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Operator: Good day, and welcome to the Abercrombie & Fitch Co. Fourth Quarter Fiscal Year 2025 Earnings Call. Today's conference is being recorded. 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 star-11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-11 again. I would now like to turn the conference over to Mohit Gupta, Vice President of Investor Relations. Please go ahead. Mohit Gupta: Thank you. Good morning, and welcome to our fourth quarter 2025 earnings call. Joining me today on the call are Fran Horowitz, Chief Executive Officer; Scott D. Lipesky, Chief Operating Officer; and Robert J. Ball, Chief Financial Officer. Earlier this morning, we issued our fourth quarter earnings release, which is available on our website at corporate.abercrombie.com under the Investors section. Also available on our website is an investor presentation. Please keep in mind that we will make certain forward-looking statements on the call. These statements are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions we mention today. These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission. In addition, we will be referring to certain non-GAAP financial measures during the call. Additional details and reconciliations of GAAP to adjusted non-GAAP financial measures are included in the release and the investor presentation issued earlier this morning. With that, I will turn the call over to Fran Horowitz. Fran Horowitz: Thanks, Mohit. Good morning, and thanks for joining us today. Before we begin, I do want to acknowledge the situation in the Middle East, with associates and stores in the region. Our focus continues to be on their safety and well-being. Returning to our results, I am happy to report the fourth quarter finished on the higher end of the ranges provided in our early January update. Once again, we accomplished exactly what we set out to do. Holiday product acceptance drove record fourth quarter net sales with balanced growth across regions, brands, and channels, along with growth in earnings per share. As a company, our goal is to set clear commitments and then deliver on them, leveraging our strong foundation and operating model. We achieved another year of consistent results for 2025, with record sales, growth across regions and channels, and leading double-digit operating margins. Substantial operating cash flows also enabled strong returns of cash to shareholders via share repurchases. Looking forward to 2026, we expect to continue on a path of global growth and add to our track record of consistent strong profitability. For the fourth quarter, we delivered net sales growth of 5%, which was balanced across regions, brands, and channels. It was particularly great to see both brands deliver record fourth quarter net sales. At Abercrombie Brands, we achieved our goal of returning the brand to growth with 4% net sales growth on top of a record last year. Hollister Brand continues to deliver for the teen customer, producing an eleventh consecutive quarter of net sales growth at up 6%. With balanced top-line growth and continued financial discipline, we delivered an operating margin of 14.1%, including 360 basis points of tariff pressure. I have to recognize the team's incredible efforts here to meaningfully reduce the impact of these costs. On the bottom line, earnings per share of $3.68 improved 3% on last year's record quarterly results, demonstrating our ability to create value through a balanced combination of global growth, operational excellence, and disciplined capital allocation. Recapping the year, fiscal 2025 net sales were a record $5.3 billion, surpassing $5.0 billion for the first time in company history. We grew over 6%, exceeding our beginning-of-the-year growth projections provided last March. For the third consecutive year, our customers responded to the team's compelling product and engaging marketing, delivering net sales growth across regions led by the Americas, up 7%. Sales also grew across channels for the third year in a row. We continue to see great traffic on digital and in store and, importantly, we continue to see our highest value customers shopping across channels. We delivered an operating margin of 13.3%, or 12.5% adjusting for a one-time litigation benefit, a double-digit result for the third straight year, despite 170 basis points of tariff pressure. On the bottom line, we delivered full-year earnings per share of $10.46, our second consecutive year of EPS over $10, by far the strongest back-to-back performance in our 30-year history as a public company. We also remain committed to shareholder return. With $619 million of operating cash flow after investing back into the business, we returned $450 million to shareholders via share repurchases totaling 11% of shares outstanding at the beginning of 2025. The team worked hard all year, staying fully committed to our customer and our playbooks, and I am proud of the consistency of these results as a clear demonstration of our leading operating model and culture of financial discipline. From a regional perspective, 2025 was another year of progress. In the Americas, we grew net sales 7% on strong cross-channel traffic, driven by compelling marketing across brands and continued store expansion. In EMEA, net sales growth of 6% was driven by double-digit growth in the UK, along with good growth in the Middle East. APAC grew 5% this year, led by solid performance across our digital platforms. Moving on to brand performance, I will start with Hollister Brands, where we set records across the business. I am so proud of what the team has achieved with the global teen consumer. With two consecutive years of 15% growth driven by increases in unit selling and AUR and product, we delivered growth across genders and key categories, showing improved balance on both. We saw great response from a variety of exciting marketing campaigns supporting key product drops, like our Collegiate Collection, the Grad Shop, and an engaging collaboration with Taco Bell. We added millions of new customers in 2025, and importantly, we also saw improved retention. Simply put, Hollister's growth and scale stand out in the teen space and we are excited about what is ahead. At Abercrombie Brands, after a challenging start to 2025 up against a near-perfect 2024, the team rallied and committed to getting the brand back to growth by the end of the year. We did just that, achieving a return to net sales growth for the fourth quarter. As we have shared throughout the year, we believe Abercrombie remains a leader for our target customer. We continue to see strong traffic along with growth in customer counts and good retention trends. Reflecting our confidence, we invested across stores, digital, and marketing to bring the brand to life in new ways throughout 2025. Most recently, the brand hosted several amazing activations leading up to the Super Bowl. As an official fashion partner of the NFL, the first of its kind, we had players and their families, several celebrities and league figures, as well as our target customers at a series of events. I was there, and it was incredible to see Abercrombie at the intersection of fashion, sports, and culture. A great finish to our 2025 season and the perfect kickoff to 2026. Our ongoing investments across channels continue to pay off in 2025. We saw growth in the stores and digital direct channels for a third consecutive year, and both remain nicely profitable. In digital, we continue to see strong performance, finishing the year with that channel delivering 44% of total sales. We also surpassed 1 billion visits across our platforms for the first time, demonstrating the scale and direct reach we have with our customers. Stores matter to them too, and we were net openers for a fourth consecutive year, leveraging our digital demand to help us determine where we can better serve Hollister and Abercrombie customers with a physical location. At the center of all these excellent brand, channel, and regional accomplishments was our Read and React inventory model. For the third consecutive year, we chased millions of units to support product demand at healthy AURs, helping to drive top-line growth. Inventories remain tightly controlled, and we finished the year with units up in the mid-single digits. I cannot overemphasize how hard our team works at this, coordinating product across functions, geographies, channels, and partners, all while tariffs were changing the global supply chain landscape week to week. So looking forward, we are very excited for 2026. We entered the year with a strong foundation, which includes two globally relevant brands, a proven operating model, and a strong balance sheet, all managed by a world-class team. For the year, our goals for the company are as follows. First, to grow sales across brands with continued investments in owned and operated stores and digital businesses while adding growth from partnerships and new product categories, like our recent launch of baby and toddler in Abercrombie Kids. Second, to stabilize gross margins as we progress through the year by mitigating as much tariff impact as possible. Third, to continue to invest in tools and technologies to improve our speed and efficiency across the product and customer journeys. A good example of this is the go-live of our new merchandising ERP system this month. We are also moving quickly to leverage AI to benefit the customer, and we are modernizing systems to help us. And finally, to maintain our strong profitability by delivering another year of double-digit operating margins and expansion in earnings per share. We also expect to continue our track record of returning excess cash to shareholders through share repurchases. After closing another record year in 2025, we are off and running on these growth objectives for 2026. We have the team, the experience, and the track record of delivering for our customers and our shareholders. Many thanks to the entire organization that makes this happen every single day. The work continues. And always forward. I will now turn the call over to Robert J. Ball. Robert J. Ball: Thanks, Fran, and good morning, everyone. I would like to add my thanks to our associates around the world for staying agile and executing consistently throughout 2025. We are really proud of what we have achieved, and we have so much further to go. Starting with Q4 results, we delivered net sales of $1.67 billion, up 5% to last year on a reported basis. Comparable sales for the quarter were up 1%, with approximately 100 basis points of benefit from foreign currency. By region, fourth quarter net sales increased 5% in the Americas, 8% in EMEA, and 9% in APAC. On a comparable sales basis, the Americas was up 2%, EMEA was down 3%, and APAC was approximately flat. Within the brands, both Abercrombie and Hollister delivered record fourth quarter net sales. Abercrombie Brands returned to net sales growth, up 4% over last year on a comparable sales decline of 1%. Hollister Brands net sales grew 6% on comparable sales growth of 3%. Across the business, we saw mid-single-digit AUR growth and low-single-digit unit growth on increased traffic. Across regions and brands, the spread from net sales to comparable sales was driven by net new store openings, third-party channel performance, and favorable foreign currency. Operating margin was 14.1% of sales, coming in at the high end of the outlook we provided in early January, delivering operating income of $236 million, compared to $256 million last year. Adjusted EBITDA margin for the quarter was 16.6% of sales, on adjusted EBITDA of $276 million compared to $293 million last year. The 210 basis point year-over-year decline in operating margin was driven primarily by 360 basis points of tariff expense, which was partially offset in gross margin by 140 basis points of freight cost favorability, both included in cost of sales. Total operating expenses were in line with last year as a percentage of sales, with investments in stores offset by leverage in general and administrative expenses. Marketing was in line with last year as a percentage of sales. The tax rate for the fourth quarter was 28%. Net income per diluted share was above our outlook at $3.68 compared to $3.57 last year. We ended the quarter with inventory at cost up 5%, with approximately three points related to tariffs. Inventory units were also up 5%, including approximately three points related to strategically building receipts ahead of our planned ERP implementation this month. I will cover the rest of our results on an adjusted non-GAAP basis. For the year, we delivered net sales growth of 6%, reaching a record $5.27 billion. Growth was balanced across regions and channels, supported by mid-single-digit unit growth and low-single-digit AUR growth on increased traffic. On a regional basis, net sales were up 7% in the Americas, 6% in EMEA, and 5% in APAC. Across the business, we saw 70 basis points of favorable impact from foreign currency. Comparable sales for the year were up 3%, led by the Americas at 4%, with EMEA approximately flat and a 3% decline in APAC. For EMEA and APAC, the favorable spread between net sales and comparable sales was driven by net store openings and third-party channel performance. EMEA also benefited from favorable foreign currency. By brand, Hollister Brands delivered net sales growth of 15%, and comparable sales growth of 13%. At Abercrombie Brands, net sales declined 1% on a comparable sales decline of 7%, with the six-point favorable spread between net sales and comparable sales driven primarily by store openings and third-party channel volume. Operating income for the year was $661 million, an $80 million decline from 2024's record result, driven by approximately $90 million in tariff expense, included in cost of sales. Operating margin was 12.5% of sales, a 250 basis point decline from 2024, also driven by tariff expense totaling around 170 basis points of sales and additional cost of sales increase driven by product mix. Operating expense as a percentage of sales leveraged slightly, with investments in marketing and store occupancy more than offset by leverage on general and administrative expenses. Adjusted EBITDA margin for 2025 was 15.5% of sales on adjusted EBITDA of $816 million compared to $895 million last year. The effective tax rate for the year was 29%. Net income per diluted share was $9.86 compared to $10.69 in 2024. Moving to the balance sheet, we exited the year with cash and cash equivalents of $760 million and liquidity of approximately $1.2 billion. We also ended the year with current investments of $25 million. For the year, we drove operating cash flow of $600 million and free cash flow of $378 million. For the year, we used $450 million of cash to repurchase a total of 5.4 million shares of stock, 11% of shares outstanding at the beginning of the year. From a direct channel perspective, both stores and digital grew nicely for the third straight year. For the year, 44% of total sales were digital, with Hollister around 31% and Abercrombie around 59%. On the store fleet, we delivered 120 new store experiences including 62 new stores, 11 rightsizes, and 47 remodels. We also closed 22 stores, finishing as a net store opener for the fourth consecutive year. We ended the year with 829 stores, 523 Hollister and 306 A&F, across 5.3 million gross square feet, growing square footage by 4% to last year. Both the stores and the digital business remain highly profitable, with four-wall store operating margins around 30% in aggregate. Shifting to our 2026 outlook, for the full year, we expect net sales growth in the range of 3% to 5% from $5.27 billion in 2025, with full-year net sales growth expected across brands. We are investing for continued growth in the Americas and EMEA from both owned and operated stores and digital channels, as well as from wholesale and licensing partnerships. In APAC, while our business has delivered sales growth in recent years, we do not believe returns have fully reflected the level of investment. Consistent with our commitment to financial discipline, we are undertaking a review of potential strategic alternatives for the region, including the evaluation of options such as partnerships, franchising, and licensing, with a goal of enhanced profitability, optimized capital deployment, and a maintained focus on shareholder value creation. We currently anticipate 40 basis points of favorable impact to net sales from foreign currency. We have assumed modest AUR improvement for the full year, as we have taken some revised ticket pricing across brands largely focused on fashion elements of the assortment. We expect full-year operating margin in the range of 12% to 12.5%. At the midpoint, the year-over-year change reflects approximately 70 basis points of incremental tariff expense, or around $40 million incrementally from 2025, net of product mitigation. Our outlook assumes the 15% global tariffs announced by the administration are effective beginning February 24 and are assumed to remain in effect throughout the end of the fiscal year. No tariff refunds or recoveries are assumed for fiscal 2026. We also expect the first half will be favorably impacted by lower year-over-year freight costs, normalizing in the back half of the year. We are forecasting a tax rate of around 29%. For earnings per share, we expect diluted weighted average shares of around 45 million, which incorporates the impact of 2025 share repurchases as well as anticipated 2026 share repurchases. Combined with the tax rate, we expect earnings per share in the range of $10.20 to $11.00. For capital allocation, we expect capital expenditures in the range of $200 million to $225 million. On stores, we expect to deliver around 125 new experiences, including 55 new stores and 70 rightsizes or remodels. We also expect to be net store openers, with our 55 new stores outpacing around 25 anticipated closures. We do expect net store openings to be relatively balanced across brands, but tilted to the Americas. The company has a strong balance sheet and cash flows. We continue to expect share repurchases will be the primary use of free cash flow. For 2026, we are targeting share repurchases of around $450 million. Turning to the 2026 first quarter, we will go live with a new merchandising ERP this month, which will temporarily impact operations for approximately two weeks. During this time, we will limit inventory receipts and movement across the business, creating a temporary headwind of approximately one to two percentage points of growth for the quarter. We also have some incremental implementation costs in the quarter, so in aggregate, we expect the ERP project will have over 100 basis points of unfavorable operating margin impact, which is factored into our Q1 outlook. Including those impacts, we expect net sales growth in the range of 1% to 3% from the Q1 2025 level of $1.1 billion, with net sales growth expected across brands. We also expect slight AUR expansion for the quarter. On the evolving Middle East conflict, we currently anticipate a slight sales headwind. We will continue to actively monitor the situation alongside our in-market franchise and joint venture partner, with safety as our highest priority. We expect operating margin to be around 7%. In addition to over 100 basis points of impact from the ERP implementation, we expect tariffs will drive approximately 290 basis points of decline, or $30 million net of product mitigation. This will be partially offset by an expected freight tailwind of approximately 160 basis points for the quarter. Marketing investments will also be up around 50 basis points as a percentage of sales, with the remainder of expense in line with Q1 last year in total. We expect a Q1 tax rate around 26%. We expect earnings per share in the range of $1.20 to $1.30, with diluted weighted average shares expected to be around 46 million, including the anticipated impact of at least $100 million in share repurchases for the quarter. In closing, 2026 is underway, and we are executing from a position of strength, supported by a proven model, strong cash flows, and capital allocation. Our outlook is informed by a multiyear track record of delivering on our commitments and reflects our confidence in executing in 2026 and continuing to build towards long-term opportunities ahead. We will now open for questions. Operator: To ask a question, please press star-11 on your telephone and wait for your line to be announced. Press star-11 again to withdraw your question. We ask that you please limit to one question and one follow-up. The first question comes from Dana Lauren Telsey with Telsey Advisory Group. Your line is open. Dana Lauren Telsey: Hi. Good morning, everyone, and certainly nice to see the progress. Fran, after the building blocks that you put in place for 2024, for 2025, the collaborations that you did with the businesses, and frankly, returning to growth in the Abercrombie brand, and certainly saw what you saw with the Super Bowl and being the fashion partner. How do you think of the merchandising drivers of 2026 and what you are most excited about to drive growth? And then, Rob, as you think about the building blocks for margins in 2026, how do you think of AUR growth relative to price increases from tariffs and the impact of tariffs on margins going forward? Fran Horowitz: Dana, good morning. So excited about what we just delivered for both the fourth quarter as well as the year. Most excited that that was delivered with balance across regions, brands, and channels. What is driving our confidence as we head into 2026 is that it is the first time the company has ever done more than $5.0 billion in revenue. It is proof that our model is working. We delivered all of that, to your point, the last three years, double-digit margins, operating margins. Our playbook is working. Our model of chasing—we did not start the year with an expectation of Hollister to drive 15%. But with that model, we were able to chase millions of units to hit another 15% for Hollister. So I am excited about the opportunities ahead, and I am really looking forward to 2026. Robert J. Ball: Yeah, Dana. So on tariff impact here, our outlook does reflect that 15% being kind of held all the way throughout the balance of the year. Obviously, Section 122 here in the front half of the year, and then we are making the assumption of something pretty substantially similar to that carries us through the back half of the year. How that kind of cadences out: Q1, we talked about this 290 basis point impact on operating margins. That will be fully incremental year over year. We will start to lap small amounts of tariffs in Q2, early towards the back end of Q2. We talked about $5 million of tariff impact in Q2 of 2025, before kind of neutralizing in Q3 and then flipping to a bit of a tailwind for us for Q4. So that is kind of the cadence throughout the year. Total impact—incremental impact of about $40 million here for tariffs on a year-over-year basis. So that is roughly 70 basis points. We feel good about the mitigation strategies that we put in place here as it relates to country-of-origin changes, supplier negotiations, product costing, and then to your last point around pricing, we did take that pricing on spring products starting kind of late Q4. That will ramp as we move through Q1, so really only expecting some slight AUR improvement here in Q1, and then that will build throughout the balance of the year, so give us some modest AUR growth on the full year. We feel good about the mitigation strategies we put in place. We are tracking to another year of double-digit profitability, so excited to take that into 2026. Dana Lauren Telsey: Thank you. Operator: And the next question is going to come from Corey Tarlowe with Jefferies. Your line is open. Corey Tarlowe: Great, thanks, and good morning, everybody. Wanted to ask first on Hollister, how you think about the sort of the right growth algorithm, if you will, for that segment—areas of success from Q4 and then areas of opportunity in 2026? And then I have a follow-up. Fran Horowitz: Hey, Corey. Good morning. So, yeah, super excited. Big shout out to the Hollister team. I mean, congrats to them on the best year ever, eleventh consecutive quarter of growth. And what is driving that is really being dialed into that teen consumer. For holiday specifically, we saw winners in categories like fleece and graphics and outerwear. We have invested nicely into that business. We opened lots of new stores this year. We refurbished a bunch of stores, spent money on marketing. Our Taco Bell collaboration on Cyber Monday was a terrific success. So I am excited about the team staying dialed into that customer, staying close to that customer. Spring, we are already seeing some nice response from the consumer. So we are excited to see another year of growth. Corey Tarlowe: That is great. And then just more for Scott and Robert. There have been periods throughout, I guess, the last five-plus years where Abercrombie has invested in ERP systems, and you have not called out impacts. What is different about this implementation specifically? What does it allow you to do going forward? And then how should we be thinking about, again, that impact? Is it acute, or will there be any longer-lasting impacts from it? Thanks so much. Robert J. Ball: Yeah, great question, Corey. As you noted, this has been a multiyear undertaking for us, and it is great to have go-live in sight here. The system that we are replacing was originally built and released about fifteen years ago, and it was really architected for a very different business than what we are running today. This new ERP system allows us to support both the owned and operated omni business that we have, as well as the expectations of growth that we have across channels and categories, in a more efficient way. In terms of what you are seeing here in Q1 and the reason we have not called out any sales impact in the past is really it has been building. This has been building the system, getting ready for this go-live. What you are seeing here in Q1—we have been running parallel with this nonproduction instance for quite a while now. We have completed all the testing, final development, and now we are ready to go live, and that is what is coming up here in the next days and weeks. We feel like we have done the right work to ensure that we have got the units in the stores to support the sales during this transition. But the risk that we are calling out here in the outlook is primarily related to temporary interruptions in third party, some product interruptions in Chase over the next couple of weeks. In the end, it is all about making us faster as we think about new growth opportunities. So we are really excited to get this new system in place, and we feel like any sort of disruptions are contained to this couple-of-week period here in Q1, and we will be in good shape as we head into Q2. Corey Tarlowe: Okay. Great. Thanks so much, best of luck. Operator: Thank you. And our next question will come from Matthew Robert Boss with JPMorgan. Your line is open. Matthew Robert Boss: Great, thanks. So Fran, on your target for sales growth at both brands this year, how are you managing the intersection between Abercrombie's return to growth and the moderation at Hollister relative to last year? What do you see as normalized growth for the two concepts? Fran Horowitz: Hey, Matt. Good morning. I mean, our goal is obviously to grow both brands each year. Mid-single digits would be a definition of success for us. We are excited to see our model working. Coming out of fourth quarter where we grew the business again on top of a record and actually having another record year on top of 2024 is certainly proof that our operating model is working. I am excited that you are already seeing confidence in the consumer about some of our—you know, the increases in prices that Robert talked about a little while ago. Those are ramping up in our assortment, but the acceptance of spring has been good so far. So excited. I think Q4, what it defines, honestly, Matt, is a balanced performance, which is growth across brands, regions, and channels, and that is definitely our objective in 2026. Matthew Robert Boss: Great. And then maybe a follow-up for Robert. Could you just break apart the drivers by brand that support the embedded revenue improvement in the back half of the year? Robert J. Ball: In the back half of the year—in terms of sales, Matt, is that what you are looking at? Yeah. Matthew Robert Boss: Yeah, top-line improvement. About first quarter relative to the for the year. Robert J. Ball: Yeah, so again, if you think about where we came out of Q4, around that plus five and, again to Fran's point, balanced across brands, regions, channels—that is kind of what we are carrying into 2026. The big difference in what you are seeing in that step down from Q4 into Q1 with that one to three guide is really just that ERP impact that we are talking about. It is a couple of points here. But otherwise, it is a pretty consistent build as we think about the full year 2026. And that is how we are running this business. We are setting these clear expectations. We are going to control what we can control, and we have got the operating model that allows us to chase into revenue as we see those trends develop. So we feel like we are in a really good place, growth on growth, and excited to continue that trend here into 2026 in Q1. Scott D. Lipesky: Yeah, Matt. Hey, Scott. Just want to add towards the end there. As we think about store growth, as Robert noted, we are net store growers here for the fourth year in a row. We will do that again in 2026. And that store growth really ramps up towards the middle half. That is nice fuel to the fire there as we get into the back half of the year. Matthew Robert Boss: Great color. Best of luck. Thank you. Operator: Thank you. And the next question will come from Paul Lawrence Lejuez with Citi. Your line is open. Paul Lawrence Lejuez: Hey, thanks, guys. Robert, just a clarification on the ERP system impact. Is that something that we are going to see throughout the entire quarter, or is that still in front of us? And maybe if you can talk about what you are running quarter to date versus what you expect the next two months to be? Just want to understand the cadence of that impact. That is just the first question. Robert J. Ball: Yeah, I would say cadence is relatively consistent. Again, you know, we ended fiscal 2025 with Q4 and are carrying that into Q1. The ERP timing is really kind of a two-week period. We are right at the start of it here with the go-live, so it is really contained to that couple of weeks. We have gotten the inventory to our stores to support the Easter peak and the spring break timelines, so we feel good about providing and supporting our stores through there. It is really just a function of this third-party impact here over the course of the next two weeks. Paul Lawrence Lejuez: So is the right way to think about it that you are running up, let us say, 3% to 5% outside of that two-week period, and that two-week period has got to be down significantly to have a 100 to 200 basis point impact on the whole quarter? Is that the right way to think about it? Robert J. Ball: Yeah, I do not know if it is down significantly. It actually is more of a—because of the way the third party flows through, it is really more of a comp-to-non-comp compression that you will see here over the course of the next couple of weeks. Paul Lawrence Lejuez: Got it. And then can you just give us an update on your sourcing base, how you have made changes as we look out to fiscal 2026, just so we can monitor if there are any changes in tariffs by country that we might be able to keep tabs on that? Robert J. Ball: Yeah, so obviously we have talked a lot about our sourcing footprint over the course of the last year or so. Really proud of that diversified network that we have in place, and it has taken us years to build. We currently source from over 16 different countries. That has been a core enabler for us and our Read and React model. The approach is not changing, Paul. We are always evolving this network to make sure that we can service our brands, help with speed, and optimize costs. To your point, the tariffs have clearly introduced some complexity to the supply chain, but our position here has been pretty consistent, and changes here take time, and you obviously want to get them right and maintain quality levels. So we are focused on building the right partnerships for the longer term. I think as it relates to some of the more near-term news in the Middle East, we do have some sourcing operations there in the region. We have not experienced any disruptions that would have any sort of meaningful impact to the receipt plans that underpin our outlook, so we will keep monitoring that and keep agile with our sourcing base in total. Paul Lawrence Lejuez: Got it. And then last one, just on the APAC strategic review. What just prompted that? And when should we expect to hear something from you on the outcome of that review? Fran Horowitz: I will jump in on this one. We have just finished our third year of growth in that region, and we really do believe in a long-term opportunity there. I will tell you, it is just a matter of assessing our go-to-market strategy within that region. We currently go to market several different ways there, and it is our responsibility to make sure that we are doing that in the most proper way for our shareholders. And so that is what the announcement was about. Paul Lawrence Lejuez: Any timing on that front? Robert J. Ball: Early days, I would say. The process is just getting started, so we will provide updates as we go forward here as appropriate. Paul Lawrence Lejuez: Thank you. Operator: And the next question will come from Marni Shapiro with The Retail Tracker. Your line is open. Marni Shapiro: Hey, guys. I am curious if you could give us a little bit of an update on some of your licensing efforts, particularly in kids, and what that looked like. And then also just on international, you have had some wholesale efforts. I know I think you are on ASOS, for example. I am curious if your go to market in EMEA and APAC would include more wholesale opportunities like that to sort of build your brand regionally alongside your own efforts. Fran Horowitz: Hey, Marni. Good morning. I will pick that one off. So yes, to your point, we have launched a global licensing opportunity this year with our kids brand, and we were very pleased with the results. In fact, we think it has actually created a halo for many people who did not even know—many consumers that did not know—we carry a kids brand. We saw some nice growth in both our owned and operated as well as for our licensed partner. We recently launched baby and toddler, which is also very exciting, so we can now capture that customer from age zero and carry them all the way through for lifetime value. Regarding your second question, I would say we are entertaining all concepts—licensing, wholesaling, franchising—as we keep talking about diversifying our operating model. So all of those are opportunities. Robert J. Ball: Yeah, Marni, as you know, the Europe retail business is very different than here in the United States. So all of those different opportunities are available to us. We have done a few of them in the past, mainly the digital players that you called out. But there are opportunities in the future in each country to be in department stores, run wholesale businesses, potential concessions way down the line. So we are looking at all of that as we think about how we go to market in Europe. Fran Horowitz: Yeah, if you think about it, it is actually a very exciting time for us. We are getting lots of reach-outs with the health and strength of both of our brands. There is a lot of interest out there. So more to come on that. Marni Shapiro: Fantastic. And could I just ask you one follow-up on the tariffs? Once we get to sort of the back half of the year and we anniversary all the noise from 2025, and I guess we are more in a steady state as you think forward into, say, 2027, even after 2028. Should you be able to rebuild product margins, or is this kind of the new normal for you guys and for the world? Robert J. Ball: Yeah, I mean, we will see. We have a fantastic sourcing network. We have got a great sourcing team. We have been able to maintain these double-digit operating margins despite all of these different headwinds that we have faced, whether that be supply chain disruptions, input cost inflation, inflation across all of operating expenses, and now tariffs. So we are working hard. We feel like as long as we put great product out there, connect with our customers, continue to give them a great experience, we have got an opportunity to grow AURs and continue to grow this business and provide a really strong operating margin. The goal would be to try and offset as much of it as possible longer term, but that is a process, and that is what we are working towards here in 2026 with some of the modest AUR growth, and we will see how all that goes. Marni Shapiro: Great. Thanks, you guys. Thank you. Operator: And the next question will come from Mauricio Serna with UBS. Your line is open. Mauricio Serna: Great. Good morning. Thanks for taking my question. First, I just wanted to ask, what have you seen so far in terms of consumer reaction to your ticket increases? And just wanted also to make sure I understood—just by quarter to date, it sounds that the growth has continued to be consistent versus what you were seeing in Q4. Just wanted to get that clarification. Thank you. Fran Horowitz: Hey, good morning, Mauricio. So first on the ticket prices: we mentioned during our last call that our strategy was to start to see some of these ticket price increases for our spring product. As a reminder, we deliver spring around December week four, January week one. And it was going to be very judicious in things and categories like fashion, for example, and we are holding our commitment to our consumer. We did not raise prices in key categories like denim and opening price point T-shirts. So we are ramping up. It is a portion of our inventory today. The initial response has been good. And we are going to continue with this strategy, and we are going to continue to test and learn as we head through 2026. Robert J. Ball: Yeah, and on your quarter-to-date trends here, Mauricio, obviously very encouraged here coming off the record fourth quarter with balanced performance across brands and regions. Off to a good start here across both brands and regions for the first quarter. January and then February was a little bit choppy with the winter storms that we saw in the US, but as we have seen things pick up here once we have gotten out of that disruption period, most of the volume for the quarter is still ahead of us, and we are expecting growth in Q1 across brands. The only other piece of disruption would be this ERP implementation that we have got live here in the next couple of weeks, so that will provide a little bit of a one-time headwind for us. But by and large, happy with where we are and excited about how the quarter started. Mauricio Serna: Got it. And just a couple of follow-ups on the Q1 guide. On the freight, you called out a tailwind for the quarter. Is that based on contracted rate, and does that remain a tailwind for the year, or is that like Q1 peak? And then the other point on SG&A, excluding the marketing deleverage, should it be in line with last year in terms of dollars or percentage of sales? Just trying to get that point of clarification. Robert J. Ball: Yeah, so I will give you some of the building blocks here for Q1. You called it out. We have got this 290 basis points of tariff headwind—that is all incremental to last year. We do have offsetting tailwinds here. We have got freight—that is about a 160 basis points of tailwind. That has to do with how we have shipped product and our contract rates are in place, so that is a yes on that answer. We do have some slight AUR improvements as well that will help offset some of that tariff headwind. And then we have got this 100 basis points of headwind from the ERP go-live this month. On the expense, really flowing through on the expense side, you called out marketing—it is about a 50 basis point headwind for us in Q1. That is really just timing. On the year, marketing will be around flattish to last year as a percentage of sales. And then the rest of the expense base should be largely in line with last year's Q1 as a percentage of sales. Fran Horowitz: Thank you. Operator: And the next question comes from John Kippur with Goldman Sachs. Your line is open. John Kippur: Hi, everybody. Good morning. Thanks for the question. Just one more thing on the Q1 gross margin. Last year, you guys were lapping carryover inventory drag. It sounds like there will not be any benefit from lapping that. Just wondering how that factors in. And then as a follow-on, what does that sort of imply about your promotional levels going into Q1? And I guess if you could give a forward-looking statement about where you think promo may or may not be going the rest of the year. Thank you. Robert J. Ball: Yeah, John. You are right—we have talked about this lapping of carryover. That is really a 2024 Q1 dynamic. 2025 was kind of normal. That is the more normal base. So as you think about where we are coming into 2026, nothing that is a major mover up or down related to carryover levels or anything like that. In terms of promos for Q1, we feel great about where our inventory sits coming into the quarter. Again, once you pull out the kind of front-loading of the inventory that we had to execute here for the ERP, we are up 2% on units. That is a great place to be for us. Both brands are really in chase position now, and that obviously gives us the best opportunity to grow the AURs here. So from a promo standpoint, we feel good about it. All baked into that slight AUR improvement that we are expecting here for the first quarter. We are in a good position to get units flowing and inch that AUR up as we move through the quarter. John Kippur: Great. And then just one more follow-up if I can. Can you guys bracket out what the difference in your expectations between, for the full year, the low end and the high end of the guide? So what has to happen to hit the low end? What are you guys baking into to hit the high end? Robert J. Ball: I mean, at the end of the day, John, it is all going to be about product execution. We have to put the right product out there, which—we are off to a great start. Feel good about our assortments here in the first quarter. We have to keep doing it and keep executing as we move throughout the balance of the year. We have to make sure that our marketing is resonating. We have consistently driven positive traffic to these brands. We have got millions of customers coming into these brands, and we have to keep that going here. And we will do that with consistent marketing spend. And then we have to provide a great experience in our stores and all of those things. That three to five range—it is all just ranges of outcomes in terms of how we are executing here as we move throughout the year. Fran Horowitz: The exciting thing, John, is that the operating model that we have created and our ability to chase and stay very agile is key to winning for us. And the example with Hollister last year—we certainly did not set out expecting to pick up 15%, but our ability to chase millions of units and respond to the customer in real time has enabled us to do that. So we are approaching this year the same way, with the expectation from both brands, obviously, to grow in 2026. John Kippur: Thanks very much. Good luck. Operator: And the next question comes from Rick Patel with Raymond James. Your line is open. Rick Patel: Thanks. Good morning. Looking for more color on the building blocks of growth at A&F. Nice to see the expectation for growth. Do you anticipate growth in every quarter, and how do we think about the timeline for a return to positive comps? Fran Horowitz: Rick, good morning. So yes, excited. The team was hard at work last year. I am excited to see that the commitment that we made to returning to growth for the fourth quarter came to be. As a reminder, being down 1% on the full-year top line was up against our best year ever in 2024. It is just proof that the brand is healthy. We are going to continue to invest in stores and in marketing. Some of the strength that we saw in the fourth quarter were key categories: fleece, outerwear, YPB, and we are seeing nice acceptance already for spring. So our expectation is to continue to grow throughout 2026. Rick Patel: And just a follow-up on inventory. I appreciate that you are in chase mode, but how do we think about how you are planning units, as we think about the price changes that are happening and the potential for demand elasticity? Robert J. Ball: Yep. So thanks, Rick. Units in control. Nice, clean, up 5% on the print. Again, up 2% once you exclude that ERP. You know how we operate here. We will keep units tight and aligned with our forward growth for the brands. We are in good shape here, leaving 2025 and heading into 2026. We will continue to flex that muscle and make sure that we are ready to chase across both of the brands. Rick Patel: Thanks very much. Operator: Thank you. And the next question will come from Janine Hoffman Stichter with BTIG. Your line is open. Janine Hoffman Stichter: Hi. Good morning. So on the product execution, can you speak to what you have been seeing on conversion, particularly at the Abercrombie brand? I think it was down a bit in 2025, but you did see some improvement as the year went on. What did you see in Q4 into Q1? And maybe some comments on Hollister conversion as well. Thank you. Robert J. Ball: Yeah, I would say it is more of the same, Janine. We were making progress. The teams leaned in on the A&S side, stayed focused on that consumer, executed against key learnings all the way throughout the year, and at the same time, going back to Rick's point here, we kept units in control all the way through, and that allowed us to chase through. That drove improvements in conversion as we moved throughout the year, and we saw more of the same headed into Q4. And similar story there with Hollister. Conversion has been a nice—it has been something that has built as we moved throughout the year. So it reflects the confidence that we have in the assortments that we are putting out there for our consumers, and we are looking to do more of the same here as we move into 2026. Janine Hoffman Stichter: Okay, great. And maybe just a follow-up to Marni's question. It has been a while since you issued a long-range margin target. A lot has changed—12% to 12.5% this year. Is that kind of the right level for the business? And if we were to see upside to that, excluding changes to tariffs, where would that come from? Robert J. Ball: Yeah, great question. Not going to provide guidance beyond 2026 today, but I think we can talk through some of the underpinnings of the margin constructs that we are talking about, which I think addresses both yours and Marni's questions. I think it is important for us to anchor ourselves that over the past few years, this operating model has delivered double-digit operating margins across all different kinds of environments. So last three years, we have gone through freight changes. We have had inflation. Input costs from a product standpoint fluctuated all over the board, and obviously tariffs here for the last bit. As you think about what underpins this business, it is highly cash generative. We have got highly profitable stores and digital businesses, and we are building capabilities in third party to really accelerate that growth in more of a capital-light way. Our balance sheet is in great shape and allows us to fund into all of these things and invest in these brands and still return hundreds of millions of dollars to our shareholders through share repurchases, which I think is in our track record. We have returned over $1.2 billion back to shareholders through cash since 2021 through share repurchases, and we are looking to do more of the same here. So all of that really gives us a lot of confidence as it relates to the durability of this model. While I am not going to extend any sort of guidance beyond 2026 today, we do think that the fundamentals of this business are incredibly strong, and they position us well to maintain these healthy earnings growth as we continue to build here in the long term. Janine Hoffman Stichter: Perfect. Thanks for the color. Operator: I show no further questions in the queue at this time. I would now like to turn the call back over to Fran for closing remarks. Fran Horowitz: I just want to thank everyone for joining the call today, and we look forward to updating you all on our progress soon. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Hello, everyone, and welcome to Wallbox N.V.'s fourth quarter and full year 2025 earnings conference call and webcast. At this time, all participants are placed in listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Analysts who wish to ask a question can place themselves into the queue by pressing star one. I would now like to turn the call over to Michael Wilhelm from Wallbox N.V. Michael, please go ahead. Michael Wilhelm: Thank you, and good morning and good afternoon to everyone listening in. Thank you for joining today's webcast to discuss Wallbox N.V.'s fourth quarter and full year 2025 results. This event is being broadcast over the web and can be accessed from the Investors section of our website at investors.wallbox.com. I am joined today by Enric Asunción, Wallbox N.V.'s CEO, and Isabel Lopez Torghillo, Wallbox N.V.'s CFO. Earlier today, we issued our press release announcing results from the fourth quarter and year ended 12/31/2025, which can also be found on our website. Before we begin, I would like to remind everyone that certain statements made on today's call are forward-looking that may be subject to risks and uncertainties related to future events and/or the future financial performance of the company. Actual results could differ materially from those anticipated. The risk factors that may affect results are detailed in the company's most recent public filings with the SEC, including our annual report on Form 20-F for the fiscal year ended 12/31/2024 filed on 05/06/2025. We will be presenting unaudited financial statements in IFRS format that reflect management's best assessment of actual results. Also, please note that we use certain non-IFRS financial measures on this call; reconciliations of these measures are included in the presentation posted on the Investors section of our website. Also, a copy of these prepared remarks can be obtained from the Investor Relations website under the Quarterly Results section so you can more easily follow along with us today. I will now turn the call over to Enric. Enric Asunción: Thank you, Michael, and thanks everyone for joining us today. Before we go into the highlights of the fourth quarter, I would like to reflect on achievements and challenges that defined 2025. We have achieved many of the objectives we set out to do at the start of the year, which all have been focused on building a more resilient organization navigating a regionally volatile market backdrop. Throughout 2025, we executed with discipline across the strategic priorities. First, we focused on operational and leadership excellence. We continued the rightsizing of our organization, which directly improved our bottom line. Simultaneously, we strengthened our leadership team with senior talent across sales, operations, and finance to drive our next phase of growth. Second, we prioritized efficient innovation. Even as we streamlined our resource base, we remained committed to our innovative DNA. This led to the introduction of the Supernova Power Ring and the commercial rollout of our leading bidirectional charger, Quasar 2. Furthermore, we expanded our U.S. footprint by achieving CTEP certification for our Supernova DC fast charger, unlocking significant new opportunities in the American market. Finally, we took action to optimize our capital position and improve the financial stability of the company. We freed up capital by reducing existing inventory and improving working capital management. In addition, we secured $25,000,000 in new investments and reached an indicative commercial agreement with core banking partners and major shareholders for our new capital structure. Commercially, the highlight of the year is the growth in software, services, and others, with 18% growth compared to full year 2024. The North American market performed the strongest from a geographical growth perspective, up 16% year-over-year despite a flat EV market. Reviewing the overall results for 2025, revenue totaled €145,100,000 as we delivered approximately 144,000 units, of which 536 were DC units. While this reflects a decrease of 11% on revenue compared to last year, we significantly improved adjusted EBITDA by 51%, landing at negative €29,500,000,000. This result, which is more than double the adjusted EBITDA improvement we had in 2024, shows our cost optimization efforts are working well as labor and OpEx are down 25% compared to last year. In addition, we significantly improved the gross margin results, now landing at 38.3%, reflecting a 410 basis point improvement compared to last year. However, the significant efficiency gain partly explains the softer revenue results as well, as the transition to a more optimized organization did require a refocus on our business scope by filtering out non-core and system resources to key markets. Looking forward, we believe we can further clarify the slowdown in revenue growth as AC and DC sales are down 1,332% year-over-year, respectively. First, we need to improve our sales and service function, which has been impacted by optimization efforts in the recent years. It is not the only function that has been impacted, but we believe that if we want to restore our growth path, we need to shift resources to better support our customers, distribution partners, installers, and commercial partners. We have a strong product portfolio and customers trust our products. We need to do a better job in supporting them at the point of sale and service afterwards. The first improvements have already been made. As previously announced, with the appointment of our new CBO, Ignacio Alastair, the implementation of new sales leadership across the organization, and the hiring of additional sales and service personnel, we are now implementing the ReShape sales and service strategies, which we expect to start gaining traction in the near term. The second factor impacting revenue is the pending finalization of our capital restructuring. In the case of DC sales, customers continue to value our products and remain interested in ordering our products. However, we do face certain restrictions to participate in selected RFQs or tenders, the completion of order financing, and clarity on the long-term financial structure. Although the refinancing process currently has an impact on revenue, we believe the completion of this milestone, which is expected soon, will serve as a catalyst for growth as it strengthens our commercial standing. In addition, customers have shown strong interest in the recently launched Supernova Power Ring, which we expect to start selling soon. We believe that with the implementation of the new sales and organization and the closing of the refinancing, we can reestablish our growth trajectory. As the EV transition advances despite regional volatility, we expect to be in a better position to capitalize on the consistent demand for premium charging solutions across residential, commercial, and public sectors. In addition, we continue to improve all other aspects of the business as we keep implementing efficiency measures, improving gross margin, and developing our product portfolio. We recognize that much is still to improve and that we did not achieve our sales expectations. But operationally, we have a better business than we did in previous years, and revenue has been growing relative to cost. For that, we thank our suppliers, customers, employees, shareholders, and banking partners. We appreciate your support and for sharing our vision for Wallbox N.V. Now we will go into the highlights of the fourth quarter, share our perspective on the market, and provide additional details on the sales and service changes we are making. Afterwards, Isabel will offer a closer look at our financial results, our key financial metrics, and provide details on the current status of the refinancing process. And finally, I will return to close this conversation, share my expectations for the year ahead, and provide Q1 2026 guidance. Q4 revenue landed at €33,700,000, below guidance and down 10% compared to the same period last year. The performance of our different business activities are different if you compare sequentially or the same period in 2024. First, we have improved our AC sales compared to last quarter by 3% with a solid performance in Europe on the back of the continued momentum in the region, but down 15% compared to the same period last year. This has helped declined significantly sequentially, but up 29% compared to the same period in 2024. From a geographical perspective, the North American market viewed a significant decline in EV sales; APAC and South America, due to the shift in resources and priorities, all have been down quarter-over-quarter. In total, during the fourth quarter, we delivered over 33,000 AC units and 140 DC units in a flat sequential overall addressable market, which we define as all regions except China in terms of EV sales. Gross margin was 37.3% in the fourth quarter, landing in the 37% to 39% guided range. This is lower than the previous quarter, but approximately in line with average gross margin results during 2025. The main reason of the decrease is product mix, and an exercise in carbon credits. In contrast, we continue to improve the bill of material cost and have positive price effect. Isabel will come back to this topic later in the call. Labor cost and operating expenses landed at €22,100,000, improving 3% quarter-over-quarter and 23% compared to the same period last year. Cash cost, defined as labor cost and OpEx excluding R&D activation, non-cash items, and one-off expenses, improved 25% year-over-year. As highlighted in the previous earnings call, we are and have been making great progress on cost reduction while improving our revenue relative to labor cost and OpEx compared to the same period last year. While our primary objective is restoring our growth momentum, we believe that traditional efficiencies are possible by improving processes and systems as we reshape the organization for this new phase. In addition, we aim to continue to improve the revenue relative to labor cost and OpEx by investing in the sales and service organization while in parallel adjusting costs in the rest of the organization. Adjusted EBITDA loss for the 2025 was minus €7,300,000, missing our guided range and slightly up from last quarter. Compared to the same period last year, adjusted EBITDA loss narrowed by 46%. Softer than expected sales was the main reason for missing guidance this quarter. Reestablishing our growth is crucial for our path to profitability by investing in sales and service, finalizing our refinancing, and leveraging our existing position as leader in the EV charging market. For the 2025, Europe contributed €24,600,000 of consolidated revenue, or 73% of total top line. Compared to last quarter, this reflects