two‑year stacks as a starting position. Remember that the first quarter of last year was the high watermark from a comp perspective, and so we have built the plan on that, which would imply the lowest comps in the beginning of the year and growth as we progress through the year. Robert W. Eddy: Thanks, Pete. We are really taking a very long‑term approach to what we are doing here. We talked a lot about our real estate growth. That impacts our depreciation and our EPS performance, but with all that said, I thought this is a pretty good year. We are very proud of our progress—the growth of our entire franchise last year: growing total merchandise sales by more than 6%, membership by 7%, MFI by 9.5%, adjusted EBITDA by 6%, EPS by 9%. Those are all fantastic results. And then, in the prepared remarks, all the three‑year stats, I think, are even more impressive. While we are not satisfied and still want to grow faster, we have a lot to be proud of. We think our shareholders should be happy with our performance, and we will continue to make long‑term investments like in real estate and in value to really get our franchise flywheel moving faster for the future. Operator: Thanks, Peter. Just another reminder for our audience: If you would like to send your questions in, you may do so by pressing star followed by the number 1 on your telephone keypad. In the interest of time, we ask that we limit our questions to just one question per participant. Thank you. Let us move on to Edward Kelly from Wells Fargo. Go ahead, please. Your line is now open. John Park: Hey, good morning. This is John Park on for Ed. Thanks for taking my questions. I guess, can you talk a little bit more about the underlying membership trends? How much of the MFI increase was from the fee increase? And any changes in discounting lately that you guys are doing? Robert W. Eddy: Good morning, John. Thanks for your question. There is certainly a lot to be proud of in our membership growth. We talked about a little bit of that in our prepared remarks, but 500,000 member growth this year; 1,500,000 over the past three years; 10% MFI growth for the year, a little bit more than that for the quarter; another year of 90% renewal rates; improvements in our higher tier—really just sustained, fantastic performance in our membership base. This continued growth in member count will continue, including with as many as 12 new clubs next year, and, obviously, some of that MFI growth was the fee increase, as you pointed out. We are quite optimistic on our ability to continue to grow our membership franchise, and as we do, we will continue to optimize for the best mix of acquisition and retention and rate, and MFI dollar growth. As you might imagine, those things somewhat compete with one another, and so we are trying to optimize the best result for our overall business. When you think about the concept of discounting, I would take you all the way back to many years ago when our chief acquisition model was a free trial model, and we moved away from that towards a discounted membership model tied to easy renewal. Folks that get a discount have to sign up for automatic renewal, and they pay full fee in the second year and beyond. Most membership models use a discounting model at this point, including our two club competitors. The team has done a really nice job optimizing those three things—member count, the rate that the members pay, and the renewal rate. The team also does a nice job varying and trying to optimize in the channels in which we offer these discounted offers, and they obviously change offer constructs and things as we go—really trying to figure out what the best value is for each segment of membership and, again, trying to optimize the business for us and for our shareholders. As we move forward, we will do a lot of the same—trying to optimize what we offer, when we offer it, and who we offer it to—and I expect we will see continued great growth in total membership, MFI dollars, and renewal rates. Laura L. Felice: The one thing I might add on to that is Bob talked about the new club growth and members we are acquiring in the new club. As we step back and look under the numbers—we have talked about this in prior quarters—we are also really proud of the membership growth in comp clubs which, as you know, is really important to the long term of our business. Think about 2% to 3% comp club member growth, which is a fantastic set that we are proud of as we move forward. John Park: Awesome. Best of luck, guys. Operator: Thank you, John. Moving on, we now have Katharine Amanda McShane from Goldman Sachs. Go ahead, please. Your line is now open. Katharine Amanda McShane: Good morning. We had a longer‑term question as well. Just with the success that you are seeing with your digital growth, do you think your stores are able to keep up with this level of fulfillment, and are there any investments that need to be made going forward to further support this growth, either in the tech stack or with assets? Robert W. Eddy: Hi, Kate. It is a good question. We have had sustained, fantastic growth in our digital business. I think it was 31% this quarter, and somewhere near 60% on the two‑year stack—obviously bigger going backwards—and it has really been the engine of convenience that our members love, whether it is buy online, pick up in club, same‑day delivery, or Express Pay. Getting that penetration up to 16% of our business has been a big win, and I expect it to go even further as we go because our members, quite frankly, love all these options. As you know, about 90% of our entire digital business is fulfilled by our clubs, and so you are right to ask the question. I would tell you that we are relatively unconstrained from this perspective. We can pump a lot more volume through our average boxes. In certain very high‑volume clubs, we have constraints. We are working around those constraints by investing capital, by investing in labor, by moving volume around the chain, by using different providers to help us do it. I do not really see a ceiling on our digital growth going forward, and we will work hard to make sure we do not have a ceiling there. We continue to invest in all of our digital properties. Our digital team is fantastic at really improving the experience every day on a relatively inexpensive basis, and they do it day in and day out, and when they say something is going to be done, it gets done. We have come to very much value that as we talk to our members and offer new things to our members, and, obviously, our members are reacting well to that. I do not really see that changing in the future. We are happy to take all the digital growth that comes to us. Katharine Amanda McShane: Thank you. Operator: Thank you, Kate. Moving on, we now have Steven Emanuel Zaccone from Citi. Go ahead, please. Your line is now open. Steven Emanuel Zaccone: I wanted to follow up on the earnings guidance for the year. Laura, you mentioned some SG&A investments—can you help us understand how big they are? And then on the merchandise margin outlook, I want to follow up there. How should we think about that for 2026? Obviously, mix was a factor in the fourth quarter, but you did reference earlier last year making some price investments, or investments in general, to provide value for consumers. How do you see that playing out in 2026? Laura L. Felice: Thanks. Good morning, Steve. Maybe I will start on your SG&A question. We spoke a little bit about that in the prepared remarks—so, slight deleverage. We are continuing to invest in the new club growth and ramp that growth. Going into Texas at the end of the first quarter, as Bill talked about, and into the second quarter, we are certainly investing to win there. We know we are off to a strong start, as Bill already talked about as well, but we want to make sure we set ourselves up for success. So some deleverage largely as we look on the new club ramp, and it is largely D&A. From a merchandise margin perspective, we do not guide to merchandise margins on an annual basis. I would say the fourth quarter was certainly the low mark on a year‑over‑year basis as we went backwards a little bit. Remember that for the full year, we rounded it out flat. What we are after this year is continuing to manage the business—making sure we are making price investments where they make sense—all after going towards our long‑term lifetime value of membership and the guidance we have set forth. Steven Emanuel Zaccone: Okay. That is helpful. Thanks very much. Operator: Thank you, Steven. Moving on, we now have Mark David Carden from UBS. Go ahead, please. Your line is now open. Mark David Carden: Good morning. Thanks so much for taking the question. I want to ask a bit about the Texas ramp. I know the stores are yet to open, but you have been doing some initial promos. How has interest been just relative to what you have seen in other markets? And then how have you handled any supply chain challenges, just given distance from current DCs? Is there a set number of clubs you need to open before it makes sense to add a new DC to that region? Thank you. Robert W. Eddy: Hi, Mark. Why do I not ask Bill to take over that question? William C. Werner: Yeah. Hey, Mark. Listen, I will start with the engagement down in the Texas market and then come back to some of the infrastructure. The engagement has been amazing out of the gate. I mentioned earlier I was down there with the team last week. We have had the team on the ground for many, many months already, engaging with the community, and we have a ton of data given the acceleration of all the recent openings in terms of what we expect from engagement and membership from the clubs that we opened so far. As we sit here and look eight to ten weeks out from the openings, we are seeing exactly what we thought we would see in terms of overall engagement and membership sign‑up, so all signs are positive so far in terms of the entry. I am really excited. The team has done such an amazing job. I am really proud of everything that they have done, and I am really excited to see the results of all their hard work. In terms of the infrastructure, we have been planning for this investment for a while now. We will serve the market with a combination of distribution from our existing distribution infrastructure as well as some hyper‑local support on the ground, and then we will continue to scale as we have done all along. As I think about how we have moved over the last handful of years to some of the adjacent western markets from where we are today—Columbus, Indianapolis, Nashville, and Detroit—that certainly has created a new distribution footprint for us, and we have served that along the way. We will continue to amplify how we serve that with the new distribution center that we are building out in Columbus as we speak. That is a major investment for us, and it will yield significant operational efficiencies for us as well as savings as we get it open. The opportunities that we have to invest in the expansion have been driven by the success of the new clubs, and it is a great challenge to work through, and we are excited for everything that we are doing. Robert W. Eddy: We are really bullish, as Bill said, about our ability to be successful in Texas. I will offer you one statistic we heard this week: there are more homes being built in the Dallas–Fort Worth market than in the entire state of California. It is certainly a place with very, very high growth. Our team has been doing fantastic work on the ground. The initial membership sign‑ups are well ahead of our pre‑opening plan. Obviously, the numbers are small until the boxes actually open, but the engagement we have seen with the folks in these communities that we will enter has been very strong. We are obviously respectful of this challenge—it has certainly got great competition in the neighborhood—and we want to make sure we offer Texans products and an experience that they like. I think we are off to a pretty good start so far, and we will invest heavily in this market to try and get it right, and we will give it our best shot every day. Mark David Carden: Thanks so much. Good luck, guys. Operator: Thank you. Moving on to the next participant, we have Oliver Chen from TD Cowen. Go ahead, please. Your line is now open. Oliver Chen: Thanks a lot. Hi, Bob and Laura. Regarding general merchandise and the variability that you are seeing, what should we expect in terms of guidance with home and seasonal? And related to that, the category management program as well as fresh in the year ahead—any major catalyst there or changes or more innovation that you are doing there that will underpin some of the comp guidance? Thank you. Robert W. Eddy: Hi, Oliver. Thanks for your question. Maybe I will start, and Laura can fill in whatever I missed. If you look at the complexion of our business in the fourth quarter, you saw quite a mix. Our grocery business performed very well—certainly, perishables is the most important part of that business. We lapped the full chain rollout of Fresh 2.0 during the quarter, and we continue to see steady gains in our perishables business. That has been impacted by some food deflation in that category, but even without that, we had a good quarter. We saw some improvement in our grocery business, and hopefully, that translates into our sundries business as well, as we start to pull some of the same levers there. In general merchandise, we had a good quarter from a CE perspective, where we could chase some inventory and sell it. The prospects for our home and seasonal businesses are kind of varied at this point in time. We need to continue to improve our merchandise mix and our assortment and our value in those categories. Our merchandising team has made strides, and they continue to get better. We obviously are still working on our merchandising team at this point, and we hope to have some news to announce in the next couple of weeks from that standpoint. I would look at home and seasonal as a longer‑term growth initiative. We will continue to grow CE. We will continue to grow apparel. We know what to do in those categories. In the future, we hope to build on that growth in home and apparel. With respect to CMPs, that program is still going on. It has been a successful program for us. Versus our older program we called CPI, which was much more margin‑focused, this has been much more assortment‑focused, and I think what you will see from us in the future is a better mix of those two thoughts. We are trying to put the right thing on the shelf, but also trying to get some more margin performance so that we can make further investments in value—making sure that we are offering the right everyday price, the right promo, the right product—and, obviously, paying the right cost for that product is a fundamental part of the retail equation and making sure we can run the business in the best way for our members and our shareholders. Lots of good stuff to be proud of in the merchandising world and lots of work to come in the future. Oliver Chen: Thanks a lot. Best regards. Operator: Thank you, Oliver. Next up, we have Rupesh Dhinoj Parikh from Oppenheimer. Go ahead, please. Your line is now open. Rupesh Dhinoj Parikh: Just going back to inventory, I know last year your team planned conservatively on the discretionary front, just given some of the tariff headwinds and uncertainty out there. Just curious how you are thinking about inventory over this year. Do you feel like you have sufficient inventory on the discretionary side? So just high‑level thoughts there. Thank you. Robert W. Eddy: Hi, Rupesh. Our inventory is in great shape. Let me first congratulate our supply chain team and our merchandising team for another great performance this quarter, where although total inventory was up 3%, on a per‑club basis it was down, and our in‑stocks improved by 40 basis points. The team continues to do a great job getting better and more efficient for our members. We need continued gains on that front, and our team has great plans to keep pushing in that regard. With respect to total inventory levels in the business going forward, there is nothing really to think about from a grocery business perspective—that is just about optimizing what we are doing there. From a general merchandise perspective, we have ramped up our inventory in the coming year. We have made bigger buys to support both the new clubs that we are bringing on and, hopefully, comp growth in our general merchandise business as well. Where we were very conservative last year from an inventory buy perspective, we are being slightly more aggressive this year—nothing crazy—but we do have plans to buy more inventory, and, hopefully, we have picked the right items and our members love the assortment and the value that we offer. Rupesh Dhinoj Parikh: Great. Thank you. Best of luck. Operator: Thank you, Rupesh. That is it for the questions queue. With that, it concludes today’s call. Thank you all for joining. We appreciate your time. You may now disconnect your lines, and have a great day.
Operator: Good morning, and welcome to the Ambiq Micro, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. As a reminder, this conference call is being recorded. 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. I would now like to turn the call over to Charlene Wan, Ambiq Micro, Inc.’s Vice President of Corporate Marketing and Investor Relations. Charlene, please go ahead. Charlene Wan: On today’s call, Ambiq Micro, Inc.’s CEO, Fumihide Esaka, will provide an overview of the company’s performance and strategy. CFO, Jeffrey Winzeler, will then discuss the quarter’s financial results and 2026 outlook. Following their remarks, Scott Hanson, Ambiq Micro, Inc.’s Founder and CTO, and Aaron Grashian, EVP of Global Sales and Marketing, will join Fumi and Jeff for Q&A. Our earnings release is available on the Investor Relations page of our website at www.ambiq.com. We have also posted our earnings presentation on the Investor Relations section of our website. Before I turn the call over to Fumi, I would like to remind our listeners that during the course of this conference call, management will discuss non-GAAP financial measures. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in our earnings release available on the company’s Investor Relations website. In addition, today’s call will contain forward-looking statements, representing management’s beliefs and assumptions only as of the date made. Our most recent annual report on Form 10-Q and other filings with the SEC provide more information on specific risks that may cause the actual results to differ materially from current expectations. And now it is my pleasure to turn the call over to Ambiq Micro, Inc.’s CEO, Fumihide Esaka. Fumihide Esaka: Good morning, everyone, and thank you for joining us. 2025 was a strong year for Ambiq Micro, Inc., defined by disciplined execution and accelerating demand for edge AI across our end markets. Our performance reflects both share gains and market expansion as we enable AI on more devices across more markets and in a growing number of use cases. We are entering 2026 with strong momentum. Based on current demand indicators, we expect outsized top-line growth. We remain confident in our long-term opportunity as we partner with customers to advance their edge AI roadmaps and deliver sustained growth. Starting with Q4 performance, we delivered our highest net sales quarter of 2025, exceeding guidance. End-user demand outpaced our customers’ expectations, resulting in incremental expedited orders late in the quarter. Three key factors behind the net sales increase from Q3 were, first, strong end demand for our customers’ products; second, broader adoption of Ambiq Micro, Inc. solutions within customer portfolios; and third, customers upgrading to Apollo 5 for more advanced edge AI functionalities. Turning to the full year, 2025 was a milestone year for Ambiq Micro, Inc. Edge AI adoption was a clear growth driver, and we estimate that more than 80% of the units we shipped were running AI algorithms. Net sales and non-GAAP gross profit increased in every quarter of the year, and we delivered our highest-ever gross profit for the year. We expanded our customer base across multiple end markets, including securing a large wearable customer. At the same time, we continued to strengthen and diversify our design funnel, particularly in medical, industrial, and smart home and building markets. As these programs move into production over the next 18 to 24 months, we expect incremental growth and revenue diversification. We also expanded our product portfolio to support more advanced edge AI applications, launching Apollo 510 Lite, Apollo 510B, and Apollo 330. On the software side, we introduced the Helia AOT and Helia RT AI runtime powered by our new Helia Core AI kernel library. Finally, we completed a successful IPO, demonstrating strong investor demand and confidence in our strategy and long-term opportunity. Our 2025 performance highlights the strengths of our SPOT platform in delivering ultra-low-power solutions and enabling edge AI across an increasingly diverse set of applications and end markets. Based on our customer conversations, we see several trends accelerating edge AI adoption in 2026, with SPOT enabling powerful new AI capabilities across an expanding range of industries. We expect to further grow market share while broadening the overall opportunity. First, customers are adding more sophisticated edge AI capabilities into their devices to differentiate their products and drive demand. Second, wearables are evolving into true personal health platforms requiring more advanced on-device intelligence and ultra-low-power performance. This includes real-time health insights across multiple wellness indicators. Third, wearables are expanding into new high-value form factors such as rings and eyewear. This broadens the addressable market and increases demand for low-power, high-performance edge AI solutions. Looking ahead to 2026, we expect customers to launch new models with more advanced features across diverse form factors, including rings, display-less bands, and watches. We also expect a new scaled global customer to enter into mass production this year. Products launched in late 2025 are continuing to ramp in volume. At the same time, we anticipate ongoing migration to Apollo 5 as customers look for greater performance and AI capability. As a result, we expect 2026 to be a year of strong growth for Ambiq Micro, Inc. While we are making impressive progress, we remain early in a large and expanding edge AI opportunity. To capture this opportunity, we are taking focused action to accelerate growth over the coming years. First, we are leveraging our existing Apollo family and derivatives to expand aggressively into high-value markets. Second, we are developing new products that enable more advanced edge AI capabilities and expand our reach. We are making solid progress on both fronts. Starting with market expansion, edge AI is becoming more capable and complex across medical devices, smart homes, and industrial markets. In healthcare, customers are building smarter cardiac monitors, senior care devices, and hearing aids, all with enhanced AI capabilities. In industrial markets, AI-powered sensors are enabling predictive maintenance and asset monitoring, which helps reduce downtime and improve operational efficiency. In smart buildings, edge AI helps manage lighting, HVAC, security, and occupancy data to optimize energy use in real time. While these markets are growing, design cycles remain longer, particularly in regulated and industrial environments. We are encouraged by our early traction and believe we are well positioned to expand our footprint as edge AI adoption scales across a broad range of end markets. Our integrated hardware and software platform is purpose-built for these transitions by combining AI-enabled processing, connectivity, and edge intelligence in a single ultra-low-power architecture optimized for power-constrained devices. Our recent partnership with RONS highlights this progress. Through the NavaSear brand, RONS is a leading provider of intelligent equipment operation maintenance solutions. By leveraging SPOT hardware and software, RONS will deploy large-scale, always-on battery-powered sensors. We expect this and similar engagements to increase diversity of our design funnel and unlock new and durable long-term growth in the industrial edge. This is just one example of how SPOT is powering AI adoption across diverse end markets. We are building on this strong foundation with the ongoing expansion of our Helia AI software ecosystem. Helia will support more AI kernels, with performance improving over time. Paired with our AI development kits, Helia will help customers build ultra-efficient AI models for health analysis, speech interfaces, machine health monitoring, and more. Turning to our product roadmap, this morning we announced new technical details for Atomic. It is the first SPOT family built on a FinFET process with TSMC, enabling operation down to 300 millivolts, the lowest voltage in our company’s history. This breakthrough pushes the boundary of ultra-low power while enabling significantly more sophisticated AI capabilities. This combination is essential for the next generation of battery-powered edge AI devices. Atomic is purpose-built for AI workloads that benefit from parallel processing rather than raw clock speed. With its integrated NPU, GPU, and embedded memory, we believe it will power a new class of intelligent devices, including advanced wearables, AR glasses, and smart cameras. At the same time, we see significant opportunity to extend our reach into new markets with Apollo derivatives that support smaller form factors and core edge AI capabilities. Reflecting stronger customer demand, we are accelerating development of both Atomic and Apollo product families. Instead of a three-year step-by-step plan, we now plan to start development of Apollo 340 and Atomic 120 this year, along with ongoing work on Atomic 110. Apollo 340 is designed as a highly scalable platform to expand into new high-opportunity segments. It combines Ambiq Micro, Inc.’s energy efficiency with an attractive price point, compact form factor, and comprehensive developer support and reference designs. This will make it well suited for distribution channels, ecosystem partners, and reference designs, multiplying sales leverage and accelerating delivery of on-device AI to the mass market. Turning to Atomic, the first SoC designed from the ground up for advanced AI, Atomic 110 will enable personal devices with smaller batteries to achieve longer battery life while supporting richer features such as natural-language voice interfaces and on-demand health analysis, unlocking new possibilities for personal life-logging devices. In industrial markets, Atomic will support more complex AI models for local, cost-effective predictive maintenance. In medical applications, it will enable more real-time, always-on, private metrics in smaller form factors. Atomic 120 will introduce capabilities tailored for smart cameras and next-generation smart eyewear, which is one of the fastest-growing categories in wearables. In summary, 2025 was a year of strong performance and focused execution for Ambiq Micro, Inc. We believe in 2026 we are well positioned for significant top-line growth, supported by solid customer demand and accelerated product momentum. At the same time, we are intentionally increasing investment across R&D, software, and go-to-market initiatives to capture an even larger share of the expanding edge AI opportunity. Our ultra-low-power SPOT platform, combined with the strategic actions we are taking, is laying the foundation for sustained long-term growth. With that, I will turn the call over to Jeff to review the financials. Jeffrey Winzeler: Thank you, Fumi, and good morning, everyone. Our 2025 performance reflects the benefits of our strategic repositioning, which strengthened the quality of our revenue base and aligned the company with long-term growth opportunities. At the end of 2024, we took deliberate steps to prioritize customers who view our ultra-low-power technology as a critical enabler of edge AI, while reducing exposure to efficiency-focused, feature-neutral customers primarily in Mainland China. As a result, we delivered sequential sales and non-GAAP gross profit improvement in every quarter of the year. Our full-year results reflect stronger margins and increased gross profit dollars by 32.1% on 4.7% lower net sales, achieving our highest-ever annual gross profit. These results validate our strategic repositioning, and with the strong momentum in the business, we believe we are well positioned to deliver sustainable growth over the coming years. Now turning to our fourth quarter results, we delivered the highest net sales quarter of 2025 with results ahead of our guidance on accelerating demand trends. Net sales of $20.7 million increased 2% year over year. Non-GAAP gross profit increased 75.5% to $9.4 million, while non-GAAP gross margin expanded almost 20 percentage points to 45.5%. This performance reflects the impact of the strategic repositioning I just described, with 8.6% of net sales driven by customers in Mainland China, down from 50% in 2024. Sequentially, net sales increased 14.2%, driven by strong underlying demand. Non-GAAP gross profit dollars increased 15.9%, with non-GAAP gross margin expanding 70 basis points. The improvement was driven by a more favorable product mix, reflecting higher sales to customers deploying multiple edge AI capabilities on our SPOT platform. Turning to operating expense, non-GAAP R&D expense was $9.3 million, up 33% year over year and 34% sequentially. This reflects additional investment that began in the fourth quarter to support our product development for both the Atomic and Apollo families. Non-GAAP SG&A expenses were $7.3 million, up 19.7% year over year, largely due to public company costs. Sequentially, SG&A increased 17.4%, driven by strategic investments in sales and marketing as well as higher incentive compensation reflecting stronger net sales performance in the quarter. Other income was $1.3 million, up $1.1 million year over year due to interest income earned on IPO proceeds. Fourth quarter non-GAAP net loss attributable to common stockholders was $5.9 million, a $1.7 million improvement year over year and $1.9 million lower sequentially. Non-GAAP net loss per share attributable to common stockholders was $0.32. We ended the quarter with no debt and $140.3 million in cash and cash equivalents, reflecting the proceeds from our IPO. And in 2026, we completed a successful follow-on offering that generated an additional $76.8 million. Our strengthened cash position provides flexibility to fund growth initiatives and support our strategic priorities. Now turning to our outlook, for 2026 we expect the following: net sales to be in the range of $21 million to $22 million, reflecting the trends Fumi covered earlier; non-GAAP gross margin between 44% and 45%, reflecting the ramp of the Apollo 5 family. We expect to see improved yield and a better cost structure as this product family scales throughout the year. Non-GAAP operating expense of $18.0 million to $18.5 million, reflecting increased investment to support our strategic growth priorities, including approximately $1.7 million related to IP purchases in the quarter. Non-GAAP loss per share of $0.39 to $0.33, based on weighted average share count of 20.38 million shares outstanding. As you update your full-year models, please keep the following in mind. We are encouraged by the demand inflection we saw in 2025. We see a clear path to strong net sales growth in 2026 driven by new model launches, ramping of a scaled global customer, higher volumes from recent customer introductions, and continued adoption of Apollo 5. We remain focused on driving continued yield improvements across the portfolio while recognizing that gross margin may be affected by broader industry cost dynamics and supply chain pressures. We expect non-GAAP operating expense will be approximately $30 million higher than 2025. This higher spending is tied to the accelerated development of both Atomic and Apollo product families, reflecting strong customer demand. The increased OpEx includes growing Ambiq Micro, Inc. engineering headcount, utilizing contract engineering to provide flex in our model for both upside and downside flexibility, and $7 million to $10 million of IP purchases necessary for product development. Given the timing of IP purchases will be project-driven, do not expect operating expenses to be linear in 2026. In summary, our 2025 results reflect the strength of our competitive position, disciplined execution, and favorable secular tailwinds. Apollo is now powering multiple generations of products in production, and our expanding portfolio of derivatives is supporting upgrade cycles and broadening our reach across customers and end markets. At the same time, we are investing to enable higher-performance edge AI applications and expand our long-term revenue opportunity. With Apollo driving growth and margin expansion today, and Atomic positioned to contribute meaningfully beginning in 2028, we believe we have multiple growth drivers to support sustainable growth over time. With that, I will turn the call back to Fumi before we open the line for Q&A. Fumihide Esaka: The opportunity ahead for Ambiq Micro, Inc. is large and growing quickly. We expect to deliver meaningful sales growth in 2026, and we are just getting started. As AI moves beyond the cloud and into everyday devices, our technology is helping lead this change. With SPOT’s industry-leading power efficiency, we enable intelligent devices that are mobile, secure, and personal. We bring powerful AI directly to where data is created and decisions are made. We believe this shift to true edge intelligence is a defining moment for our industry. We are excited about the role Ambiq Micro, Inc. will play in shaping this future. Thank you for your continued confidence and support. With that, I will open the call to questions. Operator, please go ahead. Operator: Thank you. The floor is 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 a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star one to join the queue. Your first question comes from the line of Quinn Bolton of Needham & Company. Your line is open. Quinn Bolton: Hey, guys. Congratulations on a nice finish to 2025 and a strong outlook for 2026. I guess, let me ask: Fumi or Jeff, you have mentioned several times your strong outlook for 2026. I am wondering if there is any sort of guidance you can provide around that. I mean, certainly, you could be on pace to generate north of $90 million of revenue, maybe even approaching $100 million. And a related follow-up: historically, you have seen revenue peak in June, just reflecting seasonality of some of your wearable customers. In 2025, you saw sequential growth throughout the year. What kind of revenue pattern quarter to quarter would you expect? Do you think Q2 is the peak, or could it be a more linear ramp through the year? And then I have a follow-up. Fumihide Esaka: Hi, Quinn. Thanks for the great comment. Like I said in the script, Q4, definitely, we are seeing as an inflection point. Customer forecasts are coming in extremely strong, and the trend will continue in 2026. Again, we see Q1, Q2, Q3 to be extremely strong, and Q4, I think we are still a little bit at a far distance, and typically seasonality will fix in Q4. But we clearly see a path to more than $100 million at this point, and we are very confident that we can achieve more than what we originally forecasted. Does that answer your question? Quinn Bolton: That is great. And then a question if Scott is there. You announced that 12-nanometer SPOT technology gets down to operating voltage as low as 300 millivolts. If I looked at a more standard low-voltage process at TSMC for 12 nanometer, does that get down to 400, 500 millivolts? How much lower at 300 millivolts would the SPOT process be than the standard foundry offering at TSMC? Just trying to get a sense of the power advantage you bring with the 12-nanometer SPOT technology. Thank you. Scott Hanson: Process nodes across foundries is going to be on the order of 700 millivolts, so 0.7 volts. We are running at a fraction of that operating voltage. If you are running at, let us say nominally, to make it easy math, 350 millivolts against a 700 millivolt competitor, that is going to give you a fourfold energy advantage. Of course, things are a little more complex than that. On the one hand, I have always said that a good portion of the SPOT advantage comes from all the stuff we do other than voltage scaling: the way we build our clock trees and our bus fabrics and our memories and everything else. You have the potential to go more than 4x if you layer all that innovation in. We feel really good about what 12 nanometer is looking like and are excited about some of the early measurements that we are seeing in-house. Quinn Bolton: That is great. Thank you. Operator: Your next question comes from the line of Tore Svanberg of Stifel. Your line is open. Tore Svanberg: Yes. Thank you and congratulations on the strong results. Fumi, could you talk a little bit more about some of the applications or end markets that are going to be driving the strong growth in calendar 2026? I mean, obviously, wearables have been a big part of the business, but you are now getting into industrial. Any more color on the types of applications that will be driving the growth would be very helpful. Fumihide Esaka: Thanks. We are seeing strengths in every product line and end market. First, let me tell you that Apollo 3 family, 4 family, and Apollo 5 family are seeing very strong demand to enable edge AI. And, yes, major increase is still coming from wearable customers, but 25% of the funnel is now non-wearables and medical and so on. We do expect more than the original percentage of the share as non-wearables in 2026. The growth is phenomenal. You would expect our traditional industrial leaders, but some other medical and industrial applications will be contributing to our 2026 revenue. Tore Svanberg: Very good. And as my follow-up, you talked about some volatility in the OpEx for the year. I was just hoping you could give us a little bit more feel for whether it is going to be first-half weighted or second-half weighted, because I think you did say it is not going to be linear. Any more color on first half versus second half would be very helpful. Thank you. Jeffrey Winzeler: Sure. As we think about OpEx for 2026, as you know and as we said on the call, we are going to invest roughly a $30 million increase in our OpEx year over year. The way that is going to break out is there are three major components that really drive that increased spending. The first is Ambiq Micro, Inc. headcount. We are going to hire more engineering in both hardware and software and continue to grow our internal capabilities. That spending will be somewhat linear as we add more people to the company. The second place that we are going to spend that money is in contract engineering. This is important because it gives us scale both on the upside and the downside. It gives us a more variable cost structure. For that contract engineering, it will be very much project-based. As we think about the products that we are going to tape out in 2026, you would expect to see very high periods of engineering, probably more in the Q2, Q3 timeframe, where we will utilize that project engineering. The last place that we will spend a significant amount of money is in our IP acquisition. These IPs are necessary for us to build new products, and that is very project-based. It is not a linear spend, and given it is to support products that we are going to tape out in the second half of the year, I would expect the majority of that spending to take place in the Q2, Q3 timeframe. Tore Svanberg: Very helpful. Congrats again. Operator: Thank you. And again, if you have a question, please press star one on your telephone keypad to join the queue. Your next question comes from the line of Vivek Arya of Bank of America. Your line is open. Vivek Arya: In terms of elevated component pricing, are you seeing any impact on demand due to that? Are you relatively insulated from any pricing pressure from your customers as they want to preserve their margins? And how should we think about the gross margin trajectory through the year, given the introduction of a lot more new, higher-complexity Apollo SKUs with your customers and more design wins? Should we expect that to accrete significantly or remain around this 45% zip code? Jeffrey Winzeler: When we think about margins, first of all, we are very happy with the margin accomplishments that we made in 2025. We increased our gross profit dollars by over 30% year over year, and we increased our gross margin year over year, going to 45% for total 2025. When we think about the margin equation going forward, there are two components. The first is the ASP side of the equation, and there we continue to focus on opportunities where we can maximize our value. We are very much looking for high-revenue opportunities where we get paid the most on a per-unit basis for our product. On the cost side of the equation, we are very focused on things that we can control, which are yield across our product portfolios. That said, our efforts may be tempered by some of the dynamics that are happening in the industry. The increasing cost of being a fabless semiconductor company exposes us to higher pricing of our capacity, probably more in the back half of the year. That aspect of it we are monitoring very closely, and that could put pressure on our ability to grow margins year over year. Vivek Arya: Okay. Thank you. And then in terms of this new customer you have got in 2025, any idea in terms of the timing of that ramp, when it becomes sizable? Should we expect that socket to be similar size to your other wearable customers, or will it remain a little bit smaller? Fumihide Esaka: You mean 2026, right? That new customer is starting to ramp starting Q1 with very, very strong growth quarter after quarter, and we expect that 2027 will be even bigger. We are very excited to have that new customer being a big family. Operator: Thank you. And we have a follow-up question from Quinn Bolton of Needham & Company. Your line is open. Quinn Bolton: I know you do not give us a split quarter to quarter on Apollo 3, 4 versus 5, but it does sound like you are seeing broader adoption of Apollo 5. Could you give us any rough percentage of revenue that was Apollo 5 exiting 2025, and what percent of revenue it could reach in 2026? Is it a pretty significant mix shift up to Apollo 5? Any comments would be helpful. Fumihide Esaka: Apollo 5 is definitely increasing, but again, the denominator—you know that our total revenue is growing faster than expected—and Apollo 3 is really enabling one of the big customers. Apollo 4 is enabling one of the newer customers that joined in 2025, and Apollo 5 is across all the customers. All of them are growing, and for Apollo 5, I have to say that the quantity itself is growing fast. If you ask about the percentage, we do not give out too much of that percentage, but the percentage is slowly growing, while the absolute quantity is growing fast. Quinn Bolton: Okay. Got it. Thank you. Operator: With no further questions, that concludes our Q&A session. This also concludes today’s conference call. We thank you for your participation. You may now disconnect.
Operator: Good morning. My name is Amanda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Victoria's Secret & Co. Fourth Quarter and Fiscal 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. All parties will remain in a listen-only mode until the question and answer session of today's call. I will now turn the call over to Priya Trevetti, Senior Vice President and Global Head of Investor Relations and Treasury of Victoria's Secret & Co. Priya, you may begin. Priya Trevetti: Good morning, and welcome to Victoria's Secret & Co. Fourth Quarter and Fiscal 2025 Earnings Conference Call. For the period ended January 31. Joining me on the call today is Chief Executive Officer, Hillary Super, and Chief Financial and Operating Officer, Scott Sekella. We are available today for approximately 30 minutes to answer questions. I would like to remind you that any forward-looking statements we may make today are subject to our Safe Harbor statement found in our SEC filings, and in our press releases. Certain results we discuss on the call today are adjusted results and exclude the impact of certain items described in our press releases and in our SEC filings. Reconciliations of these and other non-GAAP measures to the most comparable GAAP measures are included in our press release, our SEC filings, and in the investor presentation posted on the Investors section of our website. I will now turn the call over to Hillary. Hillary Super: Thanks, Priya. Good morning, everyone, and thank you for joining us today. This is a standout year for our business. We returned to growth mode in 2025 with full year comp sales up 5%. Fourth quarter and full year results exceeded top and bottom line guidance reflecting strength across brands, channels, and geographies. In the fourth quarter, we grew comp sales 8% to deliver our highest fourth quarter revenue since becoming an independent public company. Brand momentum is building, our customer file is growing, and we are gaining market share. Eighteen months ago, I joined Victoria's Secret & Co. because I saw one of the compelling transformation opportunities in retail. To capture that opportunity, we put in place a clear road map for the business. Our Path to Potential strategy. Built on four pillars. Supercharging our bra authority, recommitting to PINK, fueling growth in beauty, and evolving our brand projection and go-to-market strategy. Throughout the year, we executed this strategy with focus and discipline. We assembled a leadership team that has rallied around the new direction for our business, re-centering the organization around what matters most. Creating emotionally compelling product, building brand heat, and deepening our connection with the customer. While still early in our transformation, the results to date are clear. We reasserted our leadership in bras, restoring the category to growth for the first time in four years. We reignited PINK, delivering its strongest growth year in a decade. And we steadily grew our nearly $1 billion beauty business. We also expanded our customer file for the first time in years. A signature brand moment in 2025 was the fashion show, which re-established Victoria's Secret & Co. at the center of the cultural conversation and translated directly into business momentum. It also marked a meaningful step forward in our new era of sexy. Defined not as a single look or standard, but as a feeling of confidence and authenticity. The progress we made in 2025 reflects a deliberate evolution in how we operate. When we combine great product, powerful storytelling, and an elevated experience, our customer responds. I would like to spend a few moments discussing our holiday and Valentine's Day execution, which reflects marked improvement versus the prior year. I will then cover our international performance followed by the progress we are making against our strategic pillars. Scott will then walk you through our detailed financials and 2026 outlook. As we reflected on last year's holiday and Valentine's seasons, we saw an opportunity to further strengthen our position and translate learnings and insights into growth. In 2025, we amplified the fashion show to drive sustained traffic and engagement through November and into Black Friday, delivering our highest customer turnout since 2021 with strong participation from new customers. In December, we maintained a consistent cadence of fashion newness, especially in bras and sleep. We supported key categories with deliberate inventory investments, targeted digital and social marketing, and refreshed store windows and merchandising. In particular, sleep significantly outperformed expectations and became a key growth engine for the business during the quarter. For Valentine's Day, we reinforced Victoria's Secret & Co. as the destination. We shortened the semi-annual sale and set the assortment earlier, extending the selling window and broadening the lifestyle offering. For VS, this was my favorite floor set since joining the business. Elevated, beautifully executed, and undeniably Valentine's Day. Anchored in bras, the floor set was powerful and offered a range of sensibilities from glamorous to casual. We supported the launch with a high-impact campaign featuring Hailey Bieber, driving engagement and new customer acquisition. At PINK, we built on the viral fashion show moment featuring the K-pop group TWICE with a bra-centered Valentine's Day campaign. The campaign focused on self-expression, friendship, and empowerment in a way that was unmistakably PINK. The campaign resonated and drove continued acceleration in the PINK bra business. The VS and PINK Valentine's collections outperformed our expectations, delivering double-digit sales growth. The week of Valentine's Day, store traffic increased significantly year over year, meaningfully outperforming the mall. Turning to international. For the fourth quarter, net sales increased 43% year over year with growth across channels and geographies, led by continued strength in China. In that market, social commerce and live streaming are critical to the purchase journey and powerful drivers of engagement and conversion. This year, we took a more coordinated global approach to product, marketing, and storytelling. We aligned our merchandising to our strategic pillars to ensure each market delivers the right assortment and messaging and complemented our global assortment with exclusive local product, allowing us to move quickly to meet demand. We also benefited from a more global approach to the fashion show, resulting in a brand halo that extended internationally. During my recent visit, I saw firsthand the work our teams are doing to drive outsized results, and I am confident we have significant runway to grow digitally and in stores. International remains a significant long-term opportunity for us. In fiscal 2026, we expect to deliver double-digit growth by expanding in existing markets, entering new markets, and maximizing our digital and social commerce opportunity. Now let us turn to the progress we have made in each of our four pillars of the strategy. We begin with supercharging our bra authority. Over the past year, we put bras back at the center of the Victoria's Secret & Co. brand while strengthening our operating muscle. Recognizing that bras are not typically a holiday gifting category, we focused on our core franchises. We delivered a steady flow of newness as well as fun in the assortment, supported by digital storytelling and the right inventory levels to meet demand. Our disciplined execution drove outsized growth across our top bra franchises and sustained customer engagement through the holiday. As a result, the Victoria's Secret & Co. bra business grew mid-single digits in the fourth quarter. We continued reducing promotions throughout the year, which drove a mid-single-digit increase in our bra AUR. This performance was partially enabled by our industry-leading bra fitting experts, who build meaningful connections that deepen customer loyalty in our stores. Our efforts returned the Victoria's Secret & Co. brand bra business to annual growth for the first time since 2021. When we win in bras, we see a halo across the brand. That effect was evident in panties as well as in sleep which I noted earlier. We made panties more fun and playful. We introduced more newness, balanced our silhouette offering, and expanded fabrics. The results were strong. VS panty AURs increased and the business significantly accelerated in the fourth quarter, driving our best performance in panties since 2021. This momentum is particularly meaningful since this is our number one new customer acquisition category. We leaned into sleep this quarter, an important gifting category and a meaningful driver of Q4 performance. Sleep is highly visible. Customers wear it, share it, and signal their affinity for the Victoria's Secret & Co. brand. Our social channels were flooded with real moments as our sleep assortment was celebrated in posts from holiday gatherings, family photos, theme parties, and festive occasions. Our iconic sleep assortment was a standout through the holiday and into Valentine's Day led by hero styles in logo and heritage stripes. Applying insights from the last year, we were better positioned with inventory and digital activation to capture demand. As a result, sleep delivered outsized growth and became our third largest new customer acquisition category in the quarter. Altogether, the Victoria's Secret & Co. brand delivered low double-digit growth for the quarter, a clear demonstration of the multiplier effect of our strategy. We carried our momentum into the first quarter with the outperformance of our Valentine's Day collection, and immediately followed with the launch of the Victoria's Secret signature collection. Signature elevates the comfortable bra she reaches for every day, bringing new energy to an essential category and is anchored by our best selling wireless T-shirt bra featuring a stylized update to our classic logo. The collection was supported by a thumb-stopping campaign with a cast of fan-favorite VS Angels that drove strong social engagement and cultural buzz. Beyond Signature, we have a powerful pipeline of innovation. Watching our spring floor sets come together genuinely made my heart race. They are vibrant, saturated with color, and completely alive. I cannot wait to see customers step into this experience and feel that same energy. Our second pillar is recommitting to PINK. For several years, the brand had drifted from its core, losing clarity, energy, and cultural edge. In 2025, we reset the foundation and returned PINK to a differentiated, digitally native, socially driven lifestyle brand for 18–24 year olds rooted in its bold, playful, and irreverent DNA. One year into our Path to Potential strategy, PINK has a stronger brand definition, growing awareness and relevance, and renewed affinity. All of this is showing up in the numbers. In the fourth quarter, PINK grew high single digits driven by increased apparel penetration and renewed momentum in bras. Importantly, we pulled back on promotions, driving more regular price selling and double-digit AUR expansion, which benefited margins across PINK's portfolio, showing that the brand is regaining pricing power. On the apparel side, PINK won the holiday season with core icon styles and fashion newness. Our Wednesday drops have become highly anticipated as customers check in regularly with growing urgency to purchase, and our second drop from the LoveShackFancy collaboration resonated with our brand fans and drove significant regular price selling in December. PINK's bra business also exceeded expectations for the quarter. TWICE's appearance in the fashion show sparked viral demand and drove two sellouts of the Wear Everywhere bra. We built on that momentum by featuring TWICE again in our Valentine's Day campaign, deepening the emotional connection with our customer. I saw that firsthand during a visit to our Dadeland Mall store in Miami where young customers gathered together to dance and learn the choreography. This is exactly the kind of emotional connection that we have been working towards. The TWICE campaign became our most viewed PINK campaign ever, generating more than 79 million social views. PINK app downloads increased 50% in the quarter as customers sought early access to drops, with downloads accelerating further following the Valentine's Day launch. Importantly, PINK brand equity and consideration among 18–24 year olds are at their highest levels in years. As we enter the first quarter, we are maintaining a disciplined cadence of product newness, activating around spring break, continuing to innovate our ICON styles, and seeing early progress in revitalizing the PINK panty category. Later this year, we will open a stand-alone PINK pop-up in SoHo, New York, bringing the brand to life physically. In 2026, we see a long runway to expand PINK. Our focus is on building relevance with Gen Z by celebrating the moments that matter to her and meeting her in her digital world through entertainment, culture, and community. By moving at the speed of culture from high-impact moments like the fashion show and Valentine's Day to partnerships that spark conversation and engagement, we believe we can strengthen emotional connection and drive growth. Our third pillar is fueling growth in beauty. In beauty, scent is our secret weapon. It is often her first layer and her lasting impression tied to memory and the moments that matter most. For her, fragrance is emotional. For us, it is powerful. It creates loyalty and connection in a way that few categories can. This emotional resonance is translating into meaningful growth. Newness in fine fragrance, including the holiday edition of Bombshell, resonated strongly, amplified by integrated marketing across channels. As a result, beauty grew low single digits in the quarter, driving another year of growth for the business. Fine fragrance continues to lead our beauty business and remains a key differentiator. While many brands compete primarily in mists, we have established ourselves as a world-class fine fragrance destination with craftsmanship and creative rigor of couture fashion houses. This is anchored by Bombshell, America's number one fragrance. We are investing in our team and creative capabilities in beauty. Looking ahead, we are strengthening our innovation pipeline, expanding into adjacencies, and differentiating PINK's beauty offering. We are also using real-time insights to respond to demand. We see a meaningful runway to accelerate growth in 2027 and beyond. Finally, our brand projection and go-to-market pillar is transforming how our brands show up. Over the past year, we have clarified each brand's distinct positioning. That clarity now guides our product, marketing, and cultural engagement. We have sharpened our marketing model, shifting investments towards digital and social and leaning into bold, entertainment-led creative. This is allowing us to tell more brand stories on more platforms and with greater frequency. Recent examples include the January release of our behind-the-scenes fashion show documentary, which keeps the fashion show top of mind and brings the creativity and the people behind the brand to life. Social activations for the documentary have generated over 36 million views. Additionally, our Valentine's Day campaigns drove over 10.5 billion impressions, three times that of last year. These events extended the halo of our biggest brand moments. That brand heat is translating into strong results. In the quarter, we grew our total intimates business at a high single-digit rate and expanded intimates market share for the third consecutive quarter with share up low single digits. Our overall customer count grew at a low single-digit rate led primarily by new customer acquisition, including amongst young customers, while retention among existing customers improved. Growth spanned both digital and stores, and spend per customer increased mid-single digits, reflecting the continued progress in quality of sale. At the same time, our brand relevance and purchase consideration metrics are at their highest levels in several years, including across digital. Our app is a highly engaging way to connect with customers, offering personalized experiences and deeper insights into how customers shop. In the fourth quarter, app downloads increased 25%, and our apps now drive approximately one third of our digital sales. For the remainder of 2026, we continue to execute a disciplined cadence of brand-building moments. With sharper positioning, stronger consumer insight, and a more modern go-to-market model, we see a path to converting brand heat into sustained market share gains. In closing, we delivered exceptional results. One year in, the Path to Potential strategy is taking hold. The acceleration in the back half of 2025 underscores the impact of our disciplined execution and sharper focus. This performance is especially meaningful because our team is just hitting its stride. Many members of the management team have been here for less than a year and are already driving tangible impact. Over the past several months, I have spent time in our stores across the U.S. and internationally. The energy of our teams and the engagement of our customers are unmistakable. We are listening closely, responding quickly, and translating real-time insights into incredible product and experiences. That responsiveness, combined with innovation and more effective marketing, has strengthened our trajectory and positions us to build on our success. We enter fiscal 2026 with strength and confidence in our ability to lap our recent performance. The guidance we are issuing today reflects the strength building across all three businesses and how our Path to Potential strategy is creating a multiplier effect that supports sustained growth. I want to thank our teams for the commitment, creativity, and discipline they bring to this business every day. Our performance is a direct result of their execution. We are still early in this transformation, but the progress is real, the momentum is building, and the opportunity ahead is significant. With that, I will turn it over to Scott to walk through the financials and our fiscal 2026 guidance. Scott Sekella: Thanks, Hillary, and thank you, everyone, for joining today's call. Before I begin, as a reminder, in 2024, we recorded a change in our accounting estimate related to the expected future redemption of outstanding gift cards issued by the company. As a result of this change in accounting estimate, we recognized a one-time cumulative adjustment which increased net sales, gross margin, and operating income by approximately $26 million in 2024. That said, we are pleased to report fourth quarter and full year results that exceeded the high end of our guidance on both the top and bottom line. For fiscal 2025, excluding last year's gift card breakage benefit, net sales grew 6% to $6.553 billion. Adjusted operating income rose 16% to $403 million and adjusted EPS increased 22% to $3.00, all despite $85 million in net tariff pressure. Now let us review our fourth quarter results in more detail. Net sales for the quarter were $2.270 billion, an increase of $164 million or 8% over last year, or 9% excluding the one-time gift card breakage benefit. Comp sales increased 8% for the second consecutive quarter. These results exceeded expectations and reflected broad-based growth at Victoria's Secret, PINK, and Beauty, and across all channels and geographies. We saw increases in sales metrics, including higher comp traffic and average order value, reduced promotions, and increased regular price selling. AURs in the quarter were up 6% compared to last year and up 7% excluding panties. Hillary explained how we accessed the insights from 2024 and applied these learnings across the business. I want to highlight the operational excellence we are building as an organization. Our cross-functional teams have delivered more frequent product newness and bolder marketing and storytelling. This strong execution translated into impressive fourth quarter results. In North America, our total intimates business across VS and PINK grew at a high single-digit rate. We outperformed the intimates market in the quarter, driven by strong performance in bras, and delivered low single-digit market share gains. We exited the year having grown our total intimates business for the first time in four years. Combined with the success in sleep and Valentine's Day that Hillary mentioned, the VS brand grew low double digits in the fourth quarter. At PINK, we invested in-depth behind our key icon styles while delivering fresh fashion newness, returning both PINK apparel and the total PINK brand to growth. Fiscal 2025 marked PINK's strongest growth in a decade. In Beauty, we grew low single digits in the quarter supported by fine fragrance and mists, which continued to perform well. For 2025, Beauty delivered yet another year of growth. Our international business also continued to perform exceptionally well during the quarter. Reported fourth quarter sales grew 43% to $276 million driven by outstanding performance in China, primarily in the digital channel. Adjusting for the shift in the reporting of European digital sales, which were previously fulfilled from our U.S. distribution center and recorded in North American direct sales, international sales grew 27%. International results included high single-digit retail comp sales gains combined with continued new store openings. Fourth quarter adjusted gross margin dollars were $895 million. Adjusted gross margin rate in the quarter was 39.4%, compared to an adjusted gross margin rate of 39.7% in the fourth quarter last year, or approximately 38.9% excluding the $26 million gift card breakage benefit. Excluding the gift card breakage benefit, we expanded our year-over-year adjusted gross margin rate by 50 basis points despite approximately $60 million, or 250 basis points, of net tariff pressure in the quarter. We mitigated this headwind with margin expansion driven by our strong operational foundation, which enabled us to scale effectively, resulting in significant leverage on buying and occupancy expenses. Additional drivers included a pullback in promotions and increased regular price selling. Adjusted SG&A dollars were $579 million in the fourth quarter, and our adjusted SG&A rate was 25.5% compared to 25.4% last year or 25.8% excluding the $26 million gift card breakage benefit. We leveraged on the SG&A line by 30 basis points, driven by the sales beat and continued discipline in expense management across the business. This was partially offset by investments in store labor and higher incentive compensation expense associated with our outperformance in the quarter. Adjusted operating income was $316 million for the fourth quarter, above the high end of our guidance of $265 million to $290 million and up from last year's fourth quarter adjusted operating income of $299 million, or $273 million excluding the $26 million gift card breakage benefit. Nonoperating expenses, consisting principally of interest expense, were $14 million in the quarter, better than our guidance of approximately $17 million and down from last year, driven primarily by a lower level of weighted average borrowings and lower interest rates. Our adjusted net income per diluted share was $2.77, significantly better than our guidance of adjusted net income per diluted share of $2.20 to $2.45, and last year's fourth quarter adjusted net income per share of $2.60 or approximately $2.35 excluding the gift card breakage benefit. Turning to the balance sheet. Our inventories remain in a healthy position. Fourth quarter total inventories were up 12% year over year. Excluding the impact of the Adore Me inventory reserves, inventory growth would have been in line with our previous mid-teen guidance. From a liquidity standpoint, we ended the fourth quarter with a cash balance of $518 million, an increase of $291 million above last year. We generated free cash flow of $312 million for the full year. Included in free cash flow was a $69 million benefit related to the settlement of a long-standing intercompany fee litigation. Excluding this one-time item, our adjusted free cash flow was $244 million, more than $30 million above the high end of our guidance. As planned, we repaid all outstanding borrowings under our $750 million ABL credit facility in the quarter. Our cash balance and the full availability under our ABL agreement leave us in a strong financial position with ample flexibility for continued execution of our strategic priorities. Before moving to our outlook, I want to briefly address the DailyLook and Adore Me businesses. As noted in our press release this morning, we have initiated a strategic review of DailyLook, which operates as a digitally based premium subscription women's apparel and accessory styling service and represents a noncore asset within our portfolio. We are evaluating options to best position DailyLook for long-term success. We also continue to assess the Adore Me business and explore opportunities to optimize it within our portfolio. As a result of this ongoing review, we recently discontinued Adore Me's intimates-based subscription offering and converted it to a loyalty program designed to provide customers with a flexible, improved, and seamless shopping experience. We also decided to exit the Adore Me distribution center in Mexico, and we have transitioned all fulfillment operations to the U.S. In conjunction with these actions, in the quarter, we recorded a noncash pretax impairment charge of $120 million related to the long-lived assets of Adore Me and a $36 million charge related to inventory reserves and other restructuring charges. These charges have been excluded from our adjusted non-GAAP results. Moving to our outlook, which is based on tariff assumptions consistent with the rates in place prior to recent developments. We have not included any impact of any potential changes to tariff rates and will continue to monitor developments closely and remain agile in our approach. As we discussed, we saw outperformance in the fourth quarter and that momentum has carried into 2026. Our spring offering is resonating well. Looking ahead, we have a strong pipeline of floor sets and brand moments. Brand heat continues to build as our product resonates with customers, driving market share gains and growth in our customer base. Our Path to Potential strategy is in its early stages, and we see substantial opportunity ahead to continue to deliver top-line growth. For fiscal year 2026, we expect net sales to be in the range of $6.850 billion to $6.950 billion compared to net sales of $6.553 billion in fiscal year 2025, representing growth of approximately 5% to 6%. We expect fiscal 2026 operating income to be in the range of $430 million to $460 million compared to adjusted operating income of $403 million in 2025. This implies operating margin expansion of approximately 20 to 50 basis points despite the incremental tariff headwinds. We have built a solid operational foundation that enables us to scale effectively and supports growth. As our top line grows, this foundation provides meaningful leverage across our buying and occupancy expenses. In addition, we believe our disciplined expense management, tariff mitigation efforts, and ongoing focus on reducing promotions and increased regular price selling position us to continue to expand our operating margins. Our fiscal 2026 guidance assumes an incremental gross tariff cost of approximately $160 million. We expect to mitigate most of that impact, resulting in an incremental net tariff impact of about $40 million. Our mitigation efforts include optimizing costs with vendors, further diversifying our sourcing, ensuring we have a more efficient air versus ocean freight mix, and implementing strategic pricing actions including more targeted promotions, increased regular price selling, and selective price adjustments where we identify value gaps in the market. We expect tariffs to have the greatest impact in the first half of the year, with the first quarter seeing the largest impact since last year's first quarter was not affected by tariffs. That impact eases in the back half as we begin to lap tariffs and our mitigation efforts increase. Given these inputs, we are forecasting fiscal year 2026 net income per diluted share to be in the range of $3.20 to $3.45 compared to adjusted net income per diluted share of $3.00 in 2025. We estimate capital expenditures in the range of $220 million to $240 million in fiscal 2026, or approximately 3% of sales. Capital investments will continue to focus on stores, the customer experience, and technology and logistics supporting our strategic initiatives to drive growth and operating efficiencies. We estimate 2026 free cash flow of approximately $220 million to $250 million. As for store counts and renovation plans in North America in 2026, we expect store counts to be flat to slightly up this year. By the end of the year, we estimate our Store of the Future presence in North America will be approximately 250 stores or 30% of the fleet, up from 25% in 2025. Internationally, we expect our Store of the Future presence by the end of 2026 to be approximately 55% of the fleet, up from 45% in 2025. By 2027, we expect approximately 50% of our global fleet will be converted to this format. Turning to our outlook for the first quarter of 2026. We are forecasting net sales in the range of $1.490 billion to $1.525 billion compared to net sales of $1.353 billion in the first quarter of 2025. This outlook assumes top-line growth of approximately 10% to 13% based on our continued momentum quarter-to-date in our North America business as well as strength in our international business. With this sales outlook, we expect first quarter 2026 operating income to be in the range of $32 million to $42 million compared to an adjusted operating income of $32 million in the first quarter of 2025. We expect our first quarter 2026 gross margin rate to be about 35.5% compared to an adjusted gross margin rate of 35.2% in the first quarter of 2025. This means we anticipate the first quarter 2026 gross margin rate to expand approximately 30 basis points year over year. Our margins are expanding despite the approximately 175 basis points of tariff pressure in the quarter. We expect to more than offset this based on the strength of our operational model, which continues to deliver leverage on buying and occupancy expenses as net sales grow, as well as our disciplined promotional strategy and more regular price selling. The SG&A rate in the first quarter of 2026 is expected to be approximately 33% compared to the first quarter 2025 adjusted rate of 32.8%. The forecasted increase in SG&A dollars is primarily driven by store labor investments and other costs to support the customer experience and top-line growth, as well as higher incentive compensation expense as the first quarter of last year benefited from a reduced level of incentive compensation expense. Given these inputs, we estimate first quarter earnings per diluted share to be in the range of $0.20 to $0.30 compared to adjusted earnings per diluted share of $0.09 in the first quarter of 2025. We expect to end the first quarter with inventories up high single digits compared to last year. This expected increase reflects growth to support business trends, the impact of tariffs, and timing related to our operations, mostly due to our strategic shift towards ocean freight from air freight, which results in us taking ownership of inventory earlier as compared to last year. In closing, our Path to Potential strategy is delivering tangible results as evidenced by the significant acceleration in our business during 2025. We are entering 2026 with momentum. Despite an uncertain macro environment, our fundamentals remain strong and resilient. We remain focused on managing costs while continuing to invest in product innovation, brand strength, and the customer experience. We are positioned to continue to scale effectively, giving us confidence in our ability to drive sustainable, long-term value. We will now open for questions. Operator? Operator: Thank you. And one follow-up to allow ample time to respond to each participant that may wish to participate in this portion of the call. For our first question, we will go to the line of Matthew Boss with JPMorgan. Your line is open. Matthew Boss: Great. Thanks, and congrats on a nice quarter. So maybe, Hillary, could you elaborate on new