a 4% growth for the division with markets such as Spain, France, UK, and Portugal showing strong results. Even though the growth in the results does not match the growth in EV sales in Europe, which is up 22% quarter-over-quarter, it shows the positive trend that we are recapturing our position in certain European markets. Looking forward, as the EV transition in Europe continues to have solid momentum, we believe the region will be an important driver for near-term growth, especially with our increased focus on accelerating cross-selling activities where we aim to sell more global products in the DACH region and cross-sell the commercially important product in others. The recent partnership announcement with Eneco for the scaling of commercial infrastructure with the AM 4 Challenge solution in the Netherlands underlines these efforts. North America contributed €8,500,000, or 25% of the total revenue, reversing the strong momentum of the last quarters as the region is down 90% compared to the same period last year. This is mainly driven by a 40% year-over-year decline in the U.S. EV market due to the removal of incentives and tax credits. In addition, the Canadian EV market remained soft as it has been all year. However, considering this market backdrop, the results have been solid and we even see opportunities to grow in the region looking forward. First, we expect additional growth in the U.S. resulting from our bidirectional charger, Quasar 2. We showed strong growth in Q4 compared to the previous quarter. This product is less correlated to EV sales as it is considered a home energy management solution, opening a different addressable market. In addition, we are working on a CTEP-certified Pulsar for commercial applications, allowing us to tap into the California market at a large scale. In Canada, a new EV incentive scheme has been introduced and a new trade agreement with China is in place, which we believe will boost the EV market. On top of that, we introduced a hybrid sales structure in this country to capture growth opportunities utilizing independent sales agents to increase our local presence. Consistent with the prior quarters, both APAC and LATAM are currently small regions for Wallbox N.V., now contributing approximately €87,000, or less than 1%, and €538,000, or approximately 2% respectively, for the quarter. The small impact on the overall results was expected as we shift our resources towards key markets. We continue to sell through distribution partners, allowing us to potentially accelerate growth in these markets in the future without the need for significant investments. AC sales of €23,100,000, including Pulsar and Quasar, represented approximately 69% of our global consolidated revenue, up 3% compared to last quarter. We are happy to see the first signs of the improvement in our AC sales. The Pulsar Max was the largest contributor to the overall revenue, with Pulsar Max Socket, Pulsar Pro, and Pulsar Pro Socket showing the strongest growth quarter-over-quarter. While the combined Pulsar category experienced a slower overall quarter in North America due to a significant drop in EV sales and a temporary slowdown of key account orders, the Pulsar Pro sales grew well compared to the previous quarter, reflecting our efforts in improving our foothold in the commercial market in this region. In addition, the contribution of Quasar 2 is growing more than 200% compared to last quarter, and we expect this trend to continue. Overall, Wallbox N.V. has a leading AC product portfolio with a wide range of smart charging and energy management functionalities, now with improved reliability and additional warranty for our best-selling product, the Pulsar Max. The value proposition of the products is very attractive and soon will be accompanied with an improved sales and service organization. We expect the AC category to perform well, which is already reflected in a stronger pipeline for the upcoming quarters. DC sales have been disappointing in the fourth quarter, landing at €3,400,000, or 10% of sales. The result reflects a significant reduction quarter-over-quarter of 41%, which is an unfortunate break in the improvement trend we have seen in the category in the first three quarters. However, it does reflect a 29% increase compared to the same period last year. We believe this mixed trend is related to certain restrictions to participate in select RFQs or tenders for DC fast charging solutions due to the pending finalization of our refinancing and also to seasonality. As touched upon earlier, customers remain interested in acquiring our DC fast charging solutions and Isabel will surely comment on the refinancing process in more detail to provide additional comfort on our financial stability. On the product development side, and following up on a preview we shared last quarter, we introduced the Supernova Power Ring, the next-generation DC fast charging solution of Wallbox N.V. This new charging solution is driven by DC Link, our proprietary technology that connects multiple Supernova chargers into shared power systems. In a Power Ring cluster, chargers exchange and use power in real time, ensuring every kilowatt is used efficiently. A cluster of two or three units can deliver a total capacity of up to 720 kilowatts or 400 kilowatts from any outlet, and capacity expands easily by adding more rings without major infrastructure upgrades. The category “software, services, and other” generated €7,200,000 for the fourth quarter, or 21% of the total revenue, approximately flat compared to last quarter. The installation and service activities grew modestly compared to last quarter with 6% and were down year-over-year. In the case of software, growth was 112% compared to the same period last year, continuing to show strong momentum. Overall, it continues to represent an important category where we see opportunities to grow both software and services. In our addressable market, which we define as all regions except China, 2,100,000 EVs were sold during Q4. While this represents an 18% increase year-over-year, growth stalled on a sequential basis, remaining flat compared to the previous quarter. The larger offender was the North American market, which showed a significant drop in unit sales due to removal of incentives and tax credits in the U.S. This was foreseen, as commented in our Q3 earnings call, and we expected this, including the rollback of federal emission rules, will impact the overall U.S. market in the near term. In contrast, on a state level, there are initiatives aiming to support development of the EV market such as in California. The state is proposing a $200,000,000 electric vehicle incentive program for first-time EV buyers. As mentioned, in the U.S., we plan to reprioritize our efforts in the states where the EV market remains solid, introduce a new commercial product for the California market, and expect growth opportunities with the Quasar 2 as a home energy management device. In Canada, the market has been soft all year, and the Q4 was no exception. However, recently, there have been two important developments that can revive the EV market in this country. First, the new Electric Vehicle Affordability Program was introduced, allowing up to $5,000 for battery electric and fuel cell electric vehicles. Second, Canada has announced a preliminary trade agreement with China, which we expect will allow introduction of affordable electric vehicles over time. The European EV market remains strong, growing 40% compared to the same period last year, and the largest contributor in our addressable market, with 1,300,000 EVs sold. Germany, Spain, Italy, and Portugal were amongst the countries that showed the strongest growth as the EV penetration rate is catching up with the northern countries. While the EU’s 2035 zero emission target did not hold up in its original form on a European Union level, individual countries have announced additional incentives to support the transition to electric vehicles. Germany has launched a new €3,000,000,000 EV incentive program. Spain announced its AutoPlus plan with €400,000,000 allocated in 2026 for direct subsidies for the purchase of electric vehicles. And France extended its existing EV purchase incentive scheme throughout 2026. Looking ahead, we believe the momentum in Europe will remain and that we can profit from this positive trend with our new sales and service organizations. The growth in the rest of world, which includes APAC and LATAM, slowed down in the last quarter of the year, but compared to the same period last year was up 47%. As mentioned in this call, at the moment, this division is not our core focus. We keep working with great distribution partners and key accounts. With the strong growth in EV sales for the region, we will have the ability to capture the opportunity while limiting our organizational exposure. Now I would like to touch upon an important topic, which is highlighting the changes we are making to improve our sales and service organization. As mentioned at the start of the call, we are happy with the progress we made on rightsizing the organization, but now need to reestablish our growth trajectory in this more efficient setup. With our new Chief Business Officer, Ignacio Lassouei, we have redefined our sales strategy and how we can best address our key markets, which are North America and selected European countries. The strategy centers around three pillars in conjunction with improving our service setup. The first pillar is recovering lost customers, where we aim to rebuild trust by focusing on our recent improvements and our strong commitment to quality of our service and products, including the extended five-year warranty on our most popular product, the Pulsar. The second pillar is the acquisition of new customers, where we, with the new sales development representatives, have adopted a more active approach to transfer our value proposition, which we consider to include the charging solution, sellout support, and strong service coverage, to the customer as we mature from a product-oriented company to a customer-oriented company. The third pillar is the consolidation and further development of existing customers by a stricter NPS monitoring, quarterly business review sessions, joint events, dedicated customer success managers, and introducing additional products and cross-selling opportunities. We believe this categorization of customers and improved serving of each category will allow us to reaccelerate the growth trajectory. However, this cannot be achieved without improving our service organization as well in parallel to the improvements we made in the quality of our product warranty offering. Therefore, we are implementing a new structure which includes doubling the existing capacity, realigning the service to the needs of each stakeholder, and insourcing more technical support capabilities. The key stakeholders in need of service are B2B customers, such as distribution partners or direct accounts, installers, and end customers. In the case of our B2B customers, we have introduced regional level-two support, bringing more technical support closer to the customer on a country level and working hand in hand with the sales team. For installers, we have introduced a highly technical level-two support hub in our headquarters to provide our certified installation partners with more in-depth knowledge. In the past, installers and end users have been supported at the same point of contact, but the service requests are materially different as installers face potential urgent technical questions during an installation process. Quicker and more tailored support is crucial to help our installation partners to be successful. In addition, we plan to make Cosmos, our product diagnosis system’s real-time telemetry, directly available for our certified installers for faster issue resolution without the need to interact with Wallbox N.V. first. In the case of the end user, we are improving our level-one support by introducing more automation and artificial intelligence. Most of the issues at the end user site are generated by misinterpretation or incorrect configuration, which we aim to solve quickly with multichannel problem-resolution information distribution. Customers will be able to chat and call with AI agents from the Wallbox app, watch, or just by dialing our number. More specific issues will be handled by the in-house level-one human support team. Now, before I turn it over to Isabel to comment further on our financial details, I would like to welcome her as she rejoins Wallbox N.V. as our new CFO. With twenty years of international financial leadership experience across the technology, industrial, and service sectors, Isabel returns to play a central role in supporting Wallbox N.V.’s next phase of disciplined financial execution and sustainable growth. She previously served as Wallbox N.V.’s Vice President of Finance from May 2021 to January 2025, where she oversaw global finance operations and supported key initiatives, including the company's transition to a publicly listed company and its international expansion. Isabel, over to you. Isabel Lopez Torghillo: Thank you, Enric. Good morning, and good afternoon to everyone. It is a pleasure and an honor to serve as the new CFO of Wallbox N.V., and I am excited to share with you today what we are working on to reestablish our growth trajectory, refinance the organization, and improve the finance function. We are at a turning point in the history of the company, and there are many things to be excited about looking ahead. For me, the objectives are clear, with the highest priority to close the refinancing as soon as possible, which I will comment on shortly. In addition, the objective for me and for my team is supporting the whole organization, especially the sales teams, by providing the financial base and insights to keep pushing for growth opportunities. Lastly, there continues to be an opportunity to streamline the organization by introducing the right systems and processes, which can enhance efficiency, support cost discipline, but also allow for strategic capital allocation. Wallbox N.V. is a great company with strong products and well-known commercial partners. The measurable improvements in our sales and service organization, coupled with the finalization of our refinancing, provide a solid foundation for me to contribute to our return to a growth trajectory. Now before I go into the details of our refinancing process, I would like to provide you with some color on the final quarter of 2025. The fourth quarter revenue missed our guided range by landing at €33,700,000, down 5% compared to last quarter and down 10% compared to the same period last year. The main offender was slower sales in DC fast charging, which was down 41% quarter-over-quarter. In addition, the softer EV market in North America is starting to be reflected in our results as Q4 was the slowest quarter of the year. On the opposite side, AC has shown a positive quarter-over-quarter trend, which we believe we can continue with the reinforcement of our sales teams and opportunities with commercial AC charging, especially in Europe. Gross margin for the fourth quarter was 37.3%, within our guided range. This reflects a solid result where improvements in bill of materials and pricing were offset by a negative impact from product mix. DC fast chargers are the products with the highest margin and a quarter-over-quarter decrease in DC sales impacted the group gross margin negatively. In addition, in the fourth quarter, the impact of carbon credits, as discussed in the last earnings call, has been limited due to lower sales in the Canadian market. Overall, we are satisfied with the positive trend in BOM cost improvements and higher prices. This means that fundamentally, the gross margins are improving. But now, this needs to be reflected in our results as top line growth will provide us more scale. Q4 labor costs and operating expenses totaled €22,100,000, representing a 23% improvement compared to the same period last year and a small improvement compared to last quarter. Cash cost, which is defined as labor cost and OpEx excluding R&D capitalization, non-cash items, and one-off expenses, was down 25% year-over-year. As communicated before, we continue to strike a balance between rightsizing the organization while investing in our sales and service organization. In addition, we see opportunities for efficiency enhancement by implementing more automation and the correct processes, not to reduce cost but to support growth with the same cost base. Consolidated adjusted EBITDA loss for the quarter was €7,300,000, outside the guided range. This reflects an impressive 46% improvement compared to the same period last year, a testament to our significant efforts in improving operating leverage. The top line was the main reason why we did not achieve our adjusted EBITDA guidance, and going forward, we expect most of the improvement on the bottom line will result from revenue growth. In December 2025, we reached a milestone commercial agreement with our core banking partners Santander, BBVA, and CaixaBank, alongside our major strategic shareholders, to renew our capital structure. This agreement provides a clear, sustainable financial framework and a solid financial base for the coming years, positioning Wallbox N.V. to grow in parallel with the maturing global EV market. Under this plan, we are restructuring and extending the existing debt through three key components: a €55,000,000 syndicated term loan maturing in 2030. This features a backloaded amortization schedule beginning with limited quarterly payments in Q3 2026 that scale gradually through 2030. A €63,200,000 bullet instrument maturing in December 2030. This utilizes payment-in-kind interest to preserve our immediate cash position. A €52,300,000 syndicated working capital line. This matures in December 2028 and includes two successive automatic twelve-month extensions to support our operational scale. In addition to the debt maturity extension, the structure includes a proposed €22,500,000 liquidity injection. This consists of €12,500,000 in new trade commitments from participating banks, and a €10,000,000 equity investment from existing and new shareholders. Over the last few months, we have worked hard to progress this agreement and incorporate additional debt holders. While our initial December announcement covered approximately 65% of our existing debt, I am pleased to announce that we have now secured participation from additional principal lenders, bringing our total to more than 86% of the company's total existing debt. We expect the remaining debt holders to follow as negotiations continue. Furthermore, we recently achieved another milestone with a commitment from the Institut Català de Finances to invest €5,000,000 as part of the €10,000,000 equity injection. We expect to finalize these negotiations and complete the refinancing in the coming weeks. This coordinated support from our lenders, long-term shareholders, and more recently, semi-public investment funds underscores confidence in Wallbox N.V.’s products, strategy, and business plan. With this new balance sheet structure and enhanced liquidity, we believe we have the necessary runway to drive the business toward positive cash flow generation. We expect this resilient foundation combined with our improved operational setup to put us in a position to capture global opportunities in EV charging and energy management. Considering the significant progress on the refinancing process and the context of how we are improving the financial stability of the company, I would like to comment on our Q4 2025 financial metrics. We ended the quarter with approximately $9,600,000 in cash, cash equivalents, and financial instruments. Loans and borrowings totaled €165,000,000, reflecting an 8% sequential decline consisting of €55,000,000 in long-term debt and €110,000,000 in short-term debt. The decline in cash and debt position is related to the retiring of a loan-based credit facility that was not adding any value to the overall cash operations. CapEx was nonexistent for the period, as spending remains limited, with a small negative impact due to an accrual adjustment during the quarter. While CapEx investment almost decreased by 100% compared to the same period last year, this does not mean that we stopped innovation. We keep introducing new products, such as the Supernova Power Ring, recently, and we keep developing the existing product portfolio. Inventory landed at €47,500,000, a reduction of 6% to last quarter and down 32% compared to the same period last year. With this result at the end of the year, we achieved our inventory reduction target, which reflects a significant release of cash from operations and opportunity for a more efficient bill of materials. In addition, we have focused significantly on our working capital management, also in relation to the overall cash management during the refinancing period. Many of our suppliers are cooperating with us in optimizing inventory levels and payment terms to be more resilient in a volatile EV market. We appreciate their continuous support. With all these efforts—sales expansion, operational discipline, cash management, inventory reduction, limited CapEx investment, and debt refinancing—we are significantly reducing our cash burn and improving the financial situation of the company. We believe we can have a long-term capital structure in place soon, which we expect to mitigate uncertainty and provide a solid foundation for the future of Wallbox N.V. Enric, I will turn it back to you to provide some closing commentary. Enric Asunción: Thank you, Isabel. While our 2025 results have been impacted by the volatility of the market and the tail end of the company's transition phase, the year has also been defined by foundational milestones towards a more resilient organization. We significantly improved gross margin and operational efficiency, resulting in a fundamentally better business on our way to profitability and cash generation. We started 2026 heading in the right direction where strategic investments in the sales and service organization are expected to return top line growth, leveraging our extensive product portfolio and existing market position. In addition, we are close to finalizing our new capital structure with the support of our banking partners and key shareholders. Once completed, we can shift our focus from stabilization to acceleration, and I believe we have all the components in place to achieve that. These last years have been challenging. We believe the global EV transition remains inevitable and the market opportunity is significant. Wallbox N.V. has navigated a necessary transitional period and, upon the finalization of our refinancing, will emerge as a stronger platform than before. With a leaner organization, high-margin product portfolio, and renewed sales leadership, we believe we are well positioned to capture the significant market opportunity ahead. With that, I would like to discuss next quarter's guidance. For Q1 2026, we have the following expectation: revenue in the €33,000,000 to €36,000,000 range, gross margin between 38% and 40%, and a negative adjusted EBITDA between minus €5,000,000 and minus €3,000,000. Thank you for your time. Operator: Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Riskified Ltd. Fourth Quarter 2025 Earnings Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear an automated message device and your hand is raised. To withdraw your question, please be advised today's conference is being recorded. I would now like to turn the call over to your speaker today, Chet Mandel, Head of Investor Relations. Please go ahead. Chet Mandel: Good morning, and thank you for joining us today. My name is Chet Mandel, Riskified Ltd.’s Head of Investor Relations. We released our results and are hosting today's call to discuss Riskified Ltd.’s financial results for the fourth quarter and full year 2025. Our earnings materials, including a replay of today's webcast, will be available on our Investor Relations website at ir.riskified.com. Participating on today's call are Eido Gal, Riskified Ltd.’s Co-Founder and Chief Executive Officer, and Aglika Dotcheva, Riskified Ltd.’s Chief Financial Officer. Certain statements made on the call today will be forward-looking statements related to, without limitation, our operating performance, business and financial goals, outlook as to revenues, gross profit margin, adjusted EBITDA profitability, adjusted EBITDA margins, and expectations as to positive cash flows, which reflect management's best judgment based on currently available information and are not guarantees of future performance. We intend all forward-looking statements to be covered by the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our expectations as of the date of this call, and except as required by law, we undertake no obligation to revise this information as a result of new developments that may occur after the time of this call. These forward-looking statements involve risks, uncertainties, and other factors, some of which are beyond our control, that could cause actual results to differ materially from our expectations. You should not put undue reliance on any forward-looking statement. Please refer to our Annual Report on Form 20-F for the year ended 12/31/2024 and subsequent reports we file or furnish with the SEC for more information on the specific factors that could cause actual results to differ materially from our expectations. Additionally, we will discuss certain non-GAAP financial measures and key performance indicators on the call. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release issued earlier today, and also furnished with the SEC on Form 6-K and in the appendix of our investor relations presentation, all of which are posted on our investor relations website. I will now turn the call over to Eido. Eido Gal: Thanks, Chet, and hello, everyone. Ended the year strong, and this momentum positions us for continued success in 2026. Our fourth quarter non-GAAP gross profit of $57.3 million represented strong year-over-year growth of 16%, and our adjusted EBITDA of $17.7 million translated to a margin of 18%, demonstrating the scale and strength of the business. This quarterly amount alone exceeded our full-year adjusted EBITDA of $17.2 million in 2024. Our fourth quarter revenues of nearly $100 million were a record since inception, and contributed to our first ever quarter of GAAP profitability. These results are the culmination of consistent, high-quality execution across the year. In 2025, both annual dollar retention (ADR) and net dollar retention (NDR) improved year over year. ADR reached approximately 100%, up from 96%, and NDR significantly improved to 105% from 96% in 2024. Our go-to-market team had another successful year with particularly strong results in the fourth quarter of 2025. During the quarter, we won the highest quarterly amount of new business since our IPO, which represented approximately 55% of the total new business won for the year, and was driven by high competitive win rates of over 75%. This year, we won and onboarded several leaders across industries and geographies, including Aerolineas Argentinas, Abounds, Adastria, Ace Hardware, Bangsa, Qasem, David's Bridal, NetEase, Nintendo, Temu, TripAdvisor, and XTool. In addition, merchants such as Iberia Airlines, Meta, Fast Retailing, Viva Aerobus, Vivid Seats, and Zepz were all upsold in 2025, after landing on the platform over the past few years. We believe this demonstrates the power and ROI that our platform delivers to our merchants, once onboarded onto the Riskified Ltd. network. We have processed approximately $750 billion in GMV, and have over 1 billion unique customer interactions in our network since inception. I believe that this data moat has created a structural competitive advantage and that we are well positioned to capture even more of the large opportunity in front of us. That is why we are focusing our efforts on deepening our geographic presence, and growing faster in our newer verticals while identifying additional verticals to penetrate for continued market share gains. From a geographic standpoint, our non-U.S. regions collectively grew 22% year over year, driving faster, more diversified growth. Notably, APAC and LATAM were key regions of outperformance. We plan to expand further in these regions by developing localized products and features to boost pipeline generation. We have scaled our presence in the payments and money transfer category as evidenced by 66% growth in 2024, and 90% growth in 2025. Based on the current pipeline and the annualization of new business won in 2025, end-to-vertical I expect another strong year of activity in 2026. As we capture more data and payment types, leading to more refined models and bespoke features targeted to this vertical, I believe we are positioned to continue penetrating the significant white space. According to recent industry studies, there was a 27% year-over-year increase in fraud losses related to online transactions. The total losses attributed to fraud are expected to more than double in the next five years, well outpacing the expected growth of ecommerce. In addition, over two-thirds of U.S. companies experienced an increase in AI-related fraud attempts in 2025. We are witnessing escalating complexity of fraud schemes, which now target every touchpoint across the customer journey from account creation and stored value credentials all the way through the return, customer service, and dispute portals. Every part of the transaction process is at risk. Progress varies across payment types, including ACH, credit cards, digital wallets, crypto and stablecoins, agentic checkout, and other methods. We need to be prepared to support and manage risk across the full payment landscape. We are leveraging the capabilities of our AI ecosystem that has been continuously advanced for over a decade. This increase in fraud has further elevated Riskified Ltd.’s role, solidifying our positioning as a key partner for our merchants. I believe that the combination of a more pronounced and complicated fraud landscape, enhanced platform features and functionality, and a deliberate effort to expand the top of our front deal funnel has contributed to an increase in our new business lead generation of approximately 50% year over year. Furthermore, in line with our expectations at the beginning of the year, I am pleased that we generated nearly $10 million in aggregate annual revenues from Policy Protect, AccountSecure, Dispute Resolve in 2025. And we plan to continue to grow our revenues outside of our core fraud services in 2026. As we have expanded our offering, the benefits of having a platform are becoming even more pronounced. First, we saw an approximately 50% increase in the number of merchants who are now using more than one product during the year. This multiproduct approach has made us stickier. Second, each transaction processed across our suite of products strengthens our flywheel by expanding the breadth and depth of our datasets. This integrated dataset compounds across the network, enhancing our identity engine, and enabling us to develop dynamic components that can be utilized across the platform. Third, these cross-platform synergies lead to better performance for our merchants. This strong performance with differentiated capabilities allowed us to regularly outperform our competition. And fourth, merchants utilizing more than one product generally leads to higher contribution profit for those merchants. This is part of the reason why in 2026, we are focused on driving gross profit growth versus optimizing primarily for revenue growth. As Aglika will discuss shortly, we expect non-GAAP gross profit growth to accelerate double digits at the midpoint in 2026, demonstrating the continued leverage in our model. Now on to a very topical theme: artificial intelligence. Allow me to discuss how we are observing AI impacting the market and how Riskified Ltd.’s product platform and internal operations are positioned for success in this environment. There are two main dynamics that we are seeing. First is the increased utilization of agentic commerce through general purpose LLMs, but still primarily only for discovery purposes and not checkout. The second is the rise of merchant-native LLMs, which are advanced agents within a merchant's ecosystem designed to handle the full shopping journey from answering queries to completing the purchase, closing the loop completely within their ecosystem. Both flows present unique transaction risks that our platform aims to solve. In the first agentic flow, when customers do use general purpose LLMs for checkout, we have seen instances where fraudsters utilize AI to throw authentic traffic off script by generating synthetic IDs to bypass LLM verification. Our internal estimates indicate that approximately 30% to 40% of essential model features are lost when consumers transact through general purpose LLMs, increasing risk and escalating the prevalence of fraud like this. To combat this, we strive to help merchants by providing clear visibility into agentic traffic and emerging fraud MOs that they do not otherwise have on their own, proactively adjusting models based on low-signal environments, segmenting order flows, and rapidly developing features to identify emerging agentic fraud MOs. In the second flow, merchants are building out their AI shopping assistants to offer deep personalization and loyalty programs based on customer preferences. Riskified Ltd. provides a critical risk intelligence layer that helps make these transactions both smart and secure. This is especially critical when those interactions have financial implication. An example of this is providing merchant-native AI agents with real-time risk signals while they are in the conversation with customers to offer instant refund or exchange decisions, based on that individual customer's risk and eligibility. Because Riskified Ltd. analyzes the complete purchase history of the end customer across an expansive global network of ecommerce brands, including exact product list SKUs and cross-merchant behaviors, we can provide highly differentiated data that merchants cannot otherwise access on their own. We are able to provide a decision platform for their agents to make important and accurate financial decisions. We are excited about the continuous expansion and enhancement of our agentic commerce offering. Merchants are actively preparing and ready to support agentic commerce across its various forms and flows. Our ability to not only service the dynamic needs of an evolving market, but also to innovate in real time is generating an increase in merchant dialogue. I believe that this strategic engagement is a driver for our future business pipeline and growth. Internally, we continue to adopt AI to automate and scale complex business workflows across departments. This is intended to help drive operational efficiency and productivity, lower costs, improve response times, and enhance service delivery. For our engineering teams, AI has become a force multiplier. Our developers have moved from basic coding assistance to agentic systems that span the entire development life cycle, from discovery and requirements assessment to automated root-cause analysis for production alerts. In addition, by using agentic flows for code review and observability, we are reducing technical debt while increasing release velocity. The impact on productivity is measurable. Between Q2 and 2025 many of our engineers saw more than 2x increase in tickets completed. This enables us to focus on developing new product enhancements and features, and to test, train, and deploy them more efficiently, strengthening our relationships with the hundreds of enterprise merchants in our network. We are seeing similar functional leverage across the other business units. In finance and analytics, we have moved several initiatives into production to automate processes that reduce human error and manual labor to drive merchant inbounds, and the go-to-market team has found success utilizing LLMs in high-end queries. We have also developed agents that automate time-consuming cost-benefit analysis of merchant prospecting, minimizing manual work to drive quicker and more accurate outreach. And while we are getting leverage from general purpose LLMs in our own business, I do not believe that those same LLMs pose a true threat to our decision engine. In our view, LLMs lack calibration in the precise probability intervals required for fraud engines. Additionally, LLMs are optimized for text and image, while traditional AI fraud models like ours are much better at analyzing structured data inputs. The data we collect includes browsing behavior, account activity, checkout data, and post-fulfillment signals for every transaction. Our models learn from over 5 billion historical nonpublic merchant network transactions that have been labeled and tagged. With this data, we create, update, and continuously deploy features to be used by our models that solve the increasing complexities of fraud. To that end, as we announced yesterday, we have recently developed features to address this problem. Within our PolicyProtect Decision Studio, merchants are able to identify and apply business rules to manage the risk of order volume coming from their native AI shopping agent. This control will allow merchants to confidently deploy their branded conversational AI agents without exposing themselves to programmatic refund claim abuse, reseller arbitrage, or promotional abuse. We also expanded our AI agent identity signals, allowing a merchant's AI shopping agent to directly query the Riskified Ltd. identity graph to retrieve associated risk indicators and resolve an identity programmatically. The breadth and sophistication of our platform allows us to train, test, and deploy merchant- or payment-specific models. We also use this platform to retrain models with updated data, new features, and segment calibrations to protect from emerging fraud patterns across our network. All this helps us drive optimized merchant performance which, at the end of the day, is the key driver of merchant satisfaction. Our ability to rapidly adapt in the face of a shifting landscape does more than just protect our merchants. I believe it serves as the foundation for our sustained financial strength and disciplined execution. Over the past two years, we have repurchased shares representing approximately two-thirds of our current enterprise value. Based on our current expectations of improved free cash flow of approximately $40 million in 2026, we anticipate generating a free cash flow yield of approximately 10% relative to our current enterprise value. Looking ahead, I believe that our momentum remains strong. As a reflection of our confidence in Riskified Ltd.’s long-term trajectory, I am pleased to announce that our board has authorized an additional $75 million share repurchase program. This decision reflects our conviction in the fundamentals of the business, supported by strong free cash flow, a debt-free balance sheet, and a disciplined capital allocation strategy that we believe will prove beneficial for our shareholders. I want to thank our team again for their focus and strong execution against our 2025 financial plan. Our results reflected the top of our revenue and adjusted EBITDA guidance ranges, and we enter 2026 in a position to accelerate our performance even further. Now over to Aglika. Aglika Dotcheva: Thank you, Eido, team, and everyone for joining today's call. Unless otherwise noted, this discussion will reference non-GAAP financial measures. We have provided a reconciliation of GAAP to non-GAAP financial measures in our earnings release. We achieved fourth quarter revenue of $99.3 million and full year revenue of $344.6 million, up 65% year over year, respectively. And while we do not plan on reporting our billings going forward, our fourth quarter billings of $103.3 million grew 9% year over year. Our fourth quarter GMV of $46.7 billion was the highest quarter of volume reviewed in our history, and represented growth of 18% as compared to the prior-year period. For the full year of 2025, our GMV grew by 10% to $155.1 billion. During the fourth quarter, revenue growth was partially driven by strong performance in our travel sub-vertical, reflecting continued momentum from the third quarter. These gains were partially offset by softness in our tickets and live events sub-vertical which declined year over year, primarily due to tougher second-half comparable periods versus 2024’s record level of activity and larger live events. Overall, the total tickets and travel vertical was slightly positive in the period. Our money transfer and payments category grew 75% year over year driven by new business wins and upsell activity. Our fashion, cosmetics, and luxury vertical grew 8% year over year. This was primarily driven by new business and upsell activity, and 11% growth during the Black Friday through Cyber Monday period. This growth was partially offset by continued same-store sales pressure in our high-end and sneaker sub-verticals, similar to the first nine months of the year. That being said, for the second quarter in a row, we did see year-over-year improvements in some of our largest merchants in this category. Lastly, I am encouraged that we reverted to year-over-year growth in the home category as we have now fully lapped the dynamic that impacted the first nine months of 2025. For the year, our money transfer and payments, fashion and luxury, and tickets and travel categories were the largest contributors to our annual revenue growth. The combination of these verticals represented nearly 80% of total billings and are each expected to drive continued growth in 2026. For the full year, revenue in the United States declined 6% year over year primarily as a result of the contraction in our home category. Encouragingly, we continue to grow across all of our non-U.S. regions, with accelerated year-over-year growth as compared to 2024. During 2025, APAC grew 53% year over year, while Other Americas, which represents Canada and Latin America, grew approximately 13% year over year, primarily driven by the momentum in new business and upsell activity, with particular strength in the travel sub-vertical. EMEA grew approximately 18% year over year with the strongest performance concentrated in our money transfer and payments, tickets and travel, and fashion and luxury verticals, supported by both new business and upsell momentum. Our revenue derived from merchants headquartered outside of the U.S. was 46% in 2025, up from 39% in 2024. We believe that our continued international growth reflects ongoing progress in capturing global market share. During the fourth quarter, we achieved record quarterly gross profit of $57.3 million, up 16% from the prior year, and $180.3 million for the full year, representing a year-over-year growth of 4%. The full-year gross profit growth of 4% was driven by meaningful improvements in our core machine learning models with great performance in our money transfer and payments category, and within our 2024 cohort which delivered the most pronounced year-over-year improvement across cohorts. Our increased revenue from new products further contributed to our growth. This improvement was partially offset by the ramping of merchants in newer geographies, such as Latin America, and weaker performance in our 2022 cohort, which, while still maturing, has yet to reach the performance levels of the broader portfolio. As a reminder, I encourage you to continue analyzing our gross profit on an annual basis given individual quarters can vary due to the various factors, including the ramping of new merchants and the risk profiles of transactions approved. As it relates to 2026, for the full year, we are targeting non-GAAP gross profit growth of 7% to 12%, with each quarter at or near 10% growth at the midpoint. In addition, we estimate that each quarter in 2026 will approximate the same percentage of the total as they did in 2025. Moving to our operating expenses. We continue to manage the business in a focused and disciplined manner. Total operating expenses were $39.6 million for the fourth quarter, and $153.6 million for the full year, representing a decline of 2% from 2024. Our operating expenses as a percentage of revenue declined from 48% in 2024 to 45% in 2025, reflecting leverage in the business model. We ended 2025 with 617 global employees, a decline of 3% from the prior year. This was achieved through the increased utilization of artificial intelligence tools to maximize output and increase efficiency, and by strategically reducing headcount in areas that were less critical to our product development and growth strategy. Despite this nominal decline, we ended the year with an increase in our development capacity, which we believe is critical to advancing platform innovation, outperforming our competition, and improving product accuracy and customer service to deepen our merchant relationships. In 2026, we anticipate quarterly expenses to approximate $41 million to $42 million per quarter in the first half of the year, and $42 million to $43 million per quarter in the second half. The primary driver of the increase from 2025 relates to FX headwinds, mainly from the appreciation of the Israeli shekel compared to the U.S. dollar. The FX headwind is approximately 400 basis points to our annual adjusted EBITDA margin. On a constant currency basis, we anticipate relatively flat expenses year over year, as we continue to manage the business in a disciplined manner. We achieved adjusted EBITDA of $70.7 million in the fourth quarter, the highest quarterly amount in our history, which translates to an adjusted EBITDA margin of 18%. We believe that this quarter's results demonstrate that the business is positioned for continued adjusted EBITDA margin expansion and can achieve scaled performance like this over time. For the full year, our adjusted EBITDA was $26.7 million, representing a year-over-year increase of over 55%. On a GAAP basis, we achieved net profit of $5.8 million in 2025 as compared with negative $4.1 million in the prior year. I am encouraged about the progress that we have made on achieving profitability on both GAAP and adjusted EBITDA basis. Moving to the balance sheet. We ended the year with approximately $298 million of cash, deposits, and investments, and continue to carry zero debt. In addition, we continue to maintain a healthy cash flow model. In the fourth quarter, we achieved free cash flow of $10.7 million and $33.1 million for the full year. Looking ahead, I am encouraged that we expect our free cash flow to increase at least 20% to be approximately $40 million in 2026. During 2025, we repurchased approximately 22 million shares for a total price of $105.9 million, which contributed to a reduction of 8% in shares outstanding. Since the inception of our buyback program in 2023, we have repurchased approximately 52 million shares for a total price of $259.5 million, which helped contribute to a 17% reduction in shares outstanding over that time period. As Eido mentioned, I am excited to announce that our board of directors has authorized an additional $75 million of share repurchases, subject to the satisfaction of Israeli regulatory requirements. When combined with amounts that remain available under our existing share repurchase authorization, our total outstanding authorization is approximately $84 million. We believe that our strong balance sheet and liquidity position are strategic assets that provide us with the flexibility to navigate a range of operating environments. We intend to remain disciplined and thoughtful in how we deploy capital to create long-term shareholder value. On the topic of share-based compensation and earnings per share, share-based compensation expense of $51.6 million declined from $57.8 million in the prior year. As a percentage of revenue, this amount decreased approximately 300 basis points from 2024 levels. This was on top of a decline of 700 basis points over the prior two years. Looking ahead to 2026, we expect absolute share-based compensation dollars and as a percent of revenue to continue declining due to the gradual roll-off of expense associated with large grants made in 2021 and 2022 as the awards fully vest throughout 2026. Our total absolute share-based compensation dollars should approximate $40 million for the year. We expect our free cash flow generation to approximate our share-based compensation in the year. Our annual non-GAAP diluted net profit per share of $0.20 represents an increase of 18% in 2025. Now turning to our outlook. As we look forward to 2026, we currently anticipate revenue of between $372 million and $384 million, representing growth of 8% to 11%, with $378 million or 10% at the midpoint. Consistent with past years, we anticipate that our growth will continue to be driven primarily by new business activity, and at the midpoint of our guidance, we are forecasting a similar net dollar retention rate as in 2025. We currently expect all of the quarters in 2026 to reflect a similar percentage of the total revenue as they did in 2025, and growth to accelerate sequentially with each quarter throughout the year. The behavior of the microenvironment, our success in retaining our merchants, and the level of upsell activity relative to new logo wins will impact our net dollar retention rate and ultimately determine where we fall within our revenue range. In addition, we feel confident about the new business activity levels which is supported by a robust pipeline of new opportunities. Historically, the timing of when new merchants go live during the year can be difficult to predict, and may have an impact on our calendar year revenues. As always, we will continue to monitor the performance and health of our merchants, consumer spending and the broader ecommerce landscape, and the impacts on our results. Now let me discuss our adjusted EBITDA outlook. We currently expect adjusted EBITDA to be between $26 million and $34 million, or $30 million at the midpoint, representing a margin of 8%. This is inclusive of an approximate 400 basis points FX headwind to our adjusted EBITDA margin. Overall, I am encouraged by our AI advantage and market position, and I am confident that we can continue to execute on the elements within our operational control. We remain focused on identifying and executing on the many opportunities for long-term growth and our ability to deliver value to our shareholders. Operator, we are ready to take the first question, please. Operator: If your question has been answered and you wish to remove yourself from the queue, please press 1-1 again. Our first question comes from Terry Tillman with Truist Securities. Your line is open. Terry Tillman: Yes. Thanks for taking my questions, and congrats Eido, Aglika, and Chet. The first question, and hopefully you can bear with me because it is so topical around agentic commerce. It is a multiparter. And then I will have a follow-up question. As it relates to agentic, I appreciate kind of how you talked about two types of kind of agentic use cases. I am curious if you can quantify any early GMV from those two different scenarios. And then also, what would the monetization or take rate look like in transactions in that type of flow? And then how many merchants are you actually actively working with that are just trying this out at this point? And then I had a follow-up. Eido Gal: Sure. Hey, Terry. So I will take that. So maybe taking a step back. Right? We feel we are in a great position to talk to over 50 publicly traded companies and really understand what their agentic commerce strategy is. And the way they are laying it out to us is pretty clearly there are two main flows. The first flow, what we call the merchant-native AI agents, where they continue to own the relationship with the customer. And I think it shows a lot of promise in their mind. Right? And here, you would have an AI agent on their website that can support the entire life cycle from discovery to checkout to returns and customer support interaction, and this entire experience is happening on their website. So if they are a luxury fashion merchant, they can have the right type of images and product descriptions and flows and recommendations; if they are an OTA, they can have the right type of filters that are appropriate for traveling and routing. So I think they are putting a lot of emphasis on that area. What we are seeing there is, because LLMs are really—it is easy to challenge them and get them to move off script and make financial decisions that you did not intend them to make—we are serving really as this guardrail or intelligence layer that they are querying in real time to understand, hey, should I approve this transaction? What type of refund should I provide to this customer? And we are just really leveraging the entire network that we already have, making it even more unique, the value that we are providing in there. So that is kind of the merchant-native AI agent. The second flow is more kind of that general purpose LLM where it can either act as a good referral or do the purchasing on behalf of the consumer. There, to be clear, we are seeing predominantly referrals. Actually seeing agent traffic and purchasing is still extremely low and limited. From a take rate perspective, on the general purpose LLMs, we are seeing higher risk traffic there right now. So again, even if it is very small, whenever you have some of these newer flows, fraud tends to come in because there is more limited data. There is lack of experience. There is less control in those cases. And so I think on average, the take rate there would probably be higher right now, but over time, that might, you know, kind of shift. And to just a more general question around traffic, I think merchants are in a stage where they are trying to prepare and make sure that they are ready for the changes and put their best foot forward. But the traffic is probably not there yet. Terry Tillman: Very helpful. Thank you so much for that. And I guess just a follow-up, maybe for Aglika. It is helpful when you go through the different segments that you are serving and the growth rates. Money transfer and payments, it was another exceptional year of growth as you are onboarding strategic accounts, and they are growing. I am curious, though, do you see that outsized type growth continuing in your guide for 2026 on money transfer and payments versus the other end markets? Thank you. Aglika Dotcheva: Hi, Terry. So money transfer and payments was an amazing category for us this year. The growth was really, really strong. Kind of looking into 2026, we have a number of opportunities in the pipeline, and I expect the category to continue to grow, but probably just to normalize in terms of the total amount. Terry Tillman: Alright. Thank you. Operator: One moment for our next question. Our next question comes from Ryan John Tomasello with KBW. Your line is open. Ryan John Tomasello: Everyone, just following up on the agentic commerce topic. Can you talk about how you think about the potential for rising adoption there to either structurally reduce or increase the level of fraud in the system over the long run, notwithstanding kind of early days here? And then just your thoughts on the potential second-order impacts. There is a lot of talk on agentic AI agents utilizing alternative payments rails like stablecoins, you know, just how you view that also impacting, you know, structure of the system here. Thanks. Eido Gal: Right. Sure. Look. I think what we are seeing is that in order to be good at online commerce, and payments specifically, you need to be doing a lot of things well. And right now, something that is added is agentic, you know, kind of commerce. And you can add crypto and stablecoin. So if historically, you would need to be able to manage credit cards and credit card acceptance, you now need to be able to support ACH, and digital wallets, and crypto and stablecoins, and the agentic checkout. And with agentic, we are talking about a few different flows. And you know, you do not just need to think about the checkout. You also need to think about account creation and account login, and you probably have some stored value in the account that people can transfer in and out. You obviously have the checkout experience, but you also have all these various post-checkout flows—returns, refunds, leveraging the different discount codes and abusing that. You have the entire chargeback process, which is different between credit cards and ACH. It is not called a chargeback there; it is insufficient funds. You have issues around scams that are popping up. So I think we are seeing an increase in complexity. And I would just tie in the agentic checkout into that overall increase in complexity, and we are seeing an overall increase in losses within the merchant ecosystem. And I think that as merchants are trying to solve these different use cases and these various fraud patterns, it just becomes more complicated more quickly. So I think that is kind of a net benefit to Riskified Ltd. as we see this more complex environment increasing in the years ahead. On a bit more targeted and specifically on agentic, like we just mentioned, we do see an increase in fraud right now in agentic channels. Specifically when you have general purpose LLMs. It could be a combination because it is newer, and fraud, you know, tends to shift to that area, there is less control and gating there. So hard to say how that would kind of behave in the quarters and years ahead as it gains more traction. But as of now, it is probably, you know, kind of net incremental to general take rates. Ryan John Tomasello: Great. Appreciate that. And then you know, just an update if you can provide on the mid-market expansion strategy—how that plays into your 2026 growth and just broader investment plans in that category? Thanks. Eido Gal: Yeah. I think one of the unique things about Riskified Ltd. targeting the enterprises is that we are able to really customize to a high level the modeling and the performance for each individual merchant. As we have been getting much better at completely automating the life cycle of doing that, I think that is going to present opportunities to kind of continue and refine this model in more of a down-market and referral strategy. That is not something that is expected within our guide for the year. So the more we can accelerate that, that would be upside to current guide. Operator: One moment for our next question. Our next question comes from Will Nance with Goldman Sachs. Your line is open. Will Nance: First of all, I hope all the teammates in Israel are home and safe. I wanted to ask also on the agentic kind of topic of the day. I was wondering if you could just speak to status on integrating into some of the agentic protocols. So there are—you know, it is kind of—ICP, it is Stripe, GCP, Google, and any of the other relevant ones. I know a big part of the model is kind of taking all the different signals from the user behavior in those channels. So just maybe wondering if you could speak to that and maybe shed a little bit more light on kind of, like, the value of the data that might come through those protocols in detecting fraud vectors? Eido Gal: Yeah. Thank you for mentioning the team in Israel. We appreciate that. I think the issue right now that the market is seeing is, to your point, there are a wide number of multiple protocols and, you know, some of them, I think it is clear that they are already outdated. In the months, maybe quarters ahead, there