customer acquisition trends following the inflection in the file to growth last quarter? And just what inning you see marketing and product improvement in today as we think about sustaining momentum into 2026? Hillary Super: Sure. Sure, Matt. So customer acquisition. When you look at our total customer file, we are seeing growth across new, retained, and reactivated, but the highest growth in new. And within that, we are seeing a nice uptick in younger customers. It is a little gray because there is a delayed match in age range, so it is not a precise science, but we do see that and we see anecdotally in our business that we are increasing our count of new customers, which feels great. I would also add that from an income perspective, we are seeing consistent performance across the board in all income cohorts. And we are seeing growth in the customer count across all income cohorts as well as spend. So we are feeling really good about the complexion of customers as we enter 2026. In relation to marketing and what we have planned, you know, the team is just getting started. When we executed Q3 and Q4, the majority of the leadership team on the brand side was new. And so while we are tremendously happy with the success we had in the back half of the year, we are just getting started and we are learning things every day that we are playing forward. I think Valentine's execution is an example of that, where we learned the power, the virality of a K-pop group like TWICE, brought them back to collaborate on Valentine's Day, and just saw record results from that collaboration. So we are moving quickly. We have a number of events planned for both brands. And I think one of the things I am most excited about is we are really starting to find our voice with the PINK brand and what resonates there. I think we were farther along with VS and building brand heat in VS, and I am very excited about some of the things that are in the pipeline for PINK. So all the way around, we are feeling really positive. Matthew Boss: Great. And then maybe, Scott, as a follow-up, I think you mentioned momentum multiple times. I lost count in terms of the first quarter to date. But maybe just if you could elaborate on the momentum that you are seeing first quarter to date, maybe relative to the 10% to 13% revenue growth outlook and just drivers of the demand acceleration that you are seeing relative to holiday. Scott Sekella: Yeah. I mean, you know, coming off of holiday, which started with the fashion show heat, continued with the product newness. And then when you think about the fourth quarter setting Valentine's Day a little bit earlier and getting the heat around Valentine's Day in Q4. That carried in to February through Valentine's Day, and we saw, you know, impressive traffic, especially the week of Valentine's Day, which has set us up for a strong Q1 with that guide of plus 10% to plus 13%. I will say, you know, February is probably our easiest comp month given, you know, last year the trends were down and then sort of rebounded in March and April. So for Q1, we expect that 10% to plus 13%, but the March–April time frame will probably be a little bit below what we are seeing in February. Hillary Super: And then I will just jump in on the categories. We are really, really pleased in February to see very broad-based success across business units, across channels, and even in the categories that we are really focusing on. So I would say very consistent, very broad-based success. That being said, the things that I am really paying attention to in VS are sleep and intimates. In PINK it is bras, apparel, and collaborations, and in Beauty it is fine fragrance and mists. And I am really happy to report that all of those businesses are performing very well and very consistently. Matthew Boss: It is great color. Best of luck. Operator: Thank you. Our next question comes from Simeon Siegel with Guggenheim Partners. Your line is open. Simeon Siegel: Great. Thanks. Hey, everyone. Good morning. Really nice job. So Hillary and team, obviously, you have this slate here behind you. You are seeing what is working, what is it, maybe it feels like you have a really nice handle on the brand. So just as we take a step back, anything you are willing to share about how large you think each brand can and should be? And then I do not know if it is Hillary or Scott, but just any notable discrepancy in AUR, I think, versus Victoria this past quarter. And do you see greater go-forward opportunity at either brand? Thank you. Hillary Super: Sure. I am just very optimistic about all three business units. I do not see a reason why we cannot hit historical levels of sales in VS and Co. in general. I am not going to point to any specific numbers by brand, but we see tremendous runway in all of them. And we are working towards delivering that. I am feeling great across the board and with PINK, I think we are just really getting started. In terms of AUR, we are seeing broad-based success across removing promotions. But two things I want to highlight are real strength in bra AUR, which just goes back to leaning into our expertise, authority, and storytelling, as well as our in-store service. And then the other thing I would highlight as a real win was PINK apparel, where we saw double-digit AUR increases. And we have been able to, I think, make the most headway with delayering promotions. But we still think there is tremendous room to continue delayering, and we continue to look at that and discuss it and work towards it every day. Simeon Siegel: That is really great. Great job, guys. Best of luck for the year. Operator: Our next question comes from Mauricio Serna with UBS. Your line is open. Mauricio Serna: Great. Good morning, and thanks for taking our questions. First, to Hillary, maybe could you talk about, you know, on a higher level, in what inning do you see yourself on the turnaround of VS and PINK? Just curious because, you know, you have had now three consistent quarters of very strong comp sales. So just thinking, like, how far along do you think you are on this turnaround? And maybe could you elaborate on the market share trends you saw in the quarter for the North America bras and panties categories? Thank you. Hillary Super: Sure. What inning are we in? You know, early to mid. I think it is different for each business unit. Victoria's Secret brand, I think, is farthest along. That team has been working together for the longest. I think we, you know, have the clearest view of what we needed to be dominant in there, which is obviously bras being at the heart of that business. It is really just clicking. And there is so much that we can build upon there. I feel great about that. I think in PINK, we are seeing equally strong results, but we are more in learning mode. I would say this customer has changed more than the Victoria's Secret customer. The 20-year-old today is very different than the 20-year-old twenty years ago when this brand started. So we are learning and acting and seeing real success. And one of the things that I would point to outside of TWICE and what we have been able to do with that collaboration is really learning through the LoveShackFancy collaboration, applying those learnings to our PINK by Frankies collab that just dropped a couple weeks ago and seeing that turn into measurable results. And so we are consistently reading, learning, and reacting in PINK, and I think we are in earlier innings because of that. And then in Beauty, Beauty is a very technical business. There is a lot of innovation that is required. We have made some key hires, and we are really thinking a little bit longer term in Beauty. So that innovation and that regulatory element of Beauty takes a little bit of time, so we are going to be a little more conservative with Beauty in 2026 with the intention to start ramping up in 2027. I think you asked me one other question. Market share—yes. Super pleased with market share increases in all of the key categories. The only other thing that I would say to elaborate is it does look like we are taking share from the value sector primarily, which was where we had targeted all along. And so we continue to see that coming to fruition. And we are super excited that we are able to provide the emotional connection without having to drive promotions to entice those customers, and that is also just feeling like a real proof point for us. Mauricio Serna: Great. And just a quick follow-up for Scott. Maybe could you talk about the cadence of tariff impact throughout the year? You just kind of said that the first quarter is going to be the biggest one, but just more details would be very helpful. And just to clarify on the rates you are using, you are assuming a 20% for, you know, every country except China. Does that include also, like, India being, like, 18% coming down to 18% from 50%? Just wanted to understand that since I think you have exposure to that market. Thank you. Scott Sekella: Yeah. Yeah. Let me start with the second and then tackle the first. So we are assuming tariff rates in place prior to the Supreme Court ruling, and so we will continue to monitor the developments with that. With India, we had a good chunk of the 50% mitigated, so going to 18% is a smaller impact for us. So it does not really move the needle in a significant manner. In terms of the cadence of tariffs throughout the year, as we said, it will be heavier kind of in the first half and particularly even in first quarter if you think about tariffs were not in place in Q1 last year. So we will see, you know, about a 175 bps headwind in the quarter on that tariff pressure for Q1. And then it will still be an impact in Q2, but it will be lesser of an impact in the back half as, one, we start to lap tariffs, but two, our mitigation even continues to execute and ramp up through the back half. Mauricio Serna: Thanks so much, and best of luck. Operator: Thank you. Our next question comes from Corey Tarlowe with Jefferies. Your line is open. Corey Tarlowe: Hillary, I wanted to ask you about what worked well for you in 2025, and then as you think about 2026, if you could, for us, just zoom in on what you are looking to change in the first half specifically. Because I think if you compare what we saw in the back half of last year, some of that product and floor sets had your mark on it, but we heard it in your prepared remarks today about how emphatic you are about the new floor sets that are really hitting. So I was curious about what it is that you really see as the biggest factors of change in the first half of this year. And if you would like to elaborate about back half as well, that would be great too, but I wanted to zoom in there. Thanks so much. Hillary Super: Sure, Corey. Really proud of 2025 across the board. I think both from a product evolution standpoint, a cultural connection standpoint, and from a marketing optimization standpoint. I would say those were the three major levers that we pulled and worked in concert together to create the tangible results. As I think about assortment specifically to your question, Q1, the quarter we are in right now, really starting with Valentine's Day, is the first season that we, as a new team, all worked together from beginning to end, from concept to customer. And so you are seeing all of our insights, all of our conversations, all of our debates and hard work come to fruition with these floor sets. And I think more than anything, we have breathed new life into this assortment. It is more energetic. It is more fun. It is a little more youthful. We are not taking ourselves super seriously. Intimates should not be a serious business. This is about fun and escape and joyfulness. And I think that is really coming through on our floor sets. Particularly in the front half of the year, we have marketing optimization as a huge lever as that team really started to impact the back half of the year. And from our analysis on back-half-of-the-year marketing optimization, the analysis is telling us that, like, there is even more we can do, in particular with how we put the fashion show into the world. So we had a very specific pre, during, and post media strategy that worked very well, much better than it did the year prior, but even more to do there next year. So we have a very robust calendar of deliveries, activation, new ideas, new cultural connections in both brands throughout the entire year. I am not going to tell you what they are. But we are excited. And I think what you will see is the power of this executive team coming together as they all anniversary a year together and they start supercharging their ideas and really driving outsized results. Corey Tarlowe: That is great. So I guess a follow-up for Scott. Given all the excitement that is flowing into the business and sort of circling that square with the outlook for the year. How do you think about the factors of upside to the current guidance? Thanks so much. Scott Sekella: Yes. I mean, we feel really good about our current guide. As we have shared with Q1, a plus 10% to plus 13%. We touched on the momentum coming into the quarter and what we are seeing. I think you will see that momentum sort of carry into Q2. And then as we start lapping the higher comps in the back half, we see a runway to growth there, but it probably will not be as high as the growth in the front half is how we are thinking about it right now. But excited for all of these new floor sets. Excited for how the marketing is bringing the story to life, and I think it is setting us up for that sustainable growth throughout the year. Corey Tarlowe: Great. Thanks so much, and best of luck. Operator: Thank you. Our next question comes from Brooke Roach with Goldman Sachs. Your line is open. Good morning and thank you for taking our question. Brooke Roach: I was hoping I could follow up on Matt's question on marketing. What marketing spend as a percent of sales is embedded within the plan this year versus last year? Do you expect that rate to move higher on a medium-term basis given that you have with your customer engagement strategy? Scott Sekella: Yeah. I will touch on the first part and then Hillary can give some color. But in terms of marketing as a percent of sales, we see it picking up slightly right now. We see there is opportunity to potentially invest more where we can get a return on that ad spend. And so we did invest more through the back half, where we saw those opportunities, last year. And we are planning for a slight uptick this year. Hillary Super: And then I would just add that we have, you know, we have tremendous opportunity in optimization of marketing, especially in terms of segmented marketing. We are in the early stages of really evolving with the customer as she evolves her purchase and sort of consideration journey with agentic commerce. And then we are going to be looking for places where we have opportunities, where we have an absolutely unbelievable idea that is potentially out of the box and something that we want to bring to market. And so we are working to make sure that we have levers we can pull when those things arise. And we can manage it within our budgets. And, you know, those are some of the things I am most excited about, to be honest with you. Brooke Roach: That is great color. Scott, as you look at the merch margin opportunity ahead, how much more opportunity do you see from promotional reduction and what are your pricing plans? And how might that change as a result of the dynamic tariff environment that we currently find ourselves in? Scott Sekella: Yeah. Great question. As we went through 2025, you know, we had tailwinds from pulling back on promotions pretty much all year, even in Q4, which is a heavier promotional period, and we were still identifying days of promotions that we could shorten. We also increased our holiday GWP buy-in. So we are always looking for those opportunities, and we see those opportunities all through 2026 as well. As these brands become more about emotion versus promotion, we will continue to get tailwinds from pricing and promotions throughout the year. We also talked last year where we implemented some strategic price increases where we saw value gaps. So some of that will lap in the front half. We continue to monitor the consumer reaction, but we have not seen the consumer pull back. So I think you will see AURs continue to tick up throughout the year. And then we continue to monitor tariffs. I mean, as we said, we are planning with the tariffs that were in place prior to the recent developments. We talked about the color of how that is going to weigh on the front half versus the back half. But the other piece I would touch on with margins is just as we grow, we have got that low leverage point. So as we grow north of that 1% to 2%, we are going to continue to leverage in a meaningful way on buying and occupancy, which is what we have seen these last couple quarters. Whereas tariffs have come on in a big way, we have been able to still grow that gross margin rate. Hillary Super: Great. Thanks so much. I will pass it on. Operator: Thank you. Our next question comes from Marni Shapiro with The Retail Tracker. Your line is open. Marni Shapiro: Hey, guys. Congratulations. And especially on Valentine's Day, I am still shook that you had Hailey Bieber. It looked so beautiful. I do want to focus a little bit on PINK. It feels like PINK is getting its grounding and footing around the balance of apparel versus intimates versus beauty and accessories. I am curious if you could kind of outline what it should look like long term with the hits of fashion from your collaborations, like the denim that you pop in there. And where does active and beauty kind of fit into the PINK assortment now? Hillary Super: Sure. You are right. I think we are hitting our stride, and we are putting the puzzle pieces together here. And Ali said to me last week, she said, you know, it is really feeling great that the business is about 30% intimates, 30% core icons, and then 30% collaborations and fun that is unexpected. So I thought that was a good comment and something that we are really thinking about and refining. So lots of runway here, lots of experimentation. And then the key is when something clicks is how fast we can run with it to the next idea. And I think the team has done a tremendous, tremendous job at that. And then in terms of accessories and beauty, you know, I think—I am an accessories merchant from way back, so I have a lot of passion about that category, and I think there is upside and opportunity there. I think we need to spend some time really brainstorming that. We are not quite there yet, so that will be future upside. And then with beauty, we are actively working on that, so I expect that to be an early 2027 evolution as the team gets in place and starts working on longer-term ideas for PINK Beauty. But, you know, we know that that customer is deeply engaged with beauty, and we certainly think we have an opportunity there. Marni Shapiro: And so does ACTIVE fall into core icons? And then if you could also touch on VSX, which I feel like also seems to have more consistency and, like, a real home in the stores over the last, you know, four to six months. Hillary Super: Yes. Okay. So active within PINK is actually in apparel. That being said, I think that the trend is moving away from sort of a head-to-toe leggings-bra look, and so we are evolving with that into more of a lifestyle look. So it will not be as pure of an active category as it has been in the past. It will be a bit more mixed. As it relates to VSX, we continue to have great success in our authority with sports bras and really thinking of those as an extension of our bra authority initiatives. I think we have an opportunity to sharpen that assortment, focus it in, and in many cases I think it is more of a digital opportunity than a stores opportunity, and so we are rightsizing that square footage in stores as we move towards the back half of this year. But we have a little fine tuning to do there. And so, as we see the enormous, enormous opportunities in the four pillars, we are really focusing our effort on that. And then we have some of these other secondary opportunities, which we will start pursuing more in the out years. Marni Shapiro: Fantastic. Thank you, guys. Operator: Thank you. Our next question comes from Ike Boruchow with Wells Fargo. Your line is open. Ike Boruchow: Hey, everyone. Let me add my congrats. Just wanted to ask about two things, I think, for Scott, maybe for Hillary. Firstly, on the momentum quarter to date, I am sorry if I missed this, did you reference what the U.S. business is comping thus far? Is there any shifts that are impacting the business in the first quarter, Chinese New Year, anything that we should be thinking about? And then a follow-up, Scott, just on the margins, I think you had guided some slight leverage in the fourth quarter, and we saw some slight deleverage even though the revenue was significantly better. Can you kind of walk us through what exactly happened on the cost line and why there was not some better flow through there? Just kinda curious if that was incentive comp or something else, some pull forward of investment. Thank you. Scott Sekella: Yeah. So quarter to date, no real shifts, like, in or out of the quarter. So quarter to date, we have got the momentum coming off of, you know, Valentine's Day, super strong set that dropped in January. That momentum, as I said, carried into the Valentine's Day period, and Valentine's Day week the traffic was just phenomenal. So, you know, February is the lowest comp month, particularly of the year but also of the quarter, as things started to turn in that March–April time frame. So for the quarter, we expect March and April to kind of be below what we are seeing in February, but still result in that 10% to 13% guide. There is a little bit of shift between April and March, but that is all in Q1 as Easter shifts from April to March this year. So it does not impact in or out of the quarter. In terms of the margin, so gross margin grew—the adjusted gross margin rate grew year over year. Obviously, we had the tariff headwinds. But then we leveraged on buying and occupancy. And then we had more favorable promos and pricing than we initially thought, because as the quarter progressed, even though it is a promotional period, we found opportunities to continue to pull back. From an SG&A perspective, we did invest a little bit more in marketing to drive some of those outsized sales, but then we have higher incentive comp given the outperformance. So that is sort of the cost drag, if you will, from an SG&A perspective. Ike Boruchow: Got it. Thanks, Scott. Operator: Thank you. Our next question comes from Dana Telsey with Telsey Advisory Group. Your line is open. Dana Telsey: Hi. Congratulations, everyone. Hillary, you mentioned a pop-up for PINK in SoHo happening sometime. What are the markers that you need to see that would make PINK a stand-alone concept for you? And then given the success of the fashion show in 2025, what learnings or hindsight are you thinking about for 2026 that could make it even more impactful? Thank you. Hillary Super: Hi, Dana. Thanks. Okay. PINK stand-alone. We are doing a long-term pop-up in SoHo in the bull's-eye of the traffic pattern in that area. So we are very excited about that. It is going to be a little bit of a laboratory for us as we start to build out some of these additional categories that Marni was asking about. We are going to be looking at the KPIs of, you know, traffic, conversion, store productivity, all of those things. But also, it is a brand-building and marketing moment and a customer connection moment. And what is very interesting about this modern 20-year-old is that, you know, she is living and sort of beginning her connection with a brand in a digital world. Everything is happening off of her phone, but then she is seeking out in-real-life experiences. You know, they refer to her as the lonely generation. She is looking for that third space. And we are seeing a higher penetration of store sales for the PINK brand. So we are looking to create that special space and learn about that. Do I think that we would have a very significant PINK stand-alone strategy that comes out of it? Probably not. We like the side-by-side format, but I do think that there will be specific locations, whether they are college towns, etcetera, where there are particularly high levels of young customers where we may want to experiment with this. And so it is a first step towards that, and I think we are going to learn a lot. And I think we are going to have a lot of fun in the meantime. Hillary Super: We learned a lot with the fashion show. Overall, we were very, very pleased and saw much higher returns on our investment than we did a year prior. Part of that came from the very specific planning of the pre, during, and post media activation strategy. We learned that we could do more. I think we learned that the global approach to talent was an extremely important piece of its success globally. We learned that having a distinctly PINK section was particularly disruptive in a positive way for the PINK business. And I think we really have an appetite to move beyond a singular event a year. It is really an unlock to thinking about how we might be in conversation with our customer in a more evergreen way. And so those are all things that we are thinking about as we enter 2026 and beyond. Dana Telsey: Thank you. Operator: Thank you. We have time for one more question. Our last question comes from Adrienne Yih with Barclays. Your line is open. Adrienne Yih: Great. Thank you so much, and great to see the progress, Hillary, Scott, and the whole team. I guess I will start with it seems like, you know, we have all been on this journey of kind of elevating the business and getting back to your historical strength. This seems like really kind of an acceleration in that journey. When you are kind of getting feedback from customers and the new customers, are they recognizing now how highly complex bras are to make—well-fitted bras? Are they understanding the quality and the investments that you are making there? It was really nice to see the bras returning, the bra segment returning to growth. If you can talk about kind of the cadence of launches and the feedback that you are getting in that particular category. And then secondarily, I have to ask this, Middle East—I know you do franchises there. We are calculating maybe 2% of exposure there. If you can talk about any disruption there. Thank you. Hillary Super: Sure. I will start, and then I will pass to Scott on the Middle East question. So with bras, I think that we are in the very early stages of reeducating and reengaging with our customer on our authority and expertise in bras. The amount of time, energy, resources we expend to fit and perfect bras. The culture that we have in stores around bra fitting and that it is a very personal, very emotional experience and one that I think our teams do very, very well and build long-term connections around. And then thirdly, I would say middle-funnel marketing with influencers' testimonials about bras, their love for bras, has also been really impactful and, I think, something that has been missing. We have not had that authoritative voice for years. I think bringing that voice back while being able to strike a balance of emotion with authority has been the real key because it is an emotional purchase. It is a technical fit purchase, but also an emotional purchase. And I think we are doing a very good job threading that line. In terms of cadence of launches, we have a robust cadence of launches, events, and milestones this year in both brands. And it is something that we are investing more resources and energy around. And really, we have learned that we must be always-on in bras in some way, shape, or form. And so that is our intention this year, and we are excited with what is to come. Scott Sekella: Adrienne, in terms of the Middle East, we are obviously staying very close to the situation and monitoring the developments and how long this may last. But there are two areas right now that we are paying close attention to. One is just shipments to North America. We are experiencing some delays, not material, that are going to have a broader impact on the business that way. And then as you said, we have got franchise partners in the Middle East. There are a handful of store closures right now. This is where our business model helps mitigate some risk because even though there are store closures, the impact to us is the royalty rate as that product sells to the end consumer. So the impact is a bit less than if it were our own stores. Adrienne Yih: And is it fair to assume it is no sourcing there? No sourcing exposure? Scott Sekella: No real sourcing exposure. No. Operator: Thank you very much. Best of luck. Great results. Hillary Super: Thank you. Thanks, Adrienne. Operator: Thank you all for participating in the Victoria's Secret & Co. Fourth Quarter and Fiscal 2025 Earnings Conference Call. That concludes today's conference. Please disconnect at this time and enjoy the rest of your day.
Operator: Hello, everyone, and welcome to Burlington Stores, Inc. Fourth Quarter 2025 Earnings Webcast. Please note that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star followed by 1 on your telephone keypad. Thank you. I would now like to turn the call over to David Glick, Group Senior Vice President, Treasurer and Investor Relations. Please go ahead. David Glick: Thank you, Operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington Stores, Inc.'s fiscal 2025 fourth quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be recorded or broadcast without our expressed permission. A replay of the call will be available until 03/12/2026. We take no responsibility for inaccuracies that may appear in transcripts of the call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores, Inc. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the Company's 10-Ks and in our other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed in this call exclude costs associated with bankruptcy-acquired leases. These pre-tax costs amounted to $8 million and $5 million during 2025 and 2024, respectively, and $35 million and $16 million for the full fiscal years 2025 and 2024, respectively. Now here is Michael. Michael O'Sullivan: Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover three topics this morning. Firstly, I will discuss our fourth quarter results. Secondly, I will review our full year 2025 results. And thirdly, I will talk about our outlook for 2026. Then Kristin will provide additional details. Okay. Let's start with our fourth quarter results. Total sales increased 11%. This was on top of 10% total sales growth last year. The fourth quarter is by far our largest quarter of the year, so to grow total sales by double digits on top of double digits is especially impressive. It shows that we are continuing to take retail market share. Comparable store sales increased 4%. We knew coming into the quarter that we were up against 6% comp growth from last year and that we had some tariff-related gaps in our assortment. We expected our sales to be within our guidance range of 0% to 2%. So we were very pleased to handily beat this guidance and to deliver a strong two-year comp stack of up 10% for the fourth quarter. Our buying, planning, supply chain, marketing, and store teams executed very well to chase this trend. I am not going to spend a lot of time dissecting the details of our Q4 comp performance, but I would like to call out two important items. Firstly, our elevation strategy. This has been a focus over the last couple of years: elevating the assortment to offer better, more recognizable brands, higher quality, and more fashion, all at terrific values. There is clear evidence of the success of this strategy in our internal sales data. For example, when we analyze our sales by price point, we see that the highest comp growth rates are in the higher price buckets. In other words, despite the economic pressure she may be feeling, our customer is responding to the great values we are offering at these higher price points. These trends drove a mid-single-digit increase in our average unit retail in the fourth quarter. The second point I would like to make is that although we are pleased with our ahead-of-plan comp growth, as we hindsight the quarter, we can see that there were important categories where we could have done more business. I will explain what I mean, and we will talk more about this in a few moments when I discuss the full year. But before I move on to our full year 2025 results, let me just touch on Q4 earnings. In the quarter, we achieved 100 basis points of operating margin expansion and 21% earnings per share growth. Again, this is the largest quarter of the year, so we are especially happy with this performance. Now let's discuss our results for the full year 2025. For this discussion, I am going to read the headlines, but then I would like to spend most of the time talking about how, in response to tariffs, our operating strategies shifted in 2025 and how this impacted these sales and earnings results. The headlines are that in 2025, we delivered 9% total sales growth on top of 11% total sales growth last year; 2% comp sales growth on top of 4% comp sales growth last year; 80, that is eight-zero, basis points of operating margin expansion on top of 100 basis points last year; and 22% earnings per share growth on top of 34% earnings per share growth last year. What really jumps out from these headline results is that we drove extraordinarily strong earnings growth on a relatively modest comp sales increase. Let's talk about that. When we started the year 2025, as usual, we planned our business for low single-digit comp growth. So we believed or hoped that we might be able to chase to mid-single-digit comp growth for the year. Our initial 2025 focus and operating strategies were consistent with this comp sales outlook. But then in April, things changed. The introduction of tariffs forced us to recalibrate. It was clear that if we ignored the margin impact of tariffs, then this would significantly reduce our earnings growth. Over the last few years, we have worked hard to build our operating margin. And in 2025, we decided that we were not going to allow tariffs to set us back. So we took numerous actions to offset the impact of tariffs. We talked about these actions in our quarterly calls in May and November. They included pivoting away from and planning down receipts in categories which faced the greatest negative margin pressure from tariffs. These categories were mostly in our home businesses. Reducing inventory levels across the store to drive a faster turn and thereby generate lower markdowns. Raising retails in select, fast-turning categories where there was limited resistance or pushback from the customer. And aggressively going after expense savings across the P&L. These actions were very successful. In May, despite the initial shock of tariffs, we were confident enough to reiterate our earnings guidance for the year. In August, we took this guidance up. In November, we took our guidance up again. And today, we are reporting actual full year results featuring 80, eight-zero, basis points of operating margin expansion and 22% earnings per share growth. These numbers are well ahead of the original earnings guidance that we issued on this call in March. So let's talk about sales. As I said a moment ago, at the start of 2025, we planned our business for low single-digit comp growth but hoped we would be able to chase to mid-single-digit. We did not. We did not because the actions we took in response to tariffs were a drag on sales. Of course, we knew this. We knew that cutting receipt plans for businesses most impacted by tariffs was the right thing to do for earnings growth, but that it would likely dampen our sales upside. This impact showed up in Q3 and Q4. In Q3, unseasonably warm weather hurt our outerwear business. That can happen. We do not control the weather. But in the past, when this has happened, we have been able to lean on non-seasonal businesses, particularly home categories, to pick up some of the slack. That did not happen because our home assortment was the most impacted by the shift away from businesses with the greatest margin pressure from tariffs. Without these assortment gaps in Q3, we would likely have driven more sales. That said, given tariffs, our earnings growth would have been lower. My commentary is similar for Q4. I know it seems like an odd thing to say given that we are reporting strong percent comp growth on top of 6% comp growth last year. But I am convinced that we could have done even more sales in the fourth quarter. For example, toys. There are categories that are very important in Q4—gifting and housewares—where we could have done more business and driven higher comp growth across the chain. At the start of 2025, we had much higher full year sales plans for these businesses. But once tariffs were introduced, it made sense to pull back. We could have made a different decision. This would likely have delivered a stronger comp increase but with lower earnings growth. Wrapping up on the full year, let me reiterate that we are very pleased with our results. 80 basis points of operating margin expansion on top of 100 basis points last year; 22% EPS growth on top of 34% last year. One of the reasons why I have taken a few minutes to go through all this and to provide a full analysis of the drivers of our 2025 results is that it helps inform how we are thinking about the sales outlook for 2026. In fact, this is a good segue to talk about that sales outlook. I tend not to use the word “bullish” very often. But I am going to use it now. We feel very bullish about our sales outlook in 2026. Barring some black swan event, we think that we have an opportunity to really drive sales this year—comp store sales and total sales. There are several external and internal factors that are driving this optimism. On the external side, based on our trends in the fourth quarter, our view is that our customer looks quite resilient right now. Add to that, we expect that the current tax refund season is going to be more favorable than recent years. As we have said in the past, our core customer is very sensitive to tax refund payments. And the early signs and expert predictions are very positive. So we think there may be sales upside, especially in the first quarter. Staying on external issues, we do not know what will happen with tariffs this year. It is very uncertain. But we believe that the industry and our supply base have now adjusted to them. And the tariffs are unlikely to represent the same margin challenge that they did last year. Let's move on to the internal drivers of our optimism. There are two things to highlight. Firstly, in 2026, we will be up against our easiest comp sales comparisons for some years. In Q1, in Q3, and even in Q4, we look at the comp numbers that we posted last year and we feel like we have tremendous opportunity. As I explained a moment ago, in the back half of 2025, we had significant tariff-related gaps in our assortment, especially in our home businesses. These gaps held back our sales trend. Now that the industry and our supply base have adjusted to tariffs, we plan to go after these assortment opportunities in the back half of 2026. Secondly, we expect continued progress on our Burlington 2.0 initiatives, including the completion of our Store Experience 2.0 remodel for the balance of the chain. And we are also excited about the rollout of additional Merchandising 2.0 capabilities, especially regional and store-level localization. Since our last quarterly call in November, these favorable external and internal factors have caused us to reconsider and take up our sales plans for 2026. That is why we are raising our comp guidance to 1% to 3% for the full year. This is modestly higher than our typical model. That said, you can divine from my comments that we think there may be potential upside to this guidance. And we are positioned to chase the sales trend. There is one other important point to make. Although we are very excited by the sales outlook, we do not plan to go after this sales opportunity at the expense of margins. We have made huge progress expanding our operating margin over the last couple of years. We are confident there is more to come, and we anticipate that any ahead-of-plan sales in 2026 will drive further operating margin leverage. At this point, I would like to turn the call over to Kristin. Kristin? Kristin Wolfe: Thank you, Michael, and good morning, everyone. I will provide more details on the financials. First, starting with the fourth quarter, total sales grew 11% and comp store sales grew 4%, well above the high end of our guidance. As Michael noted earlier, this Q4 growth is on top of last year's 10% total sales growth and 6% comp store sales growth. Our Q4 adjusted EBIT margin expanded 100 basis points versus last year. This was 50 basis points above the high end of our guidance. The gross margin rate for the fourth quarter was 43.7%, an increase of 80 basis points versus last year. This was driven by a 60 basis point increase in merchandise margin and a 20 basis point decrease in freight expenses. Product sourcing costs were $232 million versus $217 million in 2024. Product sourcing costs levered 30 basis points as a percentage of sales, driven by supply chain productivity and cost savings initiatives. Adjusted SG&A costs in Q4 were 40 basis points lower than last year. The leverage in SG&A was primarily driven by leverage from store payroll and occupancy costs on higher sales in the quarter. Q4 adjusted EBIT margin was 12.1%, and our adjusted earnings per share in Q4 was $4.99. Both of these were well above the high end of our guidance. Our Q4 adjusted EPS represents a 21% increase versus the prior year. At the end of the quarter, comparable store inventories were up 12% versus the end of the fourth quarter in 2024. Our reserve inventory was 40% of our total inventory versus 46% of our inventory last year. We are very happy with the quality of the merchandise, the brands, and the values that we have in reserve. We ended the quarter in a very strong liquidity position, with approximately $2.2 billion in total liquidity, which consisted of $1.2 billion in cash and $926 million in availability on our ABL. We had no borrowings outstanding at the end of the quarter on our ABL. During the quarter, we repurchased $59 million in common stock, bringing our annual share repurchases to $251 million. At the end of Q4, we had $385 million remaining on our share repurchase authorization, which expires in May 2027. In Q4, we opened one net new store, bringing our store count at the end of the year to 1,212 stores. In Q4, we had two new store openings and one closing. I will now move on to discuss our full year 2025 results. Total sales increased 9% on top of 11% in 2024. Comp store sales increased 2% on top of 4% in 2024. Our operating margin for the full year expanded by 80 basis points. Merchandise margin increased by 40 basis points despite the negative impact from tariffs. Freight expenses improved by 20 basis points and product sourcing costs levered by 20 basis points. We also achieved 30 basis points of leverage on adjusted SG&A. This leverage was offset by 20 basis points of deleverage in higher depreciation and amortization costs. In terms of store openings, for the full year, we opened 131 new stores, while relocating 18 stores and closing nine stores, adding 104 net new stores to our fleet. I will now move on to our 2026 guidance. This guidance excludes expenses associated with bankruptcy-acquired leases of approximately $8 million in 2026 versus $35 million in 2025. For 2026, we expect total sales growth in the range of 8% to 10%. This assumes 110 net new store openings. We anticipate that approximately 60% of these new stores will open in the first half of the year, with the balance opening in the fall. We are forecasting comp store sales for the full year to increase 1% to 3%, and our adjusted EBIT margin to be in the range of flat to an increase of 20 basis points versus last year. This results in adjusted earnings per share guidance in the range of $10.95 to $11.45, an expected increase of 8% to 13%. Capital expenditures, net of landlord allowances, are expected to be approximately $875 million in fiscal 2026. I would now like to move on to guidance for the first quarter of 2026. This Q1 guidance excludes expenses associated with bankruptcy-acquired leases of approximately $6 million each in 2026 and 2025. We expect total sales to increase 9% to 11%. Comp store sales are assumed to increase 2% to 4% for Q1. We are expecting adjusted EBIT margins to be in the range of down 60 to down 100 basis points over 2025, which results in an adjusted EPS outlook in the range of $1.60 to $1.75 versus last year's first quarter adjusted earnings per share of $1.67. I would now like to turn the call back over to Michael. Michael O'Sullivan: Thank you, Kristin. Before I turn the call over to questions, I would like to reinforce a few of the key points that we have discussed this morning. Firstly, we are very happy with our Q4 performance: 11% total sales growth, 4% comp sales growth, 10% two-year comp stack, 100 basis points of operating margin expansion, and 21% increase in earnings per share. Secondly, we are also pleased with our full year results. We achieved 80 basis points of operating margin expansion on top of 100 basis points last year, and 22% earnings per share growth on top of 34% last year. In 2025, in response to tariffs, we had to adjust and make choices. We took actions to address the margin impact of tariffs and to drive earnings growth. The results are clear. This strategy was spectacularly successful. And thirdly, we are feeling bullish about 2026. There are external and internal factors that are driving this optimism. We think there may be upside to our sales guidance. And we anticipate that any ahead-of-plan sales should help drive additional operating margin expansion. I would now like to turn the call over for your questions. Operator: Thank you. We will now open for questions. If you would like to ask a question, please press star followed by 1 on your telephone keypad. Again, that is star followed by 1 on your telephone keypad. Kindly limit your questions to one question and one follow-up. Your first question comes from the line of Matthew Robert Boss of JPMorgan. Please go ahead. Matthew Robert Boss: Great. Thanks, and congrats on another nice quarter. So Michael, to break down the fourth quarter further, could you elaborate on what drove your ahead-of-plan sales? And in particular, what makes you think that you could have done even more sales in the fourth quarter than your reported results? Michael O'Sullivan: Well, good morning, Matt. Thank you for the question. As I said in the script, overall, we were very pleased with our trend in Q4, a strong 4% comp growth on top of 6% comp growth last year. So 10% two-year stack. That said, the breakdown of this comp growth by business was very, very different to how we had originally planned it. Let me explain that. Over the last few years, we have had enormous success growing our home businesses. Especially in the back half of the year, home has been a real engine of growth for us, with categories such as gifting, home decor, housewares, bedding, toys, and seasonal decor. Now our original plan for 2025 was to significantly expand those areas, starting in Q3 and then into Q4. We believed that we had a significant sales opportunity. Now with the introduction of tariffs in the spring, we faced a different set of economic choices. If we had maintained our original plans in those areas, we could have driven higher sales. But because of tariffs, we had to adjust. You know, the way I think about this is our mission is not just to chase sales; it is to chase profitable sales. And looking back, I am very pleased with how smartly and flexibly our teams responded in that situation. When tariffs were announced, we set about remixing our plans to focus on businesses that were less impacted by tariffs—you know, certain categories in apparel, footwear, beauty, and accessories. So not surprisingly then, coming back to your question, our comp growth in Q3 and Q4 was strongest in these specific businesses. I would say that our merchandising teams in those categories did a great job delivering terrific assortments that drove our comp sales in the back half. The flip side, of course, was that our comp growth in our most important home and holiday categories was lower. Of course it was. As I said, we deliberately lowered the mix of these businesses in response to tariffs. And it was that remixing that really enabled us to drive such extraordinary earnings growth in 2025. Now the last part of your question— which businesses could have delivered more sales then? It is all the categories that I mentioned: gifting, home decor, housewares, bedding, toys, seasonal decor. Now despite the gaps in the assortments in those businesses, we still turned very fast. So that tells me that if we had had more receipts, then for sure, we could have done more business. But those additional sales would have come with unacceptably low margins. Let me wrap up my answer by looking forward, though. We are excited for 2026. The math is different now. The industry has had the chance to adjust to tariffs—you know, tariffs are still here, but they are lower now than they were last summer. You know, as I have described, last year we started out with ambitious sales plans in our home businesses, but we had to shelve those plans in response to tariffs. That opportunity—that sales opportunity—has not gone away. And in 2026, unlike 2025, we see the chance to go after that opportunity aggressively and profitably. Operator: Your next question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open. Ike Boruchow: First question for Michael. I think I have a question on the comp guidance just for 2026—1% to 3%. It is higher than you normally give us. I know it is relatively small, but it is a deviation from your typical guide. How can you give us a little bit more color on how we should interpret this along with your—cannot help but hear the word “bullish” and think that is a change from you as well. So just how should we interpret this? Michael O'Sullivan: Yeah. Good morning, Ike. Yeah. Growing up in the UK, “bullish” really is not a part of the vocabulary. But yeah, I am using “bullish” this time around. So let me answer your question. As you know, we typically plan our business and guide to flat to 2% comp growth, with the goal being to chase any sales upside. You know, in the fall, when we started to put together our 2026 budget, flat to 2% was our starting point. And that was the—obviously, that was the initial guide that we discussed in November. So over the last two months, we have had a chance to really look at the outlook for 2026. And obviously, we have torn apart and analyzed our 2025 performance. Now based on all that, we see a lot of potential upside. You know, again, as I said in the prepared remarks, there are external and internal factors that are driving our optimism. On the external side, based on our fourth quarter sales trends, our customer looks pretty resilient to us. We also think the tax refunds are likely to create some momentum, certainly in the first quarter. And while we do not know what will happen with tariffs, we think they are unlikely to present the same margin challenge that they did last year. Now on the internal side, specific to Burlington Stores, Inc., if you like, we see an opportunity to drive sales as we look at Q1, Q3, and even Q4, as we lap issues in those quarters—especially tariff-related assortment issues in the back half. Now with all that said, let me reassure everyone that, you know, we are an off-price retailer. Our overall playbook has not changed. We are still going to plan sales conservatively, manage the business flexibly, and then chase any upside. I should also make the point that although raising guidance to 1% to 3% is not a very significant change, it does matter. It gives our merchants a little more open-to-buy so they can be more aggressive as we start the year, as we start the quarter. It gives them more of a head start, if you like, as they chase the sales trend. The other data point that I should call out is our inventory level. At the end of Q4, our comp store inventories were up 12%. Now that kind of increase is very unusual for us. But it was deliberate. And it is another indicator that we see potential sales upside in 2026—especially in Q1. Ike Boruchow: Got it. And then a quick follow-up for Kristin. On the margins—just the 1Q down 60 to 100—can you just elaborate what exactly are the moving pieces there? Because the full year seems pretty solid, but what is going on in the first quarter that we should take note of? Kristin Wolfe: Hi. Good morning. Thanks for the question. It is a great question—glad you asked. Let me start with the full year, and then I will touch on the Q1 dynamic specifically. So for full year 2026, 1% to 3% comp store sales growth and operating margin flat to up 20 basis points. Going down the P&L, we are assuming relatively flat merchandise margin as we invest and reinvest any favorability from cycling tariffs to better support better brands, higher inventory levels in stores—all of this to drive sales. Similarly, for the full year, we are expecting relatively flat freight and product sourcing costs as our continued productivity and cost saving initiatives are still there, but mostly offset by new DC start-up costs this year. Then in SG&A for the full year, we expect to see about 20 basis points of leverage at a 3% comp. That is what is driving the full year guidance. And it is worth reiterating: we continue to expect 10 to 15 basis points of incremental leverage for every point of comp above the 3%. So now to your specific question about the first quarter—it is an outlier for the year. We are guiding lower margin in Q1, but we absolutely expect margins to increase in Q2, Q3, and Q4. We have some unique factors going on in the first quarter. First, we have some pressure on gross margin. We will not have anniversary tariffs—that puts some modest pressure on markup. And we also have a markdown timing shift into Q1 from Q2. Secondly, as it relates to our supply chain costs, we will see some deleverage specifically in Q1 that is related to the start-up costs from our new Savannah distribution center, which we plan to open in the second quarter. And then the last thing going on in Q1 is we are lapping a few one-time favorable items from Q1 last year. Michael has talked about how aggressively we went after expense savings across the P&L in response to tariffs, and there were some levers that we pulled specifically in April to drive savings that we are now lapping in Q1. These are the primary deleverage items that drive the down 60 to 100 basis points for Q1. And again, just to reiterate, we do expect EBIT margins to increase to varying degrees for each of Q2, Q3, and Q4 to offset the lower operating margin in Q1 and net out to that flat to plus 20 basis points for the full year. Operator: Your next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open. Lorraine Hutchinson: Thank you. Good morning. Michael, we are expecting tax refunds to be much higher than last year. In 2021, you saw a significant sales lift from these stimulus checks. Should we think of higher refund checks in the same way? Michael O'Sullivan: Good morning, Lorraine. Thank you for the question. At a very high level, I would say that the answer is yes. Whether it is a tax refund check or a stimulus check, it puts extra money in our customers' pockets, and that is always a good thing and helps to drive comp sales. That said, there are a couple of very important differences, I think. Firstly, the stimulus checks back in 2021 were much more significant and more expansive. They went to everybody. For the one big beautiful bill, it looks like there are many different pieces to it. And it does not affect everybody equally. So it is difficult to tell how much it will impact our customers. You know, our expectation is that the impact will be much less significant than the 2021 stimulus checks. The second point to make is that the 2021 stimulus checks—they were a one-time thing. So in 2022, you will remember, we were up against them. The one big beautiful bill is a change in the tax code. And in that sense, it is permanent. So any sales lift that comes from it should be sustained rather than a one-time event. Anyway, I guess boiling it all down, it is difficult to know how big an impact it might have. We have built in some upside to our plans, and we are ready to chase. Lorraine Hutchinson: Thank you. And then wanted to follow up on inventory. You spoke earlier about the comp store inventory up 12%. But your reserve penetration was lower than last year at the end of the fourth quarter. Are you happy with your inventory levels? And maybe more broadly, how are you feeling about merchandise supply and off-price availability? Kristin Wolfe: Good morning, Lorraine. This is Kristin. I will take the first part of your question on inventory. Michael kind of spoke to it on the higher inventory levels in an earlier question, talking about our approach for 2026 sales guidance. But at the end of Q4, our comp store inventories, as you noted, were up 12%. This was deliberate, and we feel very good about the amount of inventory and the freshness of that inventory. The primary driver of the higher inventory is we wanted to be prepped and stocked for higher traffic, due to the higher tax refunds as well as the underlying trend of our business and sales anticipated in Q1. In addition, the other dynamic is we did a great job delivering transitional receipts in Q4, such that our assortment was fresh—there is newness in the store as we move from holiday and into spring. And we are continuing to improve our capabilities to better localize assortments by geography and climate, and these strategies contributed slightly to higher comp store inventory levels at the end of Q4 versus last year. So that is on in-store inventory. On reserve inventory, our reserve penetration was lower than last year, but at 40% of total inventory, it is really more in line with historical levels at the end of Q4. In 2023, for example, it was slightly higher than this—we saw 39% at that time, the end of 2023. And as we look at that inventory that we have in reserve, we really feel good about the quality and the values and the brands that will help support sales and support our ability to chase in 2026. Michael O'Sullivan: And then let me jump in on the last part of the question—on off-price merchandise availability. I would describe the buying environment for off-price right now as excellent. I think you have probably heard the same thing from other off-price retailers. There is plenty of supply in the market across most categories. You know, I mentioned in the prepared remarks that we think there may be sales upside in 2026. Well, it is important to add that we see plenty of off-price merchandise availability to help fuel that sales trend. Kristin Wolfe: Thanks, Lorraine. Operator: Your next question comes from the line of Brooke Siler Roach of Goldman Sachs. Your line is now open. Brooke Siler Roach: Good morning, everyone. Firstly, I have a quick question about the monthly cadence of comp sales in 4Q. In particular, I am wondering how your business performed in January and your comp trend exited the quarter. Thank you. Kristin Wolfe: Good morning, Brooke. It is Kristin. I will take the question. It is a good question. As we look at it, it makes the most sense, given the timing of holiday, to look at and speak to November and December combined. And for that two-month period in Q4, our comp sales increased mid-single digits. And as we got closer to Christmas, that trend accelerated. So we were really pleased with this holiday performance and the sales trend we saw, particularly given the strength of our holiday season last year. Then as we moved into January, that strong trend and momentum continued. January also ran a mid-single-digit comp. And I will point out that our comp in January would have been even stronger if not for the significant winter storm that impacted many of our major markets late in the month. It was widespread and led to several hundred store closures. This disruption cost us about a point of comp on the full quarter and several points for the month of January. Now to the last part of your question, once we dug out from the winter storm, we resumed that strong comp store sales trend. Momentum has continued into February, such that Q1 is off to a very strong start. We have a lot of the quarter ahead of us, of course, but so far, good. Brooke Siler Roach: That is great to hear. As a follow-up, I was hoping you could speak to sales trends by customer demographic. What are you seeing in terms of sales trends by different income groups? And are there any callouts on trends for other demographic groups that we should be aware of? Thank you. Michael O'Sullivan: Yeah. Good morning, Brooke. It is Michael. I will take that. It is a good question. It is something we look at all the time. We slice and dice our internal sales data just to see if there are any pockets of weakness or pockets of strength. So let me tell you what we are seeing. You know, on sales trends by different income segments, as we analyze the performance of stores based on median household income of the surrounding area, our comp sales trends in the fourth quarter were very broad-based. It is true that our stores in lower-income trade areas had a slightly higher comp than the rest of the chain, but it was very close. In other words, all income cohorts performed well in the fourth quarter. So when you segment our customers based on household income, every segment is looking fairly resilient right now. On the second part of your question—other demographic groups—again, there is not much to call out. When we look at performance of our stores based on ethnicity of the surrounding area, again, the trends look fairly broad-based. For example, stores in high Hispanic trade areas—if I exclude the southern border—those stores are pretty much right in there with the rest of the chain in terms of comp performance. So, you know, overall, as we look across demographic segments, income and ethnicity, etcetera, we are not seeing any major pockets of weakness at this point. Brooke Siler Roach: Thanks so much. I will pass it on. Michael O'Sullivan: Thank you. Operator: Your next question comes from the line of Adrian Yee of Barclays. Your line is now open. Adrian Yee: Great. Thank you very much. It is really nice to see Burlington 2.0 kind of really coming into its own. Thank you. A little bit more color on the elevation strategy. How should we be thematically thinking about the pyramid of sort of good, better, best—where it was, where it is going to? Your other off-price competitors that are doing a similar strategy—they are also opening stores in your market. So just how do we think about how you are differentiated on the product? And then, Kristin, a little bit more on the supply chain, but maybe more from a qualitative benefits over multi-year horizon. How do you think about productivity, capacity utilization? And are you running anything in tandem? Like, are you running, you know, legacy DCs or something that we can roll off, you know, in the next twelve to eighteen months? Thank you. Michael O'Sullivan: Good morning, Adrian. Thank you for the questions. Obviously, I will take the first one on the elevation strategy. Yeah. We are very pleased with what we are seeing in our elevation strategy. It has been a major focus for us for the last couple of years: elevating the assortment to offer better, more recognized brands, higher quality, and more fashion, all at great values. You know, we are very encouraged by the results. And our internal data shows us that by elevating our assortments, we have been able to drive higher customer perception scores, stronger comp growth in higher price buckets, and ultimately, higher average unit retail and higher transaction size, which is what you should be seeing if you have a successful elevation strategy. Now one aspect of this that I am especially pleased about is that we have successfully pursued this elevation strategy without taking a hit to margin. You know, that has always been the major challenge in off-price. When you increase the mix of better brands or you raise the quality or you take more fashion risks, then that can really pressure your merchandise margin. When you elevate the assortment like that, and the AUR goes up, the typical pattern is that markup is pressured and markdowns increase. It takes skill to elevate the assortment without hurting merchandise margin. So the fact that we have been able to elevate the assortment and at the same time have actually expanded our margins is, I think, a clear testament to the strength and the talent of our merchant teams. By offering a terrific assortment with great value at higher price points, we have been able to convince the customer to trade up and to spend more. And, yeah, as I say, over the past couple of years, we have elevated the assortment, but it is really important to point out that we, at the same time, have expanded our margins. And, Kristin, do you want to take the second question? Kristin Wolfe: Yes. Adrian, on supply chain—I appreciate the question. I will speak to both qualitatively and quantitatively. We do continue to make significant progress reducing supply chain expenses as a percentage of sales. That has certainly been a focus. We are doing this through numerous productivity initiatives in our DCs and cost savings projects across supply chain. So for 2025, supply chain costs levered 20 basis points, and this was on top of 50 basis points of leverage in supply chain in FY 2024. So we are seeing that leverage. This spring, 2026, we are going to go live in our newest DC in Savannah, Georgia. We are really excited about this new asset. It is more than twice the size of our current largest DC. It is highly automated. It is built for off-price processing. Now kind of near term, as you would expect, there are significant start-up expenses associated with opening a new facility of this size, and that will drive some deleverage in 2026. And for 2026 overall, we expect supply chain costs as a percentage of sales to be relatively flat for the year as these new DC start-up costs are then offset by our continued efforts around productivity and cost savings initiatives elsewhere in the supply chain. You see this dynamic more in Q1, where we are expecting about 10 to 20 basis points of deleverage on this line. And then as the year goes on, we expect that deleverage to moderate as we offset with these cost savings initiatives. Now sort of on the qualitative point in your question, it does typically take two or so years for a DC to be fully ramped up. Over time, we absolutely expect this state-of-the-art design-for-off-price DC to drive cost efficiencies for us, notably significantly faster processing time. And additionally, based on the physical locations of our vendors and our store base, we believe over time we can see some modest leverage in freight related to this new DC. So we are continuing to invest in new distribution centers and, over time, we will modify our DC footprint to have the majority of our supply and processing go through our more efficient DCs. That will take time, but that is the plan that we are continuing to execute. Adrian Yee: Fantastic. Thank you very much. Best of luck. Michael O'Sullivan: Thanks, Adrian. Thank you. Your next question comes from the line of Mark R. Altschwager of Baird. Mark R. Altschwager: Great. Thank you for taking my question. Michael, can you talk about the pipeline for new stores and relocations? Michael O'Sullivan: Yes. Good morning, Mark. Yeah. I am glad you asked this question. I am really very excited about our new store program and our new store pipeline over the next couple of years. When we—you know, going back a little bit—when we laid out our long-range plan back in November 2023, we said at the time that we thought we could open roughly 500 net new stores over the next five years, or approximately 100 net new stores per year on average. We are running slightly ahead of this. And not only are we ahead in terms of number of new stores, we are also very—it is important to say—we are also very happy with how those stores are performing. We expect new stores to achieve about $7 million in sales in their first full year. Our new stores are running in line with that. We then expect them to comp above the chain for their first few years in the comp base. And, again, recent cohorts are actually outperforming these expectations for comp growth. That means that our overall investment returns for new stores are very strong, well above our hurdle rates. The other aspect of our new store program that I am excited about and I want to call out is our store relocation and downsizing programs. You know, as you know, we have a lot of older, oversized stores in the chain. In 2025, we relocated 18 of those stores to smaller format locations, mostly in busier nearby strip centers. Now with those relocations, we are seeing a good sales lift and a reduction in occupancy costs. So driving much improved earnings. In 2025, we also physically downsized about 20 existing stores. Now this is a new and growing program for us. When we downsize the store, we reduce the footprint of the store, and we either return the excess space to the landlord or we sublease it to a co-tenant. Now as we reduce the footprint, we have refurbished, modernized, and improved the reduced space. With our downsized projects, we are seeing very strong returns driven by significantly lower occupancy costs. In many cases, we are also seeing a sales lift. We have many stores in the chain that are candidates for our downsizing program. So we expect that program to grow over time and become more important. Now wrapping up my answer, we obviously have a much, much smaller store base than our off-price peers. And we therefore have much, much more room for growth. So we are very excited about our new store program and our new store pipeline, including the 110 net new stores that we plan to open in 2026. And we are also excited by our relocation and downsize programs as I described. These programs are not only going to help us expand our store base, but they are going to help us transform it. Mark R. Altschwager: That is very good color. Thank you. And just a follow-up. In the prepared remarks, you talked about some of the localization initiatives and how that seems to be ramping up. Can you give us a little bit more detail? Michael O'Sullivan: Yeah. Sure. It is actually another really great question. Localization—it is hard to overstate this—but I think localization is a major opportunity for us. It is a capability that our off-price peers have had and have invested in for many, many years. And it is an area where we frankly are a long, long way behind. You know, there have been times over the last several years—there are even times now—when I walk one of our stores, say, in a beach community or in the South in the summer, I look around, and it looks like Burlington Coat Factory has come to town. So we need to—we have a huge opportunity to improve and get better at customizing and localizing our assortment not just based on the region and the climate, but also based on income levels and demographics of the trade area. Now, you know, this is a business problem where people, process, and technology—including, by the way, artificial intelligence—can make a huge difference. And we have known for some time now that it is a major opportunity for us. Indeed, we have talked about it with investors. But we also recognized that it would be difficult for us to make significant progress on localization until we had really strengthened and upgraded our foundational merchandise planning and allocation systems. Over the last couple of years through Merchandising 2.0, that is what we have done. And we are now in a position to really start going after localization. Now, you know, I know from experience that this is not a capability that we can build overnight. But I am very excited about some of the initiatives that we have begun to roll out—better store and class-level planning and forecasting, much stronger localization analytics, new store assortment planning and trending, seasonal flow and event planning, assortment distortions based on income and demographics, and an expansion and redesign of our merchandise planning regions. You know, if you go back and look at the history and the growth of our off-price peers over time, you will see that localization was a major unlock in their evolution and growth. As I say, we are a long way behind. We have a lot of work to do. And it is going to take some time. I think that over the next several years, localization is going to be a key driver for us. Mark R. Altschwager: Thanks again. Operator: Thanks, Mark. Our last question comes from the line of Dana Telsey of Telsey Group. Dana Telsey: Hi. Good morning, everyone, and nice to hear the progress. Your operating margins were very strong in the fourth quarter as well as for the fiscal year. Can you just walk us through the puts and takes of the margin drivers? Thank you. Kristin Wolfe: Good morning, Dana. Thanks for the question. I will start with Q4 and then I will go into full year. As Michael discussed and we talked about on this call today, we took deliberate actions in 2025 to drive our operating margin and earnings growth. In Q4, the biggest contribution was an increase in gross margin. There was an 80 basis point increase versus last year. Sixty of that 80 basis points came from merchandise margin. Merchandise margin was driven by lower shortage as well as the actions we took to mitigate tariffs that Michael talked about today. The other 20 basis points came from lower freight expenses. Similarly, on product sourcing costs, supply chain cost savings helped us leverage 30 basis points in the quarter. And then we achieved 40 basis points of leverage in SG&A. This was mostly driven by sales leverage in store payroll and occupancy expenses. And all of these items more than offset deleverage we saw from higher depreciation expenses in the quarter. For the full year, many of the same levers drove the 80 basis points of improvement in EBIT margin. And as a reminder, this 80 basis points of improvement was on top of 100 basis points of improvement in 2024. Gross margin for the year increased 60 basis points. That was made up of merchandise margin of 40 basis points and freight expenses of 20 basis points. Supply chain savings drove a 20 basis point leverage for the year with cost savings initiatives. And SG&A drove 30 basis points due to many of the cost savings initiatives we put in place earlier this year that we described. These improvements more than offset 20 basis points of deleverage we saw in depreciation for the year. And just one last point on margin. I want to reiterate that we believe the margin gains we achieved in 2025 are absolutely sustainable, and we believe we have further margin expansion opportunities ahead of us. We will be laser focused on driving sales in 2026, but we have opportunities over time to drive faster turns, generate more supply chain savings, and leverage SG&A expenses, particularly as we deliver a stronger comp store sales increase. Operator: That concludes our question and answer session. I would now like to turn the call back to Mr. Michael O'Sullivan for final remarks. Michael O'Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores, Inc. We look forward to talking to you again in May to discuss our first quarter 2026 results. Thank you for your time today. Operator: Thank you for attending today's call. You may now disconnect. Goodbye.
Operator: I will be your conference operator today. At this time, I would like to welcome everyone to the NACCO Industries, Inc. 2025 Fourth Quarter and Full Year 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. To ask a question, simply press star 1 on your telephone keypad. To withdraw your question, press star 1 again. It is now my pleasure to turn the call over to Christina Kmetko, Investor Relations. Please go ahead. Christina Kmetko: Good morning, everyone, and thank you for joining us for today’s 2025 fourth quarter and full year earnings call. I'm Christina Kmetko, and I'm responsible for Investor Relations at NACCO Industries, Inc. I'm joined today by NACCO Industries, Inc.’s President and CEO, J.C. Butler, and Senior Vice President and Controller, Elizabeth I. Loveman. Yesterday evening, we announced our fourth quarter and full year results and filed our 10-Ks with the SEC. Both documents are on our website for your reference. We will refer today to several non-GAAP metrics to give you a clearer picture of how we think about our business. Reconciliations to GAAP can also be found on our website. Before beginning our discussion, let me remind you that today’s remarks will include forward-looking statements. As always, actual outcomes may differ materially due to various risks and uncertainties, which are described in our earnings release, 10-Ks, and other filings. We undertake no obligation to update these statements. With those quick notes out of the way, I will turn the call over to J.C. for his opening remarks. J.C.? J.C. Butler: Thanks, Christie, and good morning, everyone. Before I begin, I would like to take a moment to discuss an incident that happened at one of our Florida operations. The safety and well-being of our employees has always been a cornerstone of our company’s values. Despite this focus, a tragic incident in December resulted in the loss of two employees. This loss deeply affected us, and we extend our heartfelt condolences to the family, friends, and colleagues of these two individuals. This is a solemn reminder of the importance we place on protecting the well-being of our people every day. In the aftermath of this tragedy, we are actively reinforcing our safety expectations across the organization. Our employees are the nucleus of our success, and their safety will always come before all else. I will now discuss our operating performance. We delivered a strong close to 2025. Our fourth quarter operating profit rose 95% over last year and almost 12% sequentially. All three of our reportable segments reported improved year-over-year results, led by a significant increase in the Utility Coal Mining segment. Overall, we continued to build upon the improving profitability and growth we experienced in the third quarter, highlighting the second half that overcame operational challenges experienced during the first half of the year. We disclosed over the past several quarters that we were terminating our pension plan during the fourth quarter, and I am happy to report that we have now successfully settled all future pension obligations. As a result of completing this process, we recognized an after-tax termination charge of $6,000,000. This charge, and an increase in tax expense which Liz will explain in more detail, contributed to our reported fourth quarter net loss of $3,800,000. These transactional anomalies aside, I feel good about our underlying operating results, which contributed to the 59% year-over-year and 14% sequential increase in adjusted EBITDA. I believe these results represent a business delivering on its potential. Our Utility Coal Mining segment, which features long-term mining contracts, remains the foundation of our business. I am pleased to say that our Utility Coal Mining segment reported a gross profit this quarter after a number of quarters of losses. For more than a year, I have discussed Mississippi Lignite’s unfavorable contract mechanics that resulted in a lower per ton sales price that unfavorably affected results. The team at Mississippi Lignite Mining Company has worked diligently to mine efficiently and control costs. And this quarter, the mine produced and sold more tons and, as a result, benefited from higher production efficiency and a lower cost per ton sold. Production also outpaced deliveries in the period, leading to certain production costs to be capitalized into inventory. These factors drove the current quarter gross profit compared with the prior-year loss when results were affected by a significant inventory write-down. I would like to be able to say the results at Mississippi Lignite Mining Company are moving in the right direction now, especially with an anticipated increase in the contractually determined price per ton. However, the customer’s power plant began a maintenance outage in mid-February, which is affecting first quarter demand. The power plant is expected to resume operations in mid-March. We are expecting year-over-year improvements at Lignite Mining Company in 2026, but any delay or further changes in demand or dispatch or any reduced power plant mechanical availability could alter our expectations. On our third quarter earnings call, we secured a multiyear dragline services contract as part of a U.S. Army Corps of Engineers dam construction project in Palm Beach County, Florida. This project is already starting to ramp up. We are excited about this opportunity as it advances our growth into large-scale infrastructure projects. This project also provides an opportunity to showcase the efficiency and environmental advantages of the new electro-drive Emtek draglines. We also anticipate commencing operations at a new limestone quarry in Arizona in 2026. Turning to Minerals and Royalties, this segment grew year over year. Royalties from our legacy natural gas assets benefited from higher prices and production, more than offsetting the impact of lower oil prices and production. The Catapult team continues to actively pursue additional investment opportunities to support future growth in earnings. At Mitigation Resources, we expect increasing profitability over time from the sale of mitigation credits and as reclamation and restoration services expand. While performance is currently variable due to permit and project timing, Mitigation Resources is expected to generate a profit in 2026 and move toward more consistent results over time as the business expands. We continue to invest in our businesses to drive future growth. Again, in 2026, we anticipate making significant capital investments. The majority of these planned expenditures relate to business development opportunities, and we will only make those investments if the projects meet our strict investment criteria. Overall, I continue to believe we are well positioned for meaningful growth. We are entering 2026 with clear opportunities to build on our 2025 momentum as we execute our growth strategy and create long-term value for our shareholders. Our approach is rooted in long-term contracts and investments which continue to deliver strong earnings and steady cash flow for compounding, annuity-like returns. We executed on this strategy over the past decade, and momentum continues to build. I remain confident in our businesses and in our ability to deliver strong 2026 results and continued progress in the years to come. Before I turn the call over to Liz, I would like to say thank you to all of our employees. Our team delivered strong 2025 fourth quarter and full year earnings, and their hard work and commitment will enable us to continue to deliver in the future. We have an incredibly strong team across the company, and I am proud of the work that they do. With that, I will turn the call over to Liz to provide a more detailed view of our financial results and outlook. Liz? Elizabeth I. Loveman: Thank you, J.C. I will start with some high-level comments about our consolidated fourth quarter financial results compared to 2024. In the 2025 fourth quarter, we generated consolidated gross profit of $12,000,000, an increase of 42% year over year, while our fourth quarter revenues of $66,800,000 increased 5%. We reported consolidated operating profit of $7,600,000, up from $3,900,000 in 2024, driven by improvements at all three of our reportable segments. These favorable results were partially offset by higher unallocated expenses. Consolidated adjusted EBITDA increased 59% to $14,300,000 versus $9,000,000 for the same period last year. As J.C. discussed, we completed the termination of our pension plan and, as a result, recorded a $7,800,000 noncash pension settlement charge, or $6,000,000 after tax. This charge, combined with the fourth quarter true-up of tax expense to the full-year effective tax rate, resulted in a net loss for the quarter of $3,800,000, or $0.52 per share. This compared to net income of $7,600,000, or $1.02 per share, in 2024. Moving to the individual segments, the Utility Coal Mining segment reported operating profit of $7,200,000 in 2025, a significant increase over the $2,000,000 generated in the 2024 fourth quarter. Segment adjusted EBITDA increased to $9,700,000 from $4,200,000 in the prior year. These year-over-year improvements were driven by the stronger operating performance at Mississippi Lignite Mining Company that J.C. discussed. Lower general and administrative employee-related expenses also contributed to the higher segment operating profit. Looking ahead, we expect an increase in operating profit in 2026 compared with 2025. Improvements at Mississippi Lignite Mining Company as a result of an increase in the contractually determined per ton sales price are expected to be partly offset by lower earnings at the unconsolidated mining operations. The lower unconsolidated mining earnings are due to reduced income at The Sabine Mining Company associated with the wind-down of reclamation services. In the Contract Mining segment, revenues, net of reimbursed costs, grew 9% over the prior year, primarily driven by higher parts sales, partly offset by increased volumes of lower-price tons. Operating profit of $900,000 and segment EBITDA of $3,300,000 were comparable to the prior year. Improved margins at the mining operations and an increase in parts sales were offset by a $1,100,000 loss contingency and lower employee-related expenses. The loss contingency is related to costs associated with the incident J.C. discussed previously. Looking forward, higher customer demand, earnings contributions from new contracts, and continued momentum from 2025 activities are expected to lead to a significant year-over-year increase in results in 2026. The Minerals and Royalties segment delivered year-over-year growth in revenues, operating profit, and segment adjusted EBITDA driven by improved natural gas pricing and increased production volumes due to increased royalty revenues. These benefits were partly offset by lower royalty oil revenues resulting from reduced oil prices and volumes. Lower employee-related expenses and higher earnings from an equity investment also contributed to the year-over-year profit improvement. At the Minerals and Royalties segment, newer investments are expected to contribute favorably to 2026 results. However, commodity price forecasts as well as development and production assumptions are expected to result in an overall year-over-year decrease in operating profit and segment adjusted EBITDA, particularly in the second half of the year. It is important to note that our forecast was developed prior to the recent developments in the Middle East. Any significant changes in commodity prices or production as a result of this conflict could change our expectations for 2026. Overall, we anticipate meaningful year-over-year improvements in consolidated operating profit, net income, and EBITDA in 2026. Turning to our liquidity, for the 2025 full year, we generated cash from operations of $50,900,000 compared to $22,300,000 in 2024. At December 31, we had outstanding debt of $100,900,000, up modestly from $99,500,000 at 12/31/2024. Our total liquidity was $124,200,000, which consisted of $49,700,000 of cash and $74,500,000 of availability under our revolving credit facility. As a result of the anticipated capital investments in 2026, we expect a use of cash before financing greater than in 2025. With that, I will turn the call back to J.C. for closing remarks. J.C. Butler: Thanks, Liz. To wrap up, I remain confident in our trajectory and long-term opportunities. Our businesses provide critical inputs for many industries. As the need for uninterrupted energy grows, industry fundamentals in natural resources are expected to continue to strengthen, reinforcing the critical need to keep existing reliable baseload resources online. In 2026, the National Coal Council, which is an advisory committee to the U.S. Secretary of Energy, was reestablished. This council is focused on advising the Department of Energy on reinforcing coal’s strategic role in U.S. energy policy and providing actionable advice on sustaining coal plant operations and prioritizing coal to support grid reliability, which supports our country’s economic competitiveness and national security. The reestablishment of this council and the underlying improving regulatory environment reinforce my confidence in our prospects for 2026, as well as our overall business trajectory and longer-term growth opportunities. The building blocks for durable compounding growth at NACCO Industries, Inc. are firmly in place. Our team is focused on execution, operational discipline, and delivering long-term returns for shareholders. We will now open for questions. Operator: As a reminder, to ask a question, simply press star 1 on your telephone keypad. Again, that is star 1 to ask a question. Our first question is from the line of Doug Weiss with DSW Investments. Please go ahead. Doug Weiss: Good morning. I guess starting with the coal division, can you quantify how much the step down in Sabine work is? Elizabeth I. Loveman: We have not quantified that number. Doug Weiss: Okay. J.C. Butler: But, I mean, Doug, what I would say—Doug, I think what I would say is, you know, when the plant—when the mine and the plant were operating and we were delivering coal, that was the highest level of income that we received from Sabine. As we step down into reclamation, that, you know, appropriately because, you know, we are scaling down the amount of work, that fee was reduced. As we exit that, you know, that situation, that is when it goes away. So it is not—I just want you to know that it is not going from, like, full-bore production level, which we had, you know, a couple years ago, to zero. It is stepping down from a lower level. Doug Weiss: Right. Okay. And at the same time, your, you know, your price index goes up this year. Right? J.C. Butler: Yes. You are speaking at Red Hills at Mississippi Lignite Mining Company. Yes, we believe—know it is based on what happens to indices month to month, but we believe that we are going to see an increase in price during the course of the year. Doug Weiss: Okay. And does that flow in—you know, is that weighted towards one—is there a seasonal element to that when that really starts to benefit you? J.C. Butler: It is a formula that compares current prices for relevant indices to prior indices. So, you know, it is tracking movements over a one- and five-year period. And so, you know, just as we look at what was happening in the prior periods and what our expectations are in the future periods, we are able to, you know, develop a forecast. There is not really a seasonal component to price. However, you know, there is generally a seasonal component to deliveries. In, you know, particularly in the South, power plants operate at their heaviest in the winter when it is cold, in the summer when it is hot, and the shoulder seasons typically do not operate at the same high level. Doug Weiss: Okay. Yeah. So seasonal was a bad choice of words. I really just meant when in the year do you really start to see the benefit from that index reset? J.C. Butler: Yes. You know, it is really just going to depend on how the indices play out over time. I think we have mentioned before that, you know, petroleum is represented in the basket of indices. And, you know, who knows how that is going to play out with what is going on in the Middle East. But very, very difficult to forecast that at this time. Obviously, when we developed our forecast, we did not know what the Middle East situation was going to develop. Doug Weiss: I see. I mean, could that create kind of a windfall situation given the spike in oil prices? J.C. Butler: I mean, look, I think we could play out lots of scenarios. I think you could say spikes in, you know, various things are going to drive the price up. But, you know, we can also see things happen in the market that cause some of those indices to drop as well. So I think it is really hard to forecast. I mean, every day you pick up The Wall Street Journal and you can read, even in just one newspaper, various views of how this might play out with respect to controlling prices, inflation, interest rates, and all the other stuff. Doug Weiss: Well, and I had understood from your previous comments that it was not actually the wholesale petroleum price. It was more of the diesel price at the pump. Is that true, or did I misunderstand there? J.C. Butler: So the price is based on published indices. So it is not like—it is not like we drive by the local gas station and see what diesel is selling for. It is the nationally, you know, federally published indices. Doug Weiss: Okay. I gotcha. I guess moving on to Contract Mining, how large is the—you know, I know you probably do not want to quantify it, but just relative to a typical contract is the Army Corps of Engineers contract? J.C. Butler: It is a significant contract. We are very excited about the opportunity, as, you know, we mentioned. It is an opportunity for us to apply our skills in a new market. Instead of, you know, mining aggregates that are going to be used either in a cement plant or, you know, sold as crushed aggregates or sand or gravel, this is an opportunity to go use our skills for infrastructure projects. So it is a pretty sizable project for us, and we are excited about the new opportunity and the partnership. Doug Weiss: And what is the timing of that in terms of when that starts and when it gets up to full production? J.C. Butler: We are already ramping up production. I do not actually know when it gets to full production. Liz, do you know that? Elizabeth I. Loveman: I think it is going to depend a little bit on the timing of getting the additional dragline sessions, but it will ramp up throughout this year. Doug Weiss: Yeah. It is going to ramp up throughout the year. J.C. Butler: And, you know, it will be full steam ahead. One of the things that I find interesting about this project that I think we all are encouraged or excited by—this feature is, you know, this is not a contract where we are delivering aggregates. We are mining aggregates for a customer that is responding to customer demand. This is a contract where we have been asked to go in and move X amount of material. And, you know, obviously, we have to work in coordination with our customer to do that. But this is not a contract that has any exposure to market forces. So, you know, I think it is a pretty predictable, nice contract for us. Doug Weiss: Yeah. You think there is an opportunity to add more business like that? J.C. Butler: Well, we do not know, but I think we hope so. Doug Weiss: Yeah. Okay. And how about Phoenix? How substantial is that new business? J.C. Butler: I mean, that also is a nice contract. It is a sizable dragline that we have moved out there. As you know, Phoenix is just exploding with growth. So it seems like, you know, lots of potential there. Doug Weiss: Mhmm. Okay. Interesting. You gave your capital expense targets. I guess two questions on that. Well, I guess I will start—just I will break them up. On the first one, is it reasonable to think that capital will be allocated in a manner similar to 2025 in terms of the divisional breakout? J.C. Butler: You mean, like, the pie chart of CapEx? Doug Weiss: Yeah. Like, how much is going to mining and how much is going to oil and gas and— J.C. Butler: Well, I mean, I guess I would break that down by saying, you know, we are really clear that we budget $20,000,000 of investment capital for our minerals business. And, you know, there is nothing saying that we have to spend that $20,000,000. It is just what we put in our budget. So we spend twenty and, you know, if we do, great. If we do not, that is okay too. We are only going to spend it if we find the right project. So that is kind of a fixed number generally. You know, the total of that we published is a pretty big number. And we said that, you know, the majority of what we are going to spend is with respect to growth. So I think it really determines how those opportunities play out. I think we do disclose a breakout in the 10-K. Liz can probably point us to that in a second. But, ultimately, this is going to depend on what opportunities do we really find. If you are talking about our forecast, it is in the 10-K. If you want to talk about where it actually gets spent, it really is dependent upon what projects we find and which ones, you know, meet our investment criteria. I think we have been really clear about how we think about deploying capital, and if we do not meet our investment criteria, then we just do not invest. Doug Weiss: Right. So in terms of the—sorry. Go ahead. Elizabeth I. Loveman: No. I was going to say you can find the breakout in the 10-K in our MD&A, where we have a discussion of 2025 actual and 2026 planned CapEx. Doug Weiss: Okay. Okay. Great. In terms of the Army Corps of Engineers work and the Phoenix work, that capital has already been spent. Right? So this would be capital for new contracts. Is that right? J.C. Butler: There is some additional capital for the Army Corps of Engineers project. That is going to end up being a three-dragline project. And so we are still getting the final draglines commissioned in order to construct and commissioned in order to do that project. Doug Weiss: Oh, okay. You be able to say about how much is left on that project? Elizabeth I. Loveman: We have not disclosed that. I mean, I would say what we spend in 2026 is included in the $36,000,000 we have for the Contract Mining segment. J.C. Butler: Okay. So that number is in the $36,000,000. Doug Weiss: Yeah. Okay. I guess in terms of allocating to the minerals segment, does Eiger give you—you know, do you have an opportunity to continue to invest capital in that operation? Is that an attractive use of your capital, you know, as they expand? J.C. Butler: Well, I mean, a couple pieces of that. We think it is a very attractive use of our capital. It is why we, you know, invested an additional amount in their operations. I think—and we are very enthusiastic about the investments that we have made with them. I think it is a great piece of our Minerals and Royalties platform. You know, the work that they are doing, I think, is for the most part funded. So I do not—one, I do not know that there would be additional opportunities to invest. But I also think, you know, we want to pay attention to diversifying our investments. You know, the whole premise of Catapult—or our minerals segment—is we started with a highly concentrated investment in Appalachian natural gas assets, and the goal here is to diversify into other basins and other minerals. Eiger is a piece of that. Taking more Eiger, I think, you know, is more concentration as opposed to more diversification, which is our primary goal. Now I am not going to rule out that we would ever invest more in Eiger, but I would say, generally, we are more likely to end up, you know, investing in mineral and royalty interests like we have in the past. Doug Weiss: Mhmm. Okay. If you hit that capital target, my guess is you are going to be somewhat cash negative for the year. Do you have a leverage level where you feel, you know, where you get uncomfortable or where you are willing to go up to? J.C. Butler: Well, I do not ever want to get to a level where I start to feel uncomfortable. You know, we talk often about our desire to have a conservative financial structure. As we have discussed, you know, we have been through a period of investing in all these businesses, and we believe that we are, you know, entering a period of significant harvest in a, you know, investment-harvest business model. So, you know, one, we do not know whether we are going to spend the entire $89,000,000. And, two, we are going to watch our level of harvest that is going on during the year, and we will certainly manage in an appropriate way so that we do not ever get to a point where we are having a call and I am like, I am a little uncomfortable with where we are in our leverage. I do not want to get there. Doug Weiss: Yeah. Okay. I guess last question from me is just on Mitigation Resources. So is most of the revenue in the unallocated line, is that mostly Mitigation Resources? J.C. Butler: Yes. Doug Weiss: Okay. And how are you feeling about that business in terms of growth and, you know, I saw that you said it would be profitable at the end of the year. Is that something you expect to continue going forward into next year? J.C. Butler: Yes. You know, yes, we expect it to reach profitability and grow from there. The mitigation banks—you know, there are two parts to that business. One is the mitigation banking business. Speaking of invest and then harvest, you know, we have identified properties in high-growth areas. In some instances, we will acquire property with opportunity to improve the streams and/or wetlands on that property. And, you know, you get permits approved with the Army Corps of Engineers, and then there is basically a ten-year process where we do work that would involve improving the streams and/or wetlands and then monitoring. And you receive credits. We know upfront how many credits we are going to get, and the mitigation banks that we have already got in place have a very large value of credits that are going to be released from them over time. So we have got a pretty good horizon on the—you call it credit inventory—that we will be able to sell in the future from just our existing credits. Now, you know, that is all subject to timing because, obviously, you have got to get through the Army Corps of Engineers upfront permitting process. Then you have got milestones that we need to hit with the work that we are doing. We are confident that we could be successful with that. But then you also have got, you know, what are customer projects, what is their timing look like, when do they get their Army Corps permit, and how does their development proceed. So we think all of this is moving in a positive direction, and will continue to do so in the future. And all of that gets mixed in with shorter-term reclamation and restoration projects, you know, that we are finding really nice success in that part of the business. So you blend those two together, and we think this business is on a really nice trajectory—trajectory that will really start taking hold later this year. Doug Weiss: Okay. Great. Well, nice quarter, and glad to see things continue to go well overall. And so thanks. Thank you for your hard work and for taking my questions. J.C. Butler: Great. Doug, we always appreciate your questions. Thank you for your interest. Operator: And with no further questions in queue, I will now hand the call back over to J.C. for closing remarks. Christina Kmetko: This is Christina. With that, I will conclude our Q&A session. Before we conclude, I would like to provide a few reminders. A replay of our call will be available online later this morning. We will also post a transcript on the Investor Relations website when it becomes available. If you have any questions, please reach out to me. My phone number is in the press release. An audio recording of the event will be available via the Echo Replay platform. The Echo Replay will expire on Thursday, March 12, 2026, at 11:59 PM. Operator: This does conclude today’s conference call. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Altimmune, Inc. year-end 2025 financial results conference call. After the speakers' presentation, there will be a question-and-answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 1-1 again. As a reminder, this call is being recorded. I will now introduce your host for today's conference call, Lee Roth, President of Burns McClellan, Investor Relations Advisor to Altimmune, Inc. Lee, you may begin. Lee Roth: Thanks, Gigi, and good morning, everyone. Thank you for joining us for Altimmune, Inc.'s fourth quarter 2025 financial results and business update conference call. On today's call, you will hear from Jerry Durso, our Chief Executive Officer; Christophe Arbet-Engels, Chief Medical Officer; Linda Richardson, Chief Commercial Officer; and Greg Weaver, Chief Financial Officer. Following management's prepared remarks, we will open the line for the Q&A session. Our fourth quarter and full year 2025 earnings release was issued this morning and can be found on the Investors section of the Altimmune, Inc. website. Before we begin, I would like to remind everyone that remarks made about future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Altimmune, Inc. cautions that these forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those indicated. For a review of the risk factors that could affect the company's future results and operations, we refer you to our filings with the SEC. I also direct you to read the forward-looking statements disclaimer in our press release issued this morning, which is now available on our website. Any statements made on this call are only as of today's date, 03/05/2026, and the company does not undertake any obligation to update any of these forward-looking statements to reflect events or circumstances that occur on or after today's date. As a reminder, this call is being recorded and will be available for audio replay on the Altimmune, Inc. website. With that, it is now my pleasure to turn the call over to Mr. Jerry Durso, President and CEO of Altimmune, Inc. Jerry? Jerry Durso: Good morning, everyone, and thank you for joining us today for our fourth quarter financial results and corporate update. This is my first earnings call since joining Altimmune, Inc. as CEO in January. I would like to start with some comments to reinforce why I am excited about the opportunities ahead of us with PEMB. Altimmune, Inc. is exclusively focused on liver disease, an area where I have spent a good part of my career. Despite a number of therapeutic breakthroughs in the past several years, there remains significant unmet need and treatment gaps among patients living with serious liver diseases like NASH. We believe that PEMB has the potential to bring meaningful benefit to people affected by a variety of hepatic diseases. The balanced one-to-one agonism of glucagon and GLP-1 in a single molecule achieved with PEMB makes it potentially well-suited for the conditions we are targeting. Glucagon's direct effect on the liver can drive reductions in liver fat, inflammation, and fibrotic activity, while GLP-1 can mediate weight loss and appetite suppression and may contribute to anti-inflammatory effects. Additionally, PEMB incorporates our proprietary U-port structure, which slows absorption and is believed to drive improved tolerability, potentially reducing GI and other side effects, which can lead to greater treatment adherence. Importantly, keeping patients on therapy at the right dose is crucial to the management of chronic diseases such as NASH. The data we have generated to date across multiple preclinical and clinical trials, including our Phase IIb MATCH study, reinforce our belief in the strong therapeutic potential of PEMB, as well as its ability to stand out among competing therapeutic options if approved in NASH. As we evolve the PEMB plan, we are focused not only on advancing into Phase III, but also ensuring that the potentially unique benefits of PEMB for patients, payers, and physicians are addressed in our program with a keen eye to competitive advantages in PEMB’s targeted product profile. Based on our ongoing discussions with hepatology KOLs and other practitioners, it is clear that clinical practice in NASH is evolving and will continue to evolve as new therapies become available. The prevailing sentiment is that no single therapy will be able to effectively address the needs of all patients. This is already being acknowledged by the industry as a number of companies are pursuing combination strategies to meet the needs of broader segments of the patient population. With PEMB's dual mechanism, we have a combination therapy in a single molecule, with the potential to address both the hepatic and metabolic drivers of disease at once, which could differentiate PEMB from these multidrug approaches that aim to achieve the same benefits we are providing with a single compound. In our Phase II MATCH study, PEMB showed strong and early NASH resolution at just 24 weeks and clear antifibrotic activity at 48 weeks. The key measures were consistently moving in the right direction, with important noninvasive markers of fibrosis and inflammation improving as therapy progressed in the trial. In addition to efficacy, patients need a therapeutic regimen that they can adhere to in order to realize the full benefit of treatment. As we have shared, the favorable tolerability, leading to low discontinuations due to adverse events that we saw in our Phase II MATCH trial, can be a key differentiator that PEMB may deliver. Likewise, for patients and physicians, the simple dosing aspect of PEMB could play an important role. The one- or two-step titration scheme we will be incorporating into the PEMB Phase III trial could prove to be key when compared to the much more complex dosing of other injectable compounds. The potential of PEMB was recently recognized with FDA Breakthrough Therapy designation in NASH. Breakthrough is granted to medicines that are intended to treat a serious or life-threatening condition and have shown preliminary clinical evidence indicating the potential for substantial improvement over available therapies on a clinically significant endpoint. We look forward to proving this out in our upcoming Phase III trial. I hope this gives you some additional perspective into why we are so encouraged about the future of PEMB and excited for what is to come. Now as to how we are preparing to deliver on this potential, one of my top priorities since becoming CEO is strengthening Altimmune, Inc.'s foundation to equip us for the continued successful advancement of PEMB and support our strength as a late-stage development company. I am pleased to report that over the last several months, we have enhanced our team with the addition of new leaders who bring expertise in liver disease, late-stage clinical development, commercial strategy, and other key areas. We continue to build onto the strong Altimmune, Inc. team strategically to make sure we are able to deliver. We have also remained focused on strengthening our financial position. The $75 million capital raise completed in January was an important step in our ongoing efforts to prepare for the planned initiation of our Phase III this year. We remain committed to securing access to the capital required to successfully drive our clinical programs and create long-term value. At the end-of-Phase II meeting with the FDA, which was held in the fourth quarter based on 24-week data from our Phase II MATCH study, we received valuable guidance on the Phase III trial and we made excellent progress on the in-depth planning of a major global NASH trial like this. We are clear on the overall design elements and the endpoints and we are now in the process of making the final detailed decisions on the protocol and the full operational plan. Christophe will share more on the trial with you this morning. While we have significant focus on our MATCH program, we are also executing well on our other Phase II trials. As a reminder, last fall, we completed enrollment of the Phase II AUD trial ahead of schedule, and we are now on track to report top-line data from this study in the third quarter of this year. We are also expecting to complete enrollment of our Phase II trial assessing PEMB in ALD in 2026. PEMB represents a unique and compelling opportunity to improve the lives of people with NASH and other liver conditions. It has the potential to become an important tool for physicians as they look to improve upon the current treatment paradigm. This is a very exciting time for the team at Altimmune, Inc. We are moving quickly with intent and focus on bringing PEMB to patients and creating long-term value for our shareholders. With that, I will now turn the call over to Christophe for a clinical update. Thank you, Jerry. As we shared on our conference call in December, the 48-week data from the IMPACT trials of PEMB and MATCH, which evaluated the 1.2 mg and 1.8 mg doses, was very encouraging. Christophe Arbet-Engels: The 48-week dataset, including key noninvasive markers of liver inflammation and fibrosis, weight loss, and tolerability, showed strong evidence of antifibrotic effect at week 48 following the early NASH resolution shown already at week 24. The 48-week data established a clear dose response that supports our plan to focus on the 1.8 mg dose in the Phase III trial, while also evaluating the 2.4 mg dose, which could provide additional benefits on both weight loss and, most importantly, liver efficacy. We saw substantial improvements both from baseline and from week 24 to week 48 in ELF and liver stiffness, with the results achieved at the 1.8 mg dose being particularly clinically relevant and comparable to or greater than that observed with the approved NASH product. These measures are clear indicators of antifibrotic activity, and we believe that they will translate into measurable histologic improvement at the 52-week time point in Phase III, which, along with NASH resolution, will be the basis for potential accelerated approval. In addition to the strong benefit in ELF and liver stiffness results, treatment with PEMB demonstrated statistically significant improvement in liver fat content and liver health as measured by ALT and cT1 imaging, with particularly impressive results observed in the 1.8 mg treatment arm. While these NITs tell the story of PEMB's robust direct beneficial effect on the liver, the 48-week data also provided evidence of the ability to address metabolic drivers of NASH, with patients receiving 1.8 mg PEMB achieving 7.5% weight loss at 48 weeks with no plateauing. As noted, the inclusion of a 2.4 mg dose could result in greater weight loss in the upcoming Phase III trial and be an opportunity for additional efficacy on NASH endpoints for accelerated approval. As Jerry pointed out, adherence to treatment in this chronic disease is currently a substantial challenge. Long-term treatment is key to demonstrating clinical outcomes as well as delivering benefits to patients in the real world. Therefore, safety and tolerability are of paramount importance in addition to demonstrating efficacy in NASH. I am very pleased to say that the low treatment discontinuation rates in the 48-week Phase II study were maintained in patients taking PEMB. We attribute these key benefits to the favorable safety and tolerability profile of PEMB with limited GI adverse events despite the absence of titration. The timing of the GI-related adverse events in the IMPACT trial, which were predominantly occurring in the first one or two months of treatment, informs our plan to introduce a simple one- or two-step titration depending on the dose in the Phase III program. We expect this to further improve the tolerability profile over what we observed in the Phase II study. On the regulatory side, the minutes from our end-of-Phase II meeting with the FDA, which we received in January, confirmed our takeaways from the meeting. We are aligned with the agency on all key aspects of the design for a pivotal Phase III study, which will assess PEMB in patients with moderate to advanced fibrosis. Participants in the PEMB arms will start at 1.2 mg and follow a one- or two-step monthly titration to either the 1.8 mg or 2.4 mg dose. The trial's primary population will enroll 990 patients with biopsy-confirmed F2 or F3 NASH, evenly split between placebo, PEMB 1.8 mg, and PEMB 2.4 mg, and measure improvements in either of two primary endpoints: NASH resolution or fibrosis improvement at 52 weeks, with an AI-assisted tool used to aid the histologic assessment. The 52-week endpoint is designed to support potential accelerated approval, with five-year clinical outcome data on liver-related events needed for an eventual final approval. A second cohort, following the same dosing and titration parameters, will enroll approximately 800 patients with NIT-assessed F2 and F3 NASH and measure changes in these noninvasive tests over the same three treatment periods. This population will support safety and long-term clinical outcome evaluations. In total, we will enroll approximately 1,800 patients in this pivotal study. Other key endpoints in the program will include safety, weight loss, and additional potential differentiation attributes such as body composition, quality of weight loss, and patient-reported outcomes. This will be a global trial with sites in North and South America, Europe, and Asia. In addition to the alignment with the FDA, we have submitted requests for scientific advice to both the European Medicines Agency and the MHRA. We have incorporated learnings from previous programs and believe that our Phase III design is well positioned for these regulatory agencies. Overall, we have made great strides toward preparing to initiate our Phase III trial this year. We are finalizing our protocol, and we have aligned with the FDA on the trial design. We have incorporated feedback from key opinion leaders and we look forward to execution of the Phase III study. We will be providing updates on our progress as appropriate. Now looking beyond NASH, PEMB has the potential to address major unmet medical needs in both AUD and ALD because of a similar liver physiopathology to NASH in these indications, and both of those Phase II trials are progressing well. First, RECLAIM, our AUD trial, completed enrollment in 2025 and we look forward to reporting the top-line data in Q3 of this year. In addition to patient-reported measures of alcohol consumption, the trial will also assess an objective biomarker associated with alcohol intake, PEMB's effect on body weight, and safety in this population. For the RESTORE trial in ALD, which will evaluate PEMB's effect on liver-related noninvasive tests, markers of alcohol consumption, and body weight, it is continuing to enroll, and we expect to complete enrollment later this year. Both trials will further expand the already robust body of evidence for PEMB in serious liver disease. And with that, I will turn the call to Linda for a commercial perspective on PEMB. Linda Richardson: Thanks, Christophe, and good morning, everyone. As we move toward Phase III initiation, establishing the future commercial competitiveness of PEMB in NASH remains a primary focus, both in the design of our trial, as Christophe described, and in identifying and addressing unmet needs in the marketplace. Despite early excitement with the first two classes of approved therapies for NASH, it is clear there is significant room for new therapies to address treatment gaps and needs. We recently conducted market research with 75 U.S. healthcare professionals who treat NASH patients to assess unmet needs in the market and satisfaction levels with current and future therapies. I will share some key insights now. First, we learned that physicians are identifying emerging needs in patient subgroups. This includes options for NASH patients who have discontinued semaglutide for either tolerability or efficacy reasons and now need alternatives. Tolerability failure was seen as an area of high or very high unmet need by the majority of the respondents. Half of all physicians surveyed agreed that there is a high or very high unmet need for therapies appropriate for NASH patients at risk for loss of muscle mass. A recent review of the literature shows that nearly one in four patients with MASLD is at risk for additional muscle loss or sarcopenia, and this rate is higher in more advanced NASH patients. In addition, healthcare professionals in our research see several fundamental limitations with currently approved and potential future therapies, setting up a clear need for potential novel options like PEMB. Many physicians acknowledge that the lack of weight loss with FGF21s and resmetirom are limitations of these options, and 44% agree that the tolerability profile of GLP-1 and GLP-1-based therapies causes many patients to drop off. Over one-third believe that lengthy titration schemes to improve the tolerability of these drugs creates adherence challenges. A similar number agreed that the loss of lean muscle mass is a concern when initiating GLP-1 or GLP-1/GIP therapy, echoing the concerns regarding sarcopenic patients I mentioned earlier. From our Phase II data seen to date, we believe that PEMB and its dual mechanism of action may address many of these unmet needs. Our existing clinical program already shows that PEMB has a favorable tolerability profile relative to current and investigational therapies. This may be highly differentiating and is clearly important in this market where patients must remain on drug therapy to achieve efficacy and weight loss benefit. Furthermore, other NASH therapies have trial designs with long titration schedules using multiple subtherapeutic doses to try to mitigate side effects. As Christophe highlighted, our Phase III trial will start with an active 1.2 mg dose in each arm and have only one or at most two titration steps to possibly further improve our favorable tolerability profile. The inclusion of a 2.4 mg dose with a two-step titration over only eight weeks should help maintain tolerability and allow us to evaluate potential further increases in efficacy and weight loss. Weight loss is an important element of managing NASH. It is clear that lean muscle preservation is a growing concern among HCPs. This is an unmet need that we may be able to address. As we have seen lean mass preservation in our PEMB obesity trial, we will be generating additional data on this element in our further studies of PEMB in NASH patients. Now I will share how physicians reacted to our blinded product profile in this market research. We developed our projected product profile based on our current data for IMPACT, showing early and significant NASH resolution, anti-inflammatory and fibrosis effects from NITs, and included data we anticipate seeing in our Phase III program, such as quality weight loss in the 8% to 10% range with lean muscle preservation. HCPs surveyed recognized significant promise in our efficacy, including direct action on the liver with our glucagon agonism, metabolic improvements, straightforward titration, quality weight loss that preserves lean muscle mass, and PEMB safety and favorable tolerability. In fact, in this market research setting, over 70% reported a very high or high likelihood to prescribe PEMB. Physicians projected using PEMB in 43% of their F2 patients and 51% of F3 patients. Over 80% saw PEMB as both a first- and second-line option. PEMB's potential efficacy, safety, and tolerability profile may allow for use in patients needing greater efficacy than a GLP-1 alone or providing quality weight loss not seen in certain other classes of drugs like FGF21s and resmetirom. As we add to our understanding of PEMB's clinical performance and data, and amplify our storyline regarding our unique combination of attributes, we believe we will be well positioned to enter the NASH marketplace. What we see today and continue to hear from healthcare professionals certainly signals strong interest in PEMB. It is not enough to be differentiated; you must have meaningful differentiation, and PEMB's projected profile provides that. I will now turn it over to Greg to review our financial results. Greg Weaver: Thank you very much, and good morning. I will begin with a brief review of our fourth quarter 2025 P&L. R&D expense in the fourth quarter of 2025 was $18.4 million compared to $19.8 million in the same period of 2024. The variance in R&D spend related to the end of the Phase IIb trial in late 2025. Breaking that down further, the Q4 2025 R&D spend included $12.8 million of direct costs related to PEMB development, of which $3.1 million was for the IMPACT Phase IIb trial, $7.4 million for the Phase II trials in AUD and ALD, and $1.2 million in CMC-related expenses. Fourth quarter 2025 R&D also included $1.3 million in noncash stock-based compensation, which is flat in comparison with the same quarter prior year. Moving to G&A, the G&A expenses were $10.5 million and $5.1 million for the quarters ended 12/31/25 and 12/31/24, respectively. The Q4 increase in G&A year-over-year was driven by a one-time noncash and cash stock compensation and payroll charge due to executive transition, which totaled $2.6 million, along with increases in professional fees and other compensation-related expenses. Fourth quarter 2025 G&A also included total noncash stock-based compensation of $3.6 million compared to $1.8 million in the prior year period. Net loss for 2025 was $27.4 million, or $0.27 per share, compared to a net loss of $23.2 million, or $0.33 per share, in 2024. Total full-year 2025 cash OpEx was approximately $67.5 million, excluding noncash compensation of $16 million. We anticipate the use of cash will trend up this year as we approach the launch of the NASH Phase III trial. As Christophe mentioned earlier, we are actively finalizing the last details of the study plan and the other last important details for Phase III. When ready, we will update you and provide more guidance on the timing of cash flows and related details. Now moving over to the balance sheet, we reported total cash of approximately $274 million at year-end 2025. We made a great deal of progress in building the financial position, having recorded net proceeds totaling approximately $208 million last year, in a combination of approximately $174 million in net equity capital raised and $35 million in funding off the Hercules tranche loan facility. In addition, we raised $75 million in the registered direct offering announced in January with Al Eskan Investment Group. The proceeds from this offering, along with $8 million raised off of our ATM facility in January, equate to a pro forma cash position today of approximately $340 million. We forecast that our current cash position would provide an operating cash runway into 2028 based on our current expectations for the scope and timing of the NASH Phase III plan, along with the cost of both the AUD and ALD Phase II trials. Our intent is on having the cash resources necessary to execute the NASH Phase III trial. We will continue to be strategic and opportunistic in our approach to securing access to the forecasted capital needed to fund Phase III, and we will keep you updated on our progress. And with that, I will turn the call back to Jerry. Jerry Durso: Thanks a lot, Greg. As we highlighted today, we have entered 2026 with a great deal of momentum. We have made significant progress as we evolve into a late clinical-stage organization, and we are committed to further advancing our promising, differentiated liver therapy and creating long-term value for our shareholders. This concludes our formal remarks. We will now open for questions. Operator? Operator: Thank you. To withdraw your question, please press 1-1 again. Our first question comes from Roger Song of Jefferies. Your line is open. Roger Song: Excellent. Congrats for the update, and thank you for taking our questions. So first question related to the Phase III. We all see the FDA have some new single pivotal framework. Just curious, have you talked with the FDA about that potential change, and then is that possible you can further save the cost from the Phase III if FDA allow you to do some amendment for the Phase III? Thank you. Jerry Durso: Thanks for the question, Roger. Christophe, maybe you get on that one? Christophe Arbet-Engels: Yes. No. So we have not discussed this at the end-of-Phase II meeting. The path for approval for the NASH programs is one single trial for accelerated approval and then all the way to final approval for clinical outcomes. So this does not really apply directly for us. That is new. It does not change anything in how we are approaching our development program towards approval. Roger Song: Got it. That makes sense. And then just knowing you are still finalizing the protocol, just any statistical plan you can share at this point in terms of the interim versus the final outcome of alpha split and then different two primary endpoint for the interim, if anything. Thank you. Jerry Durso: Yes. Thanks, Roger. A lot of progress there. Maybe Christophe can give the big picture on that. Christophe Arbet-Engels: Yes. So the first is we are having a fairly standard design for the Phase III. We have our two primary endpoints per the FDA guidance, which are NASH resolution without worsening of fibrosis and fibrosis improvement without NASH worsening. And this is how we have powered our study. Our study is powered more than 90% on these endpoints, and that gives us a sample size that is around 990 patients, so 330 patients per arm. As we highlighted, that power should give us sufficient patients to reach the approval. And the split of the alpha is, as you know, for the accelerated approval, for part one, 0.1, and then the rest of the alpha goes all the way to the clinical outcome. The last thing is we have powered based on our assumptions for the 1.8 mg dose. So as mentioned, we are very well powered for this. In our trial, we have the option for an upside with the 2.4 mg dose, and so we are really hoping that we will see some added benefit there. Roger Song: Thank you so much. Jerry Durso: Thanks, Roger. Operator: Thank you. And our next question comes from Ellie Merle of Barclays. Your line is open. Jasmine: Hi. This is Jasmine on for Ellie. Thank you for taking our questions. I have two. So first, from your conversation with the FDA, where does the agency stand now on flexibility to consider NITs as a potentially registrational endpoint? Is the thinking for including the NIT cohort that we could potentially see more flexibility on this in the future, that you might be able to amend and use this cohort for approval more quickly? And then secondly, can you talk about your plans in NASH F4 and potential timelines there? Thanks. Jerry Durso: Thanks, Jasmine. Maybe I will start and then turn it back to Christophe. On the first question, we did broach the point of endpoints on NITs in the end-of-Phase II process. The agency at that point said it was premature to consider that, which is why you see the biopsy-driven endpoints. Nonetheless, we will capture all of that data, so that process at the agency will be ongoing. But again, as we finalize the protocol, you will see the biopsy-driven endpoint as part of that. Maybe you want to pick up the second—sure—second half. Christophe Arbet-Engels: In the context of the AI-assisted approval, we see the agency slowly moving towards that direction. So we have incorporated this in our trials, and we have put everything in case they change during the conduct of the study. So we are in good shape here if they were to go there. The other question is on the F4. I mean, current focus is clearly on the F2, F3. We believe there is some potential here with the mechanism of action and the direct effect on the liver to impact the F4. At this point in time, the team is really dedicated towards the execution of the Phase III and putting all the last pieces in place to start. Jasmine: Okay. Thank you. Jerry Durso: Thanks, Jasmine. Operator: Our next question comes from Yasmeen Rahimi of Piper Sandler. Your line is open. Dominic: Hi. This is Dominic on for Yasmeen. Congrats on all the updates, and thank you for taking our question. So we just had a few here. The first one related to the Phase III for NASH. What are the rate-limiting steps to kick off that study? And how are you thinking about the timelines for enrollment and top-line data? Jerry Durso: Okay. Maybe I will start on the first half and then Christophe can take the second. We are very focused on bringing PEMB to patients as soon as we can. I think we are approaching the preparation on both the financial and the operational fronts. As Christophe outlined, we like where things sit on the clinical side. Good clearance from the FDA. Good insight on our proposal regarding Europe. So all things are moving in parallel. We expect that all will be in line to start the trial as we progress through this year, and we will narrow the guidance as things come to fruition. Again, the teams are moving quickly here, and this parallel approach is going to lead us to initiation of the trial. Christophe Arbet-Engels: Yes. I mean, I can just add to what Jerry said. We are preparing everything on the regulatory side. We have alignment with the FDA. We have done our homework on what is expected from the European or the MHRA. We are in good shape here. We do not expect any major changes in our approach. It is about now execution, getting the team to finalize the last details, whether it is in our protocols, some of the key aspects of the protocol, and then moving forward to be ready to start as soon as possible. Dominic: Okay. Great. Thank you. And then I just have one more question on RECLAIM. We are excited for that trial. What are your thoughts on what you hope to see, and what would you consider clinically meaningful on alcohol usage for that? Thank you so much. Christophe Arbet-Engels: So this study on the AUD is analyzing the heavy drinking days over a period of seven days or a week. And we have powered the study to see a fairly conservative change, so hopefully we will see that. We are also capturing other endpoints like the zero drinking days as well as some of those WHO risk categories because this could be endpoints that will be discussed with the FDA as we move that program forward. So we are going to look at all these aspects when we get the data, and hopefully we will see some improvement. As a reminder, the mechanism of action is well suited for this, both on the reward system through the GLP-1 side of it, as well as the direct effect on the liver, which is quite unique compared to what other programs have currently in development. Dominic: Great. Thank you. Operator: And our next question comes from Corinne Johnson of Goldman Sachs. Your line is open. Anupam: Hi. This is Anupam on behalf of Corinne Johnson. Maybe can you just tell us about the additional financing through the year and what you are anticipating needing to reach the completion of the Phase III in the NASH program? Any color on that? Jerry Durso: Yes. So maybe I will start on that, and then Greg could pick it up. Thanks. I mentioned a couple of times already, including in the prepared remarks, we are preparing on both the financial and the operational side. On the financial side, as Greg outlined, we have improved our position. He referenced roughly $340 million on the balance sheet as of February. That gives us runway into 2028. We would like to make further progress as we progress to initiate the trial. We believe we have good line of sight on some options on how we would approach that in parallel to all the good operational work that Christophe and his team are doing. And then we will access the appropriate tools along the way. Greg, anything else you want to reiterate? Greg Weaver: I will just pick up that thread. I think we have a sense of purpose here in making sure we have the strength of our resources in hand as we begin the next necessary steps to launch this trial this year. Just basically, we have a clear line of sight on what that looks like, how much that is going to take, and we are confident that we will get there. Anupam: Okay. Thank you. Christophe Arbet-Engels: Thank you. Operator: And our next question comes from Annabel Samimy of Stifel. Your line is open. Annabel Samimy: Hi, thank you for taking my question. Thanks for all the color on the profile and the physician receptivity. So I just want to ask from a competitive landscape, we will likely be seeing more data from Retta and Serva in obesity this year with the full knowledge that this is in obesity. What are some of the key data points that you as a team are looking for that may translate into NASH and could potentially have implications for the competitive landscape on the glucagon agonist front? Maybe you could just give us an idea of how you are thinking about the entire competitive landscape for these specific dual agonists. Thanks. Linda Richardson: Sure. We are always paying attention to what is happening in the marketplace. And we look at ourselves and what we have in terms of great tolerability, quality weight loss that we have not seen with these other agents, our simplicity of our titration and tolerability, which we have emphasized, is really seen as something quite important. For very obese patients, I think that there is going to be a role for managing that, but that has to be balanced with tolerability and efficacy elsewhere. And the direct-acting effects that we have shown in the ratio that we are showing, in the one-to-one ratio, we believe are very important. If you are talking about the results in obesity, there may be some read-over there, of course, but the trial that they are looking at should not read out for quite some time on outcomes. Our trial will be very heavily focused on NASH patients. So that is our focus—F2, F3—and the size of the market is such that there are going to be enough patients who need help that there will be ultimately many roles, I think, for PEMB, particularly if we deliver on the differentiation in the profile that we just talked about. Jerry Durso: I think—and just maybe one other point Linda touched on—the ratio matters. I think when you think about the BI compound, for instance, I mean, obviously we will see some additional data from them. But I think the work we have done with our own compound, we believe the balanced ratio is part of what is driving some of the elements around the tolerability profile, which, again, we saw a good solid picture in our Phase II without a titration. Now we have the opportunity to put a simple titration and maybe move forward on that as well. So we are looking at all of the competitive entrants. It is why we focused on this call, frankly, a lot more detail on the differentiation story because it is how we view the work that we are doing currently executing the Phase III and also really always understanding how we are going to position PEMB to bring the benefit to the patients that need it the most. Linda Richardson: Yes. And let me—I just want to correct myself right now. The cirmidutide study is with their eight-to-one GLP/glucagon that is in the NASH population. I was looking at the retitutri trial in my head. So I just want to make sure I correct that. Either way, I think the tolerability for Serva was going to be quite significant for them. And when you look at the complicated titration schedule, that is going to be of concern as well. Annabel Samimy: Okay. Great. Thank you very much. Thank you. Operator: And our next question comes from Patrick of H.C. Wainwright. Your line is open. Luis Santos: Good morning. Luis Santos here in for Patrick. Congratulations on all the progress. My question is regarding the NASH noninvasive tests that you are using. So now that you have alignment with the FDA, did they provide any clarity on using it as primary rather than just surrogate, as well as the AI biopsy reads for an accelerated approval. Christophe? Christophe Arbet-Engels: Yes. So on the discussion with the FDA, as mentioned, the NITs are too premature now, and we just want to be really ready on this. However, the opportunity with our two cohorts is actually several fold. One, it fulfills some of the requirements for the safety as well as the long-term clinical outcome, but also to enroll a little faster our Phase III trials because we know, and we have done that, that PIs will be happy to actually have the patients having different options—so the biopsies and the NITs—so that will give us some advantage there, and we are hoping this will play in our favor. With regard to the AI assist, this is still a consensus based on the pathology reading. At the end, the pathologist is responsible. Where we believe this could help us is actually in reducing variability, potentially, if we do the right training, etc., having a lower variance and trying to play in our favor. So we are putting those pieces into place right now. We are having a lot of discussions with key pathologists and with the AI assist company, and we are putting all the pieces of that and getting very close to having a really strong path toward biopsies, but also, as mentioned before, having the flexibility around the NITs in case the FDA changes their mind. Luis Santos: That sounds great. Very quickly, can you update us on your CMC readiness? And do you plan to scale for global trial manufacturing supply for both obesity and NASH simultaneously, or do you plan to partner on that end? Jerry Durso: Yes. M. Roberts can take the question. Just one point on the front is that we are focused on the NASH trial. Okay? We are focused on positioning PEMB as a liver compound. M. Roberts: Yes. That is exactly right. And as far as readiness for the Phase III, we believe that we are there. We are ready to go on that. As far as NASH, a global trial—that is really not an issue. For NASH, you know, we were originally developing the process for obesity. We can scale to that size as necessary, but the company is focused on NASH. And for those indications in the U.S. and the rest of the world, we are exactly where we need to be. Luis Santos: Great. Thank you so much. Thanks. Operator: Thank you. And our next question comes from Michael DiFiore of ISI. Your line is open. Michael DiFiore: Hi, guys. Thanks so much for taking my questions. Two for me. The first one, just want to drill down on a prior question that was asked. Now that you received the FDA minutes, are the key elements fully locked, and what is the single biggest remaining variable that you are still optimizing? And secondly, with the request for EU scientific advice now submitted, is there any early read on whether EU feedback could change anything meaningful versus the FDA-aligned plan? Thank you. Jerry Durso: Thanks for the questions, Michael. Christophe? Christophe Arbet-Engels: Yes. So on the FDA minutes and the discussion with them, we are really in the last phases of finalizing our protocol. We have all the elements, like I mentioned—the sample size, we talked to all of our biostatisticians, we have the primary endpoints aligned, the population, etc. What we are looking at is finalizing some—like, for example, the biopsy is a critical point, and we want to really take the time to do it in the most comprehensive manner and having our A-team of pathologists with us. So we are taking the time to do this the most appropriate way, and these are the kind of last details—some of the QC, for example, things like this. So these are really the final stages of those aspects. With regard to the EU, we have worked with regulatory consultants. We have a good understanding. We actually even have biostatisticians that are advising the EMA that work with us. We have put together all the pieces, so we do not expect anything to hold us back. And our protocol and the design of the study should not change based on the scientific advice. Michael DiFiore: Great. Thank you. Jerry Durso: Thanks, Michael. Operator: Thank you. And our next question comes from John Wolleben of Citizens. Your line is open. John, your line is open. Catherine: Hello. This is Catherine on for John. Hi. Are you hearing me? Jerry Durso: Yes. Hi, Catherine. Thank you. Two quick ones, mostly on the RECLAIM program. Firstly, how am I speaking about the mechanism of action, like as far as having GLP and glucagon, specifically maybe being beneficial over just GLP-1 agonism, in the alcohol-related diseases? And also, logistically, how do you guys plan on moving forward with the Phase III program? Are you guys going to move forward with AUD and then wait for ALD data, or do you want to see both before moving forward? Thank you. Jerry Durso: Yes, maybe I will start with the second question and then Christophe can take the mechanistic one. So as we said, we are going to expect the readout on the AUD trial in quarter three. We will assess the data and then plan next steps. That would happen immediately upon receipt of the data. No need to wait for ALD. We like the fact that we have a second Phase II going in ALD, but as the enrollment will finish this year, that will be a later readout. Christophe Arbet-Engels: Yes. On the mechanism of action, it is well recorded in the literature that GLP-1 has a central effect on the reward system and the type of alcohol use that those patients will have. The difference is the direct effect on the liver. There are now more and more—and recently in January at the MASH-TAG conference—there was clearly a talk discussing the fat in the liver of these patients, but also some elements of early fibrosis. So it would be very suited for these populations to not only treat the alcohol use and the cravings and that reward aspect, but also treat directly the liver because the liver is already substantially damaged and even with early fibrosis. Clearly the dual mechanism of action, and the tolerability, I will add, in that particular population is extremely suitable for a product like PEMB. This population feels good. They are not having—you do not want to add side effects or complications to them. So they really want to get their liver treated as well as the cravings. Catherine: Thank you so much. Jerry Durso: Mhmm. Operator: Mhmm. Thank you. And our next question comes from Andy Hsieh of William Blair. Your line is open. Andy Hsieh: Thanks for taking our questions. We have two questions. One is related to the prepared remarks that you made, highlighting that SEMA failures might be a potential segment to provide clinical differentiation. So can you tell us a little bit about the exclusion/inclusion criteria regarding the length of the washout period in the upcoming Phase III trial? So that is question number one. Question number two has to do with the pathologist panel that you decided. I am curious if it is just a two-person panel, three-person panel. Could you talk about the education process if you do not mind? Thank you. Christophe Arbet-Engels: So I will start with the first one. Clearly, what we hear and what has been presented in the past conferences is that SEMA is hard to tolerate, that most patients do not reach the NASH-effective dose, that the titration is complex for them, and that there are a lot of dropouts of treatment after already six months to a year. So this is a challenge there. If that is the case, for us, clearly, we will accept these patients in our Phase III trials. And we want to be able, if they have not tolerated SEMA, to bring them on board, because they will have an option with PEMB, again, to have—and I want to remind you here the extremely strong efficacy we have seen in our Phase II study as well as the tolerability. So both together are a perfect option for this population with a real chance now to address the liver and their metabolic causes for that NASH. With regard to the pathologists, we are still finalizing these details. We are towards the end of this. Our thinking right now is to have—it has to be a consensus. So we are thinking to have a few pathologists, and the reading would be a two-plus-one type of reading with the consensus; the plus one would be if there is no consensus between the two pathologists. Clearly, the advantage here for us is the AI assist. It really decreases the variability and helps that consensus. It should also accelerate and streamline the process. And so for us, these two aspects—decreasing variability and streamlining the process—are good positive perspectives to execute our study in the best possible way. Andy Hsieh: That is helpful. Thank you. Operator: Thank you. And our next question comes from William Wood of B. Riley Securities. Your line is open. William Wood: Thank you so much for taking our questions. Two from us, if we may. On your RECLAIM trial, it is focused on drinks per day and alcohol consumption. But I was curious if there are any NITs looking at the liver or additional measurements that could read through to either your ALD or Phase III trials. You will be evaluating the 2.4 mg dose in both the AUD and ALD, and then obviously the Phase III. As well as, could you provide any color on how far along you are in your ALD trial enrollment? And then I have a second follow-up. Christophe Arbet-Engels: Alright. On the AUD, we do not have too many. We have the typical liver enzymes, etc. We are looking at the heavy drinking days, we are looking at the zero day of drinking, we are looking at the WHO risk classification, if you wish, and how these patients will change. We also, since it is a patient-reported outcome, have blood tests such as the PEth test, which is a little bit like you would see in the HbA1c, which reflects the alcohol impregnation. So we believe that here we have—and we have all the other markers of the effectiveness of the drug such as weight loss, etc. So we have in our AUD a number of things that will be very helpful to prepare for discussions with the FDA, granted the data come out positive on this. On the ALD, we are enrolling as per plan. As you know, this is a more severe population, so it will be more difficult to enroll. We successfully enrolled very rapidly our AUD trial, much faster than anticipated. But here on the ALD, we are on track as per plan and moving forward smoothly. I cannot give you any more forecast on that at this point. William Wood: Okay. And then in your Phase III trial, maybe I missed it, but will you be evaluating any benefits, or maybe how do you plan to assess MACE since you are not conducting a separate CVOT trial? Christophe Arbet-Engels: No. This is a great question. First, we have already seen some great improvements on the lipids. On the inflammation—we clearly have a decrease in inflammation with PEMB. We have seen improvement in lipids at week 24 and similarly at week 48. So we believe there is a real potential here to see some cardiovascular benefits. We will clearly look at this in our Phase III NASH trial. However, the FDA does not want us to include this as the clinical outcome for liver-related events. Clearly, they are two separate aspects, but we will have the data built in our Phase III. William Wood: Okay. Okay. Thank you. Thank you. Operator: And our next question comes from Boris Peaker of Titan Partners. Your line is open. Boris Peaker: Great. Thanks for squeezing me in. I guess I just want to focus on the