will be new protocols that are probably even more updated than that. So, obviously, internally, we are doing everything we can to support everyone in that ecosystem, whether it is, you know, kind of AI agent-approved, AWS Marketplace, Google, you know, A2A protocol, just general RESTful APIs. We do see ourselves requiring to have that full spectrum to make sure we cover everything. Unfortunately, we do anticipate a somewhat continued fragmented approach here. So, you know, I think it is still early to say if there is anyone who is going to be a clear winner in that area. So there will probably need to be some optimization between the various protocols. Will Nance: Got it. That makes sense. And maybe just one for Aglika. The FX headwind on the margin is helpful quantifying that. Could you just remind us of the—it sounds like it is the FX exposure in the cost base that we should be thinking about there, shekel and otherwise. I was wondering if you could just update us on major currency weightings as we try to fine-tune the model. Thank you. Aglika Dotcheva: I will. So, I mean, first of all, I am so excited about the quarter, the guide, kind of the returning back to double-digit growth. And when I think about the FX headwinds, we kind of spelled it out as approximately 400 basis points, or $14 million to adjusted EBITDA. And it is frustrating. I mean, over the years, we focused and we kind of ran on a flat expense base for a period of time, and this FX headwind is really obscuring some of the progress. But the truth is that the underlying business momentum is strong, and we will continue to focus on optimizing. We will continue to focus on growth. And I am just excited about 2026. Will Nance: Yep. Got it. Appreciate it. Thank you. Operator: One moment for our next question. Our next question comes from Chris Kennedy with William Blair. Your line is open. Chris Kennedy: Great. Thanks for all the details and for taking the question. I will just echo Will's comment regarding Israel. The revenues from newer products—Policy Protect, AccountSecure—doubled in 2025. Can you talk about kind of the opportunity for that set of products in 2026? Eido Gal: Sure. So maybe just to refer back to kind of Ryan’s question where we said, hey, we are seeing an increase in complexity of forms of fraud. We are seeing it across different channels like ACH, digital wallets, crypto stablecoin, the agentic checkout. We are seeing it happen in different parts of the, you know, kind of shopping experience—not just checkout, but also account creation and abusive policy rules and things around dispute management. All this to say, I think it is leading to an environment where there is kind of more demand and more value and just basically more necessity for merchants to leverage the wider product platform. So if I think about the revenue that we anticipate from, you know, kind of PolicyProtect, AccountSecure, Dispute Resolve, some of the non-guaranteed payment flows that we now work with merchants on, you know, anywhere from $15 million to $20 million in 2026, I think, is a good range at this point. Chris Kennedy: Right. Thanks for that. And then just one for Aglika. If you think about the 2024 cohort, the CTB ratio really improved. Can you give us a little bit more color on what drove that improvement there? Aglika Dotcheva: Yeah. Of course. I am very excited about some of the improvements in that cohort, and we can see already the result of that in Q4. So there are some merchants there that are specifically about the money transfer and payments category, and we were able to kind of do significantly better there. It is kind of evident in the cohort. I think it is a great base for some of the merchants that are in the pipeline there, and just continuing to kind of optimize incoming merchants as well. Chris Kennedy: Great. Thanks for taking the questions. Operator: One moment for our next question. Our next question comes from Timothy Chiodo with UBS. Your line is open. Timothy Chiodo: Thanks a lot for taking the question. This one, we have brought this up in the past, but I thought it would be a good one just to check in on to see if anything is different in the agentic channel. My guess is it is the same, but the question is really the services that you are providing to merchants, do you consider them and/or see them operating in addition to value-added services coming from the card networks or instead of value-added services coming from the card networks? Eido Gal: Hey, Tim. So sorry. Could you rephrase—our services in addition to the services from the card networks? Timothy Chiodo: Sure. So if a merchant is working with Riskified Ltd., are they using Riskified Ltd. in addition to some of the fraud-related value-added services coming from the card networks, or are they using Riskified Ltd. instead of some of the fraud tools that are coming from the card networks? Eido Gal: Okay. Thank you for clarifying. So, look, I think there is no direct comparable in the stack of the card service providers right now to the spectrum of Riskified Ltd. One of them has more data-related features—so I think Mastercard acquired Ekata; Visa probably has Visa Verify. So those are, you know, kind of what we consider data features. You know, one of them has a more older-generation scoring tool that we do not really view as competitive. No one has a policy product. Definitely, no one has, you know, kind of what we would consider a modern machine learning type solution for fraud prevention. I think the dispute product also—there is nothing comparable. On the account side, there is nothing comparable. If you think about support for ACH, crypto stablecoin, you know, kind of the fiat conversion and account storage, there is nothing comparable. On agentic checkout, there is definitely nothing that we have seen comparable to some of the releases we have recently made. So I think overall, on the Venn diagram, it is pretty distinct and different. There could be different services that they provide, you know, maybe more towards financial institutions—anything around tokenization and rails for 3-D Secure. That is not in our wheelhouse. But hopefully that gives kind of a good mapping of what we do that they do not do. Timothy Chiodo: Excellent. That is a great answer. Thank you so much. My follow-up is around—you were talking around some of the other forms of payment, whether it be account-to-account, stablecoin—basically, alternative payment methods in general. I know that it is early, but in your experience and with your position in the industry, do you have any reason to believe that card mix within the agentic channel would be any different than the card mix is in traditional ecommerce? So whatever you believe the mix is to be in traditional ecommerce, do you think through the agentic channel that it would be roughly the same—maybe the card mix is a little lower, maybe the card mix is a little higher—and what would be the reason that would lead you to believe the answer to the question? Eido Gal: Yeah. Thank you. I think that is a great question, and obviously, a lot of debate on that. I think there are specific industries—and probably payments, remittance, you know, kind of brokerages—which would probably see an increase over time on whether it is kind of stablecoins, crypto. Those are also direct ACH connections, just because, you know, exchange fees, FX rates, everything that we know. So I think there probably is the potential for more to migrate. You know, maybe with long-term as things like ACH and others become easier, maybe merchants would have an easier time transferring some customers for, you know, kind of various discounts to that area. But overall, by and large, in most categories, I would not anticipate a shift. I think that overall consumer preference for cards, for rewards, continues to be incredibly high. And I think merchants adapt to that. I do not see that changing based on, kind of, you know, the LLM channel or merchant-native AI agents. I think merchants already have the ability, you know, to capture with extremely low interchange fees, debit cards. I think when you think about things like, you know, reward cards, the customer gets so much value from that. They have a clear preference. I think, you know, large merchants also have the ability to issue their own reward cards and take a meaningful portion of that interchange fee, and usually through agreements with, you know, kind of network or the issuers also take some, you know, kind of potential float or value of, kind of, installments or late payments there. So from an ecosystem perspective, I think, you know, cards are still around to stay in most categories. But there are probably a few specific areas where we will see an increased adoption in alternative payments. And I do not see a clear difference between kind of general purpose LLMs or merchant-native AI that would make them specifically work on, you know, kind of stablecoins or anything else relative to the existing rails. Timothy Chiodo: Thank you so much. Really do appreciate that. Operator: One moment for our next question. Our next question comes from Reginald Lawrence Smith with J.P. Morgan. Your line is open. Reginald Lawrence Smith: Yes. Congrats on the quarter and in achieving GAAP profitability. I guess I have got another question about agentic as well. So, you know, I get it, and I appreciate that there is not a lot of transaction flow coming from, I guess, third-party LLMs today, and so it is early days. Definitely get that. But I am thinking about—someone asked earlier about, you know, like, how pricing may work here. I am curious just, like, how that would roll out in general. And specifically, like, would merchants need separate contracts for agentic? Would it just be rolled into their standard, you know, ecommerce that occurs on their website? And then, you know, kind of beyond that, as you think about, you know, this new surface and these new potential risks, like, does that give you any pause at all, or concern around, like, what early losses could be like and what kind of differentiates you there, given that you will not have, like, a 13-year head start or, you know, backtesting history that you do on the traditional commerce side. So I am just curious, like, how you are thinking about that and, like, practically how this could actually roll out to your customers. Eido Gal: Sure. Thanks, Reggie. That is a great question. So I think there are two ways this can go. One is with the client that is on various submission plans and not giving everything right now to Riskified Ltd., and usually they would proactively come and say, hey, we are opening up this agentic channel or we are seeing some initial, you know, kind of traffic, or maybe we are even reaching out to them, and then they say, you know, we would want you to manage this, definitely, because, you know, we are not prepared to do that. And we have seen some of the larger clients that we work with approach us proactively with that. We are also in contact, you know, directly with some of our other merchants. And the pricing there, it is just, you know, slightly more flexible pricing to start. I think merchants are very open to having higher price initially, both because they understand there is an increased fraud in this day one and also because the absolute dollar amounts are still so small. It is, you know, less of an issue. And, obviously, we would kind of better negotiate mutually the fees once we understand the actual risk profile and the volume there. So that is one instance. The other one is merchants that, you know, already are providing all their volumes to Riskified Ltd. Yes, it continues to be the case that we would just see this traffic, and, you know, based on the risk profile there, if there is a significant increase, we might need to have a discussion with the merchant what that means from a commercial perspective. As I think about, you know, how do we anticipate some of this fraud, you know, on the one hand, you are right to say that it is still early stage, and a single merchant might only see, you know, a single transaction. But by that same token, you know, we are seeing it across the network of the largest merchants, and we are seeing some of the newer fraud MOs happen. And if you think about our system overall, what is unique and great about our system is that we are able to see fraud MOs in real time in one place, and then adapt features or create new segments and deploy that relatively quickly to other parts in the model. So even though this is something that is, you know, kind of newer, our system really is adept at learning new fraud rings, new fraud MOs, and, you know, pushing updates to the rest of the system based on that. It is what we have done as we have expanded into LATAM, into, you know, kind of other APAC regions. And you can continue to see that. I think Aglika mentioned on, you know, some of the CPB cohorts, some of that continued quick improvements there. In agentic, you know, it behaves the same. Right? There is, like, new fraud trends. You need to stop bleeding there, and then solve it for the rest of the portfolio. Reginald Lawrence Smith: Got it. Okay. And if I can ask one quick one on kind of FX. I appreciate that you guys are paid in dollars, but I was curious, is there any FX benefit to GMV growth next year? Or is that in U.S. dollars as well? Like, FX is not my strong suit. So anything you could share there would be helpful. Thank you. Aglika Dotcheva: Alrighty. I will take this one. So, specifically, the way I kind of view the FX, the fluctuations over the years have been something that we were able to absorb. Specifically this year, where I see the FX impact and kind of isolated it in this 400 basis points effect on adjusted EBITDA is around the strengthening of the Israeli currency, the shekel, versus the dollar. And since half of our expenses approximately are in Israel, it is impacting it more materially. So that is the main kind of FX impact that I talked about and it is worth mentioning. Without this, as I mentioned, on a constant currency basis, our expenses would have been flat year over year. Reginald Lawrence Smith: Got it. So, I guess, just to put a finer point on it, will there be a FX tailwind to revenue from the dollar just being weaker in general? Clearly, you have isolated the expense side, but I am just curious. Like, is there anything we should think about, you know, at the revenue line? Aglika Dotcheva: The revenue line, it is probably much, much minor. I would imagine it is, if anything, probably from the euro, but that will be probably less than half a percent, and it is something that we have already incorporated in projections as kind of, like, we are basing our projections on what we see today. Reginald Lawrence Smith: Okay. No. That is fine. Thank you so much. Operator: One moment for our next question. Our next question comes from Clark Joseph Wright with D.A. Davidson. Your line is open. Clark Joseph Wright: Thank you. At the beginning—or I believe this actually might have been Eido—you spoke about the fact that your strategy is more oriented going forward on gross profit growth versus revenue growth. What does that mean from a go-to-market perspective and your risk tolerance for specific product categories? Eido Gal: Yeah. Thanks for that question. Look. We have seen internally—I mean, we have always focused as a management team on gross profit, profit dollars, gross profit dollar growth. But it has probably been more of a focus recently over the past few quarters and will be over the next few quarters, just because we are seeing more demand and more bundling strategies for the, you know, kind of wider product portfolio. And overall, you know, there is a different margin profile within those products. So for us, it is clear we really want to focus on the gross profit dollars and that growth. From a sales perspective, you know, anything from how they target accounts to how they think about—how we think about—commission structures is more oriented in this direction now. Clark Joseph Wright: Awesome. Appreciate that. And then just on another topic that was already discussed partially earlier, but just wanted to understand the penetration rate on the non-chargeback guarantee products and the assumptions that you have for the 2026 guide. You referenced the $15 million to $20 million, but what does that mean in terms of the overall customer base and their willingness to accept, or to adopt these offerings? Eido Gal: Yeah. I think we shared on the script that we were seeing good progress of around 50% kind of increase in adoption. We have not really spelled it out by the specific product or what dual product, what single product. We will think about the best way to represent that to make it easier for investors to follow. But right now, we think that, you know, kind of revenue is probably the best proxy for that. And like we mentioned, it went from, you know, I think it was really, you know, low single-digit millions to $10 million, and we think we can continue to grow that to $15 million to $20 million this year. Clark Joseph Wright: Got it. Thank you. Operator: And I am not showing any further questions at this time. I would like to turn the call back over to Eido for any further remarks. Eido Gal: Thank you. Just before I conclude, I want to send my support to our team members in Israel and their families, and thank everyone for their hard work. And with that, just thank you everyone for joining us on today's call. I look forward to continuing to update you on our progress throughout the year. Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect, and have a wonderful day.
Operator: Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the EyePoint Pharmaceuticals, Inc. Fourth Quarter 2025 Financial Results and Recent Corporate Development Conference Call. There will be a question-and-answer session to follow. Please be advised that today's conference is being recorded at the company's request. I would now like to turn the call over to George Elston, Executive Vice President and Chief Financial Officer of EyePoint Pharmaceuticals, Inc. Sir, please go ahead. George Elston: Thank you, and thank you all for joining us on today's conference call to discuss EyePoint Pharmaceuticals, Inc.'s Fourth Quarter and Full Year 2025 financial results and recent corporate developments. With me today is Dr. Jay Duker, President and Chief Executive Officer of EyePoint Pharmaceuticals, Inc. Jay will begin with a review of recent corporate updates and discuss our clinical programs for DuraVu in wet AMD and DME. I will close with commentary on the fourth quarter and full year 2025 financial results. We will then open the call for your questions where we will be joined by Dr. Ramiro Ribeiro, our Chief Medical Officer, and Mike Campbell, our new Chief Commercial Officer. Earlier this morning, we issued a press release detailing our financial results and recent corporate developments. A copy of the release can be found in the Investor Relations tab on the company website at ipoint.bio. Before we begin our formal comments, I will remind you that various remarks we will make today constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These include statements about our future expectations, clinical developments, regulatory matters and timelines, the potential success of our products and product candidates, financial projections, and our plans and prospects. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Annual Report on Form 10-K, which is on file with the SEC, and in other filings that we have made or may make with the SEC in the future. Any forward-looking statements represent our views as of today only. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. I will now turn the call over to Dr. Jay Duker, President and Chief Executive Officer of EyePoint Pharmaceuticals, Inc. Jay Duker: Thank you, George. Good morning, everyone, and thank you for joining us. 2025 is defined by significant progress and achievement for EyePoint Pharmaceuticals, Inc. as we made important advances that set the stage for and potential value creation for the year ahead. As a result of our exceptional clinical execution, driven by our derisked and patient-centric programs, our lead asset DuraVu is on track to deliver top-line data in wet age-related macular degeneration, or wet AMD, beginning in mid-2026. In parallel, we advanced DuraVu as the only tyrosine kinase inhibitor, or TKI, program in diabetic macular edema, or DME. We are pleased to report that as of last week, the first patients were dosed in both pivotal Phase 3 DME trials. With a strong cash position that is expected to fund operations into 2027, and multiple inflection points on the near-term horizon, we are entering a transformative period for EyePoint Pharmaceuticals, Inc. with significant momentum. Our conviction in DuraVu’s blockbuster potential is underpinned first and foremost by its compelling clinical profile. In our Phase 2 trials in the largest retinal disease markets, a single dose of DuraVu demonstrated durable efficacy with improved vision and tight anatomical control. Importantly, DuraVu has a favorable safety profile with no safety signals in over 190 patients across four completed clinical trials. The safety profile so far remains consistent in the ongoing Phase 3 Lugano and LUCIA trials for wet AMD, based on continued masked internal safety review and two interim reviews conducted by the independent data safety monitoring committee. In addition to its robust clinical profile, we continue to believe in the potential for every six-month dosing via standard in-office intravitreal injection, a best-in-class delivery technology, and a novel multi-MOA that inhibits VEGF, PDGF, and IL-6 via the JAK1 receptor with no Tie2 inhibition, which are the key drivers of its differentiated profile. This unique profile positions DuraVu to address both VEGF-mediated vascular leakage and IL-6–mediated inflammation that contribute to disease pathogenesis in wet AMD and DME, thereby potentially enabling improved long-term outcomes for patients with fewer injections. Our confidence is also grounded in our established and clinically rigorous approach throughout DuraVu’s development. Our Phase 3 wet AMD program was intentionally designed to inform real-world practice and generate meaningful data for the retinal community by comparing DuraVu to on-label aflibercept as the control. Additionally, we will be evaluating statistical reduction in treatment burden and six-month redosing to support a compelling and relevant label. Based on the success of our large Phase 2 DAVIO-2 trial, and with our proven regulatory pathway and strong execution to date, we believe our wet AMD program is uniquely derisked and optimized to support success. We look forward to reporting top-line data beginning in mid-2026. The clinical and regulatory rigor that defines our approach also extends beyond wet AMD as we work to position DuraVu for multiple indications. We are pleased that randomization is now underway for both COMO and CAPRI, our two pivotal Phase 3 trials in DME, where we expect to drive rapid enrollment by leveraging our preclinical trial infrastructure and investigator network. In line with our wet AMD program, our DME program follows an established noninferiority design with an on-label standard-of-care control and redosing every six months. It was similarly informed by impressive Phase 2 data from the VERONA trial, where eyes treated with DuraVu demonstrated meaningful visual and anatomic improvements as early as four weeks. We anticipate top-line data in 2027 and look forward to building upon our strong track record of clinical execution as we advance DuraVu through our Phase 3 DME program. We believe that DuraVu is well-positioned to be the first to market among all current investigational sustained-release programs in both wet AMD and DME with a potential best-in-class profile, and we remain focused on building DuraVu into a durable franchise targeting the largest retinal disease markets. With a combined current global market of $10 billion and growing, wet AMD and DME make up the vast majority of the global branded retinal disease market. DuraVu’s unique MOA, robust clinical data package, proven release technology, and attractive storage and administration benefits offer a compelling value proposition that we believe will address the longstanding need for innovation and support strong commercial positioning. As part of our ongoing commercial readiness efforts, we are thrilled to welcome Michael Campbell as our new Chief Commercial Officer. Mike is a seasoned commercial leader with a proven track record of successful product launches and oversight of prominent ophthalmology franchises, including Lucentis and Xiidra. As we prepare to deliver on EyePoint Pharmaceuticals, Inc.’s next milestones, including potential approval and transformation into a fully integrated commercial organization, Michael’s deep commercial expertise will be instrumental as we position DuraVu for a successful U.S. launch. In addition to strengthening our commercial leadership, we continue to expand operations at our 41,000 square foot cGMP manufacturing facility in Northbridge, Massachusetts. The facility has been online for over a year, supported by about 60 full-time employees, and continues to not only support the CMC submission for a planned New Drug Application (NDA) but also commercial supply. As we near regulatory submission, we are preparing for pre-approval inspection, underscoring our growing independent commercial readiness and commitment to ensuring that we are well equipped to deliver DuraVu to patients if approved. Before passing it over to George to review our financials, I would like to thank the entire EyePoint Pharmaceuticals, Inc. team for your continued dedication to improving vision and patient outcomes. We are proud to advance our therapeutics for the benefit of the entire retina community and grateful to the patients, study coordinators, and clinical investigators who make our progress possible. As we look ahead, we are excited about the upcoming milestones and the opportunities in store for us to extend our leadership in sustained ocular drug delivery. I will now turn the call over to George. George Elston: Thank you, Jay. We ended 2025 with a strong balance sheet of $306 million in cash and investments, driven by continued stewardship of our resources and a $173 million follow-on financing in October. As the financial results for the three months and full year ended 12/31/2025 were included in the press release this morning, my comments today will be focused on a high-level review of the quarter. For the quarter ended 12/31/2025, total net revenue was $600,000 compared to $11.6 million for the quarter ended 12/31/2024. The decrease was primarily driven by the recognition of remaining deferred revenue related to the company's agreement for the license of YUTIQ product rights in 2023. Operating expenses for the quarter ended 12/31/2025 totaled $71 million compared to $57 million in the prior-year period. This increase was primarily driven by the ongoing Phase 3 trials for DuraVu in wet AMD and DME. Net non-operating income totaled $3 million, and net loss was approximately $68 million, or $0.81 per share, compared to a net loss of $41 million, or $0.64 per share, for the prior-year period. Turning to the full year ended 12/31/2025, total net revenue was $31 million compared to $43 million for the year ended 12/31/2024. The decrease was primarily driven by the recognition of remaining deferred revenue related to the company's agreement for the license of YUTIQ product rights in 2023. Operating expenses for the full year ended 12/31/2025 totaled $275 million versus $189 million in the prior-year period. This increase was primarily driven by the ongoing Phase 3 trials for DuraVu in wet AMD and DME. Net non-operating income totaled $12 million, and net loss was $232 million, or $3.17 per share, compared to a net loss of $131 million, or $2.32 per share, for the prior-year period. Cash and investments on 12/31/2025 totaled $306 million compared to $371 million as of 12/31/2024. We expect the cash and investments on 12/31/2025 will enable us to fund operations into 2027, well beyond key milestones and NDA preparation for the Phase 3 wet AMD program in 2026 and fully funding the Phase 3 pivotal DME program. In conclusion, we are incredibly pleased with EyePoint Pharmaceuticals, Inc.’s progress in 2025 and are well capitalized to continue advancing DuraVu through both of our late-stage development programs. I will now turn the call back over to Jay for closing remarks. Jay Duker: Thank you, George. EyePoint Pharmaceuticals, Inc.’s progress in 2025 reflects the strength of our programs and our consistent execution. As we prepare to drive value through transformative catalysts in 2026, we will continue to be guided by our derisked, clinically rigorous, and patient-centric approach. We are well positioned to deliver on our near-term priorities, including reporting top-line data for the Phase 3 Lugano trial anticipated in mid-2026 with LUCIA data closely following, completing enrollment in our pivotal Phase 3 DME program in 2026, and preparing for regulatory filing in wet AMD assuming positive Phase 3 data. Thank you all for your attention this morning. I will now turn the call over to the operator for questions. Operator: Thank you. As usual, we will try to get to as many questions as we can through the course of the call. Please limit the number of questions you ask to one, to give others a fair chance to participate. One moment while we compile our queue. Our first question is going to come from the line of Tessa Romero with JPMorgan. Your line is open. Please go ahead. Tessa Romero: Good morning, guys. Thanks so much for taking the question. Jay, George, can you clarify the rate of ocular AEs that you have seen across your cumulative safety database with DuraVu, in particular around the incidence of vitreous floaters and cataracts? And then, relatedly, what specifically has the physician's feedback been around your safety profile? Thank you. Jay Duker: Good morning, Tess. Sure, happy to address that. As you probably recall, we have treated over 190 patients and completed trials of one Phase 1 and three Phase 2 trials. And the number of cataracts that were measured by the 191 patients is 5.8%. In contrast, if you just look at the DAVIO-2 data, the cataracts in the DAVIO-2 study in the study arms was approximately 8%. In the EYLEA control arm, it was numerically higher; it was 9%. So this is an elderly population. You do expect cataracts. But, of course, in the controlled DAVIO-2 trial, there was no mismatch between the cataracts at all. With respect to vitreous floaters, once again, in the entire population, 5.2% of the DuraVu patients reported floaters, which is, again, consistent with what you might see in any type of study that has injections into the eye. So I think to answer the second part of the question, which is how do the clinicians perceive it, I think one of the main reasons that we were able to enroll the wet AMD trial so rapidly is the doctors had really good Phase 2 data to evaluate both the efficacy and the safety of our drug. And I think that gave them great confidence in enrolling patients. I think, again, I would like to make one more note on safety and efficacy. We think of visual acuity as the primary efficacy endpoint, which it is for all of these studies, but visual acuity also is a safety outcome. And, again, just to remind the listeners, in the DAVIO-2 trial, our treated patients in wet AMD gained vision. And, in fact, in the unsupplemented eyes in DAVIO-2, the treatment arms gained 2.1 letters over the course of the trial, which is actually numerically greater than the EYLEA arm gain. The EYLEA arm, again, at that point was getting three injections over that time frame because it was on-label EYLEA. So, to summarize, we are very comfortable with our safety. We have had no ocular or systemic SAEs attributed to our drug, and in those four prior trials, no safety signals. Thank you. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Yatin Suneja with Guggenheim. Your line is open. Please go ahead. Yatin Suneja: Just a quick one on the regulatory front. Just love to hear from you how are you thinking about recent sort of FDA chatter around single study–driven regulatory approvals. Does that change your strategy? Just curious what is possible. And then, Jay, I appreciate your comment on the safety. Clearly, it has been pretty good across Phase 2 studies and also Phase 3 blinded review that you have provided. Anything on opacity that you can comment? Like, how are those numbers relative to what we see with other TKIs in development? Thank you. Jay Duker: Thanks for the question, Yatin. So for the first question, the regulatory front, yes, I think in general, we would all welcome a more rapid and less expensive pathway to drug approvals. But as you heard this morning, and I think most listeners know, we have two identical Phase 3 wet AMD trials underway that are reading out this year. If, in fact, the FDA would allow us to file with a single trial, our second trial is only two months behind, and so overall, I do not know that that would give us any particular advantage in the single trial. In DME, we have two simultaneous trials that we expect to read out in 2027. And given that other regulatory agencies around the world are probably still not aligned with single trial, we do not believe we have any reason to alter our approach for these two indications. Future indications, of course, we will discuss with the agency. With respect to single trial in retina studies, I think that it is certainly something the agency may be considering in the future. Of course, there are rules around single trial filing that the FDA updated in 2023. Those rules are already out there, and in order to do that, you not only need to have a large trial but you need confirmatory evidence that your drug is active if it is single trial. Of course, in the case of rare diseases, there are exceptions that are made, but wet AMD and DME, unfortunately, are not rare diseases. So with regard to the regulatory pathway, we think our pathway is derisked. We have taken the noninferiority approach, which is, you know, the approach essentially that five of the last approvals have taken, and we have two trials in each of those large indications already in motion. With respect back to safety for a second, opacity is a sign that the masked investigator can see when they look into an eye. They see if there is a blockage in their ability to look into the eye, either in the back of the eye in the vitreous or the front of the eye in the anterior chamber. In our DAVIO-2 trial, we had about a 1% rate of vitreous opacity. We had no rates of anterior chamber opacity. That has not been seen at all with DuraVu in any of the treated eyes, and we would not have expected it. DuraVu is designed to hold the drug until the drug is fully eluted, so we have no free-floating drug particles. We have not seen any migration of the inserts. The inserts so far, at least, have not been reported in humans to break up into pieces. They just slowly bioerode and release their payload, which again, I would like to remind everybody, our scientists have been able to upgrade the inserts so that they are 94% payload; they are only 6% matrix. So we have not seen any anterior chamber opacity, and we would not expect to. The vitreous opacity percentage is low. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Yigal Nochomovitz with Citigroup. Your line is open. Please go ahead. Yigal Nochomovitz: Yeah. Hi, Jay and team. Thank you. I am just curious, with regards to the conduct of the wet AMD trials before they read out this summer and into the early fall, will there be additional looks at masked safety? What will the cadence of those be, and will you be reporting that to us as you proceed? Thank you. Jay Duker: Thanks, Yigal. We have got Ramiro on the line, our CMO. So, Ramiro, feel free to answer that question about continued safety looks in the wet AMD trials. Ramiro Ribeiro: Hey, Yigal. Good to hear from you. So we have, as a safety monitoring body for the studies, both internal masked review that we do on an ongoing basis as well as the independent data monitoring committee that reviews the unmasked data. The last DMC meeting was November. At that point, they reviewed the data from patients, and I remind you that at that point, we had over 25% of patients getting the second dose. The safety profile of DuraVu so far has been consistent with our previous experience in the Phase 1, Phase 2 studies with nothing new to be aware of. Our next DMC meeting is scheduled in May, so that is going to be the next opportunity for that group of physicians to review the unmasked data and provide updates to us. Yigal Nochomovitz: Okay. Thank you. And just one question on biomarkers. I know you identified IL-6 recently. I am just wondering what additional biomarker work may you be doing to further explore the activity profile of vorolanib. Jay Duker: You know, thanks for that question. Additional biomarker work around the JAK1 receptor and its ability to block downstream effects of IL-6. We will have additional data on that that we are presenting at ARVO in May. We have additional ongoing studies to really try to assess the impact of that in humans. With respect to the rest of the potential receptors, we did a very extensive evaluation of the kinome last summer at the time that we discovered that vorolanib was a potent inhibitor of JAK1 with an IC50 of about 80 nM, and we did not discover at the time any other significant receptors involved in retinal disease, either positively or negatively, that vorolanib was active against. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Claire Dong with Jefferies. Your line is open. Please go ahead. Claire Dong: Hi, good morning, guys. Thanks for taking my question. So just in terms of the durable and multi-mechanistic profile beyond VEGF inhibition, how prominently do you expect this mechanistic differentiation to really be featured in your regulatory discussions and maybe eventual commercial messaging as well? And then, is there any plan for you to report more preclinical evidence of the IL-6 inhibition MOA in the future? Thank you. Jay Duker: Yeah, Claire, great question. Thanks for it. And a bit complicated because, you know, the story, I think, is still unfolding. Ultimately, what we all want is better visual acuity—our patients certainly, and the physicians who treat them. And so the great thing about what we do is eventually it is all about the data. And what we hope to show, and really, if we can show it, I think, primarily in our DME trials, is that that additional IL-6 blockage does give a more rapid onset of visual acuity improvement. That is what we showed in the VERONA data. If you recall, as early as week four, the treatment arms with DuraVu had already separated from EYLEA. We were already four to five letters better and about 40 microns drier than EYLEA. And we believe most likely that is the effect of the IL-6. IL-6 has also been implicated in wet AMD. I think it may be perhaps a little more difficult to winnow out the effects of IL-6 in the wet AMD population. But I certainly would not rule out that we might end up with better visual acuity in the wet AMD population overall. Again, I mentioned earlier with respect to subgroup analyses, the subgroup in DAVIO-2 that was not rescued ended up with slightly better vision than on-label EYLEA. With respect to regulatory, I am going to let Ramiro take a stab at that. And with respect to commercial, Mike Campbell is here, and maybe Mike can try to take a stab at how that might affect us commercially. Ramiro, why do you not go ahead first? Ramiro Ribeiro: Yeah. Sure. Thanks, Claire, for that question. So the regulatory path that we are following with both the wet AMD and the DME studies is a noninferiority approach. So if we show that BCVA are similar to the control arm, that, of course, might be sufficient for regulatory agencies. With that, for both wet AMD and DME study, as part of our analysis plan and hierarchical testing, we are going to be testing for superiority on the BCVA. And as Jay mentioned, there is a body of evidence suggesting that IL-6 has a role in both DME as well as wet AMD. So we are going to be investigating that in our Phase 3 clinical studies. Jay Duker: Thanks, Ramiro. And, Mike, if we are able to show this additional benefit of IL-6, can you perhaps comment on the commercial aspects of that? Mike Campbell: Yeah. Thank you, Jay, and hi, Claire. The commercial approach, specifically with visual acuity and safety—and as Jay mentioned, our unique MOA—gives us a real opportunity here with IL-6 as part of that complete package. I mean, the messaging around this and the opportunity to commercialize gives patients and providers a real opportunity potentially to have a best-in-class, durable approach to treating wet AMD and DME. As Jay mentioned, if there is an opportunity to be able to show the benefit of IL-6 in the DME population, that has a real meaningful commercial opportunity to really separate yourself in the marketplace. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Graig Suvannavejh with Mizuho. Your line is open. Please go ahead. Graig Suvannavejh: Hey, good morning. Thanks for taking my question, and congrats on the first dosing in your DME Phase 3 studies. Maybe a question for Mike as the new Chief Commercial Officer. As you come into the company, how are you thinking about commercial prep for the potential launch of DuraVu? What are the key steps that are needed at EyePoint Pharmaceuticals, Inc. over, like, the next six, twelve, eighteen months to ensure an optimal U.S. commercial launch, especially when you might be going head-to-head in the competitive landscape versus a competitor? Mike Campbell: Yeah. Thank you, Graig. You know, there is a complete go-to-market strategy and approach, for sure. And as we think about the opportunity here—and to your point, potentially even having a competitor in the marketplace—there is a lot of precision that goes into a go-to-market approach, especially in the specialty retina marketplace. So it is areas, for example, around not only positioning and messaging, the market research, the pricing research; all of that is priority, along with patient access and services. I mean, we can have a fantastic—and we believe we will have a fantastic—opportunity here, but if you cannot really get good at allowing patient access through coverage and reimbursement, then it can really hinder you. And so there is a lot of effort that we are putting behind making sure we have the right rigor to come to market and make it easy for doctors to be able to use DuraVu, but also easy for patients to access DuraVu. And just lastly, I would also add that there is a lot of really good work that is going on and will continue to go on around coverage with the payers, and good payer research that we have done. Graig Suvannavejh: Jay, if I could just quickly follow up: your Phase 3 trial designs in DME are just slightly tweaked or different from the Phase 3 trial designs in wet AMD. Just wondering if you could point us to reasons why slightly different, in terms of kind of loading doses, maybe maintenance doses—just things like that. Jay Duker: Sure. Go ahead, Ramiro. Ramiro Ribeiro: Great. Thanks for the question. So when we look at our DME study in comparison to our wet AMD program, there are two main differences. The first one is on the control arm. For noninferiority studies, the FDA mandates that you use on-label medication, and the on-label regimen for aflibercept in DME is five loading doses followed by every eight weeks. So that is how we are going to be dosing patients in the control arm. The other difference is that for the DME study, we are now dosing DuraVu at day one. If you recall from the wet AMD study, we dosed DuraVu after the preloading dose at week eight. The reason for doing what we are doing in the DME study—which is to dose at day one—is to try to replicate the findings that we had in our Phase 2 study. If you recall from the Phase 2 study, we dosed patients on day one with aflibercept plus DuraVu compared to aflibercept alone. And then in that study, we showed a greater improvement in BCVA and CST early on in the study at week four. And we believe one of the reasons could be because of the role of IL-6/JAK1 in the DME disease. So we believe that if we can replicate those findings in the Phase 3 study, providing patients an earlier improvement in BCVA and CST is going to be something that is going to be advantageous for our patients. Operator: Thank you. One moment for our next question. Our next question comes from the line of Debanjana Chatterjee with Jones. Your line is open. Please go ahead. Debanjana Chatterjee: Hi, thanks for taking my question. One more on safety. So we saw a handful of cases of uveitis and iritis in a competitive trial. Could you just tell me again about your broader clinical experience in terms of this kind of inflammatory signals, even if mild or moderate, in your view? And also, is there anything intrinsic to your insert design or the overall product profile that you believe mitigates these kinds of events? Jay Duker: Sure, Debanjana. Thank you very much for the question. With respect to intraocular inflammation, the study is usually divided into iritis, which is inflammation in the front of the eye and, while somewhat troublesome, not typically sight-threatening; vitritis, inflammation in the back of the eye, a little more serious; and uveitis, which usually refers to inflammation in both those cavities. We do know historically biologics can cause inflammation, and there are various rates to the biologics. When they were first out, there were papers that were written that up to, you know, 10% or more of patients at certain times were getting at least mild inflammation. Obviously, inflammation is not ideal, and one of the real issues, even in mild inflammation, is the concern that it might actually be an infection, which can be much more serious. So with respect to the 191 patients that we have treated in those four studies, we had two cases of iritis, and both cases were mild, treated with topical drops, resolved quickly without any sequelae. We had no reported cases of uveitis, no reported cases of vitritis. So the overall intraocular inflammation rate is just those two patients, about 1%. We are optimistic and confident that our drug should not cause inflammation to any large degree because vorolanib, of course, is a small molecule. It is not a biologic. We are not gene therapy. And the matrix that we are using, that 6% matrix in the inserts—that matrix has been used in our prior FDA-approved products, and there were virtually no, very low rates of inflammation reported in those previous products. So, given that, and given the safety profile we have obviously seen in humans, which I just reported, and the safety we have seen in animals, intraocular inflammation is not something we are very concerned about. Thank you. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Colleen Kusy with Baird. Your line is open. Please go ahead. Colleen Kusy: I know we still have a number of months before the top-line readouts of the wet AMD studies, but just a clarifying question on the reduction in treatment burden, the secondary endpoint. How do you plan on measuring that? Would that include the loading doses, or is that measured after the loading doses? Just curious on the math there and just what our expectations should be for reduction in treatment burden. And then just an addendum to that, what would be clinically meaningful? Thank you. Jay Duker: Colleen, thanks for the question. First of all, the reduction in treatment burden is to be measured after the load. Since all the patients in the wet AMD trials get loaded with three monthly injections, the treatment burden clock, so to speak, starts after that. So in the first year of the trial, the DuraVu patients mandated should receive two DuraVu injections. The EYLEA arm, the control arm, has a mandated five injections. So if there is no supplementation in the entire study, we would expect that 60% reduction in treatment burden in the DuraVu arm. I can tell you that our expectation is there will be some supplementation probably in both arms, just like there was in the DAVIO-2 trial, although we do believe it is likely that there will be less supplementation in the Phase 3 for various reasons. But if you apply the supplementation rates that we saw in DAVIO-2 to the Phase 3, we would have an approximate 40% reduction in treatment burden, which is excellent. So I think from the perspective of what the doctors want to see, I think any kind of significant reduction in treatment burden will be welcome because supplementation with a TKI in the real world is not failure. Doctors do not mind doing injections; they just want to do fewer, number one. And, obviously, the more important thing is they want to get better visual acuity for their patients in the long term. So the concept of sustained release is not about reduction in treatment burden. That is a positive side effect. But what we really want to see is better vision control in the long term, and we believe we can provide that. I think some doctors may be excited about the possibility of using two MOAs, having a ligand-blocker biologic and having a receptor-blocking TKI at the same time. And that may prove to be better long-term visual acuity results. So this whole idea of supplementation, it has a strict definition within the trials, but in the real world I think the doctors will approach it a little bit differently. Now, as part of the trial, I think, Ramiro, maybe can you comment on the superiority testing that we will be doing about treatment burden? Ramiro Ribeiro: Sure, Jay. So our hierarchical testing, number one, is going to be, as I mentioned before, the noninferiority on BCVA. The next one is going to be superiority on treatment burden. This study, of course, is well powered for the primary endpoint in noninferiority BCVA. For this key secondary endpoint, the treatment burden, the study is also well powered, and we should be able to detect the difference even if the difference is 10% or 7%. Operator: Thanks. One moment for our next question. Next question will come from the line of Lisa A. Walter with R. Your line is open. Please go ahead. Lisa A. Walter: Hi. Good morning, team, and thanks for taking our question, and congrats on the progress. Maybe just one on safety. Wondering how we should think about the safety profile in Lugano and LUCIA as it relates to DAVIO-2. I believe in DAVIO-2 the two milligram arm performed better on things like eye pain, cataract, and floaters versus the three milligram arm. But my question is, how much of the safety differences in DAVIO-2 are due to the two arms using a different number of inserts versus a different amount of drug? And how might this impact safety in Lugano and LUCIA where two inserts are being used, like the two milligram arm in DAVIO-2, but the amount of drug is closer to the three milligrams that was used? Any color here would be helpful. Thanks. Jay Duker: Sure, Lisa. First of all, with respect to dosage, we have animal data that shows no maximally tolerated dose of vorolanib so far, and we dosed animals with approximately ten times higher dosing than we have ever done in a human. So we do not believe there will be any sign of vorolanib toxicity at the current doses that we are using, even with reinjection. So, no, I do not believe any of the AEs reported have been due to vorolanib. And I would extend that to say, you know, so far, all the TKIs that have been used for wet AMD, as far as I know, there are no AEs that have been suggested to be due to the drug itself. So these drugs at the doses we are using appear to be very safe in the back of the eye. With respect to insert number, the numbers are too low to really know, and that is not something we, you know, are really essentially considering. There was a higher incidence of floaters in DAVIO-2 with the three milligram/three insert versus a two milligram/two insert, and, you know, maybe it had to do with the number of inserts. But given that we are using two inserts in the Phase 3s and ongoing, it is not much of a concern. And especially because the rates were low, and we had nobody report decreased vision due to the inserts. We had nobody leave the trials due to the inserts. Nobody has had to have the inserts removed. So from a clinical outcomes perspective, we are not concerned either about the number of inserts we are using or the doses of vorolanib that we are achieving. I think that the safety in the entire cohort really speaks for itself. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Yale Jen with Laidlaw & Company. Your line is open. Please go ahead. Yale Jen: Good morning, and thanks for taking the questions. And I recall in the press release, you mentioned that there is a floater and the mechanism of action of the drug could potentially reduce that. So could you elaborate a little bit more on that? Jay Duker: I am sorry, Yale. You asked about the mechanism of action reducing the floater—something of that nature? No. I am not sure I followed that, Yale. The mechanism of action of vorolanib includes its anti-VEGF effect, potentially the anti-PDGF effect to give a benefit to fibrosis, and potentially the anti–IL-6 effect to give a better and quicker result in visual acuity. I do not think the MOA would have any effect on patients' perception of floater. And, again, given that the rate of floaters for the whole 191 patients was 5.2%, I just do not think it is a concern. Yale Jen: Okay. Yeah. I just meant it says the preventive free-floating drug particles. Jay Duker: Okay. That is the design of the inserts. And once again, the design of the insert, as we have already stated—we design these inserts so they control drug release until the drug is gone. That is the whole purpose of a sustained-release insert: to control the drug release at therapeutic levels for an extended period of time. And so we would not expect free-floating drug particles. We have not seen free-floating drug particles in any of the animal studies, and so far, there have been no reports of free-floating drug particles in the eye. So that is more of an effect of the delivery system, not the MOA of vorolanib. Yale Jen: Okay. Great. That is very helpful to clarify that. And then maybe a quick one. How many sites for the COMO and the CAPRI study in total? And are some of those ex-U.S. versus in the U.S.? Jay Duker: Yeah. Ramiro, why do you not take that question, please? Ramiro Ribeiro: Yep. So we have both studies as global studies. So we have sites in the U.S. as well as outside of the U.S. We are planning to have approximately 140 sites across both studies, and we are leveraging a lot of the infrastructure that we used for our wet AMD program. So a lot of these sites that are part of DME—most of them—were also part of our wet AMD program. And what was very interesting and very encouraging for us is that all sites from the wet AMD program that we invited to participate in the DME studies agreed to be part again of the DME program, which, again, I think highlights the confidence of the investigators in our clinical program. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Daniil V. Gataulin with Chardan. Your line is open. Please go ahead. Daniil V. Gataulin: Hey, good morning, and thank you for taking my question. In your conversations with KOLs, what are you seeing in terms of which patients they would initially be willing to focus on when considering vorolanib? For example, are they thinking more of stable patients versus newly diagnosed patients or patients with high burden? And second part is, how do you expect the steps or requirements to affect the adoption of vorolanib? Thank you. Jay Duker: Thanks, Daniil. First of all, with respect to patient selection, I think we are all speculating a little here because we do not have the Phase 3 data and the label. But if one extrapolates from the Phase 2 data, I think that at the beginning, where most doctors will try it, is their patients who are being treated more frequently than they would like—every four weeks, every six weeks, every eight weeks. I think that will be the initial adoption of it. And as doctors get comfortable with its therapeutic profile and its safety, I think it will get expanded. Now I will modify that a bit, which is if we can show in the clinical trials that we can deliver better vision than EYLEA on-label, or that we are antifibrotic, or we have neuroprotection—other benefits that are potentially going to, that we might see—then I think the adoption will be much broader than that. I mean, if we can show that we are antifibrotic, I think retinal physicians will acknowledge the fact that fibrosis in the long term is an important cause of visual loss, and if you can prevent it from happening, you will result in improved vision over the years. So I think it will start off with the eyes that likely need a lot of treatment, but it may expand well beyond that. With respect to step therapy, we would not anticipate it would be an issue. First of all, again, we do not know what our label will look like, of course, but our study in wet AMD is being done with a three-injection load. So if the label contains use of DuraVu after three injections of an anti-VEGF, for example, then that automatically puts us beyond the initial injections into a branded drug. I will say we are looking into the possibility of our different MOA and our six-month efficacy, if it is there, in the IL-6 blockage—if we can show a benefit there—to be considered different than the ligand blockers, which may also be advantageous to us in the long term. But, of course, that is all dependent on the data we show in the pivotal trials. Operator: I am showing no further questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may now disconnect. Everyone have a great day.