muscle preservation, and obviously it is one of the key differentiating elements of the drug. Just curious—the observed weight loss to date, can you comment whether the muscle preservation was stronger at the lower or the higher end of the BMI scale? And what can you potentially do in the Phase III study in terms of enrollment to maximize the impact of this muscle preservation, particularly considering it is a large and international study? Christophe Arbet-Engels: Yes. So the mass preservation and the lean mass is critical, as you say, because this is something that in that population that is aging—our average patient is 55 and older—and they start losing their bone and their muscles, and so we do not want to add anything to this. So we want to keep the muscles in this population. We have demonstrated some very interesting data already in our VCT trial. And we would like to continue demonstrating this. How we are integrating this in the Phase III—we are actually in some discussions right now, whether it is a full mechanistic study or if it is a sub-study that is put into the trial. It is something that we are designing as we are speaking today. Regarding the BMI, there is no difference between the BMI networks. It is all different types of BMI, and it is consistent throughout. That is what we have seen in our VCT study. Boris Peaker: Got it. I am just curious. What specific tests or biomarkers are you monitoring to better understand this muscle preservation? So is it just a DEXA scan, hand strength, MRI? What are you specifically monitoring, and what do you think you would need to potentially get a claim in a label on some kind of muscle preservation? Christophe Arbet-Engels: Yes. That is a complicated question because getting a claim would require some—clearly, we will have MRI. We will have the DEXA. We would like to better understand—we have some ideas how this is working as well. We believe that one-to-one ratio is one of the key aspects that could lead to this. So if we can make that link during our Phase III, clearly, it would be an important distinction and differentiator at launch. So we are putting all these pieces together as we are—first, we are finalizing that protocol for the NASH and putting the pieces on that lean mass preservation as well in parallel. Boris Peaker: Great. Thank you very much for taking my questions. M. Roberts: Thank you, Operator: Thank you. I show no further questions at this time. I would like to turn it over to Jerry Durso for closing remarks. Jerry Durso: So thanks, everybody, for joining us today. A lot going on in the company, a lot of progress. We are moving forward towards the Phase III execution. We have work to do, but we are in a good position. And we definitely look forward to providing further updates as we progress. Thanks, everybody, and have a great day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good day, everyone. My name is Luke, and I will be your conference operator today. At this time, I would like to welcome you to the Mistras Group, Inc. Q4 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 and if you have joined the webinar, please use the raise hand icon which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Thomas Tobolski, Senior Vice President, Finance and Treasurer. Thomas Tobolski: Good morning, everyone, and welcome to Mistras Group, Inc.'s fourth quarter 2025 earnings conference call. I am joined today by Manuel Stamatakis, Executive Chairman of the Board, Natalia Shuman, President and Chief Executive Officer, and Edward J. Prajzner, Senior Executive Vice President and Chief Financial Officer. Before we start, I want to remind everyone that remarks made during this conference call, as well as supplemental information provided on our website, contain certain forward-looking statements and involve risks and uncertainties as described in Mistras Group, Inc.'s SEC filings. The major factors that can cause Mistras Group, Inc.'s actual results to differ are discussed in the company's most recent Annual Report on Form 10-K and other reports filed with the SEC. The discussion in this conference call will also include certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance but that were not prepared in accordance with U.S. GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found in the tables contained in yesterday's press release and in the company's related Current Report on Form 8-Ks. These reports are available at the company's website in the Investors section and on the SEC's website. I will now turn the conference over to Natalia Shuman. Natalia Shuman: Good morning, everyone. Thank you for joining us today. It is my pleasure to report to you highlights of our fourth quarter and full year financial performance and provide an update on the progress made to date on our strategic plan and our outlook for 2026. Let me first start with fourth quarter results. I am pleased to report that we delivered consolidated revenue growth of 5.1% in the fourth quarter versus the prior year. As we communicated earlier this year, we successfully executed on a number of critical initiatives to restart revenue growth in 2025. In particular, we generated double-digit revenue growth across several key areas of our business, namely within the aerospace and defense, power generation, and infrastructure end markets. Our aerospace and defense business, which is our long-term growth engine, led the way with $4.5 million of growth in the fourth quarter, increasing 21.9% over the prior-year quarter. Power generation was up $3.3 million, representing 33.2% growth over the prior-year quarter. The industrials and infrastructure verticals were also up 6.7% and 26.8%, respectively, over the same time frame. These increases more than offset the anticipated decline in oil and gas revenue due to timing of projects and the closure of unprofitable labs. Our aerospace and defense operations, as we have reported throughout the year, have made significant improvements in 2025, driven by new leadership supported by targeted capital investments. We have rebuilt the structure, introduced a hub-and-spoke operating model, and implemented dynamic pricing strategies. In addition to commercial aerospace strength, demand within the private space and defense industries has also played a favorable role in expanding our growth in this market. These actions led to the record high performance in our laboratories business, which grew by 661% in our fourth quarter as compared to the prior year. Aerospace and defense expansion, posted double-digit growth in other key industries already mentioned, has resulted in favorable business mix, which in turn was a major driver behind the 190 basis point improvement in gross profit margin to 28.4% on gross profit of nearly $51.5 million for the fourth quarter. This contributed to our GAAP net income of $3.9 million and EPS of $0.12 in the fourth quarter, and non-GAAP net income and EPS of $7.9 million and $0.20, respectively. We achieved adjusted EBITDA of $24.8 million, which was up 18.2% over the prior-year quarter, representing a 13.7% adjusted EBITDA margin, which was a 160 basis point improvement over the prior-year comparable quarter. Our fourth quarter adjusted EBITDA and adjusted EBITDA margin represent the highest ever fourth quarter performance achieved in the company's history. Equally important, this performance reflects improved pricing discipline, mix, and operating efficiency, and not only one-time actions, such as restructuring and lab closures. Next, I would like to provide a few highlights of our full year 2025 results. On a full year basis, consolidated revenue was $724 million, which was slightly up year over year excluding the impact of laboratory closures. Revenue was up for the full year in our aerospace and defense, industrials, power generation, and infrastructure end markets. Our International segment delivered revenue growth of nearly 6% for the year, driven by a diversified platform, most notably solid performance within the industrials and aerospace and defense markets. We had anticipated our second half revenue performance to exceed that of the first half of the year, and this trend materialized, driven by significant improvements across key growth markets while improving margins. We expect to continue this trajectory of profitable growth in the future. Our overall efforts in 2025 resulted in the generation of adjusted EBITDA of $91.1 million for the year, with an EBITDA margin of 12.6%, which exceeded our previously issued outlook. Our intense focus throughout the year was to deliver EBITDA margin improvement. We, in fact, achieved these goals utilizing financial and operational discipline while establishing a strong foundation in 2025 and providing credibility to the market which our results demonstrated. To summarize our 2025 results, I am very pleased with our performance, achieving adjusted EBITDA at an all-time record. This is a testament to our proven business model and client-first mindset. In 2025, I was focused on building a new executive team, eliminating unprofitable business, and streamlining the organization while focusing on the strategic direction and building new capabilities and developing a winning culture. We have already experienced early success, including recent wins, improved margins, adoption of new pricing strategies, and an overall new sense of purpose, direction, and intensity, which position us very well for the future. Let me now shift to a brief overview of our most recent progress against our three key priorities in our strategic plan, Vision 2030, the first of which is expanding our share of wallet and transforming our current services into more comprehensive, integrated, and innovative solutions for our customers. Our Data Solutions business plays a key role in executing on this priority. This business derives significant value from its more than twenty years of inspection data that we have collected, analyzed, and transformed into actionable insights for our customers. Specifically, within this business we achieved great success within our Plant Condition Management Software, PCMS, offering, which grew by 20.7% in 2025 and 25.2% for the full year versus the prior-year comparable period. This growth was driven by market demand, new customer adoption, and increasing the number of in-house implementations. This offering is a specialized industrial software platform with a high level of recurring revenue. This platform is a part of broader OneSuite asset protection software ecosystem, a cloud-based integrated platform that brings together our various software tools, data services, analytics into a single connected environment which helps to keep complex infrastructure safe, compliant, and operating effectively. We expect to enlarge our market share related to our data analytical solutions business as we expand our platform from its original compliance focus to its current risk-based inspection, which will ultimately transition to a more sophisticated predictive maintenance and AI-centric platform, reflecting our commitment to continued innovation in data-driven inspection. We are monitoring and driving this Data Services revenue growth by measuring several interrelated metrics, including sustaining a high year-over-year renewal rate, expanding the percentage of available applications utilized by each customer, and increasing our customer retention. We intend to prospectively report upon the growth rate of this business utilizing this and related metrics so that you can monitor our progress going forward. In addition to doing more for the existing customers in the oil and gas market, we are also winning projects with new customers, allowing us to diversify our business, which is the second priority within our strategic plan. Examples of successful end market diversification include two recent wins in bridge monitoring contracts in the U.S., where our innovative monitoring and data analytical capabilities set us apart. These projects helped to contribute to the growth in our infrastructure end market, which grew by $2.5 million, or 26.8%, in the quarter and $4.5 million, or 13.2%, for the full year. This growth, coupled with recently announced strategic hires, including a Vice President of Building and Infrastructure, further expands our capabilities and creates new opportunities across an exciting end market. Another example of executing on this second priority is our recent announcement in December 2025 of a win over a long-term construction project with Bechtel related to a new LNG terminal for Woodside, which is a multibillion-dollar LNG production and export facility under construction in Sulfur, Louisiana. This project is one of the most significant energy infrastructure developments in the world and represents a major investment in the U.S. Gulf Coast energy capacity. Additionally, we continue to pursue data center business. Our services provide integrated support throughout the data center life cycle, which is responding to high demand within this sector. Currently, we are performing projects with some of the largest data center owners with the ability to further scale our services throughout the entire life cycle of the data center projects. This is illustrated in our previously announced partnership with Bachelor and Kimball to deliver our suite of specialized inspection services to BBNK's data service center projects. Our overall diversification efforts, including targeted capital expenditures as well as additional strategic sales hires, have bolstered our growth in power generation, industrials, and infrastructure in the second half of the year. This diversified revenue growth demonstrates the success of our differentiated solutions and ability to deliver on customer expectations. The third priority of our strategic plan is focused on building operational leverage by doing what we do today but better through efficiency and productivity gains. We have invested in innovative proprietary technology to assist with digitalization of timekeeping and scheduling to more efficiently monitor the utilization of equipment and productivity of our technicians. In addition, we continue to strengthen our sales and business development teams, all of whom bring industry experience and fresh perspective to our business. In summary, we have executed on several planned actions and initiatives throughout 2025 which have produced favorable outcomes. We believe that this growth reflects the strength of our people, integrated offering, and continued focus on driving efficiencies across the business. I will share more thoughts on 2026 later, but let me now turn the call over to Ed for more details on fourth quarter results and the highlights of full year 2025. Edward J. Prajzner: Thank you, Natalia. Given some early successes of our strategic efforts, gross profit increased to nearly $205.0 million for the full year 2025, up 6.4% from $192.0 million for full year 2024, representing a gross profit margin of 28.4%, which was a 190 basis point improvement year over year, compared to 26.3% in the prior year. As noted in our press release yesterday, our results reflect certain overhead and personnel expenses have been reclassified from SG&A to cost of revenue. The effect of this for the fourth quarter 2024 was $5.5 million, and for the full year 2024 was $20.9 million reclassification from SG&A to cost of revenue. This redistribution of overhead and personnel expenses had no impact on operating income, net income, or adjusted EBITDA comparability. Selling, general, and administrative expenses were up $3.6 million in the fourth quarter compared to the prior-year comparable period, attributable to strategic investments to grow our business and unfavorable foreign translation conversion. SG&A for full year 2025 was $139.9 million as compared to $135.5 million in the prior year, an increase of $4.4 million, again due primarily to unfavorable foreign translation conversion in addition to strategic investments to grow our business. The selling component of SG&A, whereas general and administrative overhead spending has been and will continue to be tightly controlled. During the current fiscal year, we have revised our presentation of foreign currency losses and gains, which are now included within other expense and income line, net. Previously, such amounts were presented within selling, general, and administrative expenses. The prior year amounts have not been reclassified due to immateriality. This change in presentation had no effect on previously reported net income. GAAP income from operations in the fourth quarter 2025 was $10.4 million compared to $10.5 million in the prior-year period. GAAP income from operations for the full year improved to $40.6 million from $39.8 million in the prior year. Non-GAAP income from operations in the fourth quarter improved to $15.7 million from $14.3 million, an increase of nearly 10%. On a full year basis, non-GAAP income from operations improved to $55.0 million from $46.2 million, which is an increase of nearly 19%, or 130 basis points year over year. We recorded $12.6 million of reorganization and other costs for the full year 2025 and $4.8 million during the fourth quarter, related to our continuing initiatives to reduce and recalibrate overhead cost in addition to incremental cost of other related actions. Our effective income tax rate for the full year 2025 was 24.7% as compared to 22% for the prior year. We anticipate our effective income tax rate for 2026 to be in the mid-25% range. Interest expense was $3.7 million for the fourth quarter, down by $0.2 million from the prior-year period. For the full year 2025, interest expense was $14.6 million, down $2.5 million from the prior year. For the fourth quarter, we reported GAAP net income of $3.9 million, or $0.12 per diluted share. On a non-GAAP basis, we reported non-GAAP net income of $8.0 million, or $0.25 per diluted share, for the fourth quarter. This resulted in GAAP net income of $16.8 million, or $0.53 per diluted share, for the full year 2025, and non-GAAP net income of $28.1 million, or $0.88 per diluted share, for the year ended 12/31/2025. This compares to GAAP net income of $19.0 million, or $0.60 per diluted share, and non-GAAP net income of $22.7 million, or $0.72 per diluted share, in the prior-year period due primarily to incremental reorganization and other costs incurred in 2025. As committed in the third quarter, we delivered positive free cash flow in 2025. I am pleased to report that we generated $32.1 million of cash from operations and $24.6 million of free cash flow in 2025. This compares to $25.7 million of cash from operations and $20.8 million of free cash flow in the prior-year comparable period. For the full year 2025, we generated $33.0 million of cash from operations and $3.8 million of free cash flow, as compared to $50.1 million of cash from operations and $27.1 million of free cash flow in the prior-year period. While full year free cash flow declined versus last year, this was driven by three identifiable factors: elevated DSO during our ERP stabilization period, higher restructuring activity, and growth-related CapEx. Two of these three factors are already moderating, and we expect improved cash flow conversion as we move through 2026. We will build upon this cash improvement achieved in the fourth quarter and continue to prioritize improving our cash flow performance in 2026, specifically by leveraging a newly hired Vice President of Working Capital Management as well as by improving back office structure, tools, and accountability to accelerate the order-to-cash cycle and lowering accounts receivable. Our total accounts receivable balance was $154.7 million as of 12/31/2025, up $27.4 million as compared to $127.3 million as of 12/31/2024. This was due to the timing of working capital throughout the year. We are intently focused on reducing our accounts receivable balance below fiscal 2024 levels throughout 2026. In addition, increased restructuring charges of $7.0 million and incremental CapEx investments of $6.2 million year over year, which were anticipated as a part of our strategic plan, also adversely impacted our cash flow. Specifically, our CapEx in 2025 was $29.2 million as compared to $23.0 million in the prior year. This increased capital expenditure spending in 2025 was heavily focused on the selective expansion of lab capabilities and capacity, in addition to strategic equipment purchases focused on improving the safety and efficiency of our field operations. We anticipate maintaining CapEx at this higher level into 2026 to approximately 4.5% of revenue, but maintaining spending thereafter at our prior depreciation level. This will enable us to continue to expand and upgrade capacity, particularly at our in-lab aerospace and defense facilities which have been partially constrained by capacity. These investments are targeted towards areas where demand already exists. The primary return mechanism is improved utilization and throughput, which allows us to convert existing demand into revenue more efficiently rather than relying on speculative growth. Gross debt was $178.0 million at 12/31/2025 compared to $169.7 million at 12/31/2024, an increase of $8.3 million. Net debt was $150.0 million at 12/31/2025, compared to $151.3 million at 12/31/2024, a decrease of $1.3 million. Our bank-defined leverage ratio was approximately 2.5x at 12/31/2025, which is up versus approximately 2.3x as of 12/31/2024, yet is well within the maximum allowable leverage ratio of 3.75x. Our capital allocation strategy is to use residual free cash flow to pay down debt to a 2.0x leverage ratio while maintaining a temporarily elevated CapEx level. We will continue to emphasize debt reduction as our priority use of our residual free cash flow, and we are targeting a debt pay down of approximately $20.0 million in fiscal 2026 in addition to the significant pay down we made in 2025. This would result in a defined bank leverage ratio of approximately 2.0x by the end of fiscal 2026. In summary, this significant financial improvement reflects our proactive cost management, operational efficiency leverage, and focus on higher-margin businesses. And this success was attributable to a new and invigorated executive team reducing unprofitable business and being laser-focused on our strategic direction, all while building new capabilities and developing the culture to win. Let me now turn the call back over to Natalia for her to give us her outlook on 2026. Thank you, Ed. Natalia Shuman: Given that we have established the foundation for future success in 2025, we view 2026 as an opportunistic time to continue on a number of management imperatives towards executing on our strategic plan in order to position Mistras Group, Inc. to unlock its inherent value over the longer term. First, as Ed mentioned, we will be increasing capital expenditures from our historic five-year average of approximately 3% to 4.5% of revenue to expand and upgrade capacity and remove constraints for targeted growth. These investments will be primarily focused on our in-lab business serving the fast-growing aerospace and defense market. Scale is key for our customers within this market who demand integrated services and large capacities from their supply chain partners. Additionally, we will invest in CapEx related to innovative AI capabilities in our Data Solutions businesses. This will enable faster and more accurate analytics and insights for our customers. Our overall CapEx plan reflects confidence in our customer demand trends with compelling ROI expectations. Most importantly, these investments are targeted and sequenced. We do not view margin erosion, leverage creep, or negative free cash flow as acceptable trade-offs. Our intent is to protect the earnings base while expanding long-term earnings power. Secondly, we will be focused on our go-to-market strategy and invest in our sales-related technological and other initiatives. This investment will focus on advancing our effort in marketing and selling our leading proprietary technology and innovative data-centric solutions, such as ART crawlers and OneSuite digital applications, as a suite of data-centric services providing predictive solutions and strategic insight. By undertaking the strategic initiative and investing organically for long-term market-leading growth, we will leverage our competitive advantages and strengths to best position ourselves for success and future growth. Accordingly, for 2026, we anticipate full year revenue to be between $730 million to $750 million and adjusted EBITDA to be between $91 million to $93 million. While we are addressing both CapEx and targeted operating investments in 2026, we expect adjusted EBITDA margins to remain resilient, as we plan to maintain operational discipline and cost control. We also expect net income and EPS to exceed 2025 performance. Importantly, our 2026 outlook does not assume a macro acceleration or strong rebound in oil and gas activity or any contribution from acquisitions. I would now like our Executive Chairman of the Board, Manuel Stamatakis, to offer his remarks. Manuel Stamatakis: Thank you, Natalia, and good morning, everyone. I would like to offer you a brief board-level perspective as we look ahead. 2025 was a very good year for the company, particularly in strengthening our position in data-driven inspection, mission-critical testing, and aerospace and defense programs. I am pleased with the operational progress and the platform that management has built across these end markets. Particularly, I want to commend the meaningful strides we have made this year in significantly improving our executive team under the direction of our CEO. We strengthened leadership and sharper execution have materially improved our performance and strategic focus. As we enter 2026, the Board fully supports management's view that this will be an investment year focused on transforming and modernizing our platform. In our industry, long-term value is created by investing to meet demand within our end markets—in data integrity, digital inspection capabilities, specialized talent, and accreditation for higher-complexity aerospace and defense work. Such investments take time to translate into revenue and margin expansion, but they are essential to sustaining durable growth. Most importantly, the Board views 2026 as an acceleration of our strategy via increased investments and a deliberate step to deepen our technical differentiation and expand our relevance to customers operating in regulated, mission-critical environments. We are confident in the execution plan, the capital allocation priorities, and the long-term ambitions, particularly as risk-based inspection and aerospace and defense spending continue to evolve. I wanted investors to hear clearly that the Board views 2026 as a targeted year which will strengthen the foundation for future growth. I will now turn it back to Natalia for her to give you her closing thoughts. Natalia Shuman: Thank you, Manny. I will close by thanking all of our customers and partners who contributed to our superior results throughout 2025. And in particular, I would like to sincerely thank all of our Mistras Group, Inc. team members, from the front lines to the back office, for their tireless efforts in executing on their day-to-day tasks while embracing transformative change and the evolving strategy of our company. These efforts are creating value for our customers and, in turn, for our shareholders. We look forward to updating you on our performance as we progress further in 2026 towards our strategic goals. And with that, let me turn the call back to the operator for questions. Operator: Thank you. We will now begin Q&A. For today's session, we will be utilizing the raise hand feature. If you would like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you have been called upon, please unmute yourself and begin to ask your question. Thank you. We will now pause for a moment to assemble the queue. Our first question comes from Mitchell Brad Pinheiro with Sturdivant & Co. Please unmute your line and ask your question. Mitchell Brad Pinheiro: Hi. Can you hear me? Okay, great. Good morning. So, hey, I—you know, a couple questions. So aerospace and defense, it is your—it had a great quarter, and it is obviously a big part of—it is your longer-term growth engine, I think you said. So I am curious, you also, in other remarks, you talked about good visibility. So I guess when you look at backlog of your customers, both in the space side and the aerospace side and then on the defense side, what kind of confidence do you have in that? Number two, from a capacity—you talked about expanding capacity. Is that at all revenue-limiting in 2026, or do you have plenty of capacity to do what you need to do? And then, you know, are you winning new business with these customers, and if so, how are you doing that in terms of capabilities? Or is it—you know, just curious how you are doing. Natalia Shuman: Yes, thank you. Thanks for this question. I will start with customers. Indeed, we do have very good close relationships with our customers. We meet with them in aerospace and defense—I am talking about—we meet with them monthly to evaluate their demands. We know what they—And as I mentioned before, for them, capacity matters. We also have established the hub-and-spoke model that allows us to use that platform at large for our customers. So regardless of their location, we are able to assist that. But, again, by expanding the capacity. When talking specifically about capacity and your questions whether we do have constraints, yes, we do have constraints, and that is exactly where we are going to invest—to remove those constraints, to then increase the utilization, increase the throughput, increase the productivity, and then sort of unlock the demand into really into the revenue. So that is essentially what we are doing in aerospace and defense. We have great visibility into demand, and these customers are—as you know, you know, in aerospace and defense, there is a strong demand for NDT, particularly NDT testing. And they do not have enough of in-house capabilities. So they are certainly looking for other suppliers who can support them and who can be large enough to support them. And, yes, we are winning new business, so we are celebrating adding a few new customers this year. And this is all thanks to our team that is there on the ground, and they are doing a really good job. Mitchell Brad Pinheiro: And then just one more question on aerospace and defense. In terms of capabilities, is this a target area for maybe a tuck-in acquisition? Do you have any plans for something like that, or are you looking at that? Or do you think you can sort of do it just through your own CapEx, your own internal investment? Look. Natalia Shuman: You are absolutely right. The growth and differentiation comes from the capabilities depth in that business specifically. So we have commented before that we are in-lab enlarging our offering. In addition to NDT tests, we now do welding, machining, repairs, cleaning, and so on. So that is quite critical for our customers. In terms of acquisitions, as you can imagine, it is very pricey—acquisitions—at this moment. Of course, we are always looking at our capital allocation strategy. But at this time, we believe that the highest return is organic expansion. And we believe that we are capable of building these capabilities and organically expanding our capacities. I can give you a good example. In, you know, Q4 demonstrated the—to respond on demand, we, in one lab, we added 100%—we—of headcount. Basically, we enlarged headcount, we removed that constraint, and we were able to generate an increase in revenue of 61%. Can we repeat it? Probably not to that extent, but we already see the ways how we can remove existing constraints to generate additional revenue. Mitchell Brad Pinheiro: Helpful. Thank you. And then, you know, I mean, with the—obviously, the disruption in the Middle East, I would love to hear your thoughts about how, you know, it may be affecting operations or how you—you know, how you view the first quarter. Is there any insight you could provide there would be helpful. Natalia Shuman: Yes, certainly. We have not seen a material direct impact. Our footprint in that region is very limited. But, of course, there is a lot of uncertainty, and we continue to monitor developments. Our customers are still evaluating, you know, what it means to them. Obviously, as you well know, if the oil price—as a result of these events—if oil price goes up, the upstream activities will be intensified within the U.S., and it will positively impact us. But at this time, it is too premature to say. Mitchell Brad Pinheiro: Okay. And then just one more question. So, you know, in terms of—obviously, oil and gas is the majority of your business at the moment, and the faster-growing segments, aerospace, the energy—you know, your power generation, I guess I could say—Infrastructure, they are going to be your focus or, obviously, you know, your growth focus, let us say. Could you talk about new customer wins, bid activity in those applications, in those segments? You know, what do you think the growth is going to come from—existing customers, a balance between existing customers and new customers? And also, if you could talk about, like, sort of the margin profile of these growth businesses as compared to, you know, say, your company average? Natalia Shuman: Yes. Thank you for this question. It is a very good one. It actually touches on two of our strategic priorities that we are intently focused on. One is to use oil and gas customers where we are expanding our offerings and services. And that is where, again, we believe very strongly that we are able to participate in oil and gas customers' digitalization effort, and by offering to them our data services and data analytics and AI tools, we are able to help them to be more efficient as they are looking at their performance. So there, we are talking about expanding that existing client base, or expanding the share of their wallet, and we are talking about expanding the margins. Right? We are intently focused on margin profile in our core markets of oil and gas. The second priority is the diversification, and those—like you mentioned—is infrastructure, power generation, where we again, we are winning new contracts. There, it is all about capabilities and all about building that go-to-market strategy. So while we are working on capabilities, while we are investing in that part, we are also looking at how to best competitively position ourselves. You know, again, a great example will be data centers. We have what it takes when it comes to data centers. It is the same services we already provide for our core client base like oil and gas. But here, we are using a new use case. So it takes a little time to get this going, but we already had wins. And margin profile, to answer your question, is higher because those services are in high demand at the moment, and the demand is very visible. So that allows us to, again, position ourselves competitively well and still generate a sufficient amount of margins. Mitchell Brad Pinheiro: And, by the way, just one more question. I am sorry. When you look at the revenue guidance for this year, you know, the difference between the low end of the range and the high end of the range is what? What type of—why would we be at the low end versus why would we be at the high end? Natalia Shuman: Good question. So basically, the reason is—so there is a couple of scenarios that we are looking at. Right? And our large share of our business is still in oil and gas. And so our customers, although they did already present themselves as—I would describe it—less pessimistic, but they are still quite cautious. So it is a large portion of our business. So depending on how oil and gas customers do this year would largely impact our performance. So we are quite confident when it comes to, you know, aerospace and defense. In power generation, we will generate a sufficient amount of growth there. But, again, it is a smaller share of our total revenue. And, therefore, we are dependent on the oil and gas market. We are making it—again, all this strategic plan is about to diversify as much as possible so we are less dependent. But at this time, this is our scenario where all depends how well we do in the oil and gas market. Mitchell Brad Pinheiro: Right. Well, thank you. That is all from me. Operator: Thank you. Our next question comes from John Franzreb with Sidoti & Co. Please unmute your line and ask your question. John Franzreb: Good morning, everyone, and thanks for taking the questions. I would like to start with the fourth quarter results, especially the improvement in the gross margin profile. I was wondering if you could quantify how much of that is pricing versus mix versus maybe exiting some of the unprofitable businesses. Can you kind of, you know, put a bandwidth around where the improvements came from? Natalia Shuman: Absolutely. I will start qualitatively, and then Ed will add if anything. So there are three distinct factors that influenced our performance in Q4. It is a favorable revenue mix, number one. Number two, it is improved pricing discipline. And number three is really the operating efficiency. So there is less impact of the unprofitable branches or laboratories closures, and we will talk about it. But let me unpack it a little bit. So, obviously, revenue mix comes with the expansion of the aerospace and defense, right? It is our laboratory business—contributed really well, as well as our Data Services. So, again, we saw great growth in PCMS due to multiple implementations. So that is revenue mix that contributed to higher gross margins. If I have to quantify—so let me touch on the pricing first. So pricing discipline—so we, as we already mentioned, in 2025 in the beginning, we had established very rigorous pricing programs, and now they are working really well. So the pricing discipline and, again, in Q4 when we had a surge in demand in aerospace and defense, we were able to apply that pricing discipline, and we had some expedited fees, and, in fact, it again had a positive impact on our gross margins. So if I have to quantify it, it is probably—think about it as 25% price and 75% volume, specifically in aerospace and defense. And then on operating efficiencies, right, it is—obviously, there is some restructuring impact, but it is minimal. It is around 1.5%. But it is not big. So it is really the effect of price and the mix. John Franzreb: Got it. And just maybe to reframe one of the previous questions, is there a way to call out how much of your aerospace and defense revenues are just in defense? Natalia Shuman: Just in defense, I probably would say—and we can follow up with you on that—I probably would say it is 70% aerospace commercial—commercial aerospace—and private space, and about 30% to 35% in defense. We have very—we have good presence in defense in International segment. And that is where we, you know, we see that increase—again, defense budgets going up. So it clearly benefits and creates positive impact. John Franzreb: Understood. And, Natalia, it seems to me like you are taking maybe a more cautious view to the oil and gas market in 2026 than you were, say, three months ago. Does that extend into the current upcoming turnaround season, or are you just looking at 2026 as a whole? Natalia Shuman: Couple of comments here. Let me start with turnarounds, right? So we had a good turnaround season in 2025. So whenever turnarounds happen, it is usually not every year, because customers have to extensively plan for turnarounds. So it is usually once in three years, once in two years. So this particular year, 2026, is not that robust when it comes to turnarounds. So that is number one. That certainly will have some impact. We still have quite good visibility into turnarounds for Q2 and Q3. But, certainly, this is something that we are still working on. Secondly, you know, if you look at oil and gas, again, what we hear from our customers, they actually do not spend as much on CapEx. They are projecting to be flat or somewhat down. What it means for us is they will maintain their maintenance budgets, right? So they want to get more life out of their assets, basically. And so that means that it should favorably impact us. So I do not foresee some negative impact in oil and gas by any means. I do see that we have a very good opportunity, and especially with our Data Services. But we have to be a bit, you know, cautious. Again, to me, I think it largely depends on, you know, on the spending of our oil and gas customers. John Franzreb: Understood. And I have got a bunch of more questions, but I will ask this last one to get back into queue. Regarding the CapEx increase to 4.5%, is that viewed as a one-time 2026 phenomenon? Or do you expect to be spending at an elevated level for maybe a couple years? Natalia Shuman: That is right. We anticipate CapEx to remain at elevated levels in 2026 and into 2027. But then we anticipate the intensity to moderate after that and kind of following the completion of our key initiatives that is driven by our strategic plan. So that is the outlook. And then we expect our CapEx to return to our historical depreciation levels after 2027 to about 3% of revenue. John Franzreb: Got it. Thanks for taking the questions. I will get back in the queue. Operator: Our next question comes from Gao Xi Sri with Singular Research. Please unmute your line and ask your question. Gao Xi Sri: Yeah. Hi. Can you hear me? Natalia Shuman: Yes. Hi. Gao Xi Sri: Good morning. Yeah, just a few questions from my side. Firstly, on the International, the profitability seems to have improved quite nicely. So just was wondering, are those gains concentrated in just a couple of standout contracts or countries? Or do you feel that you have made more systemic changes in pricing, cost structure, or customer mix that should make that improvement more sustainable in 2026 as well? Natalia Shuman: It is structural improvement. Just to answer your questions directly, we did—International had a good year, a very good year. We had overall 6% increase in our revenues and improved margin profile. So there, in International, we have quite a diversified platform. So, in fact, oil and gas was slightly down in International for the year. But we did have good increase in aerospace and defense. We had good increase in infrastructure. Good increase in power generation. So the International segment and the team in Europe and elsewhere did really, really well. So from margin profile, you know, we will invest slightly in our International facilities as well. So we will see some capacity enlargement and capacity constraints removal. So we would anticipate margins to be sustainable in the long run. Gao Xi Sri: Okay. And then secondly, on your largest strategic accounts, particularly in the oil and gas sector, how has your wallet share and contract duration trended over the last 12 to 18 months as you have shifted towards, you know, higher value, more integrated offerings? Are you seeing any change in competitive dynamics or insourcing there that would make the wallet share harder to hold in 2026? Natalia Shuman: I would not—and thank you for this question—I would not say it is harder to hold the wallet share. It is just we see more appetite from our customers to consider the—to consider digital platforms, to consider data analytics, data insights. So, and we see this as a very good opportunity for us to introduce the higher value work to them, right, that benefits them as they continue to execute capital discipline. Having said that, they are also increasing their risk-managing spending. So, again, to increase the efficiency, the operational excellence, the asset life extension. And so they have higher demands. All our strategic customers come to us to help them to create that digital data platform now, right? So there is much more appetite to look at these types of solutions, the integrated offering. So that is what we see particularly there. So it is not that it is harder to keep and retain the volume, but we are shifting away from the commoditized kind of just NDT services to more value-driven solutions where we are expanding our offerings to include data analytics, to include digital data, to include the platform—digital platform. And that is what we are essentially doing, expanding that services portfolio for our existing oil and gas customers. And, again, you know, from the bid activity, from our sales activity, we see that increased interest because, again, they are very much in tune with what they need to do in terms of the risk management when they expect more from their assets, right? Because, you know, there is more load, right, the bigger probability of failure. So they have to manage their risks. Gao Xi Sri: Okay. Understood. That is helpful. That is all from my side. Thank you. Natalia Shuman: Thank you. Thank you. Operator: Our next question comes from Alex Ragiel with Texas Capital Securities. Please unmute your line and ask your question. Alex Ragiel: Thank you very much. Very nice quarter. As it relates to the restructuring actions over kind of like the last twelve months or so, can you talk to or quantify the long-term cost savings and also address sort of any negative revenue headwinds that you could be facing in 2026 because of those. Edward J. Prajzner: Thanks, Alex. I will address that question. So, yeah, the restructuring was elevated in 2025 over 2024, as you saw. That $12.0 million—that is a combination of severance in there from headcount reductions. There are lease breaks in there and other strategic actions we have taken to really drive, you know, efficiencies and productivities. So there is a good payback on much of that. I mean, the facilities, the lab closures that we talked about throughout the year, you know, there is payback there. That is an uplift to the margins. You know, there was no contraction of business. There is not a negative revenue from those restructurings. We really, you know, are streamlining and driving for efficiency, more throughput. Natalia mentioned earlier, you know, getting another shift of operational effectiveness out of an existing site by really, you know, debottlenecking our own sort of self-induced capacity constraints. That is a big part of what restructuring is about, is really to have clean line of sight, delayering the organization to speed up, you know, decision making. So there are a lot of soft benefits as well there, but most of that cost is out. Again, some of the heads got replaced. That is not a direct one-for-one savings, but facilities is definitely a savings. And there were some one-time expenses here driving strategy and other things in restructuring in 2025. This number will moderate significantly in 2026, so that number will come back down. It was also, you know, a drag on our free cash flow a little bit. But we look for returns on the, you know, the restructuring expense that we booked here, and, you know, you will see that kind of reflecting itself in 2026. Alex Ragiel: And then as we look out longer term, can you help us to—or remind us what your sort of longer-term organic revenue growth and EBITDA margins could look like for this business that you are improving? Natalia Shuman: Yes. Thanks, Alex. So when we look at our strategic plan, we are looking at a CAGR of about 5% through 2030. And for margins, our aspirations are to reach 15% margins—EBITDA margin. That is the profile we are looking at. Alex Ragiel: Very helpful. Operator: Thank you very much. Thank you. At this time, I see no callers in the queue. I will hand the call back to Ms. Shuman for her closing remarks. Natalia Shuman: Thank you, Luke. And thank you, everyone, for joining this call today and for your continued interest in Mistras Group, Inc. I look forward to providing you with an update on our business, strategic plan, and progress achieved towards our ongoing initiatives on our next call. Thank you, everyone. Operator: This ends today’s conference call. You may disconnect at this time.
Operator: Good day, and welcome to Cresco Labs 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. Please note this event is being recorded. I would now like to turn the call over to T.J. Cole, Senior Vice President, Corporate Development and Investor Relations for Cresco Labs Inc. Please go ahead, T.J. And welcome to Cresco Labs Inc.'s Fourth Quarter 2025 Earnings Conference Call. T.J. Cole: On the call today, we have Chief Executive Officer and Co-Founder, Charles Bachtell; Chief Financial Officer, Sharon Schuler; and President, Greg Butler, who will be available for the Q&A. Prior to this call, we issued our fourth quarter earnings press release, which has been filed on SEDAR and is available on our Investor Relations website. These preliminary results for the fourth quarter are provided prior to completion of all internal and external reviews and therefore are subject to adjustment to the filing of the company's quarterly and annual financial statements. We plan to file our corresponding financial statements and MD&A for the quarter and year ended 12/31/2025 on SEDAR and EDGAR later this week. Before we begin, I want to remind you that statements made on today's call may contain forward-looking information. Actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described in our earnings press release and in the most recent Annual Information Form and MD&A filed with securities regulators. This call also contains non-GAAP measures also outlined in our earnings press release and in the MD&A filed with the securities regulators. Please also note that all financial information on today's call is presented in U.S. dollars and all interim financial information is unaudited. With that, I will turn the call over to Charles. Good morning, everyone, and thank you for joining Cresco Labs Inc.'s Q4 and full year earnings call. Over the past year, we have been executing against a clear long-term plan to improve margins, generate cash, optimize our footprint, and reinforce the balance sheet so we can invest strategically and position ourselves for growth. In Q4, we made measurable progress against that plan. We generated $162,000,000 in revenue, we produced $84,000,000 in adjusted gross profit, $40,000,000 in adjusted EBITDA, and $27,000,000 in operating cash flow. For the full year, we delivered $656,000,000 in revenue, $157,000,000 in adjusted EBITDA, and $73,000,000 in operating cash flow, while materially strengthening our balance sheet and simplifying our operations. I want to sincerely thank our team for making measurable progress across core financial priorities. They produce products that consumers want while making cultivation and manufacturing more efficient, give the customer the in-store experience that they need while prioritizing higher-return channels, and they manage capital with discipline. Today, the team is staying the course, focused on meeting the needs of the customer while building the most productive and cash-generating platform possible. Let me walk through how we are executing on that strategy. First and foremost, we are building a solid balance sheet with consistent cash generation. In 2025, we strengthened our financial position through concrete actions. We generated strong operating cash flow and refinanced our debt, extending maturities to 2030. These steps improved our capital structure, reduced near-term risk, and sharpened our operational focus. Tailoring and simplifying our footprint has been central to this effort. Exiting California was an intentional decision to reallocate capital and our internal resources toward markets where we have stronger returns. Our capital allocation framework is straightforward. We generate cash through tight execution. We deploy capital selectively when opportunities meet clear return and integration thresholds to protect and strengthen the balance sheet. All these actions enhanced our financial flexibility and positioned us to capitalize on attractive opportunities in 2026 and beyond. With internal cash flow as our primary source of capital, we are excited about inorganic investments that will strengthen operating leverage and enhance market density while meeting our financial standards. Second, our focused footprint positions us to win with organic growth in core markets and targeted expansion in markets where we see compelling returns. We are going deeper in core markets where we can leverage our existing infrastructure, and small investments will have higher incremental returns. Throughout 2025, we have evaluated multiple investments against strict risk-adjusted criteria. While most acquisitions did not meet our standards, we have identified several attractive tuck-in opportunities that have the potential to drive operating leverage. Our current pipeline for strategic acquisitions is as robust as we have seen, and we are excited to share updates on those opportunities as they progress. In Ohio, we are applying a prudent, density-driven approach. There, our focus remains on increasing retail concentration to find more scaled efficiencies and margin expansion. Our border store strategy is proving particularly effective. Sunnyside Procterville, located near the West Virginia border, is exceeding expectations and validating our site selection model. We are building on that success with two additional store openings scheduled for early this year. In Kentucky, our operations are coming together quickly. Our cultivation facility is operational with plants now in the building, shifting the market from the capital investment phase into the revenue-generating phase as initial harvests come online. We are building responsibly as the broader medical program rolls out slowly, preparing to serve patients soon without overextending capital. Internationally, our capital-light pilot in Germany has been a great success, with products selling out ahead of schedule. While our global strategy remains measured, this result validates both the strength of our brand portfolio and the portability of our operating model in a tightly regulated European environment. Across all of these initiatives, discipline is a key theme. Every expansion is evaluated against clear return thresholds, execution capability, and capital efficiency. By balancing organic growth within core markets with targeted acquisitions, we are building a platform that is positioned to expand margins over time. And lastly, our proven retail and wholesale capabilities will keep enabling us to outperform the market. Our wholesale business remains a core strength: the number one branded market share in Illinois, Pennsylvania, and Massachusetts, and leading positions across our limited-license markets according to Headset. That leadership reflects cultivation consistency, portfolio quality, and our ability to reliably supply both our own stores and third-party partners with high-velocity brands. It is further reinforced by our retail execution, where we hold the number one share in Illinois and rank among the leading operators in Ohio and Pennsylvania. We are building on that scale advantage through deliberate differentiation. For example, we are introducing Sunnyside exclusives, including our new Sunnyside house brand called Louder. Designed for champion shoppers who purchase regularly, Louder reduces price comparability and creates compelling reasons to choose Sunnyside beyond convenience. The in-store experience is another key differentiator. We continue refining operations and removing friction across the customer journey to ensure orders are fulfilled quickly, reliably, and with expert care. Our 4.9 average Google rating across the network reflects our consistency, an achievement that is difficult to sustain in large high-volume retail environments, and I cannot thank the team enough for working so hard to achieve this incredible feedback from customers. Together, our leading brand share, retail density, smart pricing strategies, and shopper innovations equip Cresco Labs Inc. to continue to gain and defend share in competitive environments without sacrificing margin. We win where we operate. This year, we strengthened our balance sheet, expanded our footprint strategically, maintained leadership positions across key markets, and improved profitability metrics. I am pleased to share that today, Cresco Labs Inc. is more focused, more efficient, and structurally stronger than it was a year ago. With that, I will turn it over to Sharon to walk you through our Q4 financial performance in more detail. Sharon Schuler: Thank you, Charlie, and good morning, everyone. In Q4, we continued to optimize mix and channel strategy across the organization, resulting in improved profitability despite modest revenue softening. We reported $162,000,000 in revenue and expanded margin across our major profitability metrics. We prioritized first-party retail shelves and higher-margin channels over lower-margin third-party wholesale volumes. As a result, wholesale revenue declined approximately 6% quarter over quarter while retail revenue remained essentially flat, reflecting continued store productivity and improved basket quality across key markets. We improved cultivation efficiencies and shifted mix towards higher-margin products and channels, which drove adjusted gross margin expansion to 52.2%, up from 48.8% in Q3. In Q3, we discussed selling through high-cost flower as new production ramped. In Q4, improved yields, mix optimization, and channel prioritization translated into margin improvements. Additionally, gross margin in the quarter benefited from certain favorable discrete items, which may not repeat to the same extent going forward. We maintained tight cost controls while supporting incremental store additions and growth initiatives, resulting in adjusted SG&A of $49,000,000, or 30.5% of revenue. While dollars increased modestly from Q3, overhead growth remained controlled relative to the size of the operation. As part of our strong accounts receivable management, we also were able to reduce bad debt reserves during the quarter, which contributed to favorable expense leverage. By expanding gross margin and maintaining expense controls, we delivered adjusted EBITDA of $40,000,000, representing 25.0% of revenue, up from 24.1% in Q3. This underscores the operating leverage in the business as mix improvements and cost control drove sequential margin expansion despite modest revenue deceleration. We continued to convert earnings into cash, generating $27,000,000 in operating cash flow in Q4 and $73,000,000 for the full year. After $9,000,000 in capital expenditures during the quarter, we ended the year with $94,000,000 in cash and no near-term maturities, reinforcing our financial flexibility. In the first quarter, we will see the impact of Michigan's excise tax changes and our exit from California, along with the effects of normal seasonality and ongoing price compression and competition in our core markets. As a result, we expect a high single-digit sequential decline in revenue with the majority of impact driven by Michigan and California. While cultivation efficiencies continue to improve structurally, we expect seasonal mix shifts and ongoing competitive pricing to result in gross margin normalization from Q4's elevated levels. We are maintaining strong expense management as we support incremental store contribution and growth initiatives. As a result, we expect SG&A to remain generally consistent with recent run rates, so we will not see a repeat of prior period benefits such as the reduction in bad debt reserves. Importantly, we do not see Q1 as a change in direction. The operational improvements we have implemented remain intact, and we expect performance to build from Q1 levels as the year unfolds. With that, I will turn it back to Charlie for closing remarks. Charles Bachtell: Thank you, Sharon. Reflecting on the quarter and year, the most important takeaway is sustained progress executing against a clear improvement plan. We are strengthening margins, generating cash, reinforcing the balance sheet, and sharpening our footprint around markets where we have structural advantages. We are building a company designed to win where we operate and expand thoughtfully into additional states and international markets when the opportunities are accretive and aligned with our return thresholds. We are not chasing growth for growth's sake. Adult-use conversions in core states, strategic acquisitions, and building density in markets where we already lead all create a pathway for high-return growth and long-term value creation for our stakeholders. At the same time, federal reform momentum is real. Rescheduling executive order is hugely consequential, and when implemented, will change the entire industry's economic landscape. That said, while reform represents real upside, that upside must be layered over a strong financial and operational foundation. We have more work ahead, but the trajectory is clear. We are confident in our direction and in our ability to continue strengthening the business quarter by quarter regardless of the federal reform timeline. Thank you for your continued interest in Cresco Labs Inc., and thank you to all the stakeholders, especially the Cresco Labs Inc. team that continue to drive us forward. We will now open for questions. Operator: Thank you very much. Our first question comes from Aaron Grey from AGP. Your line is open, Aaron. Please go ahead. Aaron Grey: Hi, good morning, and thank you very much for the questions here. Charlie, you gave some good color in terms of the M&A opportunity, talking about the pipeline being as robust as you have seen. I will get some additional detail in terms of maybe some of the dynamics that are leading to that pipeline being so robust. Is it some of the maybe distressed assets that you see in the marketplace? Maybe some of the operators and owners becoming more reasonable in the multiples they are for? Because I know the private markets had been a little bit elevated as of late. So any more color in terms of maybe some of the dynamics that you are seeing that are leading to that more robust pipeline? Thanks. Charles Bachtell: Hey. Good morning, Aaron. Thanks for the question. You actually hit on several of them. I think the rationale or the reason for the pipeline being as robust as it is is dynamic. There are several reasons for it. I think we are seeing operators that have been in the industry for a while that are realizing that they may be better suited to look at an exit and look at some sort of an M&A opportunity. I think we are seeing the limited availability and the cost of capital weighing on that scenario too. And I would also say there is more regulatory clarity on optionality from a structural standpoint, etc., that could lead to the viability of M&A transactions being structured. So when you look at all the factors that are there, it puts Cresco Labs Inc. in a really good position based on the work that we have put in over the last couple of years to really prepare ourselves, fortify the foundation to be acquisitive. And as we have said before too, we are going to make sure that we are very patient, that we are very strategic, and that we allocate capital as efficiently as we can for that long-term success. So excited. Looking forward to sharing more in the near future. Aaron Grey: Okay. Great. Appreciate that color. Second question for me, I just want to talk about some of the retail and wholesale dynamics. You talked about there being a bit of a shift from third party to first party, selling to your own stores. So I want to talk a little bit more in terms of what is driving that decision. Obviously, it led to some higher margins in the quarter, but some of the offset might be some of the branding and brand building and larger sales opportunities. So maybe you could talk about those dynamics? And then if at all, that M&A strategy and kind of bolt-on that you referenced might become a natural unlock for some more brand distribution as well. Thank you. Charles Bachtell: Yeah. I will start, and then Greg has some insights here too. You are right. And as the industry matures, I think as these—especially the larger operators—mature too, our approach to the market continues to get refined. Operational execution is a big part of it. We know what we can do. We know what we can produce, not only on the production side of the business, but at a retail level, the customer experience, being able to operate a very high-volume, higher-margin business, especially supported by owned brands. You are just seeing the continued development and maturity of a strategic model that lends itself to a greater concentration. I think as you mentioned also, the M&A and the strategic alliance structures that can be put in place in these markets will also lend itself to greater densification for a term on how we approach these markets. But it is a natural evolution from the operators that have been in the industry for a while on how to make your revenue as durable as you can and defensible. So we are really pleased and encouraged by what the team has been able to do. Greg, additional? Greg Butler: Good morning, Aaron. Only a couple of things to add to that. One is, if you look at our retail platform, we now have over half a million people engaged in our loyalty programs and growing. Seventy-five percent of our sales is going through a digital gateway. That, to us, gives us unbelievable data on pricing, price elasticity, velocity, what SKUs are turning. So you mentioned first-party growth. For sure, we saw that in our financials, but it is actually driven by a much more rigorous analytical approach to how we are thinking about not only assortment but pricing that we are able to do now through just the rich data that is coming in. And that gives us fewer cities, store trading zone pricing, we are getting a lot more competitive on how we think about bespoke promotions versus blanket always-on. And that is driving more of what you are seeing in our percent of assortment or source, but also how we are dealing with continued pricing challenges but finding ways to maximize margin through mix. And I think, to Charlie's point, as you look to other retailers, there are some phenomenal retailers out there that are probably asking themselves what do they want to do. Do they want to partner with someone or do they want to potentially get left behind? And they have unbelievable operations. So I think another push on this is we tend to always look at distressed operators. We see a lot of operators that are not distressed that are thinking about how they find a partnership with a partner that can help them drive better results for their business and then clearly also partner for any sort of longer-term foundational change here that happens in the industry. Aaron Grey: Okay. Great. Thanks for the color, both Charlie and Greg. I will go ahead and jump back in the queue. Charles Bachtell: Thanks, Aaron. Operator: Our next question comes from Frederico Gomes from ATB Cormark Capital Markets. Your line is open. Please go ahead. Frederico Gomes: Thank you. Good morning. Thanks for the questions. First question is just on Germany. You mentioned the success, I guess, that you are seeing there in terms of that initial, you know, experiment or, I guess, a pilot launch. Could you talk more about that, whether you expect to launch new products there anytime soon or maybe enter that market in a more meaningful way? Thank you. Charles Bachtell: Yeah. Thanks, Frederico. So very encouraged by our initial approach. And as we mentioned, it is a light touch. It is a limited, low-risk approach to exploring what international markets can look like for us. The pilot so far has been really successful. Products selling out ahead of time and ahead of expectations is a great result to achieve. We made the decision to continue to reinvest the profits that we have been able to gain from this pilot so far. So we are increasing the size of it, but I do want to confirm that that is a measured approach. We are definitely still in the test-and-learn phase, and it is a low-risk approach to this exploration of what we think is going to be a very robust market internationally as a whole. But it is going to play out over time, and we are going to take a measured approach. Frederico Gomes: Perfect. Thanks for that. And then my second question, just on the pricing outlook. I mean, we keep talking about price compression, and that is something that is expected to continue. But I wonder if you have seen any reduction or normalization in prices across different states? And specifically, if you would expect maybe a price relief if and when we see the intoxicating hemp ban becoming effective maybe November this year. Thank you. Charles Bachtell: Great. I will start. We are starting to see some stabilization in markets. It is the continued natural evolution of it. As it relates to the hemp impact, without question, we do think intoxicating hemp has had an impact on several of the main markets that we are in. In the event that that does diminish going forward, we do see that sort of ancillary benefit of a broadened and grown consumer base that now has had the ability and the opportunity to get to understand cannabinoids better, and that will naturally, at some capture rate, come over to the regulated, licensed cannabis market in the event that that happens. But specifically, Greg, you want to add more context? Greg Butler: No. The only thing we would add to this is as we look at pricing in Q4 and we look at the first half of this year, pricing is probably a little bit better than even we anticipated. So still seeing some slight price reduction as you mentioned, but better than we assumed. I think as we look to the second half this year, there are a couple of major factors that we are watching closely that I think help us see even better price improvement. One is, as we talked M&A and retail, retail consolidation does help. As you get away from aggressive price promos around key selling weekends, fighting to win traffic over new stores, if that starts to slow down, that helps relieve some of the top-line pressure to retail. I think in wholesale you are going to see from us—I think you are seeing from others—really focusing on mix and how do you find and push forward higher-velocity premium SKUs, which we are now getting an unbelievable amount of data on price elasticities and what actually moves our products and other partner products that are in our stores through our own leading wholesale network. And you will see more of that—how we start to flex our muscle on price promos and SKU mix. And then I do think hemp—anything that happens on hemp here towards the second half of the year—will help. We do know that hemp does compete for the same occasions where cannabis plays too. So it is a lower-price substitute. So relief on hemp availability would relieve not only some of the pressure we are seeing with consumers who might be supplementing their purchases with a hemp product—that would come back to our stores—but also slow down just the amount of hemp that seems to be flowing through the market that is causing some price noise. Frederico Gomes: Thank you very much for the color. I will hop back in queue. Operator: Our next question comes from Bill Kirk from ROTH Capital Partners. Your line is open, Bill. Please go ahead. Nicholas Anderson: Yeah. Good morning. This is Nick on for Bill. Thanks for taking the questions. First for me on New York, the state is seeing strong dispensary growth, up to around 600 locations now at about a $2,000,000,000 annual run rate. Wondering how that translates into wholesale growth for you and what your current penetration is there. If you could just unpack that write-down a little bit more, that would be helpful. Thank you. Charles Bachtell: Sure. Thanks, Nick. Those go kind of hand in hand. For us, we still evaluate New York and further investment in New York against the other opportunities that we see out there in the space and that are in the pipeline. And still to date, New York struggles as we look at not only that comparison today, but the long-term durability. Structurally, New York has challenges. And so for us, furthering our penetration into New York, especially from a wholesale standpoint, is muted, and we do not expect—unless there is further investment from us—that that would change. And currently, that explains the impairment charge that we took, while we continue to evaluate the business viability and especially when it comes to the additional capital allocation to New York. It is just the reality that the accounting requirements lead to us taking that impairment this year, which we thought was not only a requirement but the best solution to just deal with it while, again, we will continue to evaluate New York. To your point, it is a very large market. We expect that it will continue to be a very large market. But just because the market is large does not mean that it is actually a good structural model for the operators within it. We have seen that in several other very large markets like California and Michigan too. Nicholas Anderson: Understood. I appreciate that color. Second for me, just on Sunnyside.shop, can you unpack the success there? What differentiates it from other platforms? And just what are the differences in consumer spending on the platform versus in-store? Any color there would be helpful. Thank you. Charles Bachtell: Certainly. I will give it to Greg directly. Greg Butler: Yeah. So I think one of the biggest things for us on the Sunnyside site is that it is really providing value to our shoppers. It is not just a loyalty program that you are earning something on every purchase, but you are getting unique offers, you are getting a personalized experience, and in cases you are finding out about new product launches through our site. And so we are rewarding our shoppers through an elevated experience on Sunnyside. I think the fact that we also start our relationship with them digitally—most of our purchases start online; they come online as a pickup—that is enabling us to collect a lot of information and create that relationship with our shoppers, which then enables us to scale that through different pieces of communication. From an overall business perspective, though, the site for us gives us an incredible tool that, if you think about our product launch, it radically reduces our cost of acquisition because we are able to launch on our site and get it out there without spending a significant amount of media to drive awareness. It enables us to tailor custom price promotions and how we think about that. So from a business perspective, it is wonderful that we are able to delight our shoppers, but it is also enabling us to make really smart business decisions on margins and how to protect margins and launch different SKUs and push different SKUs on-site. Nicholas Anderson: Got it. That is it for me. I appreciate the color. I will pass it on. Operator: Thank you. We currently have no further questions at this time, so I would like to hand back to Charlie for some closing remarks. Charles Bachtell: Yes. I want to thank everybody for joining the call today. And we will talk to you again here after Q1 pretty soon. Thank you. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect from the call.
Operator: Good day, and welcome to the NN, Inc. fourth quarter 2025 earnings conference call. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Joseph Kameniti, Investor Relations. Please go ahead. Joseph Kameniti: Thank you, Chloe. Good morning, everyone. Thanks for joining us. I am Joseph Kameniti with the NN, Inc. Investor Relations team, and I would like to thank you for attending today's earnings call and business update. Last evening, we issued a press release announcing our financial results for the fourth quarter and full year ended 12/31/2025, as well as a supplemental presentation, which has been posted to the Investor Relations section of our website. If anyone needs a copy of the press release or the supplemental presentation, you may contact Alpha IR Group at NNBR@alpha-ir.com. Joining us today from NN, Inc.'s management team are Harold C. Bevis, President and Chief Executive Officer; Christopher H. Bohnert, Senior Vice President and Chief Financial Officer; and Timothy M. French, our Senior Vice President and Chief Operating Officer. Please turn to slide two, where you will find our forward-looking statements and disclosure information. Before we begin, I would like for you to take note of the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation, and the Risk Factors section in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The same language applies to comments made on today's conference call, including the Q&A session, as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, inflation, supply chain constraints, foreign exchange rates, tax rates, acquisitions and divestitures, synergies, cash and cost savings, future operating results, performance of worldwide markets, general economic conditions and economic conditions in the industrial sector, including the potential impacts or ramifications of tariffs, impacts of pandemics and other public health crises and/or military conflicts, the company's financial condition, and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company's control, which may cause actual results to be materially different from such forward-looking statements. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the tables in the financial section of the press release and the supplemental presentation. Please turn to slide four, and I will now turn the call over to CEO, Harold C. Bevis. Harold C. Bevis: Thank you, Joe, and good morning, everyone. Thanks for spending a few minutes with us as we give you an update on the business and the state of the transformation in 2026. On slide four, I will begin with spending some time discussing the highlights of the fourth quarter. And Joe, can you advance to slide four? Mine looks like the webcast is slow. Thank you. 2025 marked NN, Inc.'s third consecutive year of improved results, and we were able to increase adjusted EBITDA results toward recent company highs and our adjusted operating income grew meaningfully, showing a significant improvement versus 2024. And we were able to fund a large vintage year of growth programs with our free cash flow. Importantly, we completed the majority of the heavy-spending portion of our transformation plan, which saw us close and consolidate four plants and right-size about 800 people. Second point is we are well underway in showing success in strategically evolving our business portfolio. We are intentionally shifting our sales profile towards higher-value end markets and higher-value capabilities and intentionally shifting away from low-value commodity automotive part-making and certain markets in the automotive arena. We are fixing and/or exiting the unprofitable plants that we inherited and business trips, and we are replacing this business with new wins in desirable areas. Our new business wins program continues to perform well, and we continue to focus it away from commodity auto part business. We have now won more than $200 million worth of new business since the launch of this transformation plan in mid-2023. Ahead of us this year are record levels of program launches. On top of that, we have a pipeline now that stands at over $800 million of high-quality prospects. One fun point that I wanted to point out is that we recently achieved our first new business win in the data center market. It is now a key target market for NN, Inc. and we fit nicely into it. We are making the high-precision watertight couplings that go into water-cooled computing equipment. In 2026, we are already migrating a bigger portion of our cash flow used toward investment in new business since the majority of our cost restructuring has been completed. Now we are in a better position to fund growth-related CapEx. In 2026 versus 2025, we are roughly doubling the amount of capital spending that we are putting into the business for growth purposes. That ability to fund comes from a higher level of EBITDA as well as completion of projects. 2026 is going to be a year where NN, Inc. returns to net sales growth, and it is happening right now in the first quarter. This is going to be an important pivotal year in our transformation, and our 2026 forecast calls for an end to focus on top-line growth going forward. One caveat that I want to point out, and Joe touched on it and it is in our risk factors in our 10-Ks also, is that volatility remains high in our markets. We are a supply chain participant in a lot of global supply chain decisions, and there is a lot of influence by tariffs, precious metals pricing, and ongoing geopolitical unrest. The volatility has increased a little bit here with the Middle East happenings. Except for that, we have the same type of risk factors this year as we had last year. Turning to slide five in the deck, I wanted to give a little more detail on Q4 and the full-year 2025 metrics. Our fourth quarter came in at $104.7 million; our full year at $422.2 million. This is a little lighter than we had hoped. Some of our main end customers reduced their inventory positions towards the end of the year and are now getting caught up in the first quarter, and we are feeling it. Tim, Chris, and I had not seen a good, healthy backlog of typical business since we have been here, and we are happy to say that we do have backlogs here in the first quarter because people are getting caught up with some of their end-of-the-year decisions to reduce their inventories, and we are having a good quarter. But a takeaway on our sales is that we were able to rationalize some commodity, no-profit automotive parts, and we have largely done that with these plant closings and exits, and we are happy to say that that is largely behind us. Our adjusted operating income also has been nicely improving. Adjusted EBIT, which is what we are focused on as well, in the fourth quarter was $3.3 million, and we had $14.2 million for the full year. Those results are roughly three times the prior year, and we foresee and forecast a nice improvement this year again. The results are coming from a leaner, more efficient operating model across all of our operations, and we are running a cleaner set of business through our machines because we have rationalized some of the low-end stuff. Now we have a more structurally supportive model to deliver positive operating income and adjusted EBITDA. Our adjusted EBITDA continues to improve. It was almost $13 million in the quarter, $12.9 million for the full year. These results were above prior year and also pushing towards company highs. Despite the continued weakness and volatility in the global automotive and commercial vehicle markets, we were able to perform at that level. Our adjusted EBITDA margins are forecast to expand again this year, and the Q4 margins were up 90 basis points year over year, and we are continuing to improve in line with our long-term goal that we have stated in past talks like this, 13% to 14%. Our new business wins continued on the same pace, and we were awarded more than $4.07 billion for the full year. We exceeded our guidance and expectations. We were still somewhat capital-limited last year on this topic because we were spending a lot of money on restructuring still, and we have more to spend now on a go-forward basis. That is one reason why we have increased our goals now that we are intending to pursue new business. The key wins were concentrated in our focus areas and especially beneficial to us last year and continuing is the surging defense electronics industry in the United States. We are directly benefiting from that, and it is immediate ramp-up type of business. We continued to secure new awards that were at accretive gross margins and are still averaging over 25%. We are positioned to continue winning business in 2026. We have a couple of large foundational programs underway right now in medical and in defense, and they are going to be gateway wins for us. We already have a large multiyear re-win in our electrical power business that we have accomplished this year year to date, where we beat out two large global competitors and secured that business on a go-forward basis. Our adjusted gross margin performance was 18.8% in the fourth quarter and 18.5% for the full year, which again has us trending towards our five-year goal of 20% consolidated gross margins, and in this area, we are ahead of our plan and we are encouraged by our progress. This strong performance is driven by the operating improvements that I have touched upon here a couple of times, as well as the shifting in our portfolio towards our profit business. On cost and operational leadership, it is an ever-present goal for us as a manufacturer to be better and better at manufacturing with a continuous improvement mindset, and we accomplished our goals in 2025. SG&A as a percentage of sales continued to drop as well and is now at 10.9%. We have all but eliminated an expensive executive layer that was here when we arrived, and we have reinvested some of that payroll savings into a bigger business development team. We are happy to report that we achieved our cost-out targets of $15 million for the year, which offset all inflation and pricing and implemented the re-rationalizations that we wanted to do, and we have plans for another $10 million out this year. This operational performance and ability to lower costs has helped us overcome the rapid rise in precious metal cost inflation, which has been a big deal for us that we have been able to conquer and still increase our ratios on top of it. Please turn to slide six, Joe. I wanted to talk a little bit about 2026, and then Chris and Tim are going to add portions to it as well. As already mentioned, we are forecasting revenue growth in each quarter and across the full year of 2026, and that growth is happening. It started immediately in January, as I mentioned, because there was some curtailment of supply chains at the end of 2025, which are now being refilled, and we will continue growing through this year. The global automotive markets are expected to grow slightly in 2026, a couple of percent, but the growth outlooks are very region-specific, and so we have outlooks for North America, South America, EMEA, and Asia that are specific to the region and take into account adoption rates of EVs as well as affordability issues. The commercial vehicle market is expected to begin growing this year in 2026, and it has already started out that way with strong orders over the last three months. Just yesterday, ACT Research came out with the February orders, and they were some of the highest orders ever received for that time of the year. There is an EPA 2027 mandate that is forthcoming, and the long-awaited pre-buy in that market seems like it has started, and we will benefit from that and are benefiting from that, and that is one of the sources of our positive back orders right now too. We have a strong supply chain of orders in that area already, and it happened rather quickly. It happened in December, January, February. Our 2026 outlook calls for gross margin growth and adjusted EBITDA growth, and this will be balanced through the year, also starting in Q1. Our outlook for this year is supported by gradually improving markets. We do not really see any V-shaped recoveries, if you will, the hardest growth that we are participating in, the most upward, is U.S. defense business. It is likely to get stronger as all the munitions are being used and weapons are being used, and that is where we are participating in that. We are seeing increased volumes. We do have another $10 million cost-out program this year, and we have a record amount of new business launches that is underway, and we have a record amount right now in the quarter. So we have a lot of positive tailwinds right now in the business, and we are thankful for that. Tim and Chris, please knock on wood after I said that. Unfortunately, although our sales rates and production rates of U.S.-made cars are growing, we expect the U.S. auto parts market to remain volatile. Industry forecasts call for automobiles to be made and sold, but there are continued supply chain issues stemming from global tariffs, U.S.-caused trade wars, a fundamental reset that is going on between vehicles and internal combustion engines, overall affordability of U.S.-made vehicles, EPA resets, and now war in the Middle East on top of the Russia-Ukraine war. The automotive supply chains in the world are very global, and these are very disruptive things that are happening right now. The new normal will be volatility, and I would just say it is continuing. It does require tactical maneuvering on our part. As a supply chain participant, really, we are a taker on a lot of these decisions that are at the OE level. But we are upsizing our new growth program, and we have more CapEx to spend this year, and therefore, we have set higher goals and we are committing to a higher outcome. We are now looking to achieve between $70 million to $80 million of new wins this year, and I will just tell you, we have already started off this year in the first quarter on that pace. Overall, we still remain capital-constrained due to our capital stack, and I will give you an update on that later. But we have incrementally increased the amount of CapEx that we are going to spend on growth. It is very deliberate; it is very intentional. Tim and I approve them one by one. We look at every one of them. What market are they in, who is the customer, what is the part, do we want to spend money on that, do we want to spend money on that right now? I can tell you that we are hands-on with the growth topic. It is very deliberate. Overall, we are excited for this year. We can see that it is going to be stronger than last year. Our performance in the first quarter is already on track to achieve higher outcomes, and we are off to a good start. With that as an introduction, I will now turn the call over to Christopher H. Bohnert and Timothy M. French, and then I will come back and review some of the market information later. Chris? Christopher H. Bohnert: Thank you, Harold. Good morning, everyone. Today, I will be presenting our financial information on both a GAAP, or an as-reported basis, and pro forma basis to provide transparency into our operating results, primarily due to the exit of certain unprofitable business in this year and part of last year. I will start on slide seven, where we detail our financial results for the fourth quarter. I will get into the full year as well. Slide seven shows our as-reported GAAP results on the left side, pro forma adjustments in the middle, and pro forma results on the right side, as we have done in previous quarters. As a reminder, we use these adjustments to provide a representation of how management views and makes decisions about our business on a current and go-forward basis. The pro forma specific adjustments to the fourth quarter include last year's contribution from strategically rationalized sales volumes and the impacts of foreign currency translation on our non-U.S. operations. On an as-reported basis, net sales for the quarter were $104.7 million, declining by about $1.8 million versus last year's fourth quarter. On a pro forma basis, accounting for the adjustments I referenced earlier, our net sales increased $1.4 million, up about 1.4% versus the prior-year fourth quarter. Adjusted operating income for the fourth quarter was $3.3 million compared to $2.4 million in last year's fourth quarter. On a pro forma basis, operating income was down slightly to $3.2 million, or about 5.7% versus the prior year. Our adjusted EBITDA was $12.9 million, as Harold mentioned, for the quarter, up from $12.1 million a year ago. On a pro forma basis, adjusted EBITDA increased $1.1 million, or 9.3% year over year. Adjusted EBITDA margin was 12.3% of net sales. This represents about a 100 basis point improvement on an as-reported basis, expanding 90 basis points on a pro forma basis, so a nice increase there. Now turning to slide eight for the full year 2025. Our pro forma results and comparisons also normalize for the sale of the Lubbock business, which was divested in 2024. On an as-reported basis, net sales for the year were $422.2 million, declining $42.1 million versus last year. On a pro forma basis, adjusting for the sale of Lubbock, strategically rationalized sales volumes, and FX impacts, net sales decreased $7.4 million, or 1.7%. Adjusted operating income for the year was $14.2 million, up $9.1 million from $5.1 million in the prior year. On a pro forma basis, the results marked a steep improvement, more than doubling from the $7.0 million in 2024 on a pro forma basis. Adjusted EBITDA for the year was $49.0 million compared to $48.3 million for the prior year. Pro forma, our results increased $2.2 million, up about 4.7%. Adjusted EBITDA margin was 11.6% of net sales, representing an expansion of about 70 basis points on a pro forma basis. We worked through the transformation across our business; we have grown our adjusted EBITDA now towards pro forma company records. Meaningfully growing our operating income, and we have expanded our margins and advanced margin capture toward multiyear targets. Notably, we have done this work to improve our structural profitability despite a smaller top line, which has reflected the impacts of our exit of dilutive sales volumes. We are now prepared to continue delivering our growth through our operating income and adjusted EBITDA, coupled with an expected return to sales growth beginning in 2026. Now I would like to turn to slide nine, where I will detail our performance across our operating segments. For year-over-year comparisons, I will be speaking to our pro forma numbers. In our Power Solutions segment, where our business consists largely of stamped products, net sales for the quarter were $45.5 million, up $5.9 million, or 14.9%, compared to $39.6 million in the prior-year period. This improvement was driven by the increase in precious metals pass-through pricing, as well as the benefit of new program launches in electrical and defense business. This improvement was partially offset by lower sales volumes concentrated in one stamping products customer. For the full year, Power Solutions pro forma net sales of $178.6 million improved 5.3% compared to pro forma net sales of $169.6 million. Power Solutions adjusted EBITDA results as reported of $6.4 million increased $0.8 million versus last year's fourth quarter of $5.6 million. This improvement was driven by sales growth, particularly in defense and electronics products, and was further supported by operational cost reductions, higher margins, and an overall improved sales mix. On a full-year basis, Power Solutions segment adjusted EBITDA of $30.7 million improved by $3.0 million, or 10.8%, compared to the full-year results of $27.7 million as a function of our adjusted EBITDA growth, 90 basis points versus 2024. We won an additional $3.1 million in new business awards for the segment in the fourth quarter, bringing the full-year total to $13.2 million. Our wins have largely been concentrated in key target growth markets of electrical, defense, and electronics products, which we expect to remain strong growth sectors for our business. Christopher H. Bohnert: Now turning to slide 10, our Mobile Solutions segment, which covers our machined products business. Net sales for the fourth quarter were $59.3 million compared to the prior year of $63.8 million. Net sales comparisons were primarily impacted by the rationalization of dilutive business and lower volume in North American auto customers, partially offset by favorable foreign exchange effects. For the full year, pro forma net sales of $244.0 million declined $25.0 million, or 9.3%, compared to results of $269.0 million in the prior year. We note that while we observed weakness in the North American auto markets across the year, our sales comparison was largely concentrated to one specific auto part customer which had pushed out volumes due to its own production disruptions. Our fourth quarter adjusted EBITDA in the Mobile Solutions segment was $10.0 million, up slightly versus last year's fourth quarter on a pro forma basis. Quarterly adjusted EBITDA results reflected our successful shedding of unprofitable sales, which has improved the margin mix of the business, combined with overall lower operating costs. These factors have helped drive adjusted EBITDA margins to 16.9% for the quarter, up about 160 basis points from the same period a year ago. For the full year, Mobile Solutions adjusted EBITDA of $33.5 million declined 4%. Notably, adjusted EBITDA margins of 13.7% showed expansion of about 70 basis points for the full year versus full-year 2024, displaying the impact of business rationalization and footprint consolidation. On the new business front, we continued achieving new wins in innovative programs totaling $26.2 million in the fourth quarter and $58.6 million for the full year. We won over 200 individual award programs in 2025, including machined parts in defense and medical markets, as well as high-quality automotive programs focused on more innovative next-generation fuel efficiency for internal combustion powertrains. Thank you. With that, I will turn the call over to Tim, who will discuss our commercial and operational progress. Tim? Timothy M. French: Thank you, Chris. I will begin with slide 11. Our new business momentum has continued to build and is now translating into meaningful scale and future growth. As Harold mentioned towards the top of the call, over the trailing three years, we have secured over $200 million of new business wins. With quarterly commercial performance remaining consistently strong across that timeline. Importantly, these awards are coming in at an average gross margin of about 27% and are concentrated in strategic markets where we see the best long-term value. It is worth noting that the implied margins on these wins are meaningfully above the multiyear goal of 20% and higher than current levels for the business. As these programs launch, they will be accretive to the overall margin profile and help support profitability and earnings improvement. Over the last three years, we have fundamentally rebuilt our sales pipeline, which had atrophied in the years before the launch of the transformation. Now our pipeline sits strongly at $800 million of potential opportunities. Our commercial execution is focused on disciplined growth. We are winning where our technology and differentiation matter most, particularly across defense, medical, data center, and other high-reliability applications. Supporting this outlook, our global team of roughly 40 commercial and technical personnel are actively pursuing and executing against the pipeline. These opportunities convert to wins, launch cadence steps up meaningfully. 2026 will be a very big year for launches as we expect to launch over 100 programs. As I mentioned, the new programs are margin accretive and continue to shift our mix towards structurally stronger, higher-reliability end markets while reducing relative exposure to commodity automotive. Overall, the combination of strong bookings, a deep pipeline, and strong launch schedule gives us confidence in the durability and quality of our growth trajectory. Turning to slide 12, I will briefly touch on our long-term roadmap. Notably, we remain well on track to meet our long-term goals that we have laid out as part of our enterprise transformation. Our 18.5% adjusted gross margins consistently showing improvement in each sequential quarter and pulling in line with our 20% adjusted gross margin goal. Our adjusted EBITDA, supported by an improved, leaner, and more efficient operating structure, is expected to continue improving and delivering on higher margin rates. Expect to grow at a 10% compounded annual growth rate, reaching $80 million in adjusted EBITDA by 2030. Overall, we see approximately 5% market growth, further supplemented by the benefit of approximately 2% share gain, as we hone our commercial efforts in electric grid, data center, defense, electronics, and medical markets. As we do this, we are strategically deemphasizing less valuable elements of our portfolio, with the explicit intent to continue lowering our overall portion of the company attached to commodity automotive parts. In parallel, we will continue advancing our successful cost-out programs across our operations. In 2026, we aim to drive approximately $10 million with cost rationalization, which will help offset pressure from inflation and pricing. And finally, as we move forward, we are going to continue sharpening our focus on areas critical to our growth that align with our highly valued capabilities. These include robotics— Harold C. Bevis: Did we lose Tim? Operator, can you hear Tim? Timothy M. French: Can you not hear me, Harold? Joseph Kameniti: Yeah. I can hear you. Timothy M. French: Okay. Well, then just closing, these include robotics, artificial intelligence, automation equipment, as well as opportunities for material and vendor substitution. With that, I will turn the call back over to Harold. Chris, are you able to hear me? Christopher H. Bohnert: Yeah. I can hear you, Tim. Operator: Harold, is your line muted? Everyone, please stand by while I check the speaker line. Harold, please proceed. Harold C. Bevis: Thank you. Tim, are you there? Timothy M. French: Yes. I am. Harold C. Bevis: Okay. I got dropped for some reason. Are you to me now? Timothy M. French: Yeah. I completed, and we are ready for you on slide 13. Harold C. Bevis: Thank you. I apologize to the listening group here. I got dropped off the call somehow. I would like to talk about the markets for a moment, starting with the electrical grid and data center market, which is 60% of our sales, that there is a strong market outlook for this year. There are many announcements being made to expand aggressively the data center infrastructure. We participate in this market in the U.S. and in China. There is a big announcement by Amazon and a lot of the data center builders, and we continue to see growth in this area. The next market underneath that on the chart is the China automotive market, where we have been in that market for about twenty years, in the China automotive market and the China commercial vehicle market, and the China data center market now. But the automotive market has a good outlook for the year. It started off at the beginning of the year kind of weak. BYD and Geely being big end OEs that we service, they have had some timing issues in their local market. But this remains a strong element of the NN, Inc. portfolio, both sales for use in China as well as the export market for those vehicles and those parts. On the commercial vehicle side, we expect to see this market improving this year. As I previously mentioned, the growth looks like it is going to be sooner than had been forecast, as orders have come in strong for the first few months of the year already, and there are structural reasons for that if you follow that market, so it looks sustainable. It is not a fluke. Defense electronics is 10% of our business, and it is growing strongly, specifically with an end customer we serve being Raytheon and the desire for their missile defense systems. We are basically increasing our production capacity and our ability to make larger parts as well. Our own organic growth here is expected to remain strong through the year, and it is building, and we have already been given multiyear volume increase outlooks from several customers as forward indication of what we need to do. On industrial, we are really tied into GDP-level growth here, a lot of building products as well, like smoke detector parts and security system parts, and our primary focus in this area is innovation takeover business, and we are having good success. Medical remains a steady and growing market for us. For us specifically, we have been increasing the breadth of our team that focuses on this market. We now have a very large, strong pipeline of opportunities, and I mentioned earlier in my initial comments, we are on the edge of foundational large programs that will enhance our credibility. Global automotive is North America, South America, and Europe. We carry tempered expectations for the year here, not negative per se but tempered by volatility. The view here is that we will continue to participate in the high-end part of the market for very precise parts, and our goal here is over time to hold our sales flat by re-winning the amount of sales that go into production and replacing them, staying flat, keeping our capacity equally full, not going backwards, and it is not a focus area for us. It is really a hold-your-own kind of area, and this part of the company's portfolio will shrink over time. Intentionally. On page 14, in December, we announced that our Board had launched a committee to look at our financial and strategic options. We have previously discussed in some of our calls together that our capital stack is problematic. There is basically too much debt plus preferred equity, and we would like to solve that over time. We are looking at various options here. We really have no updates that are concrete. I just want you to know that it is underway. It is a Board process, and it is ongoing, and when there is something big to say, we will say it. But right now, we do not have anything, and instead, we are just focusing on looking at our options and basically letting the business grow right now, which is what is happening. Turning to slide 15, I would like to talk about 2026 and what our guidance is. We are guiding to net sales growth, which is meaningful to us: $445 million to $465 million in sales, which covers the consensus outlooks on us, anchored by the new program launches which Tim walked through, and they are expected to occur through the year, and we have already been winning new business that is immediate ramp-up for this year. So this will be a strong area for us during 2026. We have overall strengthening of some of our end markets, as I mentioned, commercial vehicle markets coming back after a three-year freight recession, and defense is growing much stronger than anyone had expected. No one had expected President Trump to be able to go through as many munitions as we have in a short amount of time, and we participate in the reloading of that supply chain. Adjusted EBITDA—we are starting with a wider range here as the year starts, and we will narrow it and focus it as the year unfolds. But as I mentioned, the first quarter is already starting off very well, and it is supported by higher contribution margins. Our mix is naturally higher now and we have unit volume growth underway, and we expect that to continue through the year, and so we are going to have good mix. Usually people talk about getting hurt by mix; we are going to benefit from mix, mix that we have caused. Furthermore, we are going to reduce costs another $10 million this year to more than offset the inflation and pricing agreements that we have in place, and we are going to increase our new business wins target to $70 million to $80 million. We have a long-term goal to get to $600 million in organic sales, as Tim touched on. We do have EOPs during the five years, so another way to think about it is our sales plan is replace EOP plus another $200 million. To do that, we have to win above that $200 million rate because we do have EOPs during the period as well. As mentioned, our pipeline is more than sufficient. We are running over a 20% hit rate and carrying an $800 million prospective pipeline. This is just a matter of doing the job on a continuous basis and making it happen. We have continued to add key personnel in defense, electrical products, data center products, electronics, and medical. We are looking forward to this year, and we are excited about this year, and we think that it is going to be a nice record year for the company. With that, I would like to turn the call over to our operator to answer any questions that you might have. Operator: Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. Our first question today comes from John Edward Franzreb with Sidoti. Please go ahead. John Edward Franzreb: Good morning. This is Justin on for John. Harold C. Bevis: Hello, Justin. John Edward Franzreb: Hey. Can you expand on the data center end market opportunity, including any additional color on the size, expected ramp timeline, and margin profile of your first direct data center win? Harold C. Bevis: Yes. We have a couple of product angles into the data center market. We are focused on the cabinetry that houses the equipment and specifically the cooling. It is a very high-precision, micron-tolerance type setup so that the cooling does not escape the cooling system and damage equipment, and it plays right into our capability as a very precise, micron-level tolerance achiever. The first entry point was to become an approved supplier to the equipment-building crowd as a provider of watertight coupling, and it turns out it is very much needed. The cabinets are dense with this type of product. We are putting our hands around the size of the TAM. It is a very specific thing, and we do intend to report out on it in our next public call. We have a team underway with that right now. The second product that we are targeting into the data center market is cable assemblies. At the top of the rack is a distribution of the electricity busbar as well as high-voltage cable assemblies, and we can make those also. The new team we hired at the end of last year from the electrical products background, with Mohammed Farhad as our leader technically, and then Tim Merrill and three other people that are account managers that know the industry well, are now prospecting. We do have formal pipelines, and we do have customers delineated, and that is what we are doing. It is not a long ramp-up either. It is not like the gestation period for getting onto a medical equipment or an automobile or commercial vehicle. It is an immediate ramp-up kind of industry because the supply industry is behind. There is a need for more gigawatts of power in data centers than is in place, so it is an immediate ramp-up business for us. We are quite excited about it. John Edward Franzreb: Very helpful. Thanks for the color there. Maybe shifting gears to transformation, with the heavy lifting behind you, including plant closures and exiting dilutive businesses, what does the roadmap for sustaining sales growth in 2026 look like? Harold C. Bevis: Yeah. So roughly speaking, if you look at the 10-K and the numbers that Chris and his team have put out there, we are going to be doubling our capital spending. The biggest use of our free cash flow is cash interest to service our debt, and the second is CapEx, and so we are increasing the amount of CapEx that we are going to allocate to growth to really continue the paths that we are on. So this year, growth primarily, 85% to 90% is from new wins, and it is going to come from wins that preceded the beginning of the year. We are ramping up business that we already won. This year's wins primarily will benefit 2027 to 2028, with the exception of areas that are immediate ramp-up like data center, like defense ramp-ups that are happening right now, like the volume increases that are going on in commercial vehicle platforms where we are already approved. There is just an increased production rate. So 2026, we can see very well, Justin, and the new wins program for this year will create the outline for 2027 and 2028. John Edward Franzreb: Great. Thanks. Good luck in 2026. I will turn it back. Harold C. Bevis: Thank you, Justin. Operator: The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Rob Brown: Congratulations on all the progress. On the kind of the ramp of new business in 2026, I think your chart showed a pretty strong ramp of sort of full program kind of ramp rates. But what is the cadence of ramp in 2026 in terms of revenue this year versus future years? Harold C. Bevis: Yeah. You want to take that one? Timothy M. French: Sure. Obviously, when we are ramping up launches, it is not an immediate turn-on of the peak annual sales. So we are launching over 100 programs this year, and we would expect to see somewhere around between $20 million and $25 million of revenue from those launches that occur in 2026. But you also have to keep in mind that we launched programs in 2025 that will continue to escalate as well. But from launches purely in 2026, it will be between $20 million and $25 million of revenue. Rob Brown: Okay. Great. That is very helpful. And then on your CapEx outlook, I think doubling that would put it around $25 million to $30 million. What sort of CapEx activity are you planning, and what program areas do you need CapEx for? Harold C. Bevis: You want to do that, Tim? Timothy M. French: Sure. The bulk of our CapEx goes towards growth programs. We will be spending well over $15 million in growth programs, and it is not focused on any specific area. It is tied to a program launch and capability requirements within that. But 75% of our CapEx spending will be focused on capital required for launching new business. Does that answer your question? Rob Brown: Yep. Very good. Thanks, Tim. I guess one last question just on Q1 activity. You mentioned some strength in Q1. How much visibility do you have beyond that? Is Q2 looking strong as well, or is that really hard to say at this point? Harold C. Bevis: We have released orders into the second quarter already, and we have, Rob, a real healthy backlog already. We have a shippable backlog that hit us a little bit by surprise with the strength that happened in commercial vehicles over the last few months. We have forecasts with our customers. Generally, we force specificity through our raw material lead times, so we can already see Q2. Yes. For Q3 and Q4, we do not have firm releases that go out that far, so we just have expectations from our customers, and it is looking to be very, very consistent with the sales guidance we just gave. I wanted to add another point to your last question, Rob, on CapEx. If you look at our net CapEx last year, it was about $10 million, and this year it is going to be about $20 million, and to Tim's point, it is primarily going to be on more growth, funding more growth programs that will help this year and next year, and primarily next year. Primarily, the capital spending for this year will help make 2027 larger because we are basically saying yes to more programs. In fact, we yesterday said yes to a pretty large program that was about $1 million of capital, for example, and it will take about six months to get the machine. It is one machine that we need, that we are out of capacity on, and we already have the load for it. The spending this year, primarily the extra spending, will primarily help next year. The $10 million kind of rate, we had already pre-spent that with programs that we were awarded last year. So absolutely inflecting up intentional growth in these target areas, and it is already hitting the first quarter. Rob Brown: Okay, great. Thank you. I will turn it over. Timothy M. French: Thank you. Operator: We will conclude our question-and-answer session, and I would like to turn back to Harold C. Bevis for any closing remarks. Harold C. Bevis: Thank you, Chloe. Thank you, everyone, for staying on the phone for a bit with us, and we are pretty happy to report this update on the business. It is quite positive. It is a nice inflection point for us to be reporting on growth and growth and growth now, and we want to get more growth. It has been our game plan all along to get the ugly restructuring out of the way. We had to part ways with about 800 employees and sever them and pay those severances. We had to close four plants. But it is behind us, and we are thankful for that, and we have a more profitable, cash-generative company now, and we are using it to our advantage to be competitive in the areas where we want to. We are off to a good start. Thank you for your support, and we look forward to speaking with you again in the future. With that, we will end our call for today. Timothy M. French: Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to the Distribution Solutions Group, Inc. Fourth Quarter 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. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Sandra Martin. You may begin. Sandra Martin: Good morning, and welcome to Distribution Solutions Group, Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. Joining me on today's call are Distribution Solutions Group, Inc.'s Chairman and Chief Executive Officer, Brian King, and Executive Vice President and Chief Financial Officer, Ron Knutson. In conjunction with today's call, we have provided a financial results slide deck posted on the company's IR website at investor.distributionsolutionsgroup.com. Please note that statements on this call and in today's press release contain forward-looking statements concerning goals, beliefs, expectations, strategies, plans, future operating results, and underlying assumptions subject to risks and uncertainties that could cause actual results to differ materially from those described. In addition, statements made during this call are based on the company's views as of today. The company anticipates that future developments may cause those views to change and we may elect to update the forward-looking statements made today, but we disclaim any obligation to do so. Management will also refer to certain non-GAAP measures, and the reconciliations to the nearest GAAP measures are available at the end of our earnings release. The earnings release issued earlier today was posted on our Investor Relations website. A copy of the release has also been included in a current report on Form 8-K filed with the SEC. Lastly, this call is being webcast live on Distribution Solutions Group, Inc.'s Investor Relations website and a replay will be available through March 19. I will now turn the call over to Brian King. Brian? Brian King: Thanks, Sandy. Good morning, everyone, and thank you for joining us. As events unfold in the Middle East, we are actively assessing any potential implications for our business, our customers, and impact on the broader supply chain. Our thoughts and prayers are with the military personnel and civilians who are in harm's way and with their families. We will continue to monitor the potential implications for global markets and are committed to operating with resilience, discipline, and care during this period of elevated uncertainty. We are not where we want to be at the end of the quarter, but our confidence and vision for the future remains strong. 2025 was a critical internally focused reinvestment, retooling, and digesting year for Distribution Solutions Group, Inc., as well as one where we managed through some dynamic pricing and supply chain and numerous one-time cost curveballs. While it was a dizzyingly dynamic year, through our daily North Star commitment to staying focused on investing in the business with a lens on long-term value creation, our urgency to offset shifting rules in the marketplace sharpened our focus on core fundamentals of building a better Distribution Solutions Group, Inc. Enhanced focus on execution tools and talent, and on timely accountability across the organization, made us prioritize not delaying targeted significant investments in capabilities and talent to position the company for long-term success. As a result, we go into 2026 with an enhanced perspective on our competitive positioning and long-term levers to drive performance across our North American and global platforms. As I reflected, we navigated challenging headwinds in 2025, including a government shutdown, shifting demand environment and macroeconomic pressures and emotions, including those driven by fluid tariffs where our diligent and largely effective efforts to recapture margin still left us short. Our financial results fell short of our expectations in the fourth quarter and for the year, and we own that. However, besides progress in our transformative investments, we enjoyed consistent operational affirmations in the marketplace around our value-added lines of business. Our teams delivered important new business and wallet share wins; each vertical held on to business on the back of service and capabilities, and made meaningful progress in our customer-facing capabilities and partnerships in 2025. We leaned in on improved discipline, heightened institutional adaptability, enhanced Distribution Solutions Group, Inc.'s more broadly presented refined value-added solutions confirmed by the marketplace. All of which add up to real 2025 successes and maturity of the business that will make us stronger in the longer term. Turning to Slide four. For the full year, we delivered total revenue growth of 9.8% on one less selling day, resulting in $1,980,000,000 in annual revenue. Organic average daily sales grew by 3.6%, reflecting solid underlying execution. Cash flows in 2025 were strong; we generated $84,000,000 of cash from operations, on top of $56,000,000 in 2024. Adjusted EBITDA finished at $175,000,000, short of our expectations. These results demonstrate our continued focus on cash generation, working capital efficiency and profitability. Throughout the year, demand remained healthy across aerospace and defense, semiconductor-related technology, renewables, and as the year progressed, industrial power. During the fourth quarter, we began to see demand soften in renewables in North America, which we are actively managing by pivoting growth initiatives in that sector towards the strong renewables demand growth for Distribution Solutions Group, Inc.'s improved presentation of capabilities in the global marketplace, and expanding our efforts on other end markets where we enjoy exceptional customer partnerships and strong secular and strengthening cyclical momentum, such as in industrial power, technology, and aerospace and defense. Our expanded platform capabilities and ability to support our historic customers and similarly discerning customers on a more global stage are supporting an expanding and accelerating set of dialogues. As we've discussed on previous calls, our financial results will not be linear. The fourth quarter is a good example of that. However, these results are certainly not indicative of our long-term plans or confidence in the future. While we anticipate some quarter-to-quarter challenges to balance earnings with our recent commitment to accelerate our talent recruitment transitions and accelerated investments, we are committed to making decisions that prioritize driving a stronger and more profitable Distribution Solutions Group, Inc. in the longer term for all of our committed stakeholders, but recognize, like in this quarter, the timing of some of those decisions unintentionally lined up with some margin near-term pressure and taxed near-term earnings more than leadership expected. While we didn't want to delay investments and talent decisions to unnaturally smooth earnings at the expense of building a better company, our leadership team still expects much better profitability performance from our Distribution Solutions Group, Inc. platform of capabilities. Let's turn to slide five to discuss our business initiatives. Gexpro Services delivered outstanding operating results in 2025 driven by the strength of the aerospace and defense, technology and renewables end markets we serve. Despite some fourth quarter sales softness, full-year organic average daily sales increased 12.3%, with full-year ADS up 13%. We continue to invest in the technology and industrial power end markets, driven by expanding infrastructure needs and increasing AI-driven demand. Our order backlog and new business pipeline remained strong in both segments. While renewables slowed in North America in 2025, we shifted our investment focus towards global strategies with encouragement of exceptional partners across technology, industrial power, aerospace and defense, and the power generation cycle. We are seeing a meaningful growth opportunity in India, while Southeast Asia is progressing more gradually due to the timing of customer qualifications. Both regions remain relatively small today, but continue to show excellent acceleration perspective and current customer engagement across more of our proven value-added capabilities at Distribution Solutions Group, Inc. and Gexpro Services. Our European business remains strong, with increasing diversification across multiple verticals. Gexpro Services is also expanding its value-added service offerings using robotic automation and AI-enabled tools that enhance customer capabilities across VMI, kitting, manufacturing, and ecommerce solutions. Since bringing Distribution Solutions Group, Inc. together, Gexpro Services went from approximately $350,000,000 in revenue to just under $500,000,000 mostly organically. Adjusted EBITDA has expanded from approximately $35,000,000 to $64,000,000 in 2025, with margins expanding nearly 300 basis points to 12.8%. This margin expansion reflects scale, broader geographic reach, enhanced value-added capabilities, and disciplined execution of operational efficiencies that leverage our cost structure. As we confidently lean into further investment at Gexpro Services, we are balancing strong optimism around marketplace pull on us to support growth opportunities with an expectation to drive earnings growth while making the important long-term investments in capabilities, geographies, and talent to support performing for our customers at a level that adds to the reasons we are winning wallet share and new mandates. As a reminder, Gexpro Services launching new customer programs requires upfront investment of significant time and margin, but results in exceptionally sticky customer engagements where we are critical to our customers, and our commitment to doing our job for them thoughtfully and exceptionally reaffirms the partnership between us and our customers. The upfront effort and investment can cause a bit of deleveraging of profits in any given quarter as programs ramp up, or mature programs slow, like the shift we felt on the margin in the fourth quarter as new programs in global renewables come on but domestic programs slow, or as we felt a year or so ago in technology. The great news is that the new business pipeline continues to expand even as mature programs may fluctuate based on each customer's program momentum. We also continue to win significant wallet share. We rarely lose programs. Expanding what Gexpro Services does as a part of Distribution Solutions Group, Inc. allows us to expand our engagement with our customers. Gexpro Services continues to be one of the most exciting growth levers for Distribution Solutions Group, Inc. Looking ahead, we are excited and focused on investing even more deliberately in additional organic and inorganic initiatives to sustain and extend the strong long-term momentum we see at Gexpro Services. Next, Lawson Products. Average daily sales increased 2.7% in the fourth quarter, continuing the momentum from the third quarter when average daily sales grew by 3%. Although new VMI installations and wallet share expansions led to organic sales growth throughout 2025, Lawson’s smaller account local revenue continued to be challenged in the fourth quarter; some of the Salesforce and selling tools transformation over the last couple of years have distracted our resources from doing the exceptional job our customers champion from our unique service model and that we expect. Lots of focus and tools teamed with additional investment in talent and process improvements are focused on getting this right for our customers, sales team, and for Distribution Solutions Group, Inc. EBITDA margins were negatively impacted by a slight customer mix shift, deliberate strategic investments, and unexpectedly elevated health care benefit costs in the quarter and for the full year. Ron will discuss in more detail in a moment. Recently, Lawson has made strategic investments in two leadership roles to strengthen the team through more capabilities and accountability. We brought on Jim Slunka as Chief Revenue Officer and Hillary Bryant as Chief People Officer. Jim joined Lawson in January 2026 and brings a proven track record of commercial transformation, having led sales and operations for a $1,800,000,000 omnichannel enterprise, overseeing more than 2,000 sales professionals, delivering a six-year sales CAGR of 8% and expanding gross margins by 300 basis points. He brings strong discipline around accountability, urgency, process, and commitments to a team-focused enthusiasm for excellence and winning, all consistent with being a former West Point athlete and officer. We are thrilled to welcome Jim to Lawson and Distribution Solutions Group, Inc. and are confident in the immediate impact he will have on the organization. Hillary brings deep global HR leadership experience, most recently managing a worldwide HR organization for a $1,400,000,000 industrial technologies company with approximately 4,000 employees. She offers a great complement to Jim, bringing a renewed discipline and energy to employee engagement and corporate culture while elevating a clear cadence around growth-focused expectation, urgency, and rewards. These important investments, alongside others that have also been recruited over the last years, put in place critical pieces to now have a stronger ensemble of experience, been-there-done-that leadership, collectively adding meaningfully to our sales and operating foundation as we pursue improved growth and execution in 2026. Turning to our 2026 growth priorities. We are focused on continuing to capture market share and expanding wallet share in our national accounts, including Lawson, Kent, and government, while reestablishing our commitment to offering the highest level of consistent service out of our Salesforce for our customers. And with that, a return to growth out of our smaller local accounts, driven by their efforts and the investment we have made in them. A key leading indicator of our growth is in new VMI installations, or internally what we refer to as ship-to locations, which we are currently ramping up after a challenging couple of years as we've been working through our Salesforce transformation. We continue to leverage technology to increase sales effectiveness and are improving the rigor and consistency of sales rep activity supported by our CRM tool, enhanced training commitment for new FSRs, and a real focus on our DSMs’ consistent cadence with our established FSRs around driving growth and consistency in the customer experience. We are also in the early stages of rolling out across our field customer-facing team a route optimization tool that we have been developing that will give them back expensive and frustrating transit time and more opportunity to serve and grow our customers. Although a smaller piece of our business, our ecommerce channel continues to deliver double-digit growth, and we are encouraged that more than 30% of customers purchasing through the site are new to Lawson. As we move forward, we remain focused on commercial excellence, the customer experience, and technology to accelerate growth and continuously improve how we serve our customers while also providing flexibility to our customers. Additionally, we are working more closely with our vendor partners to deliver solutions to our customers and to support our commercial team. At our recent sales leadership meeting in February, approximately 50 vendors presented their products and services to our sales team. We are working with a number of those channel partners to improve our product costs, as we have in turn invested to support them and our customers with our significant recent investment in our selling and servicing capabilities. We expect some nice progress this year out of our sourcing partnerships. Moving on to the Canadian branch division. The team made solid operational and synergy progress in the fourth quarter and across the full year despite macroeconomic headwinds and tariff-related uncertainty that pressured industrial end markets, especially in Canada, throughout 2025. As expected, fourth quarter revenue declined sequentially due to typical holiday season softness and weather, leading to operational deleverage. In 2025, we completed four facility consolidations, with the final consolidation expected by the end of the first quarter. As we discussed last quarter, because Source Atlantic's purchase price was largely tied to tangible assets, our first full year of transformation meaningfully derisked this investment for us, and we continue to believe this was a strong strategic acquisition to grow and scale our Canadian operations. Although the revenue headwind out of the gate has us a full year behind our ambitious profitability objectives our Distribution Solutions Group, Inc. team embraced when we acquired Source Atlantic in late 2024, and more recently, the recruited Canadian leadership team reaffirmed that underwriting. There's still significant profitability tuning work ahead; we are encouraged by our framework and expanding profitability insight and discipline that we are building, the team we put in place, and the path and significant progress they are demonstrating to us in the marketplace as the first year of ownership is now closed. At the TestEquity Group, we are investing at a renewed, feverish pace in the long-term platform we can better see now in this vertical. A massive investment in additional leadership capabilities and tools was made in the business, especially during the last part of 2025. A shift was made concurrent with these investments around dialing up a more intense focus and intentional allocation of resources, driving a structurally higher margin shift discipline out of a daily cadence around the vertical's growth priorities. And each team member owns specific accountability on discrete levers to impact that outcome. When we committed to these investments, we fully expected a J-curve recovery, with near-term transitions impacting performance, followed by improved revenue growth and profitability as our strategic initiatives take hold. For the full year, average daily sales increased 2%, and organic daily sales grew 1%, driven primarily by Test & Measurement, Rentals, and Chambers. In the fourth quarter, revenue grew 0.9% on one additional selling day, supported by continued momentum in rental and refurb chambers, and TEquip. While Test & Measurement end markets were under in the fourth quarter, we remained focused on disciplined execution of our growth and profitability prioritization initiatives and are beginning to see the tighter strategic lens and accelerated pacing around cadence and accountability at work. The result is we are seeing engagement deep into the organization take place, and the affirming pipeline activity evolving towards our areas of most differentiated capabilities, teamed with our higher margins and return on capital opportunities, including value-added solutions used in rental, Test & Measurement solutions, Chambers, and accelerating the growth and mix around our most value-added elements of our electronic production supply offer. To strengthen our margins and earnings, we are currently seeing some accelerating customer engagement building around our core Test & Measurement expertise, where we have reinforced with a renewed and discrete effort around rededicating resources focused on T&M customer solutions selling, improving our competitive moat, at a time when we believe the marketplace has passed the trough and we are seeing acceleration. We also have major initiatives underway to simplify and unify the digital ecosystem. Enhancing the customer experience through ERP consolidation, customer service, and ecommerce platform integration is foundational to our strategy, and we are actively leveraging AI applications to accelerate execution. At the same time, we are strengthening performance management, incentives, and accountability as we establish new key leadership roles. We're excited about the progress Barry is making to drive a much more disciplined approach to the portfolio of value-added capabilities and products offered across the TestEquity Group vertical. And for the employees, we appreciate their support of his accelerated operational pace and accountability, including the shifting of time and resources towards more differentiated growth areas, to drive his objectives around mix shift rather than only adding incremental costs in elevated areas of focus. Looking ahead, we are actively increasing our account base and deepening penetration among our existing customers while using new product introductions and private label offerings to expand customer choice and enhance margins. Encouragingly, a growing backlog in January and February 2026 signals momentum to come. In 2026, we recognize that the full impact of these initiatives typically takes several quarters, but we are confident they will result in a structurally stronger, more competitive, materially higher margin TestEquity business over time. With that, I'll turn it over to Ron for details on our fourth quarter and full year financials. Ron? Ronald J. Knutson: Thank you, Brian, and good morning, everyone. Turning to Slide six and starting with our full year results for 2025. As Brian mentioned, consolidated revenues for the year were $1,980,000,000, up 9.8% compared to 2024. Incremental revenue from our 2024 acquisitions was $121,500,000, and our organic average daily sales growth for the fiscal year was up 3.6% over 2024. For the year, adjusted EBITDA was $175,200,000 or 8.9% of sales, and GAAP net income per diluted share was $0.18 for the year versus a GAAP net loss per diluted share of $0.16 a year ago. Non-GAAP adjusted EPS was $1.24 for the year compared to $1.44 per share a year ago. Full year margins in 2025 were 80 bps lower than in 2024, primarily due to sales mix shifts, employee-related costs, and other investments. Fourth quarter revenues were $482,000,000, up 0.2% versus a year ago, which translated into flat organic sales compared to 2024. For the quarter, we generated adjusted EBITDA of $35,400,000 or 7.4% of sales. Each of our businesses experienced lower year-over-year EBITDA margins primarily due to sales mix shifts, some incremental bad debt expense, and higher employee-related costs, namely health care benefits. Cash flow from operations was strong, with $16,900,000 for the quarter and $84,000,000 for the full year, on top of strong results in 2024. Before I move on to the individual verticals, I wanted to comment briefly on the Distribution Solutions Group, Inc. consolidated margin for the full year and for the quarter. For the full year, adjusted EBITDA was 8.9% compared to 9.7% for the full year 2024. I would break the 80 bps compression into two buckets. The first is primarily longer-term people investments of approximately 20 bps. The remaining 70 bps was driven by timing items and nonrecurring items such as health care costs, specific customer bad debt reserves, and some lower margin to win specific customers. From a timing perspective, many of these items hit in the fourth quarter, resulting in a larger impact on our fourth quarter margins of 7.4%. Longer-term people investments impacted the quarter by approximately 25 bps. Other items impacting the quarter that we would classify as timing or nonrecurring include health care approximately 40 bps, customer-specific bad debt approximately 20 bps, recruiting and leadership start-up approximately 25 bps, mix shifts within Gexpro Services approximately 25 bps, and timing benefits realized in 2024 which is about 40 bps. Now moving on to slide seven and starting with Lawson. Full year revenue increased $12,000,000; average daily sales grew by 2.6% and organic average daily sales declined by 1.2%, primarily due to lower military customer sales. Adjusted EBITDA for the year was $51,600,000 or 10.7% of revenues for the full year. For the quarter, Lawson's average daily sales were up 2.7% and its adjusted EBITDA was $7,700,000 or 6.7% of sales. In the Lawson-based business, the margin compression from the prior year was primarily due to sales mix of about 60 bps, higher employee-related health benefit costs of approximately 100 bps, and employee costs and timing of incentive accruals approximately 110 bps. As Brian mentioned, Lawson's most significant sales initiatives focus on new VMI installations and increased share of wallet, which are leading indicators of revenue growth. We are continuing to accelerate the adoption of our CRM platform to improve sales rep productivity and grow the core business, and are currently in the early stages of route optimization planning. We are also expanding our ecommerce platform. This is a cost-effective way to do business, and one third of our customers on the site are new. Although sales are still small on ecommerce, we experienced about an 18% revenue growth in the fourth quarter. Turning to Slide eight. Full year sales for the Canadian segment were $221,400,000 in USD, up $96,300,000 primarily due to the Source Atlantic acquisition included for a partial year in 2024. Fourth quarter sales for the Canadian segment in USD were $55,100,000, reflecting some seasonal softness. Market softness for projects in manufacturing end markets persisted, mostly in Eastern Canada; however, current backlogs have increased meaningfully. Full year adjusted EBITDA was $15,600,000, 7.1% of sales, while fourth quarter margins were 6.6%. Margins were compressed slightly due to items such as first-year Sarbanes-Oxley compliance work. The Bolt Supply standalone business drove sales by 7.8% in local currency and generated a 14% margin for the full year. We continue to make progress on planned synergies around gross margins and branch consolidations between Bolt and Source Atlantic. Turning to Gexpro Services on slide nine. Full year revenue was $496,700,000, representing organic average daily sales growth of 12.3% and total ADS growth of over 13%, driven primarily by end market strength in aerospace and defense, technology, and renewables for most of the year. Recall that we highlighted tougher sales comps in the fourth quarter, which declined 1% on an average daily sales basis, generating $119,400,000. Full year adjusted EBITDA was $63,700,000 or 12.8% of sales. For the quarter, margins pulled back to 11.7% from 13.3% a year ago, on a lower Q4 sales base, the sales mix on lower renewables, and some strategic employee investments. Value creation initiatives for Gexpro Services continue to include Distribution Solutions Group, Inc. cross-selling, acquisition synergies, and expanded VMI, kitting, manufacturing, and ecommerce offerings. Lastly, I'll turn to TestEquity Group on slide 10. Full year sales were $783,200,000 with average daily sales growth of 2%, driven primarily by Test & Measurement, Rentals, and our Chambers business. Organic average daily sales for the year were up 1%. Fourth quarter sales were $192,900,000 with average daily sales up 0.9% versus a year ago. TestEquity's adjusted EBITDA for the year was $51,000,000 with adjusted EBITDA margins of 6.5% versus 7.3% for all of 2024. Margins were pressured by a sales mix shift, higher bad debt expense, and higher employee-related expenses, including the build-out of a leadership team, and nonrecurring favorable items from a year ago. Fourth quarter EBITDA margins were similar to full-year margins at 6.4% of sales. The new leadership team has aligned priorities through performance management, incentives, and accountability. Moving to page 11. We ended the year with total available liquidity of $469,000,000, and for 2025, our free cash flow conversion—defined as adjusted EBITDA less working capital investment, less CapEx—was approximately 85%. In December 2025, we expanded our senior secured credit facility through 2030. The new facility includes $700,000,000 of term debt and a $400,000,000 revolving credit arrangement, an increase over the previous $255,000,000 revolver. This puts us in a strong liquidity position to best drive shareholder returns through our capital allocation playbook. We ended the year with unrestricted and restricted cash totaling $75,300,000 and net debt leverage of 3.5 times. We continue to prioritize growth initiatives that enable cross-channel and collaborative selling across our customer base, expand our digital capabilities across our platform, and drive growth through an asset-light model. We invested $26,800,000 in net CapEx, including rental equipment, and we plan to invest a similar amount of $25,000,000 to $30,000,000 in 2026. As we've highlighted in the past, we have invested nearly $450,000,000 in M&A by acquiring nine highly complementary businesses to expand our portfolio, leverage scale, and grow through product adjacency and services. We closely manage working capital across our businesses, and net working capital was $473,500,000. As we mentioned, Distribution Solutions Group, Inc. generated $84,000,000 of cash from operations for the year, similar to 2024 before retention payments, and a testament to management's close monitoring of our working capital. Our strong cash generation in 2025 positioned us to be more active in share repurchases. In November 2025, the board authorized an increase to our existing stock repurchase program for an additional $30,000,000 in shares of Distribution Solutions Group, Inc.'s common stock, taking the total aggregate authorization amount to $67,500,000. In 2025, we returned $23,500,000 to our shareholders through opportunistic share repurchases and have approximately $30,000,000 remaining in the authorized pool. I'll now turn the call back over to Brian. Brian King: Thank you, Ron. Despite external headwinds and periods of demand volatility in 2025, we have a clear line of sight on initiatives well underway to drive sales growth and structurally higher margins. We delivered total revenue growth of almost 10%, reaching just under $2,000,000,000, supported by mid-single digit organic growth despite the burden on profitability of macroeconomic and policy challenges and an ISM remaining below 50 for all of 2025, and our deliberate investments into the business in 2025. As we enter 2026, our focus is firmly on execution and demonstrating a return to improved profitability with our expected growth while balancing critical long-term value-unlocking investments. Our revenue growth strategy prioritizes high-margin businesses, strong and sustainable cash flow generation, disciplined capital allocation, and operational excellence. We are investing to be a company that is easy to work with and for, leveraging digital and AI-enabled capabilities to respond faster to customer needs, improve operational efficiency, strengthen sales rigor, and capture margin opportunities. These efforts are supported by an accelerating level of data-driven insights that guide and improve decision making and enable us to deliver our differentiated products and solutions, enhancing our customer experience. Operating across more than 50 countries, serving over 220,000 customers, and approximately 760,000 unique products requires agility and focus. We remain nimble, ready to pivot when needed, to sustain growth while focusing on delivering improved profitability. Our leadership teams are renewing our confidence to shareholders and our colleagues that we are driving and expect growth with enhanced profitability, and with a commitment to further tune capabilities and consistent service and culture that emphasizes from our field team around volume and revenue growth for both existing and new customers. I am confident in our enhanced leadership teams and our recent investments in them across all of our verticals and their ability to execute on their re-underwritten priorities and value creation initiatives as they enjoy line of sight on building structurally higher margin and more defensive and growing businesses, with a commitment to generate strong free cash flow and an aligned incentive structure around driving accelerating long-term value for our shareholders. Our teams remain highly aligned with the shareholders and each other, collaborating and competing together to continue to win more often. Each is accountable and appropriately incentivized to deliver results for our shareholders and for Distribution Solutions Group, Inc. and all of our colleagues. We will continue to evaluate acquisitions that strategically fit and enhance our long-term competitive position to win in our current focus areas and end markets, or that complement them, as well as opportunities that can accelerate our growth and profitability objectives to enhance and accelerate driving long-term shareholder value. In addition to strengthening leadership within our verticals, after a thorough evaluation on ways to improve and enhance our corporate strategy and M&A capabilities, we recruited Sean Dwyer to lead Distribution Solutions Group, Inc.'s efforts and dedicated team while working closely with the vertical leadership and our LKCM Headwater teams. Sean comes to us with a background in investment banking and experience leading similar efforts at large public companies. Through his public company roles, he has led over $30,000,000,000 in 36 transactions. It's great to have Sean on board to add structure, perspective, and to collaboratively lead this critical component of Distribution Solutions Group, Inc.'s growth strategy. As we look ahead in 2026, we're excited about the added capability, discipline, and prioritization we've invested in across all our verticals. While most of this comes at a cost, we are confident in these investments and in the improved performance returns the investments will deliver. The first couple of months of 2026 have seen sales growth. We expect the first quarter to remain under margin pressure as we continue to digest initiatives, and then we expect to see an improved margin expansion trajectory consistent with our longer-term objectives as we move into the middle of the year. I'm proud of the heavy lifting from our colleagues and what it accomplished in 2025. And as I reflect on where we are versus the much smaller and less evolved Distribution Solutions Group, Inc. that we pulled together four years ago, we remain focused on building a better Distribution Solutions Group, Inc., on its many commercial growth initiatives and ongoing process and structure optimization. We celebrate working together to build a more valuable enterprise—one that consistently generates cash flow and long-term shareholder value. Finally, I want to thank our employees for their dedication and hard work throughout the year. Your commitment and the strength of our culture have enabled meaningful progress across our strategic priorities. We will continue to push, test, and adapt as we improve long-term performance. I also want to thank Distribution Solutions Group, Inc.'s board, our shareholders, our shareholder partners, and the LKCM Headwater team as we continue advancing our specialty distribution model together. And with that, operator, will you please open the line for questions? Operator: Certainly. 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 phone at this time. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Your first question for today is from Thomas Allen Moll with Stephens. Thomas Allen Moll: Good morning, Brian. How are you? Thanks for the time. Brian, I want to start on the comment you just made regarding the sales pacing year to date. I think I heard you say sales are up year over year in January and February. So maybe just can you confirm that? And if you're able to give us the daily sales pacing and the number of selling days for the quarter, that'd be appreciated as well. Brian King: Yeah. We'll let Ron do it. He's got them in front of him. Ronald J. Knutson: Yep, Tommy. Good morning. This is Ron Knutson. Just to add some commentary around Brian's notes relative to the first couple of months of the year: we have seen growth—really, I would say, in the low single digits—if we look at January and February versus a year ago. ADS so far for the first couple months is kind of flattish versus Q4, but up against a year ago. We're seeing a little bit of pressure continue within our Canadian branch business that both Brian and I commented on in our prepared remarks, but the other three pieces of the business are seeing some growth here in the first couple of months. Relative to the second part of your question—number of days—on a quarter-over-quarter basis, it shifts a little bit just because of the weighting, and we've got Gexpro Services on a 4-4-5, but essentially it's relatively consistent. 2026 has 63 selling days versus 2025 having 63 as well. Brian King: And I’d just add—one of the things I was referencing when I said that was on the TestEquity vertical. We were seeing some backlog build there in orders and RFPs—momentum—and it's really around the Test & Measurement side, as we've seen some messaging from manufacturers about a little bit of accelerated activity in that space. January—quite transparently—I wasn't happy with the flow-through on profitability relative to how we budgeted or what I expected. As the fourth quarter came together and the first month of the year, we saw some revenue lift, but we still suffered some of the same challenges of adding expenses around leadership and otherwise in the first month. We're seeing improvement on that, we believe, in February and expect that again in March—the releveraging of our cost structure with the pickup in revenue. But there were changeover expenses and some one-times and things that created noise in the fourth quarter and in January. Thomas Allen Moll: Brian, you anticipated my follow-up, which was on margin. Going back to the numbers that Ron gave us in the prepared remarks, there were a series of one-timers in Q4; I just added up all those basis points, and it was about 150 basis points. So my starting point on bridging was I just took the 7.4% you reported in Q4 plus 150 bps, which gets you to 8.9% as an implied baseline to start to think about the first quarter. That would be up a little bit year over year, though. Based on what you just said, that makes me think perhaps that's a bit too aggressive of a baseline. Anything you can do to help? Brian King: That number would be consistent with how margins flowed through for the year last year. When I look at it, the first quarter's still going to have a little bit more margin degradation from our average last year. Whereas the second and third quarters, we would expect that the EBITDA margin will be back towards—above—what last year's average was. If that's helpful. Ronald J. Knutson: If I go back to 2025, we were sitting at about 9%. And, Tommy, we do get burdened with some other items that we didn't call out specifically—payroll taxes reset on us, which typically drags our margins a little bit going from Q4 into Q1. The other area I would point to is we do have some resetting of some incentive accruals, as you can imagine—lower dollars in '25 based upon performance—and we certainly budget to hit higher goals going into the next year. So we'll have to reestablish some of those accruals as we work throughout the year as well, and those typically get spread pretty evenly throughout the year until we start to reforecast to a greater degree later in the year. So we do have some offsets that'll probably push our way through here yet in the first quarter. Brian King: But I would say, Tommy, the exercise you did is the same one I did yesterday when I was preparing my remarks—adding up Ron's remarks and then double-checking it against where we were for the quarter so far. Directionally, you're right on. I think it's just going to be a little below—January's not indicating to me that we're going to get to the level you said. Thomas Allen Moll: Understood. Shifting to some more strategic questions on TestEquity: you have new leadership there, and you've talked before and again today about refining the customer value prop, go-to-market, centralizing some functions, etc. What can you share about the progress to date and what's ahead in 2026? Brian King: The pacing on the team and the depth of our leadership bench is just very different than it has been. Adding Barry was critical, but it was not just adding Barry—Barry brought with him an ensemble of other executives, and we were able to really keep so many of the people that had key institutional knowledge and that we had a lot of confidence around. We did double some of our leadership expense. The total burden at the top of that company is different than it was four or five months ago. But with that has come a high level of cadence and drill-down insight. After we made the Conres acquisition, we were able to get a lot more accountability around the efficiency in our rental and used business, our calibration strategy, and our Chambers business has been taking off, so we've been trying to build out our Chambers offering and portfolio and our inventory and stock. We've been working through a more cohesive strategy around the total Test & Measurement go-to-market value proposition to the customer—so it's not just isolated to margins on new product. On top of that, we have a lot of smaller value-added capabilities inside of the TestEquity Group—some which came with Hisco and some which we had acquired. By breaking them each apart and drilling accountability and ownership on each of those verticals, we're able to see very different contribution margins among different ones. Within our EPS business, we've got parts of it that are more commodity—volume-oriented—but our channel support to that can be similar to our more discrete specialty parts of the same EPS business. The flow-through margin on those looks quite a bit different. The team is reenergizing the Salesforce on how they're spending their time and how we're delivering our messaging in the market and to our employees, around where the levers are to pull a lot more attention and acceleration through the parts of the business that have very different structural contribution margins. That focus kind of started 100 days ago, but it's trickling down through the organization more recently. Our Chief Commercial Officer who's been important to the business we made President of Mexico for all of DSG, so we could bring our cadence together across all three of our verticals in Mexico, enabling more cross-sell wins and total revenue growth. That's the business he had built for Hisco. Then we added another Chief Commercial Officer at the senior executive level to really focus on these lines-of-business efforts. Barry's got a lot of confidence in all the specialty businesses that we have and how it all rolls together, and some of the profitability inside that business has been masked by areas that have been whipping around—where we've either had too high cost to serve relative to contribution margin, and not enough focus by our Salesforce on the much higher contribution margin opportunities. We're seeing that shift. Thomas Allen Moll: Appreciate the insight. Operator: Your next question for today is from KeyBanc. We'll go to Katie Fleischer for Ken Newman. Katie Fleischer: Hi, everyone. Was wondering if we could start on tariffs and if you're anticipating any material impacts from the recent news, and how you're thinking about price/cost as we go into 2026? Ronald J. Knutson: I'll start it off. I know we've talked about tariffs in the past relative to the value of the imports that we do and our ability to pass along the majority of those from a customer relationship standpoint. I think your question is more pointed towards the recent news. I would say it's probably too early to tell yet in terms of what direct impact that may or may not have on Distribution Solutions Group, Inc. Certainly, we're evaluating the situation, trying to stay current with it. At this point, we're moving the business forward assuming that a lot of these costs that have come through to us the last 12 to 18 months will probably continue to be out there until we get further direction on where this may end up. Brian King: Katie, we've got a consulting firm we're using across our portfolio companies at LKCM Headwater, and we have some businesses that have been much more significantly impacted than Distribution Solutions Group, Inc., but it's allowed us to be informed on ways and levers that we should pull and also how to navigate or engage on the recent SCOTUS ruling. We ended up leaving some dollars on the table last year, for sure, but our team did a great job managing both pricing as well as sourcing costs and where we source things across Distribution Solutions Group, Inc. Much of it was mitigated by the end of the year, but we did end up with a drag on earnings; much of it was mitigated as we look prospectively for this year by actions taken throughout last year. Now we've got to see whether there are additional moves we need to make or whether there will be additional shifting in where the tariff burdens are going to be—and whether that informs any of our sourcing or pricing decisions this year, or whether we're contesting or protesting that we believe we should get any refund. Right now, it's really early to know how that's going to work. Katie Fleischer: That's helpful. And then just revisiting Tommy's question a bit on trends year to date—any other color you're able to provide on the segments? And then maybe for Lawson specifically, how are you thinking about these mix impacts within that segment, and should those normalize as we move through the year? Brian King: I'll start with Gexpro Services. That one's pretty easy. Gexpro Services has several key end markets that are spooling up. The power generation space has gotten a lot of attention; it's a key area for that business and its history coming out of GE—so it'll enjoy some positive leverage there. The aerospace and defense vertical is very important to it; we know what's going on around the world, and we expect a firm year there with growth. The domestic renewables business—historically about two-thirds domestic, one-third international—the domestic business is down. We really started to see it tick down mid fourth quarter, and that trend is continuing. At the same time, countries like India—where we had ~$4,000,000 of revenue in renewables in 2024—are tracking toward ~$14,000,000 this year. We're backfilling with our capabilities, manufacturing/vendor partners, and renewable developers’ programs around the world. That is backfilling, but not entirely, and there are different contribution margin dynamics as you spool up new relationships versus mature engagements. As we're taking on more opportunities at Gexpro Services, there are launch costs associated with that. We believe that Gexpro Services' margins seen throughout last year are consistent with how we think that business will continue to operate—we don't expect significant deterioration in EBITDA margin there this year. On the TestEquity side, we're seeing strong interest in Test & Measurement equipment. Our EPS business continues to see some softness. A key area is tech manufacturing—it's been soft, saw some firmness last year, and it's the biggest part of TestEquity Group’s EPS business. The Chambers business is very strong. The rental and used market is getting more attention and focus for us; it has a lot higher contribution margin and was a source of strength last year—with renewed strength now—part focus, part acceleration in demand in T&M. Ron, on Lawson? Ronald J. Knutson: Relative to Lawson, we continue to see an increase in what we call ship-to or VMI installations, particularly in our larger locations within strategic relationships and within our Kent Automotive business. There’s a renewed focus on the core local business where, historically over the last couple of years, we've seen the most pressure. We've seen flattening out in ship-tos there, but as Brian mentioned, we had our sales leadership meeting in mid-February and there is a ton of focus being put on reallocating resources to grow that piece of the business. That core local business is about 45% of Lawson's total revenue. Overall, Lawson is seeing some increase moving through January and February. We’ve got great insight into a number of locations around specific customer wins, and with Jim coming on board in January, there’s renewed focus around making sure those sites get installed on a monthly basis. Katie Fleischer: Got it. That's it for me. Thanks. Sandra Martin: Thanks, Katie. Operator: Your next question for today is from Kevin Steinke with Barrington Research. Kevin Steinke: Great, thank you, and good morning. I wanted to follow up on the earlier margin discussion. I believe in a response to one of the earlier questions, you mentioned that you thought the second and third quarter adjusted EBITDA margin could be above the full year 2025 average of 8.9%. So you're thinking kind of a similar or better cadence for second and third quarters? Brian King: I think we believe it's going to relever up higher than that. If you look at last year, our second and third quarter EBITDA margins were above that 8.9%. We expect it will be consistent with that or above. Ronald J. Knutson: Where we're going to see the most pressure is really here in the first quarter. Then, as Brian noted, second and third would be an acceleration north of what we posted for the full year. Typically, for us, the second and third quarters are the strongest quarters. That uplift generally starts in March—a longer month in terms of selling days—so we get additional operating leverage there, and then Q2 and Q3 both have 64 selling days. Brian King: Looking back at last year, Q2 was 9.7%, and Q3 was 9.4%, versus the 9.0% in the first quarter and the 7.4% that we posted in the fourth quarter. That gives you some sense of how the quarters fit together. Kevin Steinke: Got it, that's helpful. I wanted to also follow up on Lawson. You mentioned continuing challenges in the small account side—maybe some loss of focus during the transition period. I know you've been experimenting with various things to serve the small account customer base—inside sales, service reps who do the unpacking, ecommerce. Are those still the areas you want to continue to work on, or is it more about getting the actual sales rep back more frequently? Any more thoughts on how you're approaching that? Brian King: You just walked through all of them, which is great. The shift of some tiny customers—too small to service with the cost to serve of having a rep—toward inside sales and ecommerce has helped. Our revenue there is not where we've really lost volumes. We may have lost some ship-to locations, but we've seen pretty good traction out of that total effort. Where we saw pressure was with the compression of our Salesforce two years ago as we were getting set for new Salesforce initiatives and technology tools. We saw some of our smaller core customers not get the level of service we'd expect. We had fewer salespeople, and as you might imagine, they covered bigger customers or strategic/national accounts first. That caused a natural trend of losing some ship-to locations with less volume and raised concern about whether our salespeople were spending as much time on the smaller street business that used to be a lot of their earnings. Our strategic/national account initiative grew from zero to being as large as our street business. Feeding our salespeople those national accounts may have created some behavioral challenges we didn’t fully appreciate until we got more insights out of the CRM. With better data analytics and feedback surveys, we heard a consistent market message from smaller accounts asking us to come back out and provide consistent service. Now we’ve got a very proactive initiative around it, and we're seeing a relift back in those base accounts—at least the ship-to number—after several years of significant declines in locations. You don't see it in the top line as much because you're picking up the strategic accounts. But at the profitability level, mix shift matters—premium pricing out of smaller accounts versus bigger accounts—and the flow-through contribution margin hit, combined with deliberate investments in the Salesforce, created deleveraging. There was a swing in profitability we felt more acutely in Q4. We knew there would be a J-curve as we reinvested in the Salesforce and got sellers back into territories that were open or consolidated. We're also investing in field support—service reps and focused new-account or reengagement sellers—to support FSRs so they have more time to get back in front of customers. For higher volume relationships, a service tech can efficiently scan bins, place orders, and handle restocking, freeing up the sales rep to develop accounts and drive wallet share. It's a cost center we've layered in, but we’re seeing strong early indications that it’s a model we want to continue to lean into. It allows our FSRs to make more money by increasing total revenue throughput and serves customers at a higher level. This dynamic has been a drag of several percentage points of growth a year in recent years—offset in part by national sales efforts. Military was another area with a real shift in buying behavior; we're working on reengaging given it’s historically been a strong end market for us. Ronald J. Knutson: Two quick additions. First, our strategic business is really sticky—great customer relationships servicing multisite locations—so it drives solid, sticky gross margin dollars. We love that part of the business and continue to expand it and invest to win new accounts. Second, within core local customers, ship-tos over the last year or so have been flattish—most of the decrease took place prior to the beginning of 2025. Now, with core local at about 45% of revenue, it’s a renewed focus on getting that base growing again—changes in incentives, focus, and a lot of emphasis at the recent sales leadership meeting on where that business historically had been, where we sit today, and where we need to take it. Kevin Steinke: Great, thank you for all the color. Lastly, on the M&A pipeline—given your strong liquidity and the extension and expansion of your credit facility, looks like you'd be set up to explore and maybe execute on some opportunities. Brian King: We highlighted that Sean joined us maybe 100 days ago or less—a critical addition. We've spent the better part of the last year to year and a half evaluating our business development/M&A and corporate strategy function. Sean has significantly increased the funnel in just 100 days and has strong buy-in from the vertical leaders and our team about where we want to spend our time and effort. We had a few things last year that were high priorities we hoped to get done that didn't get done—none are off the table, but we just weren't able to get them over the goal line. Right now, we’re focused on some smaller tuck-in acquisitions that significantly bolster areas of strength or focus in a few verticals. We would expect some small tuck-ins over the first half of this year. The three we’ve prioritized would add significantly to the margin construct of those verticals, though they are small tuck-ins. Kevin Steinke: Got it. Understood. Thanks again for all the insight. Brian King: Thanks, Kevin. Operator: We have reached the end of the question and answer session, and I will now turn the call over to Brian King for closing remarks. Brian King: Appreciate everybody's engagement and your time this morning. We look forward to stronger quarters in the future, and I appreciate everybody continuing to be supportive and engaged with us. Have a great next several months. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Welcome to CPI Card Group Inc.'s Fourth Quarter 2025 Earnings Call. My name is Kate, and I will be your operator today. If you are viewing on the webcast, you may advance the slides forward by pressing the arrow buttons. The call will be open for questions after the company's remarks. If you would like to get in the queue for questions, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Now I would like to turn the call over to Michael A. Salop. Michael A. Salop: Thanks, operator. Welcome to CPI Card Group Inc.'s fourth quarter 2025 earnings webcast and conference call. Today's date is March 5, 2026, and on the call today from CPI Card Group Inc. are John D. Lowe, President and Chief Executive Officer, and Tara Grantham, Interim Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see CPI Card Group Inc.'s most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only; we undertake no obligation to update any statement to reflect the events that occurred after this call. Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures, including, but not limited to, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net leverage ratio, free cash flow, and net sales growth excluding the impact of the accounting change implemented in the second quarter. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation we issued this morning. Copies of today's press release as well as the presentation that accompanies this conference call are accessible on CPI Card Group Inc.'s investor relations website investors.cpicardgroup.com. In addition, CPI Card Group Inc.'s 2025 Form 10-K will be available on CPI Card Group Inc.'s investor relations website. On today's call, all growth rates refer to comparisons with the prior-year period unless otherwise noted. The agenda for today's call can be found on slide three. We will open the call for questions after our remarks. I will now turn the call over to John D. Lowe. John D. Lowe: Thanks, Mike, and good morning, everyone. We are very pleased to report strong fourth quarter performance and solid results for 2025, a year which featured significant strategic, operational, and technological advancements. As we discussed throughout the year, we anticipated our business to accelerate in the fourth quarter, and we successfully executed to deliver that growth with a record quarter, growing revenue 22%. In addition to the contribution from AeroEye, this performance exceeded our expectations. We delivered strong growth across our debit and credit portfolio in the fourth quarter, driven by sales of contactless cards and ongoing double-digit growth from our software-as-a-service-based instant issuance solution. Revenue growth and the resulting operating leverage contributed to a 34% increase in adjusted EBITDA in the quarter and a 170 basis point increase in margins, and we generated exceptional cash flow. For the full year, we delivered 13% revenue growth and 5% adjusted EBITDA growth despite more than $4,000,000 of tariff expenses. We generated $60,000,000 of cash from operating activities and $41,000,000 of free cash flow, both large increases over 2024, allowing us to maintain net leverage around three times at year end. Overall, I am proud of our team's execution, which resulted in a solid end to 2025 and significant advances with our strategic initiatives. Now before I cover some of our significant accomplishments in 2025, I would like to take you to slide five covering how CPI Card Group Inc. is continuing to evolve with the market and the successes we are having executing on that strategic evolution. After being CEO for two years, and after nearly eight years here at CPI Card Group Inc., I have recognized we are a company that is constantly adapting with our markets, evolving with technology, and finding new solutions for our customers in whatever forms they need. Historically, the company has been and remains a leading producer of debit and credit cards for the U.S. market, and chances are we are in your wallet. However, while debit and credit card production and personalization are solutions we focus on advancing every day, they do not define CPI Card Group Inc. or the key role that we play in the U.S. payments market. We are broader than that, with deep value in what we have built over many years and continue to build. We are a connector, an innovator, a company that educates our customers on the next big thing and how their customers can pay, and more importantly, how they can stay top of wallet both physically and digitally. At our core, our solutions help our customers win, allowing them to enable their customers to pay whether in the form of a physical debit, credit, or prepaid card; a digital mobile wallet; a digital card; a service that provides cloud-based instant issuance; or other evolving digital alternatives. To summarize, CPI Card Group Inc. has evolved into a payment technology company that provides a comprehensive range of physical and digital payment solutions for thousands of U.S. financial institutions, processors, fintechs, prepaid program managers, and more. Our proprietary platform and expertise uniquely position us to deliver today and into the future as the market expands and payment methods evolve. Our strategy is to continue providing payment technology solutions that help our customers win, driven by three primary growth pillars that underpin our value proposition. First, a proprietary technology platform with a vast reach into the U.S. payments ecosystem. Second, our marketable base of thousands of deep and broad relationships across the U.S. payments market. And third, our proven track record of delivering evolving payment solutions that reflect changing market needs. Let me spend a few minutes discussing each of these pillars. Starting with our proprietary technology platform and a vast reach into the U.S. payments ecosystem, our capabilities make it simple for any customer to offer flexible payment solutions to their customers. Over more than fifteen years, CPI Card Group Inc. has built a vast network of technology integrations and connections. In simple terms, we call these connections into the payments ecosystem pipes so an issuer's payment programs can be agnostic to any service provider, maintaining their sticky, long-term relationship with CPI Card Group Inc. while offering their customers, U.S. consumers and businesses, the payment options they want. Our connections are broad and include thousands of financial institutions, fintechs, credit union service organizations, program managers, processors, core banking systems, payment brands, mobile providers, and mobile app development companies, among others. We prove this every day when we see our customers change their processor or banking core, where we simply move the pipes to maintain our relationships. CPI Card Group Inc. enables payments and informs the market on what is next. Today, it is debit, credit, and prepaid accounts accessed via cards, mobile wallets, and apps. While probably many years away, we may see other forms for consumers to pay gain broader market acceptance, such as crypto and biometrics. CPI Card Group Inc.'s platform expands with our customers' growth and their ambitions to meet market needs. Our second pillar is our marketable base. As CPI Card Group Inc. has evolved, our long-standing deep and broad relationships continue to grow. Through a robust network of thousands of customers, partners, and service providers, CPI Card Group Inc. solutions reach deep into the U.S. consumer base. As the market shifts to add new payment methods, the fundamental need to securely deliver payment credentials does not change. That is where CPI Card Group Inc. shines with our reach. As consumer needs evolve beyond the physical and complementary digital issuance and usage grows, issuers count on CPI Card Group Inc. to enable innovative solutions to meet those needs. We have kept their trust by always delivering. That trust, built over decades, is why our customers count on CPI Card Group Inc. for their ongoing payments innovation. They know we will execute. And if you are developing an innovative service that adds value for issuers, CPI Card Group Inc. can connect you to our broad marketable base, further solidifying our value. Our final pillar is our evolving payment solutions. By leveraging our proprietary technology platform and our marketable base, CPI Card Group Inc. has a proven track record of delivering evolving payment solutions that reflect changing market needs. Through significant investments in digital solutions, we are increasing CPI Card Group Inc.'s value to customers, driving new and incremental recurring revenue streams, and expanding access to CPI Card Group Inc.'s platform to enable future digital capabilities. So why are we doing this? According to a prominent study, digital issuance was the number one new capability debit issuers planned to introduce in 2024 and remained the most cited priority for 2025, and we hear the same directly from many of our customers. Additionally, we expect digital issuance to not only be incremental, but to outnumber physical cards as penetration grows. That will be positive for CPI Card Group Inc.; we would expect digital to have greater economics than physical. Let me give you one example to demonstrate what all this means, and that is our software-as-a-service-based instant issuance business. The value of instant issuance is not rooted in delivering a payment card. It is about enabling issuers to instantly provide account access to their customers through a cloud-based service that is plug-and-play for a financial institution. We spent over a decade building the pipes to deliver the service to virtually any financial institution in the U.S. We integrated with and connected to all the major players in the financial ecosystem, resulting in CPI Card Group Inc. being able to offer the service to nearly any issuer regardless of what processor, core banking system, or other relationship they operate through. With instant issuance, we leveraged our proprietary technology platform, provided a service to our marketable base, and evolved our solutions to provide a plug-and-play cloud-based service meeting the needs of the market. In this case, the solutions enable account access leveraging a payment card, but we have been evolving to use these pillars to provide access to mobile wallets and other forms as well, which indicates where we see our solutions going in the future. To summarize our evolving strategy, our decades-long-in-the-making connections, people, and solutions enable payments both physically and digitally for a broad and expanding customer base, and these customers count on us to deliver what is next. CPI Card Group Inc. will continue to evolve with the market, delivering market evolution to our customers while creating more value for our shareholders along the way. Let me take you to slide six for how we will execute and share our progress. To advance our strategy and drive long-term growth, we recently announced a new organizational structure, promoting several leaders to new roles, heightening the focus on our customers, our operations, and our digital capabilities. Along with the structure change, we are also reorganizing our reporting segments. Driven by the success of our software-as-a-service-based instant issuance and other digital solutions, and to better reflect how we manage CPI Card Group Inc. today, this change will provide more visibility on our technology-driven solutions, as well as highlight the growth and diversification of our business. Our new reporting structure includes three segments: Secure Card Solutions, Prepaid Solutions, and Integrated PayTech. Secure Card Solutions represents our business as a leading debit and credit payment card and personalization provider in the U.S. market, and we estimate we produce about one out of every four cards in the U.S. We believe we have gained significant market share over the years, and we will continue to push to gain more share in growing markets through innovation, quality, and customer service. Prepaid Solutions consist of our market-leading open-loop prepaid card and secure packaging solutions as well as our growing prepaid healthcare payment solutions. We intend to grow our value in the prepaid market by creating innovative packaging for our open-loop market, expanding into the larger closed-loop market, and providing fraud-preventing chip-based solutions to the broader prepaid market, which we believe should further expand its value. Integrated PayTech, our newest segment, which was formerly a part of our debit and credit segment, has reached the success level where it now represents more than 20% of CPI Card Group Inc.'s profitability. We need Integrated PayTech to reflect its value, the profit of integration CPI Card Group Inc. has built over the last decade into the U.S. payments ecosystem, enabling it to provide ever-evolving payment technology to our customers. This segment represents an incremental addressable market opportunity additive to physical payment cards. When we help our customers stay top of wallet digitally, we are not only creating greater value for our customers, we are adding incremental growth per customer for CPI Card Group Inc., and we expect those who adopt digital usage to do so in greater number than they do with physical cards, using that same credential across multiple mediums, such as a mobile phone, watch, tablet, or laptop. As we continue to grow our pipes into the U.S. payment ecosystem, our addressable market for these solutions continues to grow. For a bit more context on Integrated PayTech's profile, it has roughly 55% gross margins, approximately 40% EBITDA margins, and a 95% plus customer retention rate, and an expected growth rate of over 15% in the coming years, as we intend to invest to accelerate our digital solutions growth faster than we did with our instant issuance solutions. Now let us turn back to the 2025 results. I would like to highlight some key accomplishments on slide seven. In Secure Card Solutions, we acquired ArrowEye and made significant integration progress, paving the way for future revenue and cost synergies while driving strong results during the process. ArrowEye contributed $43,000,000 of revenue and more than $6,000,000 of adjusted EBITDA in less than eight months in 2025, implying approximately $9,000,000 of adjusted EBITDA on an annualized basis even before most of our expected synergies have been realized. Post-acquisition, ArrowEye has signed more than a dozen new customers, showing the value proposition they have in the market when combined with CPI Card Group Inc.'s packaging. We also completed the build-out and transition to our new state-of-the-art Secure Card production facility in Indiana, which will provide operational efficiencies, increased capacity, and additional capabilities. And we invested in automation in our Colorado facility, which we believe will drive even more efficiencies. We believe these investments have already helped us gain share in 2025, including being a key driver to winning another four years with Valera. Valera is one of our larger, long-standing secure payment card customers and the premier payments credit union service organization in the U.S., servicing 4,000 financial institutions. We made significant improvements to our personalization operations, which allow us to continue to increase capacity and maintain high quality all while driving greater efficiency as we grow. We believe these advancements were a key contributor to winning one of the largest credit unions in Texas in 2025. And we expanded our metal card offerings, providing market-competitive options to our marketable base. This expansion, while still small relative to the overall market position, contributed to our strong contactless card growth during the year with nearly $15,000,000 in metal sales in 2025. In Prepaid Solutions, we developed production and operational capabilities to enter the closed-loop prepaid market, which we believe has volumes greater than five times the open-loop market and will increase in value as fraud prevention features are further adopted. We had a successful start in the fourth quarter and have already signed multiple deals since launch, including with a leading provider TDS Gift Cards, who services many blue-chip customers in the U.S., such as Uber, DoorDash, and others. Our reputation for quality, innovation, and execution in the open-loop market is proven, and we are leveraging these attributes to drive our closed-loop expansion. While our prepaid business was down in 2025, we see strong signs of the transition starting to occur in the prepaid market. Fraud continues to drive either higher-value packaging or greater use of chip-embedded gift cards, both of which would result in a unique market position for CPI Card Group Inc., as we are the only U.S. company that is a leader in both categories. And in our new Integrated PayTech segment, we grew revenue nearly 20% as we continue to increase our instant issuance penetration and further built out integrations and customer pipelines for our evolving proprietary technology platform, including to expand the addressable market for push provisioning for mobile wallets. We expect to continue to see great things out of this segment, including strong growth and high margins, leveraging our market-leading value proposition. One driver of our expected growth is our recently signed deal with a large U.S. processor and global leader in payments and financial technology, where we have gained preferential access to more than 450 financial institutions and 3,500 banking locations, representing an opportunity to grow our software-as-a-service-based instant issuance solution footprint by 25% over the coming years. We also invested in an Australian fintech and program manager, Carta, to introduce into the U.S. chip-embedded prepaid cards which enhance security and provide a user-friendly physical-to-digital experience. Our ownership in Carta after our investment is 20% with the option to purchase an additional 31%. As we have worked with the Carta team, we continue to be impressed by their growth as a program manager in Australia, a large opportunity to grow their digital card validation solution, branded as Safe to Buy, in the U.S. prepaid market, and their potential value as a program manager in the U.S. Our agreement with Carta also makes us their exclusive U.S. supplier of their Safe to Buy solution, providing contactless prepaid cards with chip technology embedding Carta's Safe to Buy applet. Carta's solution eliminates the need for data to be printed on cards, significantly reducing the risk of prepaid fraud. And as a reminder, prepaid gift cards in the U.S. rarely are embedded with chip technology. So between Carta's technology to reduce fraud and CPI Card Group Inc.'s prepaid and chip solutions, we were a perfect fit to drive meaningful and positive change in the prepaid market. We are currently in the second stages of a pilot for this solution with a large national retailer across hundreds of locations in the U.S., and we are seeing encouraging results. Overall, we are proud of what our teams delivered in 2025, and we look forward to continuing to advance these initiatives and their benefits over the next several years. In 2026, we expect to deliver good growth again, and Tara Grantham, our new Interim CFO, will give you more color on our outlook in a few minutes. Tara brings a wealth of CPI Card Group Inc. and industry knowledge and experience to this role, including most recently leading CPI Card Group Inc.'s enterprise growth and strategy area, and previous leadership of our financial planning and analysis and treasury teams, among others. She has been with the company for nearly ten years, and I want to congratulate Tara for being promoted into this new role, and I am happy to have her join us for the call today. Tara will now take us through the fourth quarter results and 2026 outlook in more detail. Tara Grantham: I am pleased to be here and look forward to meeting many of you in the coming months. I will begin the detailed review on slide nine with the fourth quarter results. Fourth quarter revenue increased 22% to a record $153,000,000, which reflects a strong $18,000,000 contribution from ArrowEye as well as double-digit organic growth from our debit and credit portfolio. Debit and Credit segment revenue increased 40% including the impact of ArrowEye. Organic growth for this segment was 20%, driven by strong sales of contactless cards and continued excellent performance from our instant issuance solutions. Our personalization services also delivered a solid sales increase in the quarter. Prepaid revenue declined 27% compared to the exceptionally high prior-year fourth quarter, when sales increased 59% to $33,000,000, but revenue increased 4% compared to the third quarter. As we said at the beginning of the year, we expected prepaid growth to be constrained due to comparisons with the very strong year in 2024, and we ended the year down 3% when adjusting for the impact of the revenue recognition accounting change in the second quarter. And as John said, the prepaid market is transitioning, but we expect that to be a positive for CPI Card Group Inc. We began closed-loop prepaid shipments in 2025, and we expect this business to ramp significantly in 2026. Turning to profitability, fourth quarter gross profit margin declined from 34.1% to 31.5%, although it increased from 29.7% in the third quarter. Compared to prior year, the margin decline was driven by increased production costs including increased depreciation and tariffs, and unfavorable sales mix, partially offset by benefits from operating leverage on sales growth. Mix trends stabilized, though, and were comparable to the third quarter. Production costs in the quarter compared to prior year included $2,000,000 of increased depreciation primarily related to ArrowEye and a new Secure Card production facility and $1,600,000 of tariff expenses. Fourth quarter SG&A expenses increased $3,300,000 from the prior year primarily due to ArrowEye integration costs of $1,800,000 and the inclusion of ArrowEye operating expenses, partially offset by reduced medical benefit expenses compared to a high level in prior year. Our tax rate for the quarter was 27%, which brought our full-year rate to 31%, higher than anticipated coming into the year due primarily to nondeductible expenses related to the ArrowEye acquisition. Net income increased 9% in the quarter to $7,400,000 as the benefit of sales growth was offset by integration costs related to ArrowEye and a higher tax rate. Fourth quarter adjusted EBITDA increased 34% to $29,400,000, and margins increased by 170 basis points from 17.5% to 19.2% driven by sales growth and the resulting operating leverage. Full-year results and variance explanations can be found on slide 10. Highlights for the year include revenue increasing 13%, led by double-digit growth from contactless cards and instant issuance solutions and a $43,000,000 contribution from ArrowEye following the May 6 acquisition. We believe ArrowEye is already benefiting from being part of CPI Card Group Inc., driving strong execution and increasing its ability to sell into the market. Net income decreased 23% to $15,000,000, reflecting $6,000,000 acquisition and integration costs and a higher tax rate, partially offset by lower debt retirement costs compared to prior year. Adjusted EBITDA increased 5% to $96,500,000 as profitability from increased revenue was partially offset by the impact of unfavorable sales mix and $4,400,000 of tariff expenses. Turning to slide 11, we had very strong cash flow generation in the fourth quarter and for the full year. Our cash flow generated from operating activities for the year increased from $43,300,000 last year to $59,500,000 in 2025, with $40,000,000 generated in the fourth quarter. The increase in operating cash flow was driven by lower working capital usage, including better receivables and inventory management, and cash tax benefits from the U.S. Budget Reconciliation Bill. Full-year free cash flow increased from $34,000,000 in prior year to $41,000,000 in 2025, driven by lower working capital usage, partially offset by increased capital spending. We spent $18,000,000 on CapEx in 2025, double the prior-year level, as we invested heavily in our new Indiana production facility and other advanced machinery to support operating efficiency, capacity expansion, and new capabilities such as closed-loop prepaid. On the balance sheet, at quarter end, we had $22,000,000 of cash, $25,000,000 of borrowings on our ABL revolver, and $265,000,000 of senior notes outstanding. Our net leverage ratio at year end was 3.1 times as cash flow generation mostly offset the funding of the ArrowEye acquisition in May. During the course of 2025, significant capital allocation included the acquisition of ArrowEye for $46,000,000, an investment in Australian prepaid fintech Carta, and completion of the new production facility in Indiana, as well as retirement of $20,000,000 principal of our 10% senior notes in July. Before turning to our 2026 outlook, I would like to share the new business segment reporting John mentioned we are implementing this year on slide 12. Beginning with the first quarter reporting, our business segments will include Secure Card Solutions, Prepaid Solutions, and Integrated PayTech. Secure Card Solutions includes our debit and credit card production and personalization businesses, including our ArrowEye on-demand solutions. This business should provide steady growth over time driven by ongoing cards-in-circulation growth and share gains from our leading innovation, quality, and service. As noted in our appendix slide, cards-in-circulation in the U.S. continue to increase, with the latest U.S. cards-in-circulation trends from Visa and Mastercard showing a 7.5% compounded annual growth rate for the three years ended September 30. Prepaid Solutions, which has not changed from our prior prepaid segment, includes our open-loop gift cards and secure packaging, healthcare payment solutions, and closed-loop. We expect open-loop growth to be driven by continued innovation in fraud prevention packaging and the introduction of chip cards into the prepaid market, and overall segment growth to benefit from expansion of healthcare and development of our closed-loop solutions. Our third business unit is Integrated PayTech. As John said, as our success has grown, we are now breaking this out as our fastest-growing, highest-margin unit consisting of strong recurring revenue businesses that rely on our vast and expanding technology connections into the U.S. payment ecosystem to provide various payment solutions to our customers. The majority of our revenue in this segment today is driven by our software-as-a-service-based instant issuance solution, but we expect to ramp digital push provisioning for mobile wallets and other digital solutions in the coming years. On a pro forma basis, this segment would have represented 14% of our 2025 revenue and more than 20% of our EBITDA at an 18% growth rate with EBITDA margins of approximately 40%. Over the next few years, we expect more than 15% annual top-line growth from the Integrated PayTech business segment, while the EBITDA growth will be impacted by investments to accelerate our top-line growth. Turning to our 2026 financial outlook on slide 13, we expect another good growth year while continuing to invest heavily toward our strategic initiatives. We are currently projecting high single-digit revenue growth with growth across our portfolio, led by expected double-digit growth from our Integrated PayTech segment. Our adjusted EBITDA outlook for the year is low- to mid-single-digit growth, which reflects benefits from sales growth and cost savings activities, partially offset primarily by approximately $4,000,000 in incremental spending to drive Integrated PayTech growth and penetration and other technology investments. Our outlook reflects $6,000,000 of tariff expenses, similar to our instant issuance trajectory, which took years of investment before scaling and turning into a high-margin, recurring revenue business. We are still in the investment phase with many of our digital solutions, which is impacting our overall near-term profitability. While some level of PayTech investments will continue into future years, we expect our digital solutions profitability to expand greatly once revenue begins to ramp and scale in the next two to three years. Regarding tariffs, there is still uncertainty on how the newly announced tariffs will be applied and what permanent tariffs may be enacted later in the year. At this point, our outlook reflects estimates based on a full year of the tariffs we paid in 2025. We are working hard and pursuing various avenues to seek refunds for tariffs paid in 2025 based on the recent Supreme Court ruling. We expect a tax rate between 30%–35% in 2026 and strong cash flow conversion, with capital spending likely similar to 2025 levels as reductions in spending on physical capital are replaced by increased technology capital spending. We would also expect free cash flow conversion at similar levels to 2025 and continued improvement in our net leverage ratio, ending the year between 2.5 and 3 times. As we complete integration of ArrowEye in 2026, we are projecting approximately $5,000,000 to $7,000,000 of final integration costs. Similar to 2025, we expect revenue and EBITDA levels to ramp during the year, with the fourth quarter again being the largest, although revenue growth rates will benefit early in the year from the addition of ArrowEye. However, we expect adjusted EBITDA in the first half of the year to be flat to down slightly with prior year due to digital and technology investments and a slow start of the year in prepaid. Overall, we believe the environment is healthy, and our momentum is strong, and we look forward to delivering a good year in 2026 while continuing to invest and advance various key strategic initiatives for long-term growth. I will now turn the call back to John for some closing remarks. John D. Lowe: Thanks, Tara. Turning to slide 14 to summarize before we open the call for Q&A, we had an exceptional fourth quarter with revenue growth acceleration, strong adjusted EBITDA growth and margins, and excellent cash flow generation. For the full year, we achieved solid revenue and adjusted EBITDA growth and generated over $40,000,000 free cash flow. We accomplished many strategic and operational objectives, including the ArrowEye acquisition and investment in Carta, the completion of our new Secure Card production facility, entry into the closed-loop prepaid market, and the ongoing build-out for our other digital solutions. We are excited about our new organizational structure to drive our strategy and the long-term opportunities to enhance incremental growth. We intend to continue leveraging our expanding proprietary technology platform, our extensive marketable base, and our evolving portfolio of payment solutions to meet the market needs, drive growth, and enable our customers to win. We are confident in our strategies and teams, and we expect to deliver another good year in 2026. Operator, we will now open the call up for any questions. Operator: We will now open the call for your questions. If you would like to ask a question, press star then the number 1 on your telephone keypad. Your first question comes from the line of Jacob Stephan with Lake Street Capital Markets. Your line is open. Jacob Stephan: Hey, guys. Good morning. Congrats on the results. Welcome, Tara. Maybe just to touch on something that you kind of talked on, the closed-loop market being five times larger, so pretty significant opportunity for you guys. How are these sales cycles any different from, you know, potentially other prepaid deals? And, you know, do you have to change anything internally to kind of capture this market? John D. Lowe: Yeah, Jacob, good morning. So it is interesting. The closed-loop market, you are right, five times larger in volume, probably slightly higher than that. The value of closed-loop we expect to continue to grow and become even greater as we expect packaging to become more pervasive, if you will, across the United States mainly due to regulatory changes and fraud. From the sales cycle perspective, we actually have a slightly accelerated sales cycle versus our normal, just our broader portfolio in general. And that is because, you know, on the open-loop side, we have been working for most all the program managers that are out there. With the addition of ArrowEye, now we work for all of the major program managers. So we have relationships with, I would say, more than half the market that is already selling into the closed-loop space. So as we build out our capabilities, we have the proven ability to execute and deliver, and so that has given us the right, if you will, to move into the closed-loop market fairly quickly, winning some deals, locking down contracts, and really building out the whole operation in late last year. And, ultimately, we believe we are going to have a decent growth out of that in 2026. Jacob Stephan: Okay. Got it. Helpful. Maybe just to kind of put a cap on that. So can you kind of help us think through the recent announcement with the TDS, and, you know, how the closed-loop opportunity kind of plays into the high single-digit growth guidance for 2026? I know you guys kind of talked about that being an important driver this year. John D. Lowe: Yeah. Yeah. No. And, Jacob, good question. There are a lot of moving parts in our business. We have diversified quite a bit over the years. You know, the prepaid market in general is—it is kind of odd because it is actually a little bit choppy right now, but that is positive for us. And the reason I say that is because if you look at the broader prepaid market, fraud has been prevalent for a number of years. It has been a bit of a cat-and-mouse game. That has caused, on the open-loop side where we are the market leader by far, that has caused significant kind of improvement in fraud-preventive packaging, if you will, that, you know, we are constantly trying to innovate with our customers to stay ahead of the, you know, I would say, the criminal activity from a fraud perspective. But because of that, you are also starting to see on the closed-loop side the same thing happen. Right? You are starting to see states' regulations that say the closed-loop gift card has to be in a package or has to have a chip in it. And you are starting to see, as an example, the open-loop side, just like, you know, our investment in Carta, where we own 20%, have a call option to grow to 51%. We are using their unique technology with one of our larger customers on the prepaid side and ultimately one of the larger national retailers in the United States to go through a second stage of pilot where we are putting chips in prepaid cards to reduce fraud, and those results have been very strong. That said, it creates kind of this environment in the prepaid market where the program managers, the distributors, others, the merchandisers are trying to understand, okay, do we move towards greater packaging? Do we move towards putting chips in prepaid cards more broadly? It is more expensive. But, ultimately, you know, if you think about CPI Card Group Inc. and what we do, right, we are by far the leader in open-loop packaging. We have the scale that no one else in the market has. We are also one of the leaders in the United States from a chip-embedding perspective in the debit and credit market. So we are the only player in the U.S. market that has strong capabilities on both sides. And so while the prepaid market is choppy this year, and actually, you know, we are starting the year slow, and we would expect that to ramp up over the course of the year but still have a fairly flat year to slow-growth year, ultimately, over the long term, it is going to be really positive for us given how we are positioned in the market. So I know a lot to take in there, but hopefully that helps. Jacob Stephan: Yeah. And you kind of touched on my last question. Obviously, fraud has been a pretty important theme over the last, you know, year, year and a half. As we kind of look out to 2026 and maybe even beyond, you know, is there potentially another sort of, like, recurring revenue-type business that you would be interested in, you know, potentially acquiring with, you know, AI kind of boosting fraud rates? And I am wondering if there is any sort of additional software solution that can help on the fraud prevention side that you guys might be interested in? John D. Lowe: Well, we do already resell one major fraud solution that uses AI in their modeling, if you will, in their machine learning, to prevent fraud on the debit and credit side. That is something that—they are a fairly large player in the debit and credit market—connected into a lot of the processors to kind of—it builds off our proprietary technology platform and our ability to provide those types of services to our financial institution base broadly. But fraud is a market that is constantly changing, and so from an acquisition perspective, it would have to be a software that is proven and has an ability to constantly pivot on the fly. So right now, our strategy on fraud is really to help from kind of the production perspective as well as producing technology from what Carta produces to be able to prevent fraud on the prepaid side where we believe there is probably a lot more value, and ultimately, on the debit and credit side, provide solutions from a more commercial perspective. But if you think about on the prepaid side of our business, what Carta does—they are taking data off the prepaid card and ultimately using their solution to not only reduce fraud just by the fact that you cannot steal the data off the card, but their solution also loads the prepaid gift card onto your mobile wallet and is a digital issuance platform as well. So there are kind of multiple value propositions on the Carta side. But from a fraud side, it is constantly changing, so it has to be someone who has really unique technology to look at them from an M&A perspective. Jacob Stephan: Okay. Got it. I appreciate it, guys. Thanks. Operator: Your next question comes from the line of Craig Irwin with ROTH Capital Partners. Craig Irwin: So, John, when I look at my wallet, I am seeing new cards from Chase, Wells Fargo, and Fidelity, provided by CPI Card Group Inc. These are large issuers. Now I am not asking you to comment about any of these specific large issuers, but I am sure there are probably others. Can you maybe just give us a high-level commentary on, you know, these customers that I do not think you did a lot of business with over the last several years? Are you seeing an increased capture rate with large issuers? You know, what was the contribution, if you could give us color, on the 40% growth there in debit and credit from large issuers? John D. Lowe: Yeah. Craig, thanks for the callout. We will be happy to have you on our marketing team anytime you want to join. But, no, in all seriousness, the largest—we are based—I mean, we have said this over time. We work with about half of them. You know, you mentioned a couple different names there. One of those we are actually doing metal with as part of our metal growth. I will not name names, but—so very positive in terms of our relationships we have with the large issuers. We have been growing share over the last, I would say, five years with the larger issuers. But I would not comment specifically on their growth rates in Q4 or 2025. What I would say is just broadly the larger players in general. So go beyond the large issuers that are the names you are thinking of. Think of the credit union service organizations. We mentioned Valera this morning, that we signed another four-year deal with. Think of the large processors out there. There are a number of partners that we have that are fairly large that we also have been growing share with. And so we are excited about our position in the debit and credit market. Our Secure Card Solutions side, between our card production, our personalization business, the acquisition of ArrowEye, really gives us a unique value proposition and allows us to continue to execute on our strategy and win share not only in the large issuer market but in the broader FI, fintech, and other markets. Craig Irwin: Thank you for that. My second question is about headcount. Right? When I looked at your K, I saw you now have about 1,700 employees beginning 2026. It is up about 13% or a little over 13% consistent with your revenue growth last year. Now that does not kind of point to leveraging the model. And I know there are a bunch of initiatives you were staffing up, particularly on the technology side and some of these things with, you know, incredible long-term potential. Can you maybe flesh out for us, you know, where you would likely be hiring in 2026? And, you know, would you expect mid- to high single-digit growth consistent with revenue, or do we potentially see a more tempered rate of hiring? John D. Lowe: So a lot of our hiring last year, when you just look at a headcount perspective, was through the acquisition of ArrowEye. Right? I mean, they have—I do not know the exact number, I think it is 250 people roughly in Las Vegas. So fairly decent-sized business there. So you have to kind of take that into account, Craig. But if you went out and looked at who we are hiring and who we have hired over time, it has been predominantly in the go-to-market side to try to, you know, push our solutions further into the market, expand our go-to-market efforts, as well as on the technology side within our Integrated PayTech segment. So those are probably the two areas where we will continue to invest in, and we continue to invest broadly in the business as we grow. But I think if you stripped out ArrowEye, you would realize we are definitely growing in the number of people that we have, but I would not say we are not getting leverage out of the model, and you saw that in Q4 from our growth in Q4 and what we pushed to the bottom line. Craig Irwin: No, that—an excellent quarter, the fourth quarter. Congratulations. Thanks for taking my questions. I will hop back in the queue. Operator: Your next question comes from the line of Hal Goetsch with B. Riley Securities. Hal Goetsch: Hey. Questions on CapEx. CapEx was up, you know, from $8,000,000 to in the high teens. You said it is going to be similar to that in 2026. Is this a number we should expect going forward, or is this a number that might come back down after, you know, a two- or two-year investment period. John D. Lowe: Yeah. That is a good question, Hal. I would say it probably will come down in the outer years. It has grown, you know, quite a bit in 2025 as we built out closed loop. We built out Indiana. But I would say it is more on the physical side in 2025 than more on the digital side in 2026 and what we might expect in coming years. But, Tara, do you want to add to that? Tara Grantham: Yeah, just to add to that, we did spend about $5,000,000 in CapEx in 2025 on our new factory in Indiana. So that is going away. But we are replacing that with higher investments in our technology spend. So that is on the CapEx side to the growth of our Integrated PayTech business and also to help upgrade some of our other technology as well. I will say that even with that CapEx spend, we are expecting similar cash flow conversion in 2026 as we had in 2025. So we are happy to be investing in the business and continuing to convert on the cash flow side as well. Hal Goetsch: Yep. Goal is to drive leverage down even while investing. So could you share with me on the tax side? It seems like your tax rate is higher than most of the companies I follow that are, you know, mostly domestic. And I think you said over 30%. Is that correct? And what was the cash flow impact, free cash flow impact, this year from the big, beautiful bill or tax change that might have lifted free cash flow this year, and what might be the impact next year from tax law changes to your free cash flow? Tara Grantham: Hal, we did get a slight benefit; I do not think it is a huge number. I think it is in the few-million range. Just on the tax rate in general, I think the big impact this year was due to the ArrowEye acquisition and integration costs that are not necessarily tax deductible. But I do not know if you have any other comments. Yeah, so we are expecting a benefit between 2025 and 2026 from the U.S. budget bill of $3,000,000 to $5,000,000 across 2025–2026. Just a reminder, though, that that is a cash impact, and it does not impact our ETR. Hal Goetsch: Yeah. And follow-up, last question for me. On kind of, like, modeling. Are you going to provide pro formas for the new three segments going back maybe at least quarters for 2025? That we can project trends and margins off of? Thank you. John D. Lowe: Hal, I think we did. I think there is a filing this morning, if I am not mistaken. It has 2025 quarters as well as the full year. Hal Goetsch: Okay. Terrific. Thanks. Operator: As there are no further questions in the queue, I would now like to turn the call back over to John Lowe for closing remarks. John D. Lowe: Thanks, operator. Well, first, I would like to thank all of our CPI Card Group Inc. employees for what they accomplished in 2025 and their ongoing commitment to serving the company, our customers, and executing on our strategy to win in the market. I hope everyone enjoyed learning more about CPI Card Group Inc.'s evolution this morning. We are proud of our 2025 and year-end performance, and we look forward to sharing more on our progress in future calls. Thank you all for joining, and we hope you have a great day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time today, please press 0, and a member of our team will be happy to help you. Please standby; your meeting is about to begin. Good morning, everyone. Welcome to the Janus International Group, Inc. fourth quarter and full year 2025 earnings conference call. Currently, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference today, you may press 0. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Sara Macioch, Senior Director, Investor Relations of Janus International Group, Inc. Please go ahead, ma’am. Sara Macioch: Thank you, operator, and thank you all for joining our earnings conference call. I am joined today by our Chief Executive Officer, Ramey Jackson, and our Chief Financial Officer, Anselm Wong. We hope that you have seen our earnings release issued last night. We have also posted a presentation in support of this call, which can be found in the Investors section of our website at janusintl.com. Before we begin, I would like to remind you that today’s call may include forward-looking statements. Any statements made describing our beliefs, plans, strategies, expectations, projections, and assumptions are forward-looking statements. The company’s actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, including, but not limited to, tariffs, interest rates, and other macroeconomic factors, many of which are beyond our control. Please see our recent filings with the Securities and Exchange Commission, which identify the principal risks and uncertainties that could affect our business, prospects, and future results. We assume no obligation to update publicly any forward-looking statements, and any forward-looking statement made by us during this call is based only on information currently available to us and speaks only as of the date when it is made. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted EPS, and net leverage. Please see our release and filings for a reconciliation of these non-GAAP measures to their most directly comparable GAAP measure. On today’s call, Ramey will provide an overview of our business. Anselm will continue with a discussion of our financial results and 2026 guidance before Ramey shares some closing thoughts and we open up the call for your questions. I will now turn the call over to Ramey. Ramey Jackson: Thank you, Sara, and good morning, everyone. Thank you all for joining our call today. To begin, I would like to express my appreciation for our team at Janus International Group, Inc. for their hard work and dedication. 2025 was a challenging year as our markets remained constrained due to macroeconomic concerns and sustained high interest rates. We focused on execution, operating safely, and serving our customers as we worked to stabilize the business, delivering $884.2 million in revenue and $168.2 million in adjusted EBITDA for the year. Despite an unfavorable backdrop, we realized several key wins in 2025 as we worked to position the business for long-term success. On the self-storage side, Janus International Group, Inc.’s Nokē products were present at five out of six facilities earning Facility of the Year awards from Modern Storage Media. Our Betco business announced a comprehensive expansion of its metal decking product line and received a certification from the Steel Deck Institute, achieving an exceptional score and reinforcing our commitment to quality. We also unveiled a redesigned web portal for our Nokē Smart Entry platform, and in Europe, we launched a new high-security swing door. On the commercial side, our ASTA business rolled out its high-performance product offering and achieved Miami-Dade certifications, further strengthening its portfolio. From a financial standpoint, our strong liquidity and cash generation allowed us flexibility to be opportunistic with regards to capital allocation priorities in 2025. We completed a voluntary prepayment of $40 million on our first lien term loan in 2025 and repurchased 1.9 million shares for $16 million throughout the year under our share repurchase program, which had $80.5 million of remaining authorization at year-end. We were also pleased to receive an upgrade of our credit rating from S&P in October. While we anticipate market conditions will continue to be constrained, principally in new construction in North America, in 2026 we will continue to execute and focus on what we can control. As a diversified solutions provider with a global network of manufacturing and installation capabilities, we are committed to executing our strategy of further penetrating the self-storage market, increasing our share in the commercial market, driving adoption of access control technology, and pursuing strategic accretive acquisitions. I will now expand on each of these priorities. First, in the self-storage market, we have shared our strategy of increasing our content in facilities. Our acquisition of Kiwi II Construction announced in January exemplifies this approach by expanding and strengthening Janus International Group, Inc.’s exterior solutions offering and design-build capabilities. Kiwi II is a premier self-storage buildings provider. It is well respected within the industry for its high-quality service and engineering prowess. They have an established, active base of institutional customers and a solid presence on the West Coast and in Florida. Kiwi’s business is complementary to our design-build business, Betco, which has a stronger geographic presence on the East Coast and primarily serves non-institutional customers. Kiwi also aligns well with our Janus International Group, Inc. core business, which focuses on interior self-storage solutions, including doors and hallways, and this integration will allow Kiwi to offer a full end-to-end solution for self-storage. We are very pleased to welcome Kiwi to the Janus International Group, Inc. family, and our early integration efforts are progressing well. Another key driver of our self-storage market penetration is leveraging our differentiated R3 platform. We estimate that nearly 65% of the facilities in the United States are over 20 years old, supporting sustained renovation activity. Industry consolidation is further accelerating this trend as large operators invest to bring aging assets to modern standards. Janus International Group, Inc. is uniquely positioned to meet these needs as the category creator for self-storage restore, rebuild, and replace services. Our International segment represents another important lever in advancing our self-storage penetration. Over the past several quarters, we have carefully refined our product offering and go-to-market strategy to better serve our customers, which has been a driver of our international revenue growth this past year. We are committed to continuing the momentum we saw in 2025 by focusing on increasing scale in our Nokē product as well as pursuing targeted geographic expansion into new countries that will support strategic growth moving forward. The second priority of our growth strategy is increasing our share in the market for commercial doors. The commercial door market is vast, and as a smaller player in the space, we see plenty of opportunity to drive growth over time. As demand for commercial construction continues to grow, we are working to refine our offering and leverage our manufacturing expertise to provide a robust suite of commercial door solutions. We are seeing positive results from our expanded distribution footprint, as well as our multiyear efforts to secure product specifications. We are pleased to share some of our rolling steel doors are now being specified in data centers, representing a meaningful step forward for Janus International Group, Inc. in a fast-growing segment. Next, on the access control front, adoption of our Nokē Smart Entry system continues to progress. Our industry-leading smart security system improves efficiency for operators by streamlining labor needs, reducing theft, and increasing unit-level security. Nokē also offers operators high-value customer insights such as usage trends and other unit-level data. At the same time, the smart locking solution enhances the customer experience, allowing for a seamless access solution and features such as remote monitoring and digital key sharing that provide a competitive advantage for operators. As of year-end, we had 458,000 installed units, representing an increase of 25.5% year over year. As I shared on our last earnings call, we have seen an increase in interest from large institutional customers for our Nokē products. We are encouraged by this momentum as we continue to enhance our offering and move towards scale and improved margin performance in our Nokē business this year. Finally, we will continue to pursue strategic acquisitions to build on our track record of identifying, executing, and integrating acquisitions to support our growth. As we have stated, M&A is part of our DNA. We will continue to seek value-added opportunities that have a strategic fit within our organization in order to expand our product and solutions offerings. Consistent with the priorities I just outlined, we are initiating our 2026 guidance range. We expect revenue in the range of $940 million to $980 million, which represents an 8.6% increase at the midpoint from 2025. Adjusted EBITDA is expected to be in the range of $165 million to $185 million, a 4% increase at the midpoint from 2025. As I conclude, I would like to emphasize that our strategic priorities remain intact. Despite the near-term challenges, household utilization for self-storage continues to grow. With sustained high occupancy rates in the industry, we believe demand will only increase when the housing market improves. While the market headwinds we are facing, particularly in new construction, may persist, we are committed to focusing on what we can control in the near term. We are the industry leader in self-storage solutions with significant scale, financial discipline, and attractive adjacencies for expansion. As we look ahead, we believe we will be well positioned in the markets we serve when macro conditions improve. I will now turn the call over to Anselm for a further review of our quarterly financial results along with more details on our initial 2026 guidance. Anselm? Anselm Wong: Ramey spoke to our full-year results at a high level, and I will focus my remarks on our financial performance in the fourth quarter followed by a discussion of our initial 2026 guidance. For the fourth quarter, consolidated revenue of $226.3 million declined 1.9% as compared to the prior-year quarter. In total, our self-storage business was down 0.4%. New construction decreased 8.1%, and R3 was up 12.7% for the quarter. The decline in revenues for new construction was driven by weaker demand for development in the Americas from our non-institutional customers, partially offset by strength in our International segment. The increase in R3 revenue was driven by increases in door replacement and renovation activity. In the fourth quarter, our International segment saw total revenues increase to $26 million, up $6.5 million, or 33.3%, compared to the prior year, driven by growth in new construction and market share gains as well as positive foreign exchange rates. For the quarter, revenue in our Commercial and Other segment decreased by 5%. The decline was primarily driven by softness in demand for commercial sheet doors, partially offset by strength in rolling steel and TMC. On a consolidated basis, the impact to revenues for the quarter was roughly 90% price and 10% volume. Fourth quarter adjusted EBITDA of $37.2 million was up 7.5% compared to 2024. This resulted in an adjusted EBITDA margin of 16.4%, an increase of approximately 140 basis points from the prior-year period. The increase in margins year over year is primarily attributable to the prior year being negatively impacted by adjustments to our provision for credit losses and an additional warranty reserve, which was partially offset by volume declines and the impact of geographic segment and sales channel mix. We are seeing benefits from our previously announced cost reduction program, achieving the target of $10 million annual pre-tax cost savings in 2025. We continue to regularly evaluate opportunities to improve our efficiencies. To this end, in early 2026, we successfully completed an expansion of our facility in Surprise, Arizona. With the additional capacity now available at our Arizona facility, we were able to optimize our manufacturing space by combining two of our facilities in Houston. This streamlining of our operational footprint will not affect our product offerings, quality standards, or customer service levels. For the fourth quarter, we produced adjusted net income of $15.6 million, down 15.2% compared to the prior-year period, and adjusted EPS of $0.11. We generated cash from operating activities of $24.8 million and free cash flow of $19.2 million in the quarter. On a trailing twelve-month basis, this represents a free cash flow conversion of adjusted net income of 137%. Capital expenditures in the quarter were $5.6 million. We ended the quarter with $260.5 million in total liquidity, including $194.4 million of cash and equivalents on the balance sheet. Our total outstanding long-term debt at year-end was $551 million, and net leverage was 2.1x. Following the acquisition of Kiwi II Construction, as stated in the press release, our net leverage is expected to remain within our target range of 2.0x to 3.0x. These liquidity levels provide us optionality with regard to capital deployment, and we had $80.5 million remaining on our share repurchase authorization at year-end. In February, we were also pleased to announce a repricing of our first lien term loan, reducing our interest rate by 50 basis points from SOFR plus 250 to SOFR plus 200, significantly lowering our cost of capital and enhancing our financial flexibility. Now moving to our 2026 guidance. As Ramey mentioned, full-year revenue is expected to be in the range of $940 million to $980 million. This includes approximately $90 million to $100 million in inorganic revenue from the Kiwi II Construction acquisition. Our guidance does not include any embedded assumptions of an improvement in market conditions. We expect North American organic self-storage revenues to be down mid-single digits compared to 2025, driven mostly by continued softness in new construction. In our commercial sales channel, we anticipate a return to growth in 2026, driven by our ASTA business. On the International side, we expect high single-digit revenue growth. 2026 adjusted EBITDA is expected to be in the range of $165 million to $185 million. This reflects an adjusted EBITDA margin of 18.2% at the midpoint. Consolidated EBITDA margin will continue to be impacted by both geographic segment and sales channel mix. We expect that Kiwi II’s EBITDA will be a drag on overall margins for 2026, and synergies from the acquisition are expected to be back-end loaded for the year. Cash flow remains robust, and for 2026, we anticipate being around the higher end of the free cash flow conversion of adjusted net income target range of 75% to 100%. Please refer to the presentation we have posted for details on the key planning assumptions for 2026. Thank you for your time. I will now turn the call over to Ramey for his closing remarks. Ramey? Ramey Jackson: Thank you, Anselm. Janus International Group, Inc. has a solid position in a great industry. We are the partner of choice for our customers through the full life cycle of their projects, from design and build-out to maintenance and facility upgrades. While we face a dynamic operating environment, we continue to focus on the factors we can control. Consistent with our growth strategy, we are optimistic about our recent acquisition of Kiwi II Construction, and we are confident in our plan to achieve our 2026 guidance of total revenue in the range of $940 million to $980 million and adjusted EBITDA in the range of $165 million to $185 million, reflecting growth of 8.6% at the midpoints, respectively. As I mentioned, household utilization for self-storage continues to grow. This, coupled with sustained high occupancy rates in the industry, is a positive signal for increased future demand with recovery in the housing market. Our strong balance sheet and cash flow foundation position us to further build upon our industry leadership position, expand into adjacent markets with attractive fundamentals, and support our future growth. Taken together, I remain confident in our strategy and in our ability to deliver long-term value for our stakeholders. In closing, I would like to thank our team, customers, and shareholders for your support. We appreciate your participation on today’s call. Operator, we will now open for questions. Operator: Certainly, Mr. Jackson. Thank you, sir. Ladies and gentlemen, at this time, if you would like to ask a question, please press 1 on your telephone. If you find your question has been addressed, please press 1 again to withdraw. Once again, that is 1 for questions. We will go first this morning to Daniel Moore with CJS Securities. Will Gildea: Good morning. This is Will on for Dan. Ramey Jackson: Hey. Good morning. Good morning. Will Gildea: You have always described the core self-storage business as having two to three quarters of visibility. How does your visibility today compare to historic averages? Anselm Wong: I think we still have similar visibility from what we see in that two to three quarters based on the backlog that we have. It has been similar in terms of visibility, and we reflect that in our guide. Ramey Jackson: In terms of new construction, we are going to continue to see pressure there, but we are certainly optimistic around R3 and some of the initiatives that we are focused on like Nokē, the R3 efforts, and just remaining super competitive and having that dominant strength in new construction and commitment to our customers. It is all reflected in the guide. Will Gildea: Thank you. And just a follow-up: what are the one or two key metrics your REIT customers are looking for that would give them confidence to start to invest and build out new capacity once again? Ramey Jackson: It is 100% interest-rate driven. We have been very consistent in terms of the driver. The number-one driver of self-storage is mobility around housing. That is on the sidelines today. When you look at how operators are performing, there is certainly some noise around pricing, but it is a very stable operating environment, lacking the largest driver, which is mobility around housing. Once people start moving around, you are going to see a different operating environment. Will Gildea: Thank you. Operator: Thank you. We will go next now to Jeff Hammond of KeyBanc Capital Markets. David Tarantino: Good morning, everyone. This is David Tarantino on for Jeff. Ramey Jackson: Hey, David. David Tarantino: Maybe starting with margins, could you give us a bit more color on the degree of headwind from the higher International mix in 4Q and what you have assumed in the guide on the margin line from an organic perspective? And then maybe any thoughts on how long you expect these mix headwinds to last would be helpful. Anselm Wong: Thanks for the question. If you saw what we printed for the quarter, you saw International continue to grow pretty strongly, as it did for the full year. If you look at their EBITDA margins, obviously it has improved year over year, but it is still significantly down versus our North America. Going into next year, as Ramey said in his remarks, we are still seeing softness in our new construction in our Janus International Group, Inc. core Americas business, which is a meaningfully higher margin rate. We cannot predict when that turn is going to be, but as long as we are going to see some of that pressure on the new construction piece in the Americas, we will probably have some margin and mix headwinds from that. David Tarantino: And just to follow up quickly there, is it fair to assume that the guide assumes that these mix headwinds persist through 2026? Ramey Jackson: Yeah. Definitely. David Tarantino: Okay. Great. And then on commercial, it seems like it weakened if you adjust for the TMC catch-up, and you called out some commercial sheet door decline. So could you give us some color on the softness here? And I just want to clarify on the guide: is it high single digits just for ASTA, or what are we thinking for the whole business? Anselm Wong: For commercial, if you include everything together, it is in the high single-digit range, but not if you actually back out the TMC piece. Looking at Kiwi in there and the other pieces balances the number, but if you look at the guide, we are probably mid-single digit for commercial for the full year. Just additional color: a lot of the softness in commercial is coming from commercial sheet. We are actually seeing growth in our ASTA business, which we highlighted. Ramey Jackson: We have been consistent in terms of the messaging around architectural specifications effort, and we have certainly secured some work around the data center space, which is an exciting space to be in, and we have worked really hard to get specced. So we are excited about that and expect growth in the rolling steel business. David Tarantino: Great. Operator: Thank you. We will go next now to Reuben Garner of The Benchmark Company. Reuben Garner: Thanks. Good morning, guys. Morning. Reuben Garner: I think that you are roughly implying low single-digit organic revenue declines if we strip out an assumption for Kiwi. One, is that accurate? And two, can you break down the components of that price and volume? And then you mentioned commercial, but what about your assumptions for new versus R3 on the self-storage side as we sit today? Anselm Wong: That is about right, Reuben. We are looking at an organic decline in the core business. The biggest piece, as we described, is really in that new construction Americas piece. That piece is going to continue to be a drag in terms of what we are seeing in the environment today, and that is what brings down the revenue year over year for the organic piece. Reuben Garner: And in terms of price versus volume? Anselm Wong: Price right now, as we described, we had more price in 2025 that will roll into the first half of this year. So think about a similar type of price impact in the first half, barring anything that happens with steel in the back half. Reuben Garner: Okay. And then can you—you have talked about the margin profile a little bit of Kiwi, but can you break out what gross margin looks like for that business? And then on the synergy front, can you go into detail on the synergies? I assume that there are some top-line potential synergies at some point as well. Just refresh us on the opportunities there. Anselm Wong: We have not disclosed any of the details on the synergies, Reuben. But if you think about EBITDA margins, we have given a range where it would be in that low-teens range to start with because of integration costs and getting that business integrated into Janus International Group, Inc. Longer term, we said that it has potential to get into the high teens as a business. Reuben Garner: Okay. Thanks, guys, and good luck. Ramey Jackson: Just to add to that, Reuben, as a stand-alone—I think you are asking the question as a stand-alone—but part of the acquisition strategy was Kiwi had never gone to market with the full solution, meaning door and hallway. Now they can offer their customers end to end both buildings and interiors, and as you know, the Janus International Group, Inc. core business is higher margin. We expect to see some pickup in the Janus International Group, Inc. core sales by going to market with Kiwi, so we will experience some higher-margin stuff at core with the acquisition. Reuben Garner: Great. Very helpful. Thanks, guys. Operator: Thank you. We will go next now to Phil Ng of Jefferies. Phil Ng: Hey, guys. Hey. Good morning. The outlook—you are not assuming much of an improvement here, which seems more than reasonable. But, Ramey, you talked about what is going to drive volumes perhaps reaccelerating as housing turns—housing mobility. We could look at that from existing home sales and certainly rates coming down. All good. Help us unpack what is the lag if we look at that turnover inflecting. How does that impact your business, whether it is R3 or new construction? The other piece you have teased out in the past on rates is really more for your non-institutional customers. Maybe credit has been more challenged into less mortgage rates, more shorter-term rates, and maybe their ability to pursue more projects. Any color on that front if the credit markets have loosened up a little bit? Ramey Jackson: That is a great question. I do not know that I can answer a lot of that, but from a confidence perspective, when things start to turn and things feel better, you will see increased activity and investment. As we sit today, the mom-and-pops are essentially on the sideline, and that is a big—it is 70% of the market. Any momentum we can get with that segment will certainly have incremental value. When you think about R3, obviously acquisitions matter, and I think we are hearing from the REITs that this should be a good year for acquisitions, which should bode well for R3. I cannot predict the interest rate and what is going to get people moving around. I have no earthly idea—you probably know that better than me. We are focused on being in the right position so when this turns around we can take advantage of it, sticking to our corporate strategy, making sure that we are lean, focused, and able to optimize everything and take advantage of what the market has to offer. Phil Ng: That is great color, Ramey. Then your outlook on R3 sounds a little more upbeat. I may have missed it if you quantified what you are assuming for R3. Is that mostly M&A—that you are talking about big REIT guys doing more renovation work that is driving that—or are you seeing other avenues that give you enthusiasm on that inflection in R3? Certainly you have had some headwinds with the retail side of things that seem to have bottomed out. Give us a little more perspective on what is driving the inflection in R3. Ramey Jackson: You hit it. It has a lot to do with acquisitions. Obviously some of the big names we all know—we kind of track that activity—and that has been a big driver. What we are finding with our Nokē product line is folks that are interested in adopting Nokē are taking advantage of that opportunity to disrupt the unit, disrupt the tenants, and do full door replacement. That is a newer use case that is driving the R3 kind of renovation door replacement. Keep in mind, 60% of the installed base is over 25 years old, so there is still a meaningful replacement cycle that exists, and we just have to continue to put ourselves in position to take advantage of that. Phil Ng: Okay. And, Ramey, since you brought up Nokē—good milestone this past year, up quite a bit. I believe we are not far away from that breakeven threshold of 500,000 units where it swings to a much bigger kicker to your profitability. What are you assuming this year in terms of Nokē contribution, and any big ones you want to call out in terms of some of these bigger REITs that have perhaps adopted or committed to more Nokē units for this year? Ramey Jackson: I will let Anselm talk about the metrics, but we remain super optimistic with Nokē. Nokē is addressing a few industry issues right now. A lot of customers are experiencing increased operating costs; our Nokē customers are watching those operating costs go down. There is an issue in the industry around theft and security; our Nokē customers are addressing that and eliminating that element. It is really resonating and building out additional use cases. I am not going to mention names at this point in terms of the larger folks who are working with the solution, but it continues to increase. We are in a much better place in terms of enterprise-grade software. The team has done a phenomenal job on uptime and stability. We plan on rolling out additional products this year, and we are excited. You hit the nail on the head—we are going to hit 500,000 units this year. Anything past that is going to help improve the bottom line, so I am even more optimistic today than I was in the past. Operator: Thank you. We will go next now to John Lovallo of UBS. Matt Johnson: Thanks, guys. This is Matt Johnson actually on for John. I appreciate the time. First off, sales in the quarter were a bit stronger than we were expecting—I think they were above the top end of the outlook as well—while EBITDA was closer to the midpoint, so margin was a bit lower than we were expecting. I think you mentioned it a little bit in the prepared remarks, but were there any mix impacts to call out, particularly on the gross margin side? How should we think about the trajectory of gross margin as we move into 2026? Anselm Wong: As we said earlier, it is the trend of the mix of the North American business being down a bit more than the other BUs that we have. As you know, the margin is a lot different. You saw International continue to be strong in the quarter, and their margin rate is lower than the Americas. That is the trend we saw, and that is what we indicated is going into 2026 in our guide. Matt Johnson: That makes sense. And within the context of the 2026 outlook, how should we think about sales and EBITDA in the first quarter, and how impactful was adverse weather in January? Anselm Wong: If you look at the trend, the trend we talked about continues into Q1, where new construction in the Americas is a bit softer. There is a little weather impact that we have seen as well, so I would expect a slower start for the year. Matt Johnson: Thanks, guys. Operator: And, gentlemen, it appears we have no further questions today. Mr. Jackson, I would like to turn things back to you, sir, for any closing comments. Ramey Jackson: Thank you all for joining us today. We appreciate your support of Janus International Group, Inc. and look forward to updating you on our progress. Have a great day. Operator: Thank you, Mr. Jackson. Thank you, Mr. Wong. Again, ladies and gentlemen, that will conclude the Janus International Group, Inc. fourth quarter and full year 2025 earnings call. Thanks so much for joining us, everyone. We wish you all a great day. Unknown Speaker: Goodbye.
Operator: Good day, and thank you for standing by. Welcome to the OTC Markets Group Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Zinn, General Counsel and Chief of Staff. Please go ahead. Daniel Zinn: Thank you, operator. Good morning, and welcome to the OTC Markets Group Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. With me today are Cromwell Coulson, our President and Chief Executive Officer, and Antonia Georgieva, our Chief Financial Officer. Today’s call will be accompanied by a slide presentation. Our earnings press release and the presentation are each available on our website. Certain statements during this call and in our presentation may relate to future events or expectations and as such may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements. Information concerning risks and uncertainties that may impact our actual results is contained in the Risk Factors section of our 2025 annual report and is also available on our website. For more information, please refer to the safe harbor statement on slide three of the earnings presentation. With that, I would like to turn the call over to Cromwell Coulson. Cromwell Coulson: Thank you, Dan. Good morning, everyone, and thank you for joining us. I will begin by reviewing our year-end 2025 results at a high level and will then turn to our priorities for 2026. For the full year 2025, gross revenues grew 13%, bringing us to over $125,000,000 for the first time in our history, while our net revenues grew by 12%. The company achieved double-digit gains across all four quarters last year, with each business line contributing to our strong results. For the year, OTC Link was up 17%, Market Data increased 15%, and Corporate Services was up 8%. OTC Link's performance primarily resulted from increased trading volume across our markets. In times of increased market activity, we focus on providing reliable service trusted by our broker-dealer subscribers. Meeting that standard across all of our ATSs is a direct result of the hard work and dedication of our business, infrastructure, and technology teams. Market Data benefited primarily from price increases that took effect at the start of 2025, supported by new sales in certain product areas. While pricing power is a critical part of long-term competitiveness, especially in inflationary environments, we prioritize consistently adding value to our subscribers, expanding our distribution networks, signing new clients, and growing unit counts. While not materially impactful to our revenue during 2025, our OTC Link and Market Data teams established the foundation of our overnight trading business. Moon ATS, which facilitates overnight trading in exchange-listed securities, gained traction in the fourth quarter as a result of our team's onboarding subscribers and educating the global trading community. The momentum in NMS securities on Moon and the lessons learned will serve us well as securities markets move to 24/5 and longer. Our Corporate Services business not only delivered solid revenue growth for the year, but also ended the year with 17% revenue growth in the fourth quarter. These increases resulted from the success of our OTCID Basic Market, launched in July, as well as price increases and strong new sales in our OTCQX and OTCQB markets. Over the long term, our Corporate Services business remains strategically focused on client success and retention, helping connected companies close the investor and broker information experience gap with exchange-listed securities. Our operating expenses also increased last year, up 7%. Compensation and benefits remain the largest components of our expense base, as we continue to invest in our people. I am grateful for the hard work and dedication of our colleagues, and thrilled that our trajectory last year reflects each person's contributions. With revenue running faster than expenses last year, our operating margin also rose back above 31% for the year. We remain committed to achieving sustainable growth over the long term. Overnight trading and the OTCID Basic Market were our primary strategic initiatives during 2025. Although our work on each is far from over, I am pleased with our progress thus far. On overnight trading, Moon ATS saw a substantial increase in volume traded during the fourth quarter as our broker-dealer subscribers used the system to trade thousands of exchange-listed securities between 8:00 p.m. and 4:00 a.m. We face significant competition in this space, with one established player already controlling a majority of the market share, and the listing exchanges planning to enter the space as early as this year. In this increasingly competitive landscape, we believe that Moon ATS offers an elegant, reliable, and cost-effective solution for our current subscribers and an opportunity to expand and scale our network. Our overnight trading initiative is also focused on educating and onboarding subscribers to our OTC Overnight Market. Although we have not yet had trading take place in this market, the OTC space is where we can offer a unique value proposition. Over 12,000 OTC securities trade on our daytime markets, and more than 9,000 of those are non-U.S. Providing global investors access to these securities during hours more convenient for non-U.S. time zones remains a key part of our vision for overnight trading. Our second priority initiative last year was the OTCID Basic Market. Following its launch, OTCID experienced a rapid uptake as qualifying companies chose our services to publish a baseline of ongoing information. It is well aligned with our strategy of connecting more companies to their U.S. trading market to improve market quality one security at a time. OTCID enhances our offerings for corporate clients, filling a gap below the premium OTCQX and OTCQB markets. With a disclosure- and management certification-driven service, OTCID allows more companies to connect without the price, float, or financial requirements of our higher-level markets. It is a simple entry point for companies to start to stream information, gain a foothold of liquidity, or test the waters. We have designed our premium markets to provide the functionality for connected companies to supply data that will improve the quality of the market for their securities. In comparison with Pink Limited securities, our objective is to clearly flag risks. Investor-focused companies need to be actively connected to the market, consistently updating investors, with management teams willing to certify compliance with regulations. Otherwise, gaps in communication can lead to information asymmetries, disruptive corporate actions, and discounted valuations that diminish their market quality. The connected companies on our OTCQX, OTCQB, and OTCID markets represented approximately 25% of all securities traded on our platforms at the end of 2025 and contributed roughly 31% of the dollar volume traded on our markets during the fourth quarter. Our primary focus is to increase the percentage of connected companies and related dollar volume on our markets. When we empower public companies to connect to our Corporate Services, actively publish ongoing information, and demonstrate global governance standards, our markets become better informed and more efficient. These are the core activities that improve the quality of each company's individual trading market, open up more investor accounts, and expand overall investor interest. As we move these metrics higher, we will improve overall market quality and further separate companies on our premium markets from the imperfections and inefficiencies of securities orphaned on our Pink Limited Market. Preparing for the introduction of tokenized and digital asset securities into our markets is another strategic priority for 2026. As the SEC and Congress continue their work to provide regulatory clarity in these areas, it is vital that we prepare to support our FINRA member broker-dealer, market data customers, and other market participants as they innovate around these new technologies. We also continue to advocate for modernizing digital asset regulation without undermining market integrity. We believe a technology-neutral approach rooted in existing regulatory principles will foster responsible growth, prevent regulatory arbitrage, and reinforce confidence in U.S. market structure. Our regulatory priorities extend further, with a particular focus on capital formation, state Blue Sky laws, and disclosure-based initiatives that will improve the often-overlooked market functionality that provides the backbone of our capital markets. Being public should not be painful, and we need to both lower the burdens on public companies and increase the benefits. We have achieved 50-state Blue Sky compliance for our own shares, so we will use that knowledge to efficiently map the path to national compliance for our corporate clients. International companies on our markets, and the dollar volume traded in these companies, has trended higher in recent years. This is due to a number of factors, including our premium markets for issuers, improved broker-dealer trading functionality across our ATSs, increased access to our market data, and targeted outreach by our Corporate Services team. Continuing to grow our international presence remains a key objective for 2026. We are focused on educating non-U.S. companies about how best to use our market structure, data, and disclosure tools to connect with more investors and build their brands in the U.S. I look forward to updating you on our progress with each of our 2026 core initiatives throughout the year. We have a long history of paying regular quarterly dividends and a special dividend at the end of the year. It is a conservative strategy that gives us operational flexibility and financial resilience. In reviewing companies with similar strategies, we have decided to increase our quarterly dividend to better balance the ratio between quarterly and special dividends. We will also look to opportunistically resume buying back shares in the public market. As such, I am pleased to announce that on March 2, our Board of Directors declared a quarterly dividend of $0.30 per share payable later this month. This dividend reflects our ongoing commitment to providing superior shareholder returns. With that, I will turn the call over to Antonia. Thank you, Cromwell, and thank you everyone for joining us today. Antonia Georgieva: I would like to start by thanking our entire OTC Markets team for driving our business to record revenue, and for the successful execution of our key projects for 2025. I will now review our results for the fourth quarter and year ended 12/31/2025. Any references made to prior period comparatives refer to the fourth quarter or the year ended 12/31/2024. A review of our fourth quarter results is included on page seven. We generated $32,700,000 in gross revenues, up 15% as compared to the prior-year period. Revenues less transaction-based expenses were also up 15%. OTC Link's gross revenues increased 7%, driven by a 12% increase in transaction-based revenues from OTC Link ECM and OTC Link NQB with Moon ATS contributing as we benefited from a higher number of shares traded on those platforms. As an offset, transaction-based expenses also increased 12%. Additionally, OTC Link saw a 6% increase in usage-based revenues, including OTC Link ATS messages due to a higher number of messages and the Quote Access Payment service due to the increased volume of trading activity. Trading volumes remain highly unpredictable and could decline in the future. OTC Link finished the fourth quarter with 117 subscribers on OTC Link ECM, and 77 subscribers on OTC Link ATS, compared to 114 and 82, respectively, at the end of the prior year. OTC Link had 145 unique subscribers to our ATSs at the end of 2025, up four from 2024. Revenues from Market Data licensing increased 17% quarter over quarter, reflecting a 25% increase in the registrar-based revenues, a 14% increase in revenues from direct-sold licenses, and a 3% increase in revenues from data and compliance solutions. Within the 32%, primarily due to price increases from 2025 combined with a 3% increase in professional user count. Nonprofessional user revenues declined 4% as a result of an 18% reduction in reported nonprofessional users, which more than offset the impact of the price increases. Historically, in the normal course of business, we have seen significant changes in the number of nonprofessional users as market volumes and retail participation on our markets fluctuate, and we may experience further decline in the future. Broker-dealer enterprise licenses and internal licenses drove the growth in direct-sold licenses. Broker-dealer enterprise license revenues increased due to the combined effect of price increases and subscriber growth, while internal system license revenues increased due to subscriber growth. Increased revenues from data services and the Blue Sky data product contributed to overall growth in data and compliance solutions revenue, partially offset by lower revenue from EDGAR Online. Corporate Services revenues increased 17% in the fourth quarter. The impact of annual incremental pricing adjustments effective 01/01/2025 and improved sales, combined with a steady average number of OTCQX companies, resulted in an 8% increase in OTCQX revenues. OTCQB revenues increased 11% due to the same factors combined with a higher number of companies on the OTCQB market. In the fourth quarter, we added 41 OTCQX companies compared to 22 in the prior-year quarter, and finished the period with 574 OTCQX companies, up 1%. On OTCQB, we added 71 new companies in the fourth quarter compared to 61 in the prior-year period and finished the quarter with 1,106 OTCQB companies, up 5%. The launch of OTCID on 07/01/2025 resulted in a substantial number of Pink companies upgrading to OTCID and receiving access to DNS as a result. In addition, select Pink Limited companies also chose to subscribe to DNS. The resulting increase in DNS subscribers combined with price increases from the beginning of the year drove a 55% increase in related revenues compared to the prior-year period. As of 12/31/2025, 1,052 companies traded on the OTCID Basic Market, up from 1,035 companies at launch on 07/01/2025. Overall, we had a combined 1,508 OTCID companies and Pink Limited subscribers to DNS and other products at the end of the fourth quarter, representing a 13% increase from 1,338 companies at the end of the prior-year period. Month-to-month variability in our Corporate Services subscribers is driven by new sales, offset by non-renewals, corporate events, and compliance downgrades. Turning to page eight for our full-year results. In 2025, we generated gross revenues of $125,300,000, up 13%. OTC Link revenues increased 17%, driven by the same factors as previously mentioned. Transaction-based expenses increased 39%. Market Data licensing revenues increased 15%, also driven by the same factors as previously discussed, with nonprofessional user revenue increasing 1% for the full year due to price increases offsetting the decline in nonprofessional user count. Corporate Services revenues increased 8%, with a 46% increase in revenues from our OTCQX and OTCQB markets as well as a 29% increase in revenue from the OTCID market and the DNS product, driving the overall increase. During 2025, we added 137 new companies to OTCQX compared to 83 in the prior year, and 293 new companies to OTCQB compared to 190 in the prior year. The retention rate for the annual OTCQX subscription period that began on 01/01/2025 was 96% compared to 93% for the prior year. The net increase of seven in OTCQX companies reflects the 137 new sales, partially offset by 130 OTCQX removals. For the annual OTCQX subscription period beginning 01/01/2026, we achieved a 95% retention rate. Turning now to expenses on page nine. On a quarter-over-quarter basis, operating expenses increased by 6%. The primary drivers were a 6% increase in compensation and benefits, and a 9% increase in each of IT infrastructure and information services costs, and professional and consulting fees. Compensation and benefits comprised 61% of our total operating expenses during the fourth quarter, unchanged from the prior-year period. In the fourth quarter, income from operations increased 32%, while net income and diluted earnings per share each increased 28%. Operating profit margin expanded to 36.3% compared to 31.6% in the prior-year quarter. On a year-over-year basis, on page 10, operating expenses were up 7%, driven by similar factors. Compensation and benefits comprised 63% of our total expense base in 2025 compared to 64% in the prior year. Turning to page 11. For the full year, income from operations increased 19%, and net income increased 14%. Operating margin expanded to 31.5% compared to 29.9% in the prior year. Our diluted earnings per share increased commensurately to $2.58 per share compared to $2.26 per share. In addition to certain GAAP and other measures, management utilizes adjusted EBITDA, a non-GAAP measure which excludes non-cash stock-based compensation expenses. Our adjusted EBITDA was $47,600,000 for the full year 2025, and our adjusted diluted earnings were $3.94 per share, each up 15% compared to the prior year. Cash flow from operating activities for 2025 amounted to $48,600,000 and free cash flows were $48,400,000 compared to $32,900,000 and $31,600,000 in the prior year, respectively. Turning to page 12. During 2025, we returned a total of $32,600,000 to investors in the form of dividends and through our stock buyback program, a 10% increase from the prior year primarily related to an increase in the special dividend. We remain focused on growing our business and delivering long-term value to our stockholders. With that, I would like to thank everyone for your time and pass it back to the operator to open the line for questions. Operator: We will now open for questions. Please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Our first question comes from Steven Silver with Argus Research Corp. Steven Silver: Thank you, operator, and good morning, everybody. Thanks for taking the questions. Cromwell, you had mentioned that you are looking to build on the momentum in Corporate Services in 2026. And there were a lot of new companies added to OTCQX and QB, but a lot of that was offset by companies leaving as well. Just curious as to your high-level thoughts on momentum in Corporate Services given the flow of companies coming on and off those markets over time? Or markets, rather. Cromwell Coulson: Yes, Steve. I think that is a very good question. You know, every subscription business deals with churn, and there are different reasons for churn. Clients get taken over. Clients go to competitors. Clients have financial distress. And so targeting how we are selling our service into securities that have a foothold of trading liquidity in the U.S., and educating and engaging those companies to use the Corporate Services tools we have built to create better information on investor screens, and better data in brokers’ machines to really close the gap in functionality from the user perspective with exchange-listed securities. And then there are all the activities that once a company takes ownership of a symbol, that they can do around their brand, around their current investor base, and around their potential investor base. You know, successful companies over the long term connect share ownership with other communities of consumers and business partners. And that part of it, I think is for us going to be an important strategy going forward. One bright light is you have seen large issuers joining OTCQX and seeing the value there. And that is, you know, part of it when you use the OTCID to change the conversation. We are addressing churn at the low end by having a product for anybody who is willing to publish and certify information, and it brings in other companies wanting to use our full suite. Steven Silver: Great. And one more if I may. You talk a little bit about increasing visibility into OTCID and ATS Moon contributing to revenues in 2026. But then you mentioned that OTC Overnight is still kind of building that connective tissue and has not yet commenced trading. Is there a timeline for that? Is that anticipated to launch in 2026, or is that still maybe a little further out? Cromwell Coulson: Well, it is live. The industry is figuring out NMS overnight. And the real activity is, while it is broad, most of the activity is trading in a narrow list of names by the bulk of the activity, and it is a big lift for the industry. So the industry is moving thoughtfully forward on that. My belief is that we will see some activity this year. It is a chicken-and-egg game, but the same brokers trade these during the daytime. So it is moving through the development queues for firms, and it will move along. And I have always said, we wanted to do NMS because our clients want that now. And what we learned from NMS is going to be incredibly helpful in bringing the complexity of OTC securities into overnight trading. Steven Silver: Great. Thank you so much for the color, and best of luck throughout the year. Operator: Our next question comes from Brendan Michael McCarthy with Sidoti. Brendan Michael McCarthy: Great. Good morning. Congratulations on a strong quarter and strong year. I just wanted to circle back to the Corporate Services segment and a follow-up question there. On OTCQB, which looks like you had really strong growth in total dollar volume, also very strong growth in dollar volume per security. Is there any, you know, noticeable trend going on there? Cromwell Coulson: Fannie Mae and Freddie Mac. Bill Ackman’s tweets. Brendan Michael McCarthy: Got it. That makes sense. And what is the pivot to? Okay. Simply— Antonia Georgieva: Just to add to that. As we launched our OTCID campaign, that gave us an opportunity to reengage with our entire addressable market for our tiered markets. And many of our potential subscribers considered the full lineup of offerings, and many ended up opting for higher tiers such as QB, as they were being approached to evaluate or consider OTCID. So we saw some of that upselling contribute to the number of companies and the volume as well. Brendan Michael McCarthy: That makes sense. I appreciate the additional color there. And on that topic, Antonia, I think I saw OTCID had just a small drop in subscribers from Q3. Is that primarily due to uplisting, or is there anything to read through there? Antonia Georgieva: In terms of OTCID, you will see fairly regular ups and downs. We have a highly automated process to tag companies as qualifying for OTCID, and around reporting cycles, you may see certain companies being somewhat late, perhaps in filing or failing to meet any of the criteria that the automated process looks for to tag them as OTCID. What we do see is that movement month to month, so I would not necessarily read too much into it. We will continue to monitor the trends in ID subscribers over time, but it is too early to say what that trend really looks like, and the month-to-month variability has to do with just regular filing cycles and other events that occur at our company. Brendan Michael McCarthy: Understood. Brendan Michael McCarthy: And wanted to ask a question on OTC Link. Can you talk about your pricing strategy there? I think I read in the annual report that you are considering potentially competing on price going forward. Maybe talk about your pricing strategy and how that plays into your competitive position. Cromwell Coulson: We—our pricing strategy is a Costco-type strategy, which is subscription-based with quality products on the shelf. And when you buy volume, you get great value. I mean, we like to make money. We do not like to make as much money as the exchanges. Brendan Michael McCarthy: Got it. Thanks, Cromwell. Last question for me. Just wanted to ask about tokenization. It just seems to be a growing topic of discussion across many different industries. We saw ICE announce plans for the New York Stock Exchange to develop a platform for on-chain tokenized securities. Are you taking a similar approach here, or are you awaiting regulatory clarity? How can investors think about your stance on the topic? Cromwell Coulson: We are very involved in the discussion. So there are a lot of tokenized assets that are not securities. There are not many lawful tokenized securities yet. So there are a lot of different discussions and experiments about how these securities will trade, how efficient such trading will be, what is the cost of such trading. We are deeply involved in discussions with regulators, with how do we bring tokenization into the complexity of securities markets, which we have an experience and history of helping brokers trade, publishing data out on them, and assisting issuers in demonstrating their compliance with securities law, and helping brokers understand the risks and lawfulness of different securities. All of that complexity is showing up. We will be there with tokenized securities when they are free trading and lawful. Brendan Michael McCarthy: Understood. Understood. That is all for me. Thank you. Operator: Our next question comes from Walter Hopkins with Eighteenth Square. Walter Hopkins: Hi. Thanks, and congrats on the big quarter and the year. First question is just a sort of high-level question about the company’s overall strategy with organizing the markets. Do you think the current state of the market, with the addition of OTCID, likely reflects the end state of how OTC Markets Group Inc. sort of views the organization of the market into OTCQX, QB, ID, and Pink Limited? Cromwell Coulson: Thank you, Walter, for that question. I would say it is our current state. Bringing out OTCID lets us improve the standards for the higher markets. I would view that standards are always going to be a work in progress. But if you think about the four—if you add the Expert Market, five—buckets that we place securities in, they are pretty well formed from our perspective. They will be tuned over time. We will both add and remove standards as we learn, with the ultimate goal of incentivizing issuers to maximize the amount of information, governance, compliance that actually improves market quality and their investor experience and the broker experience. Now, OTCID was launched in the middle of last year. It is very new. It seems old to us. However, our user bases are just learning to understand it. So this is a long-tail build-out, and we have work to do around building the positive momentum of our premium markets, but we also have work to do educating investors about the reasons for risks and discounts in the Pink Limited Market and the responsibility lying with the managements of those companies, that they have chosen proactively not to do the base-level things that are fiduciary for shareholders and a company that wants to be compliant with rules and regulations in all jurisdictions where they operate or they have investors. That is really important. And as we build that out, you know, that understanding across all the different constituencies, the tiered market structure will become more powerful. And, you know, the future is on screens and in machines. That is where our markets are built for. But the information does not come directly from us. We need others to buy in, and when they buy in, it becomes more powerful. Walter Hopkins: Thank you. And next question is about Moon. Congrats on creating Moon’s success and traction out of thin air. It seems to kind of follow a tradition at OTC Markets Group Inc. creating new products that customers value without, you know, necessarily investing a lot of CapEx. I just have a couple questions on it. To the extent you are willing to share, it looks like daily volume is up significantly so far in Q1. Can you share the sort of run rate that you are seeing so far in the quarter? Antonia Georgieva: We will start putting out more information about Moon volumes in the near term. At that point, you will be able to see more specific statistics. Walter Hopkins: Okay. Thank you. Cromwell Coulson: Walter, the view of platforms is it really takes five years to turn it into a profitable franchise when you are doing the electronic platform business. And so you are doing these steps to gain traction, and then you are building out on it. And it is—you know, we have got a great team, but it is a grinding and elbow grease and one-on-one conversations to really build it out and understand how we can provide unique value to our broker-dealer clients on a competitive basis. Walter Hopkins: Understood. I saw that a competitor suggested that once you get to breakeven, that they thought they would see 90% incremental margins above breakeven. And I guess that is just two questions on that. You know? Is it—given the existing broker-dealer network and the sort of upfront investments that came through IT expense—are—is OTC Markets Group Inc. already at breakeven on the overnight trading side? Cromwell Coulson: They have a different understanding of transactional businesses than I do. So I wish I had that magic, but we are not so special. We have to work harder. Walter Hopkins: Okay. And I saw that they also said that they expected, you know, about half of the revenue to come from transaction volume and the other half to come from market data licensing. Does that seem like a realistic split for OTC Markets Group Inc.? Cromwell Coulson: They have a different view of competitive dynamics in the market data business than I do. Walter Hopkins: Okay. Okay. Understood. And then the last question is just kind of a technical one. I noticed that the OBV drove the GAAP taxes up a good bit, but drove down the near-term cash tax payments. So maybe this one is for Antonia. Do you mind just describing what is going on there and what you might expect the medium- and long-term effect on cash taxes to be? In other words, you know, what is the normalized effective cash tax rate look like for the company? And is it lower? Antonia Georgieva: I will ask our Chief Corporate Controller, Jeff Jim, to weigh in on those questions. Walter Hopkins: Thanks, Antonia. Jeff Jim: Walter, as you have seen on cash flow, where we disclose our tax payments over the past three years, the trend is going down because the OBB were allowed a more beneficial deduction on R&D credits as well as its deductions. So for the next couple years, you will see very similar trends, and with the adjustments, there is a lingering tax benefit that we will take in 2026, and then you will see a slight upward trend in cash taxes. Therefore, for your benefit, the accounting standards were expanded, particularly focusing on additional disclosure in the tax notes. So we provide significantly more enhanced disclosure about our GAAP provision for income taxes as well as cash tax information in the back. If you would like to review that in our annual filing, it is a newly adopted standard, so newly provided enhanced disclosure. We will be happy to follow up with you with a more thorough discussion, but please review our new tax disclosure in Note 14 to the annual report. Walter Hopkins: Okay. Thank you. That is all for me. Thank you all. Operator: Our next question comes from Jonathan Isaac with Quilt Investment Management. Jonathan Isaac: Hi. Thanks for taking my question. Congrats on the quarter. Can you hear me okay? Antonia Georgieva: Yes. Jonathan Isaac: Great. Great. Wondering, can you discuss changes to your capital allocation philosophy? You mentioned in the preamble paying a higher quarterly dividend and better balancing the quarterly and the special dividend, but you also mentioned—and this is music to my ears, by the way—opportunistic buybacks. In the past, buybacks have mostly been used to limit the impact of stock-based compensation, if my memory serves. What specific metrics do you think about when considering opportunistic buybacks? And what influenced you to evolve your capital allocation philosophy? Thanks. Cromwell Coulson: Well, Jonathan, we should question everything, and then we should look around and see what other successful companies have done, especially ones that tend towards enduring. So, you know, looking at our dividend strategy, looking at our buyback strategy, and looking at the ratio, from—you know, I took a look at Hermès as a company that, you know, builds sustainable value over time. You know, they are a luxury brand product, but they put real value into their products. They are not incredibly greedy about margin, and they have had a special dividend for a long time. Then if you switch over to the financial services industry, the CME is an example too. And as you and others have pointed out about in-the-market buybacks, for us, the desire is to be buying back some shares in the market as well. The challenge with buying back in the market is around—you know, let us say 10% for argument’s sake—of our stock turns over in a year. Now I think it is fantastic that we have happy shareholders who do not want to sell. We have a lot of community banks in our market that have the same problem. And I do not think it is actually a problem. I think it is a great thing if you have shareholders who are with you for the long term, so you do not have to run your business quarter to quarter, and the CEO does not have to spend a third of their time convincing new people to buy their stock because others are flipping out of it. However, starting to buy back in the market, and doing it in a manner that we are not putting our finger on the scale, is important. We are a profitable, cash-flow-positive company, so we will look opportunistically. We do not want to be doing it in a manner which could feel overwhelming to other buyers wanting to come in. But we will be opportunistic. And, you know, we are in a position with our financial strength and cash flow, where a mixture of quarterly dividends, special dividends, and buying back stock both as we have to give employees consistency around their stock compensation and, as you said, reduce dilution, but also in the market as well. So I think that is kind of how we look at the lens today, and, you know, we will, as we move forward and find areas in which we can deploy capital for shareholders, we may adjust it. But if we are creating more capital than we need, we are a big believer in being the kind of company that sends its excess capital back to shareholders because we have a group of very intelligent shareholders who know how to deploy that capital in other areas. Jonathan Isaac: Great. Thanks. Considering the firm’s large cash position, which is rather idiosyncratic for your industry, should we expect the new capital allocation philosophy to potentially result in a lower cash balance or even in a net debt position over time? Antonia Georgieva: Jonathan, one clarification on the cash position. There is a clear and well-defined seasonality in our cash position if you look over the years, with the fourth quarter and year-end cash position tending to be the largest, considering that we have an annual renewal cycle for our OTCQX subscription that starts in the fourth quarter of the year prior to the new cycle of QX subscriptions. So we tend to have significantly more collections and cash inflow in the fourth quarter, followed usually by a meaningful reduction in the same cash balance by the end of the first quarter in connection with year-end expenses related to incentive compensation and taxes. So it is more appropriate in our view to look at the cash balance as an average over the year or to trace its general evolution quarter to quarter, rather than focus exclusively on one particular quarter that happens to be our high point. Cromwell Coulson: And, Jonathan, you know, there is a course they teach using spreadsheets at Harvard Business School called “Everything looks better with leverage,” and then every market cycle, there is the school-of-hard-knocks course called “Until it does not.” We run our books conservatively. Now, if we were to acquire something, we would look at debt, but just leveraging up our balance sheet because it makes the numbers look better is not really what I have any interest in for the company where I have the majority of my personal wealth and many of my friends, family, and colleagues here have significant amounts of. It could look better in the short term. Now, if there was a durable cash flow asset that we could buy, that can change. And the companies that you are comparing us to are larger; they have a history in the capital markets. For the most part, they are in the S&P 500. So they have an incredibly low cost of equity capital, and they have a low cost of debt. So, you know, I think that is not something that is in our strategic outlook anytime in the near future. Jonathan Isaac: Thanks for taking my questions. Operator: That concludes today’s question-and-answer session. I would like to turn the call back to Cromwell Coulson for closing remarks. Cromwell Coulson: Thank you, operator. I want to thank each of you for joining us today. I would encourage you to read our full 2025 annual report, the risk statements, and the earnings press release for more information. Links to both are available on our Investor Relations page of our website. On behalf of the entire team, we look forward to updating you on our key initiatives that will continue to shape the integrity and competitiveness of the public markets. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the fourth quarter and full year 2025 NCS Multistage Holdings, Inc. earnings conference call. At this time, participants are in a listen-only mode. After the speakers’ presentation, we will open up for questions. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s call is being recorded. I would now like to hand it over to your speaker today, Corbin Woodhall, Hayden Investor Relations. Please go ahead. Corbin Woodhall: Thank you, Victor. I would like to welcome everyone to the conference call and thank NCS Multistage Holdings, Inc. management for hosting today’s call. Us on the call today are Mr. Ryan Hummer, CEO of NCS Multistage Holdings, Inc., and Mr. Mike Morrison, the CFO. I want to remind listeners that some of today’s comments include forward-looking statements, such as our financial guidance and comments regarding our future expectations for financial results and business operations. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any other expectations expressed herein. Please refer to our most recent Annual Report on Form 10-K and our latest SEC filings for risk factors and cautions regarding forward-looking statements. Our comments today, as well as the results of operations included in our earnings release, contain the following non-GAAP financial measures: EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA less share-based compensation, adjusted gross profit, adjusted gross margin, free cash flow, free cash flow less distributions to noncontrolling interest, net working capital, return on invested capital, net operating profit after tax, and average invested capital. These non-GAAP measures and reconciliations to the most comparable GAAP financial measures are provided in our quarterly earnings release, which can be found on our website at ncsmultistage.com. I will now turn the call over to Ryan Hummer. Ryan Hummer: Thank you, Corbin, and welcome to our investors, analysts, and employees who are joining our fourth quarter and full year 2025 earnings conference call. I will begin my discussion with the financial highlights for 2025, and I will review certain commercial and operational accomplishments from 2025 and early 2026 that are aligned with NCS Multistage Holdings, Inc.’s vision and core business strategies. I will also discuss the integration of ResMetrics, and outline our strategic objectives for the year. Mike will follow, covering the financial results for the quarter and our near-term guidance. 2025 was a very important and successful year for NCS Multistage Holdings, Inc. Strong performance in the fourth quarter capped a year in which we exceeded the high end of our guidance range for the quarter and full year, for revenue, adjusted EBITDA, and free cash flow. Year over year, we grew revenue by 13% compared to 2024, and 10% excluding the contribution from ResMetrics, which we acquired in July 2025. We achieved revenue growth in each of the U.S., Canada, and international markets despite the challenging industry environment. Adjusted EBITDA increased by 20% year over year, outpacing our revenue growth and reaching $26.7 million with an adjusted EBITDA margin of 15%. Free cash flow, after distributions to noncontrolling interest, totaled $18.9 million and represents over 70% adjusted EBITDA-to-free cash flow conversion, which highlights the impact of our asset-light model. We strengthened our balance sheet while completing the strategic acquisition of ResMetrics, enhancing our global position in the tracer diagnostics space. ResMetrics is a highly complementary addition to our business that I will discuss further. So starting with our strategy, our vision at NCS Multistage Holdings, Inc. is to advance more efficient, intelligent, and sustainable energy development by enabling unmatched well performance. In practice, we deploy this vision in pursuit of the approximately $10 billion global completions market through a cohesive product and service offering that is designed to enable our customers to reliably maximize the value of their unconventional assets. This applies across diverse markets, in the more mature markets in North America, in emerging, high-growth unconventional developments in Argentina and the Middle East, and in more conventional geographies like the North Sea and Alaska, where we are successfully deploying unconventional technologies and techniques, collaborating with our customers to open new markets for our products and services in technically demanding environments, including innovative solutions for heavy oil utilizing steam-assisted gravity drainage, or SAGD, for deepwater offshore markets, and for enhanced geothermal systems. We also continue to partner with our customers to pursue further applications of our products and services during the production phase of the well. As we have discussed before, we have three core strategies that are supported by two guiding principles. I will review each, including recent progress, to demonstrate how we are creating long-term value for our stakeholders. The first core strategy is to build upon our leading market positions. This includes our market share and relationships in Canada, our extensive global track record in fracturing systems, and our expertise in tracer diagnostics, which has been strengthened through our combination with ResMetrics. This strategy is evident when we partner with our customers to introduce our solutions in new markets, often based on our extensive track record and the partnership that we have built with our customers over time. An example includes the first use of our fracturing systems technology for stimulation in a SAGD project in Canada in 2025, which also utilized our tracer diagnostic services to corroborate production results. Another example is the first expected installation of our Raytec Propex sliding sleeve system with integrated screen technology that we expect to deliver to our customer later this year for use in the deepwater Gulf of America. A second core strategy is to capitalize on high-margin growth opportunities worldwide. Over the years, I have highlighted the growth of our customer base in the North Sea, which continues to expand. We have received orders from two new customers already this year, each operating in the Dutch sector of the North Sea. We completed our first well in the Middle East utilizing our fracturing systems technology in 2025 and expect further applications in that market in 2026. And we have made the first sales of Repeat Precision frac plugs in the Middle East in 2025 with continued sales to two customers in the region so far and continuing during 2026. Our final core strategy is to commercialize innovative solutions to complex customer challenges. This proved to be an effective and exciting year for us with several significant achievements. In Canada, we recently installed our first Terrus AICV system, which has an integrated autonomous inflow control valve to improve the production profile of more mature wells, reducing produced water volumes while allowing for potential increases in oil rates. We look forward to additional installations of this system during 2026. Customer adoption of our StageSaver solution at Repeat Precision has been a meaningful contributor to growth, with new customers added during 2025 and early 2026 reflecting the value that our customers place on the contingency mitigation offered by the product, paired with the proven performance of our Purple Seal frac plugs. We are capitalizing on our investments in new tracer diagnostic solutions, including our RapidTrace on-site tracer detection solution, our Luminate multi-day composite samplers, and expanded use of ResMetrics SmartProp particulate tracer into Canada and other geographies. I will now speak to the two guiding principles that underpin our long-term strategy. First, seek to maximize financial flexibility. Our business model reflects this strength, with a net cash position at year end of approximately $29 million and an undrawn revolver. During 2025, we generated $22 million in free cash flow, $19 million of which is free cash flow after distributions to our noncontrolling interest. This free cash flow after distributions constitutes over 70% of our adjusted EBITDA for the year, reflecting meaningful conversion, especially considering our 13% year-over-year revenue growth. Our second guiding principle is to uphold the promise. Our company values are embedded in the promise, which represents the commitments that we make as a company to our employees, customers, vendors, and other stakeholders related to how we conduct business. It also speaks to our focus in the areas of technology, quality, health, safety, and the environment. Now I will provide a brief update on the integration of ResMetrics. This combination immediately strengthened our tracer diagnostics platform, increased our exposure to new markets in the Middle East, and aligned well with NCS Multistage Holdings, Inc.’s culture and our capital-light business model. I am pleased to say that we are operating under the ResMetrics commercial brand in the U.S., having integrated our sales and business development team. We have also upgraded our laboratory information management systems to incorporate certain ResMetrics processes, allowing us to uniformly plan and execute jobs for our customers. Operational and manufacturing integration will soon follow, with manufacturing and U.S. lab operations to be centralized in Tulsa by midyear. We have a clear line of sight to achieve the cost savings that we identified with this transaction, and we are progressing to deliver on revenue synergy opportunities we originally characterized as upside potential from the combination. I will close this section by reviewing our goals for the year, which are straightforward and are aligned with our long-term strategy. In 2026, we aim to grow revenue in excess of underlying market activity in the U.S. and internationally, with an objective to grow total revenue relative to 2025 inclusive of a full-year contribution from ResMetrics. We are targeting the conversion of more than 50% of our adjusted EBITDA to free cash flow. We expect to advance commercial adoption of our recent and new technology introductions, drive further commercial success for our product and service offerings, and also continue to penetrate the newest markets that we have entered. We are working to continuously improve our employee engagement and to ensure workplace safety, and we expect to advance initiatives currently underway to participate in higher temperature and production markets, to drive better data-enabled decision-making, and to expand our gross margin by implementing strategic actions to drive our efficiencies and optimize the cost and performance of our products and services. Mike will now provide more detail for our results for 2025 and our guidance for 2026. Mike Morrison: Thank you, Ryan. As reported in yesterday’s earnings release, our fourth quarter revenues were $50.6 million, a 13% increase compared to the fourth quarter of last year, and comfortably above the high end of our guidance range. Growth for the quarter was driven by healthy double-digit percentage improvements in both product and services revenue. From a geographic standpoint, the U.S. led with a 69% year-over-year increase, with international up 5% and Canada down 7%. The increase in the U.S. was due to the improved NCS Multistage Holdings, Inc. fracturing system sales, higher plug revenue from Repeat Precision, and a $2.9 million contribution from ResMetrics, a business we acquired on July 31, 2025. The decline in Canada for the quarter reflected moderately lower activity levels due to a general market headwind. Our fourth quarter revenues were the highest of the year and sequentially increased by 9%, with increases in Canada and the U.S. partially offset by a decline for international. Our adjusted gross profit, defined as total revenues less total cost of sales, excluding depreciation and amortization expense, was $21.2 million in the fourth quarter, representing an adjusted gross margin of 42% compared to an adjusted gross margin of 43% for the same period in 2024. Despite the favorable contribution from ResMetrics, the slight decline in adjusted gross margin was attributable to the mix of international tracer diagnostic jobs and fracturing system service activity, positively offset by an expansion in gross margin for our product sales. Selling, general and administrative costs were $14.2 million for the fourth quarter, down 5% compared to the same period last year, reflecting the timing of incentive bonus accruals recorded in the fourth quarter last year, as well as lower professional fees and share-based compensation expense associated with our cash-settled awards, which we recognize as expense as our stock price changes. During the quarter, ResMetrics contributed $600,000 to our SG&A. The provision for litigation, net of recoveries, was a benefit of $900,000 and resulted from a 2025 ruling by the Federal Court of Appeal of Canada, which remanded a prior judgment against NCS Multistage Holdings, Inc. in a patent dispute to the trial court and reduced the cost award. Accordingly, $900,000 of the cost award was returned to NCS Multistage Holdings, Inc. in November 2025. Other income of $1.1 million declined from $2.4 million for 2024, driven primarily by timing of royalty income licenses associated with our intellectual property, with 2025 activity aligning with our expected normalized rate of approximately $1.0 million per quarter. Net income for the fourth quarter was $15.0 million, or diluted earnings per share of $5.34, which included a positive impact of $9.8 million related to the release of our deferred tax valuation allowance. This reversal demonstrates confidence in our continued profitability and our ability to fully utilize our deferred tax assets in the future. Adjusted EBITDA was $9.2 million, or an adjusted EBITDA margin of over 18%, which exceeds the high end of our quarterly guidance range and is above the $8.2 million for the fourth quarter last year. Now turning to our full year 2025 results. Our revenues were $183.6 million, an improvement of over $21 million, or 13%, compared to 2024, exceeding the 5% midpoint of our initial guidance range for the full year. Excluding the revenue contribution of ResMetrics, which totaled $5.2 million for the five months following the acquisition and was slightly above our expectations, revenue for the year increased by 10%. All regions delivered an increase in total revenue for the year. Our adjusted gross margin for fiscal 2025 was stable at 41%, a slight decline of approximately 40 basis points compared to last year. For 2025, our SG&A expense was $58.8 million, an increase of $1.0 million compared to last year. ResMetrics contributed $1.1 million of SG&A in 2025, while increased share-based compensation expense also drove higher SG&A expenses. However, these increases in SG&A were partially offset by lower professional service fees, R&D expenses, and other SG&A reductions. Other income declined to $4.8 million from $7.3 million in 2024, primarily driven by the timing of royalty income recognition we previously discussed. Also, the prior year benefited from a technical service agreement with our local partner in Oman that ended in November 2024. Net income for 2025 improved to $23.7 million, or diluted earnings per share of $8.65, which includes a net positive impact of $11.5 million related to the release of our U.S. and Canadian deferred tax valuation allowances, as previously discussed. In the prior year, net income was $6.6 million, or diluted earnings per share of $2.55. Adjusted EBITDA was $26.7 million, up 20% compared to $22.3 million in 2024, with an adjusted EBITDA margin expanding to 14.5%, up from 13.7%. Turning to the balance sheet. On December 31, we had $36.7 million in cash and total debt of $7.6 million, which consisted entirely of finance leases, resulting in a net positive cash position of $29.1 million. The borrowing base availability under our undrawn ABL facility was $24.4 million, resulting in total liquidity of approximately $61 million. Turning now to a few points of guidance for the 2026 first quarter. We currently expect first quarter total revenue in the range of $49 million to $53 million, implying an increase of 2% at the midpoint compared to 2025. We expect U.S. revenue to range from $19.5 million to $20.5 million, international revenue from $3 million to $4 million, and Canadian revenue from $26.5 million to $28.5 million. Adjusted gross margin is expected to be between 39% and 41%, a modest decline compared to 2025. Adjusted EBITDA is expected to be between $6.5 million and $8.5 million. Our first quarter depreciation and amortization expense is expected to be approximately $1.6 million. With that, I will hand it back over to Ryan, who will provide our full year 2026 guidance and closing remarks. Ryan Hummer: Thank you, Mike. We expect the market environment to be challenging again in 2026. Based on our current outlook, we expect flat to lower overall customer activity in North America for 2026 compared to 2025, and for customer activity to increase in the primary international markets that we serve, though the improvements are likely to be weighted towards the back half of the year, especially in the Middle East. Accordingly, our full year guidance for 2026 is as follows: We currently expect full year revenue to range from $184 million to $194 million and for full year adjusted EBITDA to be between $26 million and $29 million. We expect our revenue growth to come primarily from the U.S. and international markets, where we are well positioned to outperform underlying market trends through continued market share gains, particularly at Repeat Precision, and also through new product adoption and continued international expansion. We currently expect Canadian revenue to be lower year over year as we face some headwinds from a lower total rig count, especially in Q1, and from specific customer consolidation that is likely to result in reduced pro forma activity levels. Our financial guidance does not incorporate any meaningful additional impacts from the currently volatile trade environment, including the potential imposition of new or retaliatory tariffs involving the U.S., Canada, and Mexico. The guidance also does not reflect the potential impact of the current conflict in the Middle East, either on operations in the region or potentially resulting from a sustained increase in commodity prices. We expect our gross capital expenditures for 2026 to be between $1.5 million and $2.0 million. In addition, we paid $1.5 million of contingent consideration associated with the ResMetrics acquisition in January 2026, which will be reflected in cash flow from investing activities. We expect our free cash flow after distributions to our JV partner of $12 million to $16 million, further strengthening our robust balance sheet and positioning us to pursue strategic investment opportunities. Due to the seasonality of our business, and consistent with prior years, we would anticipate that the achievement of our annual adjusted EBITDA guidance range will be weighted towards the second half of the year, with free cash flow weighted towards the end of the year. Before Q&A, I will close with a few comments. I am very proud of what the team at NCS Multistage Holdings, Inc. accomplished in 2025. We grew revenue, adjusted EBITDA, and free cash flow in a challenging market environment, delivering the benefits that we expect as we executed our strategic plan. We have the infrastructure in place to support revenue growth. Over time, we would expect our incremental adjusted EBITDA margins to be 25% to 35%. We are benefiting from the successful introduction of new solutions that meet the needs of our customers, adding to our portfolio and expanding our addressable market. We are operating as a unified tracer diagnostics business with ResMetrics. We have completed the work required to realize most of the anticipated synergies of this combination, with more benefit to come as we consolidate our U.S. lab and manufacturing footprint and increasingly focus on revenue synergy opportunities. We maintain a strong balance sheet and liquidity position, with total liquidity, including availability under our revolver, of over $61 million. We are efficiently converting our adjusted EBITDA to free cash flow, with free cash flow after distributions to noncontrolling interest totaling $19 million in 2025, which constituted over 70% of adjusted EBITDA. We expect our free cash flow after distributions to noncontrolling interest to exceed 50% of adjusted EBITDA again for 2026. As of yesterday, the midpoint of our free cash flow guidance for 2026 would represent a free cash flow yield of approximately 132% to our market capitalization. Finally, we uploaded our new investor presentation yesterday, which touches on a few of the items I discussed earlier in the call: our efforts to open new addressable markets, the progress we are making on the areas of emphasis from our corporate strategy, and the actions that we are taking across our product lines to improve profitability. We also added a new slide highlighting our return on invested capital, which illustrates the significant improvement in our business over the past few years. While we continue to be focused on core metrics, including revenue and EBITDA growth, margin improvement, and free cash flow, I think it is important to keep in mind that we are competing for investment capital not only with our industry peers, but the broader market as well, and return on invested capital is an important indicator of a company’s ability to create value for its shareholders over time. I am proud of the progress we have made, achieving after-tax returns of over 11% in 2025, reflecting our disciplined capital allocation and the operating leverage inherent in our business as we grow. Over time, our objective is to continue to improve our returns, with a medium-term objective of 15%, which we believe to be highly competitive across industries. With that, we welcome any questions from the audience. Operator: Press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please limit yourself to one question and one follow-up in the interest of time. We will now open for questions. Please stand by while we gather the candidate roster. One moment for our first question. Our first question will come from the line of Dave Storms from Stonegate. Your line is open. Dave Storms: Morning, and thank you for taking my questions. Ryan Hummer: Morning, Dave. Dave Storms: Just wanted to get started with the puts and takes on guidance. I know there is now a couple of quarters in a row you guys have telegraphed that a lot of your revenues this year are going to be weighted towards the back half. Is there potential for some of that to get moved up, or is a lot of maybe some of the Middle East stuff still in qualification phases that is pretty locked into Q3, Q4? Ryan Hummer: Yeah, Dave. I think you will see that profile continue. Right? Part of it has to do just with the seasonality of our business and our weighting to the Canadian market where, while Q1 is generally relatively strong, we see spring breakup in the second quarter and then more normalized activity in the second half of the year. Certainly, acquisition of ResMetrics, which is more U.S. and international focused, will help to mitigate that bit, as well as some of the market share gains that we have made with frac plugs in Canada, which tend to go to work that is more year-round. But I think we will continue to see that seasonality. I think as we look to certain specific opportunities, you know, for NCS Multistage Holdings, Inc., they are not just kind of market-driven. We do see a lot of the projects for 2026 developing such that we will see that pattern again with the majority of the earnings and the cash flow coming in the back half of the year. Dave Storms: Understood. That is very helpful. Thank you. And then I know you mentioned in your prepared remarks, you spent a little bit of time talking about some of the cross selling that you have been able to do specifically in Canada. Is it too early to talk about some cross selling potential in the Middle East with the ResMetrics, excuse me, with the ResMetrics transaction, or should we still wait on that until later in the year? Ryan Hummer: Yeah. So with ResMetrics internationally, we started to see some benefits. It is really more within North America, however. For example, I mentioned a product, a type of particulate tracer that ResMetrics has called SmartProp that was developed and utilized initially with their customers in the U.S., and we have now deployed that and have utilized it with some customers in Canada who really appreciate that technology. We are seeing, and what I would say is, kind of as you look to international markets, we are really looking at the combination of some of the new technologies that we have across that tracer diagnostic platform. One of those that is really applicable internationally is something called RapidTrace, and that is an on-site tracer detection capability for us. And that really brings value in remote markets where it might be hard to collect a sample and ship it to a lab and wait for that time to see results, but also where decisions that you make as you see that tracer result can enable a customer to take an asset off location and save significant dollars. So that is one of the things I think will help us in multiple international markets. The international work that ResMetrics has is really under long-term contracts. We mentioned they have work in the Emirates and in Kuwait. So those contracts, because they are multiyear, can certainly work to expand scope. We can also work to bring some of the best practices we identify across the organization. But as far as kind of revenue cross selling, that will take a little bit more to develop outside of North America. Dave Storms: That is great color. Thank you. I will get back in line. Operator: Thank you. Once again, that is 11 for questions. 11. One moment for any questions to queue up. Alright. One moment for our next question. We have a follow-up from Dave Storms from Stonegate. Your line is open. Dave Storms: Appreciate that. I did also want to ask maybe about what you are seeing in the North Sea. I know it tends to be pretty project by project. Maybe just any updates on the pipeline there as you continue to expand deepwater and some other unique capabilities. Ryan Hummer: Yeah. Thanks, Dave. Obviously, North Sea has been a great success story for us over the last several years, especially with our fracturing systems technology. I believe last year in 2025, we worked with, I believe it was seven customers across the North Sea, either having sold sleeves or, you know, complete completions work out on the platforms. And I mentioned earlier in the comments that, you know, we have orders in place to add two customers to that roster that are operating in, you know, the Dutch sector of the North Sea. So we are now, you know, working with customers in Norway, in the U.K., in the Netherlands. So, yeah, I think just the breadth of the customer base that we have developed speaks to kind of the product market fit that we have in that region and the results that customers are seeing utilizing that technology. And I think in a prior call, we might have mentioned, you know, a workshop that we held in Norway where we had great, you know, customer engagement and feedback for operators that were operating not just in Norway but across the entire region. So we feel, you know, really, really good about the work that we have in the North Sea. So as far as kind of how that might develop and play forward and, you know, that technology into other markets? You know, one of our North Sea customers is a project partner in the deepwater Gulf of America well that we expect to participate in later this year. So you have some connectivity there. There is also a customer that we have in the North Sea that we are talking to about other project opportunities in shallow water markets outside of the North Sea. So, you know, I would expect that to continue to develop over the course of the next year or two, but we certainly are looking to build on that success in shallow water offshore markets, taking that outside of the North Sea and then leveraging and moving into mid and deeper waters over time as well with our technology. Dave Storms: If I could just ask one follow-up on that. You mentioned the drill that you are expecting later this year in the Gulf of America. It is kind of a new market opportunity for you. How would you characterize maybe in the medium to long term some of your other new market opportunities that you might go after? Ryan Hummer: Yeah. No. Thanks for the question, Dave. And I think one of the things that came through in the prepared comments is the work that we have been doing to open up new addressable markets for our technology. So certainly, the deepwater is one, and that is a long, you know, a long sales cycle and product development cycle to get to it. So we feel really encouraged to be able to deploy that technology for the first time, hopefully, this year, and we believe that will open up additional opportunities with that customer, but then, you know, also opportunities for other customers that are targeting the same type of reserves going forward. The other areas where, you know, we have, you know, development initiatives in place, one is higher temperature more broadly. That does play into some deepwater markets. It is offshore in traditional oil and gas. It also plays into the thermal oil developments in Canada. I had mentioned SAGD. It also plays into enhanced geothermal systems, where customers are looking to leverage technology developed by the oil and gas industry, horizontal drilling, hydraulic fracturing, to access, you know, the heat in situ, you know, deep underground to provide baseload power that can be used to power data centers and other things. So I think, you know, the SAGD or the heavy oil market in Canada is one that we feel, you know, will open up some opportunities for us over the medium term. I think geothermal is one as well. Those are all relatively early days, will take time to scale, but good examples of what we are looking to do to participate in those markets. The other one is that, you know, historically, we focused primarily on supporting our customers during their completions. And within our fracturing systems portfolio, we do have an enhanced recovery suite of technology. You know, historically, that has been around what we would call injection control, so helping customers be more precise in the way they inject fluid, typically water, but in a waterflood or secondary recovery regime, when they are doing that with a horizontal injector, to being able to compartmentalize the well to create efficient sweeps and optimize the value of those waterfloods. We do have a development underway which is called TERIS AICV. I mentioned that earlier, which is more of a production control solution, which should help our customers to reduce the water cut that they are seeing in their wells, and, you know, handling produced water is an expense for our customers. So the deployment of the solution, we can help them reduce their production operating costs, but then also, through kind of preferentially producing through this specialized valve, preferentially producing the oil relative to the water, you may be able to see an oil production uplift as well. So if we can help our customers both improve their revenue profile and reduce their cost profile on existing assets, that is something that we think will have good application for our customers in the industry over time. And then, again, sort of speaking to one of your earlier questions on the ResMetrics integration and how that plays into some of this enhanced recovery and production space. Historically, we have been a little bit limited in our ability to pursue deploying tracers in waterflood projects. But with some of the new lab and chemical deployment techniques that, you know, we have been able to utilize from that ResMetrics brought to the table, that has opened up new opportunities for us in the production space on the waterflood, and our Canadian team in particular has been very successful this year going out and participating in projects that we probably were not as competitive in before without those capabilities. Dave Storms: That is great color. I really appreciate it. Thank you for taking my questions, and good luck in the quarter. Ryan Hummer: Alright. Appreciate it. Thanks, Dave. Operator: Thank you. Once again, that is 11 for questions. 11. And I am not showing any further questions in the queue. I would now like to turn it back over to Ryan Hummer, CEO, for closing remarks. Ryan Hummer: Thank you, Victor. On behalf of our management team and board, we would like to thank everyone on the call today, including our shareholders and analysts, and especially our employees. I truly appreciate the depth and breadth of the expertise of our people at NCS Multistage Holdings, Inc., at Repeat Precision, and the folks that have joined us from ResMetrics, and the passion and the effort that our people bring to their work. Our team continues to provide excellent service to our customers, commercializing new products and services that will enable our customers to be more successful. We are taking on demanding and technically challenging work and delivering results. We appreciate everyone’s interest in NCS Multistage Holdings, Inc. We look forward to speaking again on our next quarterly earnings call.
Operator: Good afternoon. Welcome to the Amprius Technologies, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us for today's presentation are the company's CEO, Thomas Stepien, and CFO, Ricardo Rodriguez. At this time, all participants are in listen-only. Following management's remarks, we will open the call for questions. Please note that this presentation contains forward-looking statements, including, but not limited to, statements regarding our financial and business performance, our business strategy, future product development or commercialization, new customer adoption and new applications, our growth and the growth of the markets in which we operate, and the timing and ability of Amprius Technologies, Inc. to expand its manufacturing capacity, scale its business, and achieve a sustainable cost structure. These statements involve known and unknown risks, uncertainties, and other important factors that may cause Amprius Technologies, Inc.'s results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied in such forward-looking statements. For a more complete discussion of these risks and uncertainties, please refer to Amprius Technologies, Inc.'s filings with the Securities and Exchange Commission. This presentation includes a non-GAAP financial measure, which is adjusted EBITDA. This non-GAAP financial measure does not replace the presentation of Amprius Technologies, Inc.'s GAAP financial results and should only be used as a supplement to, not a substitute for, Amprius Technologies, Inc.'s financial results presented in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies. A reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, is included in our press release, a copy of which is filed with the SEC and posted on our website. Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on the company's Investor Relations website at ir.amprius.com. In addition to the webcast, the company has posted a press release that accompanies these results, which can also be found on the Investor Relations website. I will now turn the call over to Amprius Technologies, Inc.'s CEO, Thomas Stepien, for his comments. Sir, please proceed. Thomas Stepien: Welcome, everyone, and thank you for joining us this morning. Let's start with Slide two. 2025 was a landmark year for Amprius Technologies, Inc. Our second generation SiCore silicon anode batteries gained broad adoption with many unmanned aerial vehicle customers. One recent win I would like to highlight is Nokia Drone Networks, whose commercial drone-in-a-box system is one of the most capable platforms on the market. Amprius Technologies, Inc.'s balanced cells provide Nokia drones with the burst power needed for takeoff and the sustained energy required for extended flight, ensuring obstacle avoidance, return to home, and other safety-critical subsystems remain powered throughout the mission. Our technology enables drones to fly longer, carry more, and operate in conditions once considered impractical, helping customers improve safety, reduce downtime, and increase mission value. In early January, we were honored to receive a Best of Innovation Award at CES. Our silicon anode lithium-ion battery was selected from the thousands of entrants for delivering an industry-leading 520 watt-hours per kilogram. For perspective, that is nearly twice the energy density of conventional graphite-based lithium-ion cells. Our cells are lighter, longer, and stronger. In December 2025, the U.S. updated the National Defense Authorization Act. Under the revised NDAA, batteries used in Department of War UAVs must meet two sourcing requirements. First, final battery assembly must be conducted by a non-foreign entity of concern, typically located in the United States or in an allied nation. Second, functional cell components must not be sourced from or produced by FEOC. For new DOW acquisition programs, both of these requirements must be met by 01/01/2028, approximately 22 months from now. NDAA is important in the context of our contract with the Department of War's Defense Innovation Unit. Awarded in July 2025 through a competitive solicitation from the 2024, the contract was recently increased and now totals $14,800,000. The DIU contract provides prototyping funds for Amprius Technologies, Inc. to accelerate production of NDAA-compliant SiCore pouch cells used in military unmanned autonomous systems. The contract includes milestones for supply chain diversification, pilot line expansion in Fremont, California, and the selection of NDAA-compliant contract manufacturing partners. Amprius Technologies, Inc. is ahead of schedule on NDAA compliance. One of our South Korean contract manufacturing partners has been delivering cells to customers since September 2025. We have expanded the Amprius Technologies, Inc. Korea Battery Alliance to three contract manufacturing partners, and in early January, we announced our first U.S.-based partner, Nanotech Energy, located in Northern California. I am happy to report that our scorecard for the battery component sourcing is 11 out of 11. All internal SiCore components—anode, cathode, electrolyte, separator, and seven additional elements—are now sourced from primary and secondary suppliers in NDAA-compliant countries. We are prepared to supply domestic cells to customers such as L3Harris Technologies, which delivers integrated solutions across space, air, land, sea, and cyber in support of national security. On the financial front, we completed our aftermarket financing facility during the fourth quarter. We also fully exited our Colorado facility and settled the remaining lease and expense obligations. Fourth quarter revenue reached a record $25,200,000, representing an 18% quarter-over-quarter improvement and a 137% year-over-year increase. Gross margin improved to 24%, a nine percentage point increase quarter over quarter and a 45 percentage point increase year over year. Full year 2025 revenue reached $73,000,000, 3x our 2024 level. Gross margin for the year was 11%, up significantly from the minus 76% in 2024. Later in this call, Ricardo will share additional financial details and color. Now turning to Slide three. Amprius Technologies, Inc.'s customers choose our batteries because they materially improve the performance of their products. By replacing standard graphite-based cells with our silicon-based cells, customer drones achieve significantly longer flight times. One way to think about our batteries is through the analogy of espresso. Espresso delivers the same amount of caffeine energy as a standard cup of drip coffee but in a much smaller volume. And if you match the volume and weight of the two, espresso gives you roughly twice the energy. Drone customers tell us this consistently. Amprius Technologies, Inc. batteries extend their flight time. In many cases, flight times double. Amprius Technologies, Inc. Xpresso batteries give customers the extra energy they need to elevate system performance. We elevate without compromise. The Amprius Technologies, Inc. silicon anode platform spans 22 cell designs across multiple chemistries, pouch and cylindrical formats, and a range of sizes. We have tuned and optimized cells for specific customer duty cycles, giving us the precision to deliver ideal solutions for energy-focused missions, the takeoff power required by air taxis, and applications demanding high cycle life. This tunability is a significant differentiator for Amprius Technologies, Inc. Slide four looks at our market segments. We serve five principal end markets. The first is UAVs, including drones used for defense, public safety, security, and logistics. Defense platforms that require high energy density typically support long loiter missions and are primarily ISR—intelligence, surveillance, and reconnaissance. Public safety drones are typically DFR—drone as first responder—systems integrated directly into 911 emergency workflows. In the U.S., more than 1,500 emergency departments now operate DFR programs as a part of real-time response operations. Drones are pre-positioned in fixed launch stations across the city and are dispatched automatically or semi-automatically the moment a 911 call is received. The objective is to get a camera over the scene in under two minutes, well before police, fire, and EMS units can arrive. Market segment number two is satellites and space. Satellite launch providers charge customers by the gram, making our ability to deliver the same energy at roughly half the weight—our espresso advantage—extremely valuable. Alto, a division of Airbus, is a long-standing customer in this segment. Its Zephyr high-altitude pseudo satellite are solar-powered aircraft that operate at 70,000 feet for months at a time. The persistent ISR capability that Zephyr provides is strategically important for both defense and commercial applications. Amprius Technologies, Inc. cells are also gaining strong traction in light electric vehicles—e-motorcycles, scooters, and e-bikes. Wins in this segment typically align with the launch of new models, so revenue tends to be lumpier than in other markets. This category also includes a healthy replacement and range extender sub-segment, an area we are beginning to explore. Robotics is our fourth market segment, and while still early, it is developing quickly. Robot performance is closely tied to battery capability, and Amprius Technologies, Inc.'s tunable cells can deliver both the high power needed for tasks like lifting and the energy required to maximize time between charges. With strong growth rates and expanding use cases, this segment is highly promising. The final segment that depends heavily on our industry-leading energy density is the electric vertical takeoff and landing aircraft, eVTOL, and other advanced air mobility. Customers are developing autonomous, point-to-point regional transport for both passengers and cargo. Several companies are currently testing our cells, and we have a customer-funded joint development program underway with one leading company. In this program, we are tuning our chemistry to meet the specific power and energy requirements of their aircraft. Turning to Slide five. Amprius Technologies, Inc. captures customer interest through our flexibility. We work closely with customers to understand their energy, power, and cycle life requirements, then select internal components that meet those needs while aligning with country of origin constraints. Because SiCore cells are produced on standard lithium-ion equipment, we can secure early design wins from our California pilot line and seamlessly transfer cell recipes and process steps to our contract manufacturing partners as volumes scale. During Q4 2025, we introduced three new cells to our silicon anode platform and retired one. The portfolio now stands at 22 designs spanning energy, power, and balanced cells in both pouch and cylindrical formats. We continue to offer the tunability, speed, and flexibility our customers rely on. Now turning to Slide six. Increasingly, customers care about the country of origin for both battery cells and internal components. Much of this is driven by the NDAA requirements discussed earlier, and the impact now extends to non-defense customers as well. Avoiding foreign entities of concern has become a compliance mandate, not just a marketing detail. Procurement teams are asking detailed questions about where cells are manufactured, where anodes and cathodes are processed, and where critical minerals originate. Fortunately, we anticipated this shift and began executing more than a year ago. In 2025, we announced our first NDAA-compliant contract manufacturer in South Korea, which delivered cells to customers just one quarter later. Last week, I was in South Korea with several of my Amprius Technologies, Inc. colleagues visiting component suppliers, checking in with current contract manufacturing partners, supporting new partners coming online, and meeting customers at our booth at DroneShow Korea. We still have work ahead on the NDAA supply front. With multiple contract manufacturers, 22 cell models, and 11 internal components, aligning every variable is operationally intensive. But we got an early start, we invested wisely, and we consistently share our progress with customers. They understand our roadmap, for both cell manufacturing and for cell content sourcing, and they respect our ability to deliver the right cell from the right location at the right time. On Slide seven, we present our high-level cell roadmap. The Amprius Technologies, Inc. roadmap highlights our industry-leading energy density on the vertical axis over the next 18 months. It organizes our portfolio into three cell types: high energy cells, where long uptime drives range and usability—key segments here include drones, robotics, and LEDs; high power cells, which deliver short, intense power bursts—applications include power tools, data center backup systems, and aviation platforms such as eVTOLs and drones that require power pulses for takeoff and landing; and long-life balanced cells designed for applications that demand both power and energy along with extended cycle life—these include eVTOL, satellite, and bendable device applications. We routinely share this high-level roadmap and the detailed information behind it with customers. We listen closely to their needs, incorporate their feedback, and adjust the roadmap as required. I will now turn the call over to Ricardo Rodriguez, for the financial results. Thank you, Tom, and good morning, everyone. Ricardo Rodriguez: I am very happy to be reporting another record-breaking quarter on behalf of our team, starting on Slide eight. In the 2025, we delivered $25,200,000 of revenue. This translates into 18% growth over the third quarter and is over 2.3x higher than the same quarter last year. I am particularly excited about crossing the $100,000,000 annual revenue run-rate mark, which positions us to deliver over $1,000,000 of revenue per employee, joining a very selective and unique group of companies. Echoing Tom's remarks, clearly the monster role technical edge has continued driving demand for our products as we broadened the portfolio and expanded our capacity in close collaboration with our manufacturing partners. For the year, our revenues were $73,000,000, in line with our expectations and just over three times higher than 2024. Our Q4 cost of goods sold, at $19,300,000, did not increase at the same rate as the revenue, thanks to a favorable product mix and higher volumes. This enabled gross profit margins of 24%, a significant improvement over our Q3 gross margin of 15%. Our lower SiMax line mix was now below percent of revenues, providing a powerful driver of our gross margin improvements. For the year, gross margins were 11%, reflecting a step-change improvement over negative 76% gross margins in 2024 as our revenue from SiCore increased around the world. Our resourceful culture enabled the team to only spend $8,900,000 of OpEx, which excludes a one-time charge of $22,500,000 linked with our decision to not develop a facility in Colorado and the decommissioning of some equipment in Fremont. The quarter-over-quarter increase in OpEx of $900,000 was driven by a targeted investment in our sales and go-to-market efforts along with the reallocation of some R&D expenses from cost of goods sold to OpEx as development services agreements are completed. These expenses, including the one-time charge of $22,500,000 that I mentioned earlier, bring our Q4 operating loss to $25,400,000 compared to an operating loss of $4,700,000 in the prior quarter. Without the one-time charge, our operating loss would have been $2,900,000, which would have reduced our operating loss by 37% quarter over quarter. A similar dynamic applies to our annual operating loss of $46,600,000, which would have been $24,100,000 without the same one-time charge and the 48% reduction of the operating loss of $46,200,000 from 2024. Our GAAP net loss for the third quarter was $24,300,000, or negative $0.18 per share, based on 132,100,000 weighted average shares outstanding. Without the one-time charge, our loss would have been only $1,900,000, or $0.01 per share. In Q4, we recorded adjusted EBITDA of negative $1,800,000 compared to negative $1,400,000 in the prior quarter. With $1,600,000 in operating costs from Colorado, we would have actually had positive adjusted EBITDA of $177,000 in 2025. As a reminder, we define adjusted EBITDA as net income or loss before interest, taxes, depreciation, amortization, stock-based compensation, and other items that we do not believe are indicative of our core operating performance. In Q4, these adjustments included $1,200,000 of depreciation, $1,900,000 of stock-based compensation, $1,100,000 of interest and other income, along with $1,600,000 of quarterly operating cost linked to the Colorado facility. If we adjust our EBITDA for the costs that we will now not be incurring in Colorado, our adjusted EBITDA in 2025 would have been negative $5,300,000, reducing our EBITDA loss by 77% year over year and putting us on a path to have positive adjusted EBITDA above our current revenue run-rate. As of the 2025, we had 134,500,000 shares outstanding, which was up by 4,100,000 from the prior quarter. The change includes approximately 2,300,000 shares issued from option exercises and RSU vesting along with 1,800,000 shares issued under our at-the-market offering program. Now turning over to cash flow and the balance sheet. We ended the third quarter with $90,500,000 in cash and no debt. The main drivers of cash flow in the quarter were the following: $13,500,000 used in operating cash flow was mainly driven by a near-term $1,800,000 increase in accounts receivable and a $2,100,000 increase of inventory. $2,240,000 of Q4 investments that are being funded by the Defense Innovation Unit, or DIU, as part of our project to stand up NDAA-compliant pilot and manufacturing lines. This brought our total CapEx in 2025 to $4,400,000. And lastly, $23,100,000 from financing activities consisting of $19,600,000 from the issuance of common stock under our at-the-market sales agreement and $3,500,000 of proceeds from warrants and option exercises. As we announced on January 12, we have now terminated our at-the-market offering program. Before I turn the call back to Tom, I would like to take a moment to frame out our outlook for 2026 and the North Star beyond that using Slide nine as the backdrop. With what we know today, we believe that by leveraging our platform and existing relationships, we can deliver at least $125,000,000 of revenue in 2026, which would enable us to have our first full year of adjusted positive EBITDA of at least $4,000,000. This baseline level of profitability would translate into a net loss of $8,000,000 for the year, or $0.06 per share, assuming 134,500,000 shares. When we say at least, we mean that we believe that while we are positioned to deliver additional upside, we would rather size this incremental opportunity as it happens than commit to delivering it as we work our way through what can be a great year for Amprius Technologies, Inc. Our CapEx for the year will be less than $10,000,000 as we have made a decision to strategically invest in diversifying our supply chain and expanding manufacturing capacity within our Fremont facility to include electrode manufacturing. As noted earlier, we are doing this in collaboration with the U.S. Government Defense Innovation Unit and have secured a contract for $14,800,000. With what we know today, we expect this funding to cover most of our capital over the next several quarters as we work to develop a growing and resilient source of supply in a dynamic trade environment. Last month, alongside the announcement of our agreement to produce cells with Nanotech Energy in the U.S., we also reported that we eliminated a lease and related expense obligation of over $110,000,000 in Colorado by settling it for $20,000,000. As a result, you can expect our cash position in Q1 to decrease by that amount, along with the reduction of $13,400,000 in right-of-use assets and the $33,200,000 reduction in near-term liabilities in our balance sheet. In forecasting our cash burn, we believe that our current revenue level and even slight improvements from these can put us on a path to mainly consuming cash for working capital versus funding operating expenses in the near term. Looking further ahead, we believe that as we work through 2026, it will become increasingly clear that our plans to build an efficiently scaled, multi-market leader that sets the technical pace in high energy and density power cells are realistic. As we close out the decade, we are targeting making the most of over $600,000,000 of contracted capacity by enabling our customers’ most mission-critical duty cycles and positioning us to deliver over 30% gross margins. By maintaining our resourceful culture and low-cost structure, we can then translate that into at least 20% EBITDA margins. Most importantly, the capabilities in go-to-market, product development, quality assurance, and enabling scale that we would have by then would position us for additional growth beyond 2030. That opportunity has our team energized and motivated to work together to meet and hopefully even surpass these goals by improving ourselves and how we work. With that, I am happy to turn the call back to Tom for his closing remarks. Thank you very much for your attention and continued support. Thomas Stepien: 2025 was a very strong year. We delivered consistent quarter-over-quarter revenue growth, expanded our customer base to more than 550, demonstrated state-of-the-art technical performance, and achieved three consecutive quarters of positive and growing gross margin. The lithium-ion battery market is intensely competitive, and we embrace those challenges. In 2026, we remain focused on delivering next-generation silicon anode performance that raises the bar for energy density and sustained power without compromising safety or reliability. We are equally committed to meeting the cell manufacturing and content country of origin requirements our customers expect. We will broaden our product portfolio to unlock new market opportunities and convert a growing number of customer engagements into formal qualifications and deployments, particularly across mobility-centric platforms. We are starting 2026 in a financially clean position, having completed our ATM program, fully exited the Colorado facility, and transitioned all legacy SiMax Generation One customers to our Generation II SiCore platform. We are incredibly bullish about the opportunities in front of us. We look forward to meeting and reconnecting with many of you as we participate in a number of upcoming investor conferences. Thank you for your continued interest and support of Amprius Technologies, Inc. With that, I will turn it back to the operator for questions. Operator: Thank you. We will now open for questions. Ricardo Rodriguez: I ask you please limit yourself to one question and one follow-up. Operator: The first question is coming from the line of Eric Stine with Craig Hallum. Please proceed with your question. Eric Stine: Hi, Tom. Hi, Ricardo. So curious—maybe if we could start just with the selection of the 11 components. I mean, a quite significant step. But just curious, you talked about it a little bit, Tom, but just maybe a little bit more in-depth about what you need to do now, what some of the steps might be in 2026. Obviously, you have got a head start, but those steps as you work towards gaining that full compliance, and I would assume you are trying to do that well in advance of the 01/01/2028 date. Thomas Stepien: Yes, good question. So we have technically selected anode, cathode, electrolyte, separator, and [other elements] that make up the internals of our battery and give us the internal performance that we talked about. We have primary vendors and secondary vendors. It went through a pretty rigorous testing process. This all started with the DIU project back when it started in July '25. So we have had six, eight months to turn the knobs here. So we are happy with the performance of the cells with the different internals. In fact, in some cases, we see slightly improved performance compared to the legacy components. So that is where we are. The work that remains includes productizing and getting all of those new suppliers under multiyear agreements. Part of what I was doing in South Korea last week is talking to some of those suppliers because Korea is, outside of China, probably the second largest country in terms of suppliers. There are ones in Japan. There are suppliers here in the U.S., etc. So we need to put those agreements in place, make sure that we can operationalize it, get them to deliver their components to our contract manufacturer. So there is some operational work. There is some supply chain work that is still on our plate to complete to finally deliver full cells at quantities that our customers are demanding. Eric Stine: Got it. So it sounds like you are really through all the technical or the engineering side of it. It is now more about just making sure that—yes, you have qualified those sources—but can you lock those down and be able to incorporate those in your products for, obviously, larger volumes? Thomas Stepien: That is a good way to summarize it. The heavy lifting on the technical side is done, and now it turns over to our operational teams who need to do exactly that and get the supplies. Eric Stine: Appreciate that. And then just maybe for my follow-up, saw the first Gauntlet Awards under the Drone Dominance Plan, and I know there were 25 awardees. I do not know if you are able to give specifics or any color around this, but of those 25 awardees, just kind of curious how many of those are your customers? How do you view that as an opportunity? And then obviously, just your outlook for the next steps under the executive order? Thomas Stepien: Yes. The gauntlet one of the Drone Dominus program had 25 invitees. We should see here in the next couple of days the results of the actual fly-off that has completed. Our understanding is that it was done last week and there is a down-select going. We are all over that in terms of understanding where is Amprius Technologies, Inc. inside in each of the 25. We are looking forward to understanding the official down-select list that, again as I mentioned, should be [out shortly]. So that is where we are. Stay tuned on specifics. I think as that list is published, we may be able to talk about [more]. Understand there is a second, third, and fourth gauntlet, so this will happen over the next 18 months or so. This is early, but we feel good about where we are today. Operator: Thank you. Our next question is from the line of Austin Volle with Needham and Company. Please proceed with your question. Austin Volle: Hey, guys, thanks for taking my question and congrats on the great results. I just wanted to dive into the new customer wins. Historically, this was a metric you guys were giving. In the deck, it says that you are working with 550 customers. So, my question is, is it fair to assume you guys added over 100 new customers in the quarter? And then just trying to get a sense of where they are in volume production. Are we still kind of in the early design phase for the majority of these? When do we get to those high-volume production levels? Thomas Stepien: It is fair, Austin, to assume that it is more than 100. It was 444 in the last call in November. You said 550. So yes, we continue to add to that. We have both repeat customers, of course, which is an interesting signal that we have earned the trust and can grow that, and we continue to expand the funnel with over 100 new logos. In general, the 100 new ones are new evaluations, right? Some of these are a couple of hundred cells for testing. They come from our Fremont pilot line, which is set up exactly to win these [programs]. So we keep track of those because we are planting seeds first. The average PO—we looked at that just the other day—during Q4 increased relative to Q3. Customers are purchasing larger volumes. But it is still early days here. You can obviously do the math on our revenue; we are at single-digit market share in these markets, and growing. So, it is early. We have a lot of work to do to capture what we believe is our fair share given our tech. Austin Volle: Okay. Thank you for that. And just one quick follow-up. Looking at your guidance and kind of what is baked in from a geographic perspective—historically, Europe or international has been the main driver. Could you talk about what is baked into that and what we should be expecting from a regional perspective? Ricardo Rodriguez: Yes, sure, Austin. We see a continuation of the same trends that we saw especially in Q3 and Q4, and are really waiting to see where the U.S. comes out in terms of enabling us to deliver additional upside. So, frankly, within the guide, we expect our mix to look pretty similar to where we were in Q2, Q3 of last year. Austin Volle: All right. Well, thank you, guys, and best of luck for the rest of the year. Ricardo Rodriguez: Thanks, Austin. Thank you. Operator: Our next question comes from the line of Mark Schubert with William Blair. Please proceed with your question. Mark Schubert: Tom and Ricardo, congrats on the great progress in 2025. Question about some recent geopolitics. The war in Iran—we are starting to see the U.S. drone warfare capabilities. But at the same time, we are starting to see some strain in the munition stockpiles. So I am wondering, in the past six days, have you had any increased urgency from any U.S. military defense contractors? Are they looking for you to ship more batteries yesterday? Thomas Stepien: Yes. Over the weekend, we actually had one customer who themselves have a reconnaissance drone—tends to fly for hours and days at a time—that was a little bit on hold that is getting a pull themselves, which creates a pull for us. And that is where this pilot line we have here where, for Ricardo and I, are in Fremont and quickly do a student body right. Okay, let's make those in this one and eight cells. Deliver them quickly, i.e., in a couple of weeks, to that. So we are seeing some of that. It is hard to talk about more than that, just a single customer, but that is one data point to share. Mark Schubert: The Nanotech partnership we thought was a creative solution to find some capacity. How much demand are you seeing from these super NDAA-compliant customers where they need U.S. manufacturing? And are you looking to find more creative solutions like another Nanotech, or do you think that the pilot line that you are increasing capacity in Fremont with the DIU investment will provide enough capacity later this year? Thomas Stepien: Yes. The pilot line is well named because it is primarily to win initial designs. And once there is volume that is a couple of thousand cells, that is when we transfer to one of our partners. Nanotech helps us on cylindrical cells, and we are getting a really strong pull. I was at [customer meetings in] December. As the NDAA changes [rolled out], they are okay with some of the cells they are getting today from the countries and content today, but they really want to understand the when. We mentioned that earlier. So we share with them the roadmap—here is when we are really going to have volume from either Nanotech or others. And there will be more coming. That is clear. The pull is there. This will balance out in a couple of years. Some of our customers are insensitive to this, and Korea is serving that, as I mentioned. As we know, we have sales from Korea today, and some must have U.S. So it will balance out maybe one-third, one-third, one-third, in a couple of years, grading that transition. Operator: Thanks, Tom. Your next question comes from the line of Colin Rusch with Oppenheimer. Please proceed with your question. Colin Rusch: Thanks so much, guys. Tom, I would love to get a better understanding of what is happening here within the technology roadmap. Are these fundamental changes in some of the electrolyte and binder technologies or any of those separator technologies as you move towards these higher performance cells? And how mature is the testing process to give you comfort that you will be able to execute on these over the next 18 to 24 months? Thomas Stepien: Yes. We think that—let's go inside the battery a bit. So the anode with our silicon design, which took us a little while to get right, we think is pretty strong. So the big question is, okay, why cannot we go above 450, 500—depending on the cell type—watt-hours per kilogram? Is that some of the other components, as you alluded to? Primarily on the cathode. So there are knobs being turned by our R&D folks. The thinking is that cathode may be slowing down the overall package. So there is some work being done. We had a Board meeting yesterday and shared our goals to the Board on specifics related [to that], and it is very focused on improving that. We are big believers you get what you measure. We are measuring our energy density inside. We are R&D focused on that. On the testing part, we feel pretty good. We have got a pretty robust system here at the small scale, the manual scale P&L, and then as these 30 different tools arrive, funded by the defense unit, that is getting stronger. Colin Rusch: The performance that you are talking about here from a technology perspective is just fundamentally advantaged and looks defensible in a pretty material way. And the target market that you guys are looking at are so much larger than what it looks like the target is for 2030. So can you talk a little bit about the considerations around the pacing of growth, pricing and margin, kind of internal targets as you think about growing this platform and doing it sustainably? How should we think about the key gating items and how we should think about potential acceleration relative to those targets? Ricardo Rodriguez: Yes, Colin. So again, I think this all really just starts with the technical performance that we are able to deliver. So in our view, if we deliver everything that is there on Slide seven, and the markets grow—maybe not even to the full extent, but half of what we have on Slide four—we look at some of the main drivers. And as we were looking at the markets, one element that people forget about: there is a bit of a replacement dynamic within some of these end applications. And then it really comes down to us leveraging the capacity that we have contracted, having that capacity in the right place, so that we can deliver the right cell at the right time from the right place. And, yes, when we look at it, I agree with you. I think that is why we have $600,000,000 plus. We will find out over time what capacity is needed in 2030. But with the way we are looking at the world today, I think this is, as you mentioned, pretty achievable. Colin Rusch: Thanks so much, guys. Thomas Stepien: Thank you, Colin. Operator: The next question comes from the line of Ryan Pfingst with B. Riley Securities. Please proceed with your question. Ryan Pfingst: Hey, good morning, guys. Thanks for taking the questions. Hey, Ricardo. Tom, you mentioned market share earlier. Could you frame how you are thinking about your aviation market share today, maybe for drones globally? Or if you could get more specific within military drones or advanced drones? Thomas Stepien: Yes. Thanks, Ryan. It is, as we have said, single digits. These markets are large and growing. We have updated—and you see that on Slide four—our understanding that also goes into our 10-Ks. We are trying to really double-click on that for some of the specifics. Drone taxonomy is groups one through five. Okay, we know that batteries are used in one, two, and half of three. Not in four and five. How much of that is industrial versus defense? What is going on by region? DFR—drone as [first responder]. We have not yet found a good source for that double-click. We got the first click to understand as we present it, but our goal is to have more definition that we can have both internally and share externally. We have started—we have a good third party who is helping pull that together. But it is so early and it is changing so fast, right? This dominance program, the U.S. has admitted that, hey, we got to catch up. So what we have today is what we can share. We are not holding anything back, but we are certainly trying to get smarter and understand that better. Ricardo Rodriguez: And Ryan, the point that we are trying to drive here is that our share depends on how you subsegment the market. In some cases, our batteries basically enable the duty cycle. By the time you power the drone, a camera, a gimbal, a radar, multiple sensors, you wonder how there is energy left in the battery to still make the drone fly a couple of miles away. And so we are seeing our share be pretty high on those drones that have a lot of other power-draining devices, while those more inexpensive drones—some of them are frankly using remote control car batteries—and therefore that is not a market for us to play in, even though the volumes are pretty high. So we do believe, just through process of elimination of the folks who are not yet customers, that we are positioned to do very, very well in that high power, high energy draw drones—tend to be the larger ones that are used for surveillance or more complex missions. Ryan Pfingst: Got it. Appreciate that detail. And then just a follow-up on guidance. Could you give more detail around what is baked into the baseline revenue estimate, maybe what needs to happen to exceed it? And what your revenue capacity is roughly today? Thomas Stepien: Yes. I will answer it sort of in reverse order. In our assumptions is what we see from current customers and some prospects that we are looking to convert here into customers in Q3 and Q4. Sort of going back to Austin's question, we still see the UAV market accelerating from being pretty well established in Europe. And what is not baked in fully just yet is any [incremental upside] that could come from additional drone production and sourcing here in the U.S. So in our guide, we are still assuming that the mix is meaningfully outside of the U.S. for 2026. And as I said, we will size the upside here as we deliver it because there are some pretty quick decisions being made on the U.S. side around what this demand could be. Alongside some of the calls that we got here this weekend and have been getting this week, we do see this evolving favorably from a demand perspective, but we want to size it with POs, not with some loose idea of what the pipeline is. Ryan Pfingst: Appreciate it, guys. I will turn it back. Thomas Stepien: Thank you. Operator: The next question is from the line of Ted Jackson with Northland Securities. Please proceed with your question. Ted Jackson: Thanks very much. I hope you can hear me—a xylophone band literally set up behind me in the airport while I was on this call. So it is really loud. I have got a lot of really nice ambient music for you. I had a couple of questions. So, a real simple one. You made a comment, if I recall, that your SiMax revenue has fallen about 60% of total—I guess, we are ongoing—and then you have transitioned your Gen One SiMax customers to Gen Two SiCore. So I guess my question is, what was the mix of revenue SiMax or SiCore coming into the year? What was it coming out? Where do you see it at the '26? Ricardo Rodriguez: At the '26, we see it zero. And coming in it was about 25%. Ted Jackson: Okay. Then my next question—with the NDAA compliance success that you have had, in terms of getting all your suppliers in place and your contract manufacturing in place—where do you think you stand in that process vis-à-vis the market as a whole? Do you think that you are on a path with everyone else or perhaps a few lengths ahead? And do you see the ability to get there first as a competitive advantage? Thomas Stepien: Yes. So we think that we are near the front. It is hard to know whether we are at the front. Every battery manufacturer got the memo and is looking to serve. We tend to take “only the paranoid survive,” so we never really want to think of ourselves as being at the front. We are happy with our industry-leading advantage, etc. We are working hard. We have got work to do for sure. As I mentioned, there is more announcing here—work is underway. You can imagine that there is a lot of effort long before things get announced. So we are happy with where we are. We are very focused on making sure that we keep up with [demand] because it is [evolving quickly]. So happy, but work to do. Ted Jackson: Okay. And then my last question—just looking over at Slide four over to the right where you have your OEMs and key market players. You have a lot of corporate logos up here. Have all of these logos in some form or fashion sampled or looked at the Amprius Technologies, Inc. product? Are they customers? How much do you give to someone with this—like, some of them you have clearly announced as customers, some we have not. Are these all people that you actually have kept making your battery in the past for some form or fashion? Thomas Stepien: Yes. You are right. Some are customers. The title of that column on Slide four is appropriate, key market players. So some are customers that we can talk about publicly, some are potential customers where we are in testing, and other ones we have to earn their trust. So that is the mix that we have on that right-hand column. Ricardo Rodriguez: But in general, these are all folks for whom it would be logical to buy cells from us. And they may have bought cells at low volumes for testing as well. Ted Jackson: Okay. I will step out of line. Thanks very much and congrats on the quarter. Operator: Thanks, Ted. Thank you. Our next question is from the line of Derek Soderberg with Cantor Fitzgerald. Please proceed with your question. Derek Soderberg: Yes. Hey, guys. Thanks for taking the questions and my congrats as well on the results. First one on the Nokia—hey, the first question is on the Nokia Drone Networks. Is this sort of a single product win? Is it more of a platform win? Can you talk a bit about the unit volumes and ramp timing for that? And then as we sort of look into exiting the decade, can you sort of talk about how large the opportunity would be with the Nokia piece? Thomas Stepien: We like Nokia, Derek, because it is a communications platform generally, right? Our understanding of this platform is that it is able to beam 5G signals to difficult-to-reach places where you cannot easily install cellular. It is a platform. If you talk to the Nokia guys, there is a lot of work that they have planned in the future, and they have their roadmap, of course. We do not tend to break out specific customer volumes and share those. We do like this because it emphasizes what we say—this espresso advantage. Nokia drones with our batteries can fly 40%, 50% longer, and other customers twice the flight time compared to standard batteries. That is what led them to us. Derek Soderberg: Got it. That is helpful. And Tom, you have got a validated technology, hundreds of customers. You have been commercial for seven, eight years now with Fortune 500s. You really have had a head start, at least in the drone opportunity. How do you think you can best leverage that position to really accelerate the growth of the business? Thomas Stepien: Yes. It is about execution on the operational side for sure—to get the customers what they want, when they want it, and from the right place. We are also investing into the customer-facing side of the house. We have added to our sales team. We have a pack partner program that is embryonic but growing. Some of our cells go directly to the folks who make crafts—products that fly or roll or walk around like robots do. Others go through pack houses, and those packs then go into those end-use products. So we are investing there for sure. We are investing in some of our internal processes. We want to be able to meet and exceed this demand that we see. Derek Soderberg: Super helpful. Thanks, guys. Operator: Thank you. Our next question is from the line of Chip Moore with ROTH Capital. Please proceed with your question. Chip Moore: Hey, good morning. Thanks for taking the question. I want to follow up—actually, you brought up a good point on the replacement dynamic for batteries. Have you done any sort of analysis on what replacement can become as some of these markets mature, understanding that some of them are still pretty nascent? Where do you think that can go over time? Ricardo Rodriguez: I think it can be pretty meaningful depending on the market. In eVTOLs, it could very well be even more than the initial install volume if these things are—almost the same way, if you look at jet engine manufacturers in planes today, the maintenance and the replacement of those parts within those jet engines make the Rolls Royces of the world more money than selling the jet engine the first time. And that is a dynamic that you obviously do not see in EVs because you hopefully do not have to replace the battery—you just replace the whole car. But in UAVs, in robotics, in eVTOLs, we are seeing a little bit of a razor–razor blade dynamic, where the replacement market could be even larger than the initial sale market. And so, of course, depending on what assumptions you have for that, you end up with completely different market sizing. There is also a lot of work that can be done here to develop a standardized battery pack, and so this is something that we think about pretty frequently. We are looking for the right way to frame this out for the industry so that we do not have customers pulling in different directions when the duty cycle and the requirements are pretty clear and where we can drive meaningful convergence. Chip Moore: Yeah. No. That is helpful, Ricardo. And maybe just for my follow-up—appreciate all the new detail in the slides, great job. On the market slide, on Slide four—huge opportunities. What about opportunities outside of those core markets—fast charge and discharge capabilities, data center at the rack level, higher-volume electronics? Just maybe quickly address some of the adjacencies. Thomas Stepien: Yes. We alluded to this in Slide seven. There is a little picture of a data center there for the high power cells. That is an opportunity. Another one that we are looking at are battery packs for military applications. So the average soldier carries over 100 pounds of gear, and the standard battery packs currently use standard lithium-ion cells. If we bring higher energy density, we believe that we can cut the weight of those packs in half, potentially even make them more powerful. And if you combine them with something like a supercap, you can even trim the upper bounds of power peaks that tend to degrade batteries further. So, theoretically, we could cut the weight of those things in half or double their capacity. Then at the same time, almost double the life of those battery packs, therefore reducing the need to replace them as frequently. So, outside of what we have in Slide four, high power cells for data centers are obviously a market. And then anywhere else where you are using a battery pack, particularly in military applications—looking to leverage some of the customers that we already have—those would be other ancillary opportunities. Thomas Stepien: And maybe just to pile on, some of the characteristics that we show on Slide three are inherent with the silicon platform. Fast charge is up—and by the way, we also can charge a lot faster—and we have a wider temperature range. So we lead with our strengths—our only-ness is energy density, or metric density. But some of these other ones really help secure the win and secure the long-term relationships that we are building with customers. Chip Moore: Excellent. Thank you very much. Ricardo Rodriguez: Thanks, Chip. Operator: Thank you. Our last question comes from the line of Amit Dayal with H.C. Wainwright. Proceed with your question. Amit Dayal: Thank you, guys. Good morning. With respect to trying to bring manufacturing costs down or the price of the batteries down, do you have any room as you iterate on your side and how much of that may come from the engineering side from your end versus what the contract manufacturers can support you with? Thomas Stepien: Yes. Certainly design is a big lever for sure. Volume plays a part also. As we get volumes up, there is some pricing that we see with the 11 suppliers we have. And then we are getting into that, as we mentioned, as we go full NDAA with the contracts and the negotiations with suppliers on the 11. So we are in the midst of some of that. But the good news is that volumes are increasing. That is a big lever. And then we will see that. When we do talk to customers and they are insisting on U.S., that is where this interesting dynamic comes in—where they want U.S., but they want pricing. So we tend to have a little bit of an arm-wrestle. But in general, we are happy with the margins we see. And you, of course, understand the guidance. I think we can get [there]. Amit Dayal: Understood. Thank you, Tom. And then just last one for me. In terms of your balance sheet, it looks really solid with over $90,000,000 in cash. It looks like at this point, you really do not need to tap the ATM anymore. Especially going into sort of a capital-light strategy with Colorado out of the picture now, what are the uses of that cash that we can think of that could maybe accelerate sales or product development? Any color on that would be helpful. Ricardo Rodriguez: Yes. I mentioned in my remarks, Amit, with the current balance sheet, we are really only looking to fund working capital. As I mentioned, our CapEx will be funded by the DIU here in Fremont. Any little bit of incremental CapEx that could be needed at the contract manufacturers to accelerate production if demand ramps up even beyond our expectations will also be funded by the balance sheet. We are also looking at putting in place a working capital line with some of our banking partners to further scale the balance sheet. And then, yes, as you mentioned, earlier this year we put out an announcement saying that we are basically done with the ATM. I think the ATM did its job over the last two years. And right now, as you mentioned, the balance sheet is solid. We think our current strategies are more than fully funded. Amit Dayal: Understood. Thank you, guys. That is all I have. Thomas Stepien: Thanks so much. Take care, Amit. Ricardo Rodriguez: Thank you. Operator: This concludes our question and answer session. I will now turn the floor back to management for closing comments. Thomas Stepien: Thank you so much for joining us on the call. Stay tuned. We look forward to meeting some of you on the road here as we attend a couple of Investor Relations events. Be well, and thanks for your support. Ricardo Rodriguez: Absolutely. As we talked about, 2025 was a great year. We think 2026 can be even stronger as we play to our strengths—our energy density—and continue to push new products, expand our portfolio, respond to the country of origin requests. We are in a fortunate position. We are certainly in it to win it, and we appreciate your support. Operator: Ladies and gentlemen, this will conclude today's conference. You may disconnect your lines at this time and have a wonderful day.