Operator: Good day, everyone, and welcome to The Real Brokerage Inc. Fourth Quarter and Full Year Ended December 31, 2025 Earnings Call. At this time, all participants are placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, Alexandra Lumpkin, Chief Legal Officer at The Real Brokerage Inc. Ma'am, the floor is yours. Alexandra Lumpkin: Thanks, and good morning. Thank you for standing by, and welcome to The Real Brokerage Inc. conference call and webcast for the fourth quarter and full year ended 12/31/2025. We appreciate everyone for joining us today. With me on the call today are Tamir Poleg, our Chairman and Chief Executive Officer; Jenna Marie Rozenblat, our Chief Operating Officer; and Ravi Jani, our Chief Financial Officer. This morning, The Real Brokerage Inc. published an earnings press release including results for the fourth quarter and full year ended 12/31/2025. The press release, along with the consolidated financial statements and related management's discussion and analysis for the full year ended 12/31/2025 have been filed with the U.S. Securities and Exchange Commission on EDGAR and with the Canadian Securities regulators on SEDAR. Before we get started, I would like to remind everyone that statements made on this conference call that are not historical facts, including statements about future time periods, may be deemed to constitute forward-looking statements. Our actual results may differ materially from these forward-looking statements, and the risk factors that could cause these differences are detailed in our Canadian continuous disclosure documents and SEC reports. The Real Brokerage Inc. disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. With that, I will now turn the call over to Chairman and Chief Executive Officer, Tamir Poleg. Tamir, please proceed. Tamir Poleg: Thank you, Alex, and good morning, everyone. 2025 was another transformational year for The Real Brokerage Inc., and our fourth quarter results provided a strong finish. In the fourth quarter, we grew closed transactions by 38% to nearly 49,000, significantly outpacing the broader existing home sales market. This volume drove revenue growth of 44% to $505 million and a 30% increase in gross profit to $39 million. Net loss narrowed to $4.2 million, while adjusted EBITDA was positive $14.2 million, a 56% year-over-year increase. Looking at the full year, revenue grew 56% to nearly $2 billion, while our gross profit growth of 44% significantly outpaced the 25% increase in operating expenses. This discipline resulted in a substantial improvement in our GAAP net loss to $8.1 million, while adjusted EBITDA reached $62.9 million, up 57% from last year. Furthermore, our model generated positive cash flow from operations of approximately $66 million, allowing us to return $39 million to shareholders through buybacks, while maintaining a debt-free balance sheet with $50 million in liquidity. We ended 2025 with 31,739 agents on our platform, up 31% year over year, and today, that number has grown to over 33,000. These results would be impressive in any environment, but are notable given the broader housing backdrop. Existing home sales remain well below long-term averages, transaction volumes across the industry remain constrained, and many market participants are waiting for macro improvement. Meanwhile, our growth continues to be driven by structural factors: a powerful agent-attraction flywheel, improving agent productivity, and ever-increasing agent engagement and retention on our platform. That distinction is important. At the same time, we continue to make steady progress expanding beyond brokerage into ancillary products and services tied to the housing ecosystem and transaction life cycle. To that end, OneReal Mortgage generated $6 million in revenue in 2025, up 50% year over year, driven by increased loan officer growth and productivity. In January, we were pleased to welcome Kate Gurovich as CEO of OneReal Mortgage and look forward to seeing accelerating growth and improved profitability under her leadership. OneReal Title generated $5 million in revenue, up 5% from 2024, as we began transitioning our model toward more scalable state-based joint ventures. Today, OneReal Title operates 13 joint ventures with operations across 17 states, and we expect to open three additional joint ventures in 2026. And RealWallet, which completed its first full year, generated nearly $900,000 of revenue with 77% gross margins, with its current run rate approximately $1.5 million. Importantly, today, more than 7,000 agents are actively using Wallet with approximately $23 million in deposits. We view Wallet not only as a revenue opportunity, but as a deeper integration point with our agents' daily financial workflows. While brokerage remains the core engine of the business, these ancillary services represent the next layer of value creation. They increase engagement and improve and expand revenue and gross margin per transaction. Over the past decade plus, we have been focused on building an integrated platform, aligning agent economics, investing in proprietary technology, and expanding our ecosystem of products and services. In 2025, we saw clear evidence that this model can scale while improving operating leverage. We are not managing a collection of disconnected tools or regional systems. We are operating one unified platform across North America. That consistency is what allows us to improve the system year after year. With that, I will turn it over to Jenna. Jenna Marie Rozenblat: Thanks, Tamir, and good morning. As Tamir noted, 2025 was another transformational year. Revenue increased 56%, gross profit increased 44%, and operating expenses increased only 25%. That operating leverage reflects the structural foundation of our business. Everything starts with Reason, which is our proprietary transaction management platform. Every transaction, every document upload, every compliance step, and every commission payout flows through that single system of record. With all 33,000 agents operating inside one platform, we benefit from standardized workflows and structured transaction data across our entire network. That unified foundation allows us to embed AI directly into live transaction workflows and deploy enhancements at scale. We are not layering standalone tools on top of fragmented systems. Instead, we are integrating intelligence into the core operating system of the brokerage. Let me give a few practical examples. First, agent productivity. LEO Copilot is our intelligent assistant embedded directly inside Reason. It provides agents real-time guidance on transaction status, commissions, next steps, and even marketing assets. Since its launch in 2023, agents have engaged with LEO over 700,000 times. It has become an essential part of their daily workflow. Second, support and compliance. Last summer, we made LEO the first line of support across email and phone. Since then, LEO has answered more than 20,000 support inquiries, or approximately 46% of total support volume. That success rate improves responsiveness for agents while reducing incremental support headcount as we scale. We also introduced LEO Voice Broker, an automated broker review to enhance compliance oversight. Automated broker review uses AI to review documents as they are uploaded, identifying missing information or inconsistencies before they reach a human broker. That reduces back and forth, shortens approval cycles, and allows brokers to focus on more complex issues rather than routine checks. Third, internal automation. Beyond agent-facing tools, we are increasingly deploying AI agents and workflow automations to replace repetitive manual tasks across brokerage operations, finance, transactions, support, and enablement. For example, we have automated significant portions of our ready-to-close transaction workflows, reducing manual intervention across a growing share of transaction types. And we have also standardized processes such as refund coordination, commission calculations, and bulk document retrieval, replacing multistep spreadsheet- and ticket-based workflows with structured, system-driven processes. While these initiatives may not be visible externally, they reduce friction, improve auditability, and prevent headcount from scaling linearly with transaction volume. Over time, these improvements compound. That is what makes the leverage durable. And last, but certainly not least, in the fourth quarter, we extended HeyLeo.com, our unified platform, to the consumer. HeyLeo is our AI-powered consumer portal where home buyers converse with intelligent agents to find their next property. This is not just a search site. It is a full AI Relationship Manager, or AIRM, that provides each of our agents with a customized web portal, a dedicated SMS phone line, and a dedicated HeyLeo email address. The power of HeyLeo lies in its Atlas skill layer. It is backed by comprehensive MLS data, 180 integrations today and a target of 400 integrations by July, and nationwide school and neighborhood insights. Whether a buyer is texting a question about a school zone or emailing about a kitchen layout, the AI provides instant data-backed responses. It can even schedule showings directly on the agent's calendar. By providing this 24/7, omnichannel engagement, we are giving our 33,000 agents a one-to-many scaling advantage. While HeyLeo remains in beta, it represents a critical link in our goal to streamline the entire transaction life cycle from the first consumer click to the final commission payout. Taken together—agent productivity, compliance, back-office efficiency, and now HeyLeo’s consumer engagement—we believe we have developed a structural advantage that is scalable, durable, and economically meaningful. I will turn it over to Ravi. Ravi Jani: Thank you, Jenna, and good morning, everyone. Our 2025 results reflect another year of significant growth and improving operating leverage, even as our results were impacted by a shift in our transaction mix. Consolidated revenue for the fourth quarter rose 44% to $505 million, contributing to full year revenue of nearly $2 billion, a 56% increase from $1.3 billion in 2024. This performance was led by our North American brokerage segment, where closed transactions increased 38% in the fourth quarter. This significantly outpaced the broader existing home sales market, which saw only a 1% increase in the same period. This performance was all organic and reflects our continued success in attracting high-producing agents and teams to The Real Brokerage Inc. platform. We also saw continued momentum in our ancillary businesses. Ancillary revenue in the fourth quarter rose 24% year over year to $3.2 million and reached $11.9 million for the full year. This includes RealWallet, which generated $339,000 in the fourth quarter, an 8x increase from its launch quarter a year ago. We believe the continued expansion of these services represents a meaningful long-term opportunity to diversify our revenue base and enhance our margin profile. Gross profit for the fourth quarter was $39 million, up 30% year over year, bringing our full year gross profit to $166 million, an increase of 44%. Our fourth quarter gross margin was 7.7% compared to 8.6% in the prior-year period, while our full-year margin was 8.4%. The year-over-year change is primarily a function of our evolving mix. In the fourth quarter, we saw a 400-basis-point increase in the proportion of transactions completed by agents who have reached their annual commission cap. While these post-cap transactions carry a lower margin for the brokerage, they are a core element supporting agent retention, evidenced by our revenue churn improving to 1.6% in the fourth quarter, down from 1.8% in the prior year. We believe maintaining a best-in-class retention profile is fundamental to our long-term competitive position. Based on our current outlook, we expect this transaction mix shift to continue in 2026; however, we anticipate margins will ultimately normalize as market activity improves and transaction growth becomes more evenly distributed across our broader agent base. Over time, we expect ancillary businesses and platform efficiencies to support further gross margin expansion. A highlight of our 2025 performance was the continued decoupling of our expense base from our revenue and gross profit growth. In the fourth quarter, operating expenses grew 22% to $44 million, while gross profit grew 30%. Operating expense in the quarter includes $750,000 related to an agreement to settle the CoinArc class action lawsuit on a nationwide basis. For the year, we limited operating expense growth to 25%, for a total of $175 million against a 44% increase in gross profit. The largest driver of our OpEx increase remains marketing—specifically revenue share and agent equity compensation—which scale directly with our transaction volume. As a percent of revenue, operating expenses improved by 160 basis points to 8.8% in the fourth quarter and by 220 basis points for the full year to 8.9%. Our adjusted operating expense, which is a non-GAAP metric that reflects our fixed cash overhead, improved to 4.3% of revenue, down from 5.7% in the prior-year period. On a unit basis, our adjusted OpEx per transaction declined 22% year over year to $440 in 2025, down from $565 in the prior year, further validating the scalability of our platform. Importantly, this operating leverage drove improvements across our profitability metrics. Operating loss improved to $5.2 million in the fourth quarter compared to $6.4 million in 2024, while full-year operating loss narrowed to $9.2 million from a loss of $25.2 million in 2024. Net loss improved to $4.2 million in the quarter and $8.1 million for the full year, compared to a net loss of $6.7 million and $26.5 million for the respective prior-year periods. Adjusted EBITDA rose 56% to $14.2 million in the fourth quarter and reached $62.9 million for the full year, a 57% year-over-year increase from 2024. The Real Brokerage Inc. generated $66 million in cash flow from operating activities for the full year and returned $39 million to shareholders via share repurchases, including $15 million in the fourth quarter. We ended the year with $49.9 million in unrestricted cash and investments, and we continue to carry no debt. Our capital allocation strategy remains disciplined, focused on maintaining ample liquidity to fund our organic growth while retaining the flexibility to return capital to shareholders and evaluate strategic M&A. Regarding our outlook, we are not providing formal guidance at this time. In the near term, as others in the industry have noted, January and February saw an unseasonably slow start to the year. Volatile weather and historic snowstorms across much of the country impacted transaction velocity during the first two months. Consequently, we expect Q1 revenue, operating loss, and adjusted EBITDA to decline sequentially from Q4 2025 levels. However, on a full-year basis, we expect the fundamental trends of organic growth significantly outpacing the broader industry to persist. We also remain confident in our ability to drive revenue and gross profit growth at a faster rate than operating expenses, which should result in year-over-year improvements in both GAAP and non-GAAP profitability metrics for the full year 2026. More details on our results and key operating metrics can be found in the earnings press release and investor presentation that accompany this call. I will now turn it back to Tamir. Tamir Poleg: Thank you, Ravi, and thank you, Jenna. Let me close with a broader perspective on the business we are building. Real estate is among the world's largest and most complex asset classes. A single transaction involves a convergence of buyers, sellers, agents, lenders, attorneys, regulators, and multiple sources of capital. It often involves leverage and requires compliance that varies across jurisdictions. And for most consumers, it happens only a handful of times in their lives. That combination—high value, high complexity, and low frequency—makes trust and infrastructure critically important. When we started The Real Brokerage Inc., our goal was not to build a better brokerage. It was to reinvent the model entirely—economically, technologically, and culturally. Traditional firms were built on physical infrastructure and overhead, with technology as an afterthought. We chose a different path. We aligned our economics with agents, built a unified system for the entire transaction life cycle, and we focused on culture by treating our agents as long-term partners. The brokerage was our starting point, but the platform is our destination. Our platform today encompasses a massive funnel of high-value transactions. By building a platform that productive agents never want to leave, we earn the right to serve them more deeply across mortgage, title, fintech services, and now consumer engagement. These are not opportunistic add-ons. They are integrated components of our flywheel: attract productive agents, process transactions with unmatched efficiency, improve infrastructure with every deal, retain through alignment and value, and ultimately capture more of the transaction life cycle as the ecosystem matures. What makes this model resilient is not just our code, but the compounding advantages of a scaled network, years of platform development localized down to the municipality level, and the massive volume of structured data we capture with every transaction. In 2025, we proved the model. We reached nearly $2 billion in revenue and over 185,000 transactions, all while generating meaningful cash flow, achieving our first quarter of GAAP profitability, and strengthening our balance sheet in a constrained housing environment. We cannot control the macro environment, but we can control our vision, our execution, and our discipline. We believe the opportunity ahead remains significant. Thank you to our agents, employees, and partners for your belief in The Real Brokerage Inc. We are still in the early innings, and we are building this to endure. Operator: Thank you. We will now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you are listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press 1 on your phone. Your first question is coming from Stephen Sheldon from William Blair. Your line is live. Stephen Sheldon: Hey, thanks. Good morning. First, I think I have probably asked this most times. I just wanted to ask about the agent recruiting environment and pipeline. There are a lot of changes in the industry, especially with the Compass-Anywhere merger. So are you seeing that create any more opportunity to attract agents, and are you seeing any pickup in agent interest to join since you announced some of the AI initiatives late 2025? Tamir Poleg: Hi, Stephen. There are a lot of moving parts right now in the industry and a lot of uncertainty for many agents. I think that when it comes to us, we still have a very strong pipeline. We have not tried to be opportunistic with approaching teams or agents that were part of some mergers in the industry. We believe in our value and believe that we should not rely on just occasions in the industry in order to attract agents. So the pipeline is strong. We think that there is an opportunity to double down even more on agent attraction, and in the coming weeks, we will announce some exciting things around that. We also think that the technology that we will be introducing later this year will help us attract agents even at a faster pace. So we are still very optimistic about our ability to continue and grow the way we have been in recent years. Stephen Sheldon: Got it. Good to hear. And then a follow-up on the title side, great to hear that you have more states opening. It sounds like three more on top of the current 13. How should we be thinking about the trajectory of title in 2026, especially as you move past the headwind from switching from team- to state-based JVs? Tamir Poleg: Sure. So 2025 was a transition year. We did a change in leadership at the beginning of 2025, and then we transitioned from team-based JVs to state-based JVs, and now we are starting to see the fruits of that labor. We are also doubling down on focusing on non-teams or any agent with 10 to 20 transactions within those 13 states. So we think that in the coming month and couple of quarters, we will see a significant movement. We are not happy with the performance in 2025. We understand that it was a transition year, but it is time for us to start seeing the signals of that growth. So it takes time, but I think that we have the right model and the right leadership in place, and we will start seeing the signs later this year. Stephen Sheldon: Good to hear. Thank you. Operator: Thank you. Your next question is coming from Naved Ahmad Khan from B. Riley. Your line is live. Naved Ahmad Khan: Great. Thank you very much. So, two questions from me. Maybe one just building on the title. Can you maybe quantify the drag from the transition that you had in the fourth quarter from transitioning from the old structure to the state-level JVs? And then I think on the last earnings, you had shared some data points about the attach rate that you were seeing in some of these markets that are transitioning over. Can you maybe share some color on how these are progressing? Are you seeing continued improvement in attach rate where markets have transitioned over? And the second question I had was on mortgage. Now you have more than, I guess, more than 100 loan officers, and you also introduced the consumer-facing video to help with driving attach for mortgage. What are the early results from these initiatives that you are seeing? Thank you. Tamir Poleg: Thank you, Naved. So on title, the attach rates that we have been seeing in the past couple of months are between 30% to 40% within the JVs. We want to see those percentages grow even further, and we also think that there is potential to expand those JVs and invite more agents and focus on the highest-producing agents, and those are efforts that are taking place right now. It takes a little bit of time to have those conversations with the agents and teams and get them signed up, and then earn their deals and move from there. This is why it is taking a little bit of time. But we would like to see the attach rates go beyond where they are right now in the short term. On mortgage, as you know, we brought in Kate as the new CEO of OneReal Mortgage a month and a half ago. We have a very strong pipeline of productive agents that are in the process of getting licensed as loan officers and, obviously, they will be a part of our loan officer base. So I think that within a couple of months, when they ramp up and start sending their deals, we will see an uptick in mortgage. We are very happy with the impact of Kate’s actions so far, and I think that they will have a very positive effect on revenue later on this year. So I think that mortgage is really on the right track. When it comes to LEO, what we are now doing is trying to experiment with AI technology that helps our agents nurture and convert leads in the background without them doing too much. And we think that will also help us drive mortgage and title. It is still in the early days. It is alpha tests, but it is showing very promising signs. So I am very optimistic about our ability to attach ancillary services through technology, and I think that LEO will become an integral and essential part of a transaction for many of our agents in the very near future. Naved Ahmad Khan: Okay. And then can you maybe just quantify the drag from the transition in the title side, moving from entity- to state-level JVs? Ravi Jani: Sorry, I can take that one. It was similar to last quarter. It was in the neighborhood of a couple hundred thousand dollars of revenue from JVs that existed in the prior year that were wound down and have not ramped back up. And importantly, on the point of how we expect title to grow throughout the year, we would expect to see growth reaccelerate as we lap some of those transitions. So we should be back to double-digit and solid double-digit growth as the year progresses. Jenna Marie Rozenblat: Excellent. Thank you. Naved Ahmad Khan: Thank you. Operator: Your next question is coming from Matthew Erdner from JonesTrading. Your line is live. Matthew Erdner: Hey, good morning. Thanks for taking the question. I know you touched a little bit on the capped agents and the roughly 400-basis-point increase. Where do you expect margins to normalize once we work through, call it, the slug of the market where a lot of the capped agents are winning transactions? Ravi Jani: Thanks, Matt, for the question. I think we are at a point where, while we expect this mix shift to probably continue in the first half, as we get into the second half of the year, some of the fee model changes we announced last year start to manifest, and we start to see ancillary reaccelerate, we should be at a point where we are seeing less or no drag on margins as we get to the second half. But just given where we ended 2025 and entered 2026, we expect to see this mix shift dynamic in the first half, and then that should level off. And I think the important thing to keep in mind is that while we are focused on the margin rate, we are also focused on the gross profit dollars and our ability to grow the gross profit dollars faster than we grow OpEx, which we proved throughout 2025. And so we are mindful of the margin, and we have taken corrective action on that front. But importantly, we are controlling what we can control on the fixed OpEx side as well, and so that should translate to improved bottom line. Matthew Erdner: Got it. That is helpful there. And then last one for me, I will keep it short here. What are you looking for in terms of greater adoption on the Wallet side and growing that overall deposit base? Tamir Poleg: It is a combination of a couple of things. We have about 7,000 agents on the Wallet, and we want to see more agents utilizing Wallet. We think that there are ways to push agents to adopt Wallet even further, and we are contemplating those actions. We will probably see them later on this year. At the same time, one of the biggest drivers of revenue to Wallet is Real Capital, and Real Capital expands to more and more states. I think that we are currently in 20 or 21 states, so we still have a long way to go there. As we see more states opening up and more agents having lines of credit available to them, we will see more revenue driving into Wallet. Matthew Erdner: Got it. That makes sense. Thank you. Operator: Thank you. Thanks, Matt. Thank you. And once again, everyone, if you have any questions or comments, please press star then 1 on your phone. Your next question is coming from Nick McAndrew from Zelman. Your line is live. Nick McAndrew: Hey, thanks. My questions—maybe one on the churn side of things to start. I think agent churn has improved pretty dramatically in just the back half of the year to the mid-single digits. I am wondering how much of that is attributable to ancillary products like RealWallet and maybe the credit lines that are creating switching costs for agents versus how much of this is simply better agent quality coming in the door? Thank you. Tamir Poleg: Thank you, Nick. It is a good question, and I think that our performance on agent retention is especially remarkable given all of the dynamics in the market and the fact that agents are really hurting right now. I think that everything that we release—LEO, Wallet, all of the features, all of the technology that we offer agents—adds an incremental way to value the platform. So the more services we offer, the harder it gets to leave the platform. Obviously, if you have a line of credit from The Real Brokerage Inc., it is really difficult to give that up. If you have LEO available to you, and you can ask questions and get immediate answers and get all of your files reviewed within seconds, it is really difficult to step away from that. So I think that all of those just add up to a platform that is really, really attractive for agents. Nick McAndrew: Thanks, Tamir. That is helpful. And maybe following up on that, I think there has been some level of multiple compression in a lot of software names across the space that has been driven by concerns around agentic AI disruption. I am curious if you can reiterate how you think about the tech stack relative to peers. But even more broadly, as AI tools become increasingly accessible, is there any risk that agents start building or adopting their own tools independently, or do you view all of these agentic AI developments as just a net opportunity for The Real Brokerage Inc. platform? Tamir Poleg: Obviously, we see that as an opportunity. And if you look at our financial performance, you can see that the numbers speak for themselves. At the same time, we also see a huge opportunity in the implementation of AI and the fact that a lot of the things that agents do can be helped with AI. I do not think that agents can figure all of that on their own. I think that it is important to have an integrated system where all of the information is in one place, and AI has access to all of your documents, all of your past performance, all of your financials, all of your conversations. It makes the AI substantially more efficient. And this is what we are trying to build. I think that agents on their own will never have the ability to build something as powerful as what we are building for them. So for us, we will continue to invest, and we just want to create an unfair advantage for agents, and it is starting to happen these days. Alexandra Lumpkin: Alright. Well, thanks for the question, Nick. Now that we have concluded the analyst portion of the call, Matthew, are there any more questions in the queue? Operator: Certainly. There are no further questions in the queue. Ravi Jani: Great. Well, now that we have concluded the analyst portion of the call, we wanted to address some of the questions we received from shareholders on the SAIT Technologies Q&A portal that was opened last week. We received a number of excellent questions, and so thank you to all who participated. First question for Tamir: When do you expect The Real Brokerage Inc. to turn a profit, and is there anything shareholders can do to help The Real Brokerage Inc. become profitable? Tamir Poleg: Thank you for the question. It is important to understand that for a company with our growth profile and capital efficiency, profitability is largely a strategic choice. Many of our peers are currently posting much steeper losses despite having significantly larger agent bases, which we believe validates the superior efficiency of our model. To give some context, our largest segment, North American brokerage, was nearly breakeven in the full year of 2025. The significant majority of our consolidated loss currently reflects our ancillary businesses, where we are deliberately choosing to invest today because we believe the long-term returns will be substantial. As for what shareholders can do to help, the most direct way to support our path to profitability is to engage with our ecosystem. If you are buying or selling a home, work with a Real agent, utilize a OneReal Mortgage loan officer, and choose OneReal Title for your escrow and title services. Increasing the attach rates of these services directly fuels our highest-margin revenue streams and significantly accelerates our timeline to consolidated profitability. Ravi Jani: Thanks, Tamir. The next shareholder question is: Do you anticipate stock-based compensation to continue to scale at around the same pace as cash flow, or will it level out or decrease at some point? I appreciate the opportunity to clarify our approach to equity. First, it is important to note that nearly all of our agents’ equity awards are tied directly to production, and so we do not write large upfront checks or offer guaranteed signing bonuses. Equity is primarily earned only when a transaction closes or an agent reaches their production-based milestone, such as hitting their annual cap or achieving Elite status. And we are already seeing some natural leverage in the model as we scaled. In the fourth quarter specifically, stock-based compensation as a percentage of revenue declined by 80 basis points year over year. As we continue to grow revenue and gross profit faster than our fixed headcount, we would expect this leverage to continue, reducing stock-based compensation both as a percentage of sales and free cash flow over time. You have seen that over the past few years. With all that said, we remain highly mindful of dilution, which is why we have a buyback program in place to offset it. And given where our stock is currently trading, we are pleased to be in a position where we have excess cash available to repurchase shares. Ravi Jani: Last shareholder question for Tamir: Can you talk about the growth in RealWallet and revenue growth specifically? How has it trended since the product launched? Tamir Poleg: Sure. RealWallet has been a standout success story for us. The business generated around $900,000 in 2025, and it is currently generating annualized revenue of over $1.5 million, which continues to grow on a month-over-month basis. We now have over 7,000 agents utilizing Wallet, as I mentioned, with our total deposit balance growing to over $23 million. On the lending front, we have extended over $8 million in lines of credit, and notably, our U.S. balances now exceed those in Canada. Beyond being an attractive high-margin revenue line, Wallet serves as a unique value proposition and a powerful retention tool that deepens our relationship with our most productive agents. Ravi Jani: Great. Well, that concludes the retail shareholder Q&A. If you have any more questions on today’s earnings release, please feel free to contact me and our Investor Relations team. Matthew, would you please give the conference call replay instructions once again and close the call? Thank you. Operator: Certainly. Ladies and gentlemen, today’s call will be available for replay. The replay phone numbers are (877) 481-4010 or (919) 882-2331. The replay code is 53464. And once again, the replay phone numbers are (877) 481-4010 or (919) 882-2331, and the replay code is 53464. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bath & Body Works, Inc. fourth quarter 2025 earnings conference call. Please be advised that today's conference is being recorded. During the question-and-answer portion, you may ask a question from the phone by pressing star one. I will now turn the call over to Luke Long, Vice President of Investor Relations. Luke, you may begin. Luke Long: Good morning, and welcome to Bath & Body Works, Inc. fourth quarter 2025 earnings conference call. Joining me on the call today are Daniel Heaf, Chief Executive Officer, and Eva C. Boratto, Chief Financial Officer. In addition to this call and this morning's press release, we have posted a slide presentation on our website that summarizes the information in these prepared remarks and provides some related facts and figures regarding our operating performance and guidance. As a reminder, some of the comments today may include forward-looking statements related to future events and expectations. For factors that could cause actual results to differ materially from these forward-looking statements, please refer to the risk factors in Bath & Body Works, Inc.’s 2024 Form 10-K. Today's call also contains certain non-GAAP financial measures. Please refer to this morning's press release and supplemental materials for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure. With that, I will turn the call over to Daniel. Daniel Heaf: Thank you, Luke, and good morning, everyone. Today, we will discuss our fourth quarter results, our outlook for fiscal 2026, and the early progress we are driving to return the company to consistent growth. Our fourth quarter performance was better than we had anticipated, but still well below the standard we expect for ourselves. Our aspiration is clear: to bring together luxury scent, real benefits, and unmatched access, building a brand consumers love, trust, and choose every day. Last quarter, we introduced the Consumer First Formula, our multi-year plan to return Bath & Body Works, Inc. to sustainable growth. Our fourth quarter results reinforced our diagnosis, and the necessity and urgency of this plan. After a soft start to the quarter, our actions to strengthen our performance were successful, supported by consumer rebound after the government reopened and strong execution of targeted promotions by our teams during key holiday moments. We ended the quarter with net sales down 2% and adjusted EPS of $2.05, both ahead of our expectations. Looking ahead, we expect improvement in our financial performance as we execute the Consumer First Formula with discipline and urgency. However, the full financial impact of the actions we will take will take time and build throughout 2026 and accelerate into 2027. Since launching the Consumer First Formula last quarter, we have been focused on execution. Across the organization, teams are motivated, aligned, and moving with pace. With many new roles and leaders in place, we are implementing an enhanced go-to-market approach with improved processes and collaboration between product, brand, and marketplace teams. Let me walk through some of the progress we are making across our four strategic priorities. First, creating disruptive and innovative products. Strengthening our hero category product offering and restarting our innovation engine is foundational to our plan. Since Q3, our product, merchant, and supply chain teams have been working side by side to take insights from consumers and prestige brands and translate them into innovative products that we can deliver to consumers at extraordinary value and unmatched scale. We are prioritizing investments behind our fragrance icons, our priority product franchises, and the core forms that drive repeat purchase. A recent example is the launch of our new moisturizing hand soap, one that features an updated, efficacious formula, elevated packaging, and is marketed as benefit-first. Since the launch, consumer reviews and sell-through have been strong, so much so that we are now actively chasing into demand. This is a sign of things to come as we refocus on the consumer and our hero category. Our 2026 product pipeline reflects this approach to innovation. It is grounded in consumer insights, incorporates enhanced consumer testing, and is targeted in the body care, home fragrance, and soaps and sanitizers categories where we are the market leader. In the back half of 2026, consumers will begin to see significant product evolution in these hero categories that include new forms and upgraded vessels, such as the restage of our moisturizing body wash and a new flat-back spray hand sanitizer, both directly informed by consumer feedback and designed to look modern while improving usability. We are also strengthening how we communicate product quality by evolving the labeling on our packaging, emphasizing ingredient transparency and highlighting product efficacy and benefits, such as 48-hour moisture and dermatologist-approved claims. We know stronger quality messaging is critical to attract new, younger consumers, and it is already being rolled out across all touch points, including our stores, digital platforms, and our product labels. We expect that our new product formula, upgraded packaging, stronger product claims, and elevated franchise positioning will increase our appeal to new consumers, while also increasing loyalty amongst our core customer base. We also expect consumers to respond positively to the rollout of higher fragrance load across our iconic scent franchises and complemented by new sensitive skin offerings. These examples reflect our focus on strengthening leadership in the core, delivering more consistent and relevant benefit advancements, and better meeting the evolving expectations of today's consumer. In short, these are early actions of a much broader innovation agenda which accelerates in the back half of the year and continues through 2027. Earlier this quarter, we launched our latest Disney Princesses collaboration. Building on the insights from last year's collection, including offering a broader range of accessories, this latest lineup features five new fragrances: Life Is a Fairytale, Snow White, Mulan, Rapunzel, and Aurora, along with the return of two fan favorites from the original collection, Belle and Tiana. The launch has resonated with customers and overall is in line with our expectations. Collaborations remain an important part of our growth strategy, and we have more collaborations planned this year than last. As we said last quarter, we will over time deploy them differently and more strategically to drive energy into our fragrance icons, key franchises, and seasonal collections. A good example of this is the launch of the Peak Collection, specifically designed to support the Easter shop. In summary, we are moving with pace to modernize our product packaging and formulation, and this will become increasingly visible in the back half of the year and continue to build through 2027. Second, reigniting the brand. We have begun laying groundwork to modernize how Bath & Body Works, Inc. shows up and communicates with consumers. Our brand and marketing teams are shifting towards clearer, more elevated brand and product storytelling. We are sharpening our position and creative platform, adopting a modern, consistent visual identity across channels, and increasing investment in upper-funnel media with higher-caliber influencers and creators to build a more culturally relevant presence that sparks excitement and builds awareness with new consumers. Earlier this quarter, our evolved brand identity made its debut on Amazon, showcasing Bath & Body Works, Inc. in a modern and relevant way for today's consumer. I will speak more about the Amazon launch in a moment. This updated visual identity is supported by richer, visually compelling product storytelling that highlights what makes our brand distinct. That everyone deserves to find that feel good. As expert creators, we bring together luxury fragrance, meaningful benefits, and easy access delivered at exceptional value. The new brand expression that debuted on Amazon will begin rolling out across our own channels later this year. As we modernize the brand, creators and influencers at scale will be an important part of our new go-to-market strategy. The use of influencers is a proven go-to-market playbook that will allow us to create a more visible and consistent presence across the social media platforms we know our consumers use every day. These actions are the beginning of a transformation of Bath & Body Works, Inc. from a retailer to a global brand, one that leads with creativity, celebrates product, and creates culture. I know what this looks like when it is successful, and I can see the upside. Third, winning in the marketplace. Discovery should feel effortless. We are focused on meeting consumers wherever they choose to shop—online, in stores, and across third-party platforms. Our global store fleet is a meaningful advantage in beauty and fragrance, one that would take newer competitors significant time and resources to replicate, and we are committed to fully leveraging its strength. To welcome more consumers to the brand, we have taken steps to simplify and modernize the in-store experience. For example, we have reduced SKUs by 10%. Looking ahead, we are focused on enhancing in-store navigation. Changes will roll out later this year, creating a more intuitive, inviting, and elevated shopping journey. I am confident the consumer will feel the difference. At the same time we are making these in-store changes, we are broadening and improving how consumers can discover and shop the brand across owned digital and third-party platforms. A major milestone in this work was our February 20 launch on Amazon. We know consumers often go to Amazon to purchase their beauty products, and this launch gives us access to Amazon's broad, high-intent customer base, enabling us to reach new and lapsed consumers in one of the world's most trafficked marketplaces. The curated Amazon assortment is designed to attract new shoppers to the brand while giving loyal consumers far more convenient access to their favorite products. As we learn more from our Amazon launch, we are evaluating additional opportunities to extend our distribution further in strategic and brand-accretive ways. In parallel, we are elevating our owned digital experience with a focus on reducing friction and improving the customer experience through clearer product navigation, stronger storytelling, and a more intuitive and modern shopping experience. For example, we have now lowered our free shipping threshold from $100 to $50, aligning more closely with specialty retail standards, enhancing our competitive positioning, and crucially reducing friction for new-to-brand consumers. Looking outside of North America, our international business continues to be an exciting opportunity. The international business is approaching $1 billion in retail sales. Our partners, who own and operate the stores, believe in our strategy and are accelerating the pace of new store openings across existing and new markets, including Germany and Brazil. This reflects the strong global demand for our brand and allows us to further expand our reach to consumers worldwide. Our goal here is simple: be in the path of the consumer, spark discovery, and ensure the Bath & Body Works, Inc. brand shows up consistently and powerfully across every owned and partner touch point. Finally, operating with speed and efficiency. We are laser-focused on removing complexity from our business, streamlining decisions, shortening cycle times, and driving productivity. Our multi-year Fuel for Growth program targets $250 million in cost savings over two years, with approximately $175 million included in our 2026 guidance. These savings allow us to accelerate and fund our strategic investments in product and brand. As we move forward, we are closely monitoring indicators that our strategy is gaining traction, and we will share green shoots along the way, such as accelerated growth in new-to-brand consumers, stronger pricing power behind our innovation, improved performance in our hero category, and expanded reach through new distribution channels. The Consumer First Formula represents a comprehensive end-to-end transformation of our company. It is designed to ensure we consistently meet and exceed the expectations of today's modern consumer. This work is well underway. We are moving with urgency, and as the year unfolds, our progress will become increasingly visible to consumers, associates, and shareholders alike. At the core, this transformation is repositioning us from a specialty retailer to a premier global brand. With that, I will turn it over to Eva to walk you through our financial performance and outlook. Eva C. Boratto: Thank you, Daniel, and good morning, everyone. Today, I will provide the details of our fourth quarter results, a wrap up of 2025 performance, and a review of our 2026 guidance. Beginning with the fourth quarter, net sales were $2.7 billion, down 2.3% versus last year and better than the guidance floor we set of down high single digits. This performance reflects improvement as the quarter progressed following a soft start in early November when we navigated significant macroeconomic pressure that impacted our consumer demand. Our targeted promotional and operational adjustments, such as a new Black Friday weekend event, drove dual-channel traffic growth on those key days. Our Q4 category performance reflects the same challenges we shared in Q3. We must deliver consumer-right product innovation, elevate the brand, and be available wherever and whenever she chooses to shop. Body care declined mid-single digits, below the shop, driven by underperformance in seasonal collections, notably Holiday Traditions, which did not resonate for the first time in several years. Consumer research shows our body care offerings have become too predictable and that we need to be more disruptive with modern, benefit-led innovation. On a positive note, Champagne Toast had its strongest year ever, validating our strategy of elevating our core fragrance icons. Home fragrance grew low single digits, performing above shop. Candles were a relatively bright spot, supported by stronger three-wick and single-wick acceptance, better inventory positioning, and disciplined pricing. Soaps and sanitizers also grew low single digits, with our PocketBac sanitizers leading the way. In U.S. and Canadian stores, net sales were $2.1 billion, a decrease of 2.6% to the prior year. Direct channel net sales were $579 million, a decrease of 2.5%. When adjusted for Buy Online, Pick Up In Store, digital outperformed stores. International net sales were $91 million, up 8.6% to the prior year, and system-wide retail sales grew 13%. We are pleased with the rebound of our international business, with all geographies delivering growth, and our partners maintained healthy inventory positions. Our fourth quarter adjusted gross profit rate was 45.7%, better than expected and a decline of 100 basis points to last year, driven primarily by tariff impacts and partially offset by B&O leverage, which benefited from the Q1 2025 exit of a third-party fulfillment center. Mix-adjusted AUR declined low single digits, reflecting our strategies during holiday. Adjusted SG&A rate was 23.2%, an increase of 90 basis points to last year, reflecting softer sales and investment in technology and initiatives associated with the Consumer First Formula. Bringing it all together, adjusted operating income was $614 million, 22.5% of net sales. Adjusted earnings per diluted share of $2.05 exceeded expectations and declined 2% to last year. With respect to inventory, we ended the fourth quarter with inventory down 5% to prior year and, importantly, with clean inventory levels headed into spring. Our real estate portfolio remains healthy, with 60% of our fleet in off-mall locations. In the quarter, we opened 21 new North American stores, all off-mall, and closed 28 stores, primarily in malls. For the year, we opened 32 net new stores. International partners opened 36 stores and closed seven stores in Q4, with 44 net new stores in the year. We ended the year with 573 international locations. Now, for the fiscal year 2025, net sales were $7.3 billion, flat to the prior year, and adjusted earnings per share was $3.21, down 2% to the prior year. For additional full-year results, please refer to the slide presentation we have posted on our website. Turning to our 2026 guidance. We expect 2026 to be a year of disciplined investment behind the Consumer First Formula, balancing rigorous cost control with targeted reinvestment to position the business for sustainable long-term growth. We expect net sales to be down 4.5% to down 2.5%. Key assumptions behind our net sales include a macro environment similar to 2025 with continued value-oriented consumer behavior. Our innovation pipeline, improved marketing execution, and new touch points, such as marketplace and wholesale, will begin to contribute more meaningfully over time, with a greater impact in the back half of 2026 and into 2027. Promotions are assumed at comparable levels to 2025 and will remain an important tool to drive traffic and customer engagement. International net sales are expected to be up mid- to high single digits. We expect full-year gross profit rate of approximately 42.4%, reflecting B&O deleverage primarily due to sales decline and merchandise margin pressure from product investments, partially offset by our Fuel for Growth initiatives. We are assuming tariff levels, inclusive of product cost inflation pressures, remain roughly neutral to year-over-year earnings. We expect full-year adjusted SG&A rate of approximately 29.2%, reflecting normal wage inflation, Consumer First Formula investment, and sales deleverage, again partially offset by Fuel for Growth initiatives. Our Fuel for Growth targets $250 million in cost savings over two years. As Daniel mentioned, we expect approximately $175 million of cost savings in 2026, with those savings earmarked to accelerate investments in innovation, digital, and marketplace capabilities, and high brand-impact initiatives. We expect full-year adjusted net non-operating expense of approximately $230 million, reflecting the interest benefit of the early redemption of our January 2027 bond, an adjusted effective tax rate of approximately 26.5%, and weighted average diluted shares outstanding of approximately 203 million. There are no share repurchases assumed in our outlook. Considering these inputs, we are forecasting full-year adjusted earnings per diluted share of $2.40 to $2.65. Turning now to the first quarter. We expect Q1 net sales of down 6% to down 4%. We expect first quarter gross profit rate to be approximately 42.5%, reflecting approximately 150 basis points headwind from tariffs, as we had no tariff impact in Q1 2025, and B&O deleverage due to the sales decline. B&O dollars are expected to be relatively flat. We expect our first quarter adjusted SG&A rate to be approximately 32.3%, reflecting net sales deleverage and net timing of investments and Fuel for Growth savings. Our first quarter outlook includes adjusted net non-operating expense of approximately $60 million, an adjusted tax rate of approximately 28.5%, and weighted average diluted shares outstanding of approximately 202 million. Considering all of these inputs, we are forecasting first quarter adjusted earnings per diluted share of $0.24 to $0.30. Now for a quick update on capital allocation. We are a strong cash flow generating business, and our top priority remains driving sustainable long-term profitable growth through strategic investments in the business. For the full year 2025, we invested $237 million in capital expenditures. We generated free cash flow of $865 million, including approximately $125 million of working capital benefits that our teams drove. We returned $167 million to shareholders through dividends and repurchased 15.1 million shares for $400 million. In 2026, we expect to invest approximately $270 million in capital expenditures focused on high-return real estate, Consumer First Formula investments largely related to product assortment, and logistics and fulfillment upgrades. We expect to reduce the number of new store openings this year, resulting in square footage growth of approximately 1%. We expect to generate approximately $600 million of free cash flow in 2026, including a $65 million after-tax benefit from the interchange fee litigation settlement. We expect to maintain our annual dividend of $0.80 per share and will redeem our $284 million of January 2027 notes in the first quarter, as I previously noted. We remain committed to returning to our 2.5x gross leverage target over time. As always, we will take a balanced approach, investing to drive long-term growth while returning excess cash to shareholders. To summarize, 2026 is an investment year as we execute our Consumer First Formula with pace and discipline. We are confident in our strategy and our ability to establish Bath & Body Works, Inc. as a premier global brand, one that delivers sustained, durable growth. Operator: Thank you. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. To allow for as many questions as possible, we ask that you each keep to one question and one follow-up. Our first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Lorraine Hutchinson: Daniel, I wanted to get your insight on the competitive landscape across mass, specialty, and other fragrance players. Some of these competitors are also leaning heavily into content creators and elevated packaging. How are you approaching this, and do you think you are positioned to compete effectively at this point? Daniel Heaf: Good morning, Lorraine. Thanks for the question. Without a doubt, the landscape we are operating in is increasingly competitive. We operate in innovative, useful, fast-growing, high-margin categories that naturally attract strong interest and new entrants. I really love the sectors that we play in. As I explained on the last earnings call in Q3, for a period our product innovation, our brand expression, and our market execution did not keep pace with the competition or with the consumer. We leaned too heavily on promotions to drive the business. The Consumer First Formula is directly addressing those gaps, and we are moving with pace. It is not strategy; it is action. You will see from us bold and disruptive product innovation—you know, we talked about a green shoot on the call in the moisturizing hand wash—new packaging, new formula, benefit-led marketing, and the success that we have had; a refreshed and reenergized brand that resonates with today's consumer; and an elevated and extension and expansion of our distribution in the marketplace, as you have seen with our February launch on Amazon. Now, as part of that marketing evolution, we are going to significantly expand the use of content creators. This is really what I mean by moving from being a specialty retailer to being a global brand. We expect to see a roughly tenfold increase in how we leverage content and how we leverage content creators so we can show up in social media in a way that is modern and relevant. What I love so much about this job and what I love so much about this company is where we sit. We are evolving to adopt the playbooks used by these small insurgent competitive brands, but we do so from a position of strength and with what I believe are significant competitive advantages. We have the scale and resources to invest meaningfully. We have our 2,500 stores globally, which gives us an amazing amount of trap to capture the demand we create. We have our fast, agile domestic supply chain that allows us to chase into demand, and we offer extraordinary value to our consumers. What I like about where we sit is that we will be an incumbent but operating with the pace and the agility of an insurgent brand. I have so much confidence in our strategy, in our competitive position, and, most importantly, in our team's ability to execute with pace. Lorraine Hutchinson: Thanks, Daniel. And Eva, can you talk a little bit about the puts and takes around your gross margin forecast for the year? What's embedded for tariffs, promotions, any other items? I would have thought you would get some of those elevated China tariffs back over the course of the year, so maybe just how you are thinking about the pace of gross margin development through the year? Eva C. Boratto: Sure. Thanks. Good morning, Lorraine. Overall, our outlook assumes about 130 basis points of gross margin pressure. I will start with merch margin, where we expect to see pressure really driven by those product investments that Daniel just referenced. You will begin to see some of that new product in the back half of the year. From a tariff perspective, our guidance assumes tariffs inclusive of product cost inflation. It is tough to separate those, roughly flat to earnings year over year. I would note you will see an outsized impact in Q1 as we are wrapping the start of tariffs, which for us began in Q2 of last year. We had essentially no tariff in Q1 2025. That reverses a little bit with some of the rate movements in Q3 and Q4. We expect to experience B&O pressure as well, natural deleverage given the sales declines, the investments we are making in real estate, and some wage inflation. This is all net of our Fuel for Growth. The Fuel for Growth program that we highlighted, about half of the savings flow to gross margin versus the other half to SG&A. We are continuing to mine for opportunities to improve our underlying cost as we progress. Thank you. Operator: Thank you. Our next question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Ike Boruchow: Hey, good morning, everyone. Congrats on the improvements. I guess two questions. First one, Eva, can you help us understand the Q1 revenue guide a little more? Just looking for some thoughts really relative to the trends maybe that you saw exiting the fourth quarter? Eva C. Boratto: Sure. Thanks for the question. I will start with a comment we made last November that was very consistent in Q4. When you exclude the benefit of broader promotional activity, our core business has been trending down about 3%. As I noted in my prepared remarks, our plan does assume promotional levels consistent with 2025. We are not building incremental promotional intensity into our plan. That does not mean we will not have different promotional events, but overall, as we think about intensity, we are assuming we are relatively flat. Think about the 3% I referenced as a baseline for 2026. For Q1, we are facing our most challenging year-over-year comparison from a top-line perspective. We had our strongest quarter last year in Q1. Ike Boruchow: Got it. So I guess my follow-up is kind of to that point. So last year in Q1, I think you started off with a really successful collab, which created some tough compares for you this year. But just kind of curious if you can comment on how the follow-up Princess launch, which you had a few weeks ago, did. I think Daniel had some positive comments, but really just trying to understand how you were able to comp that event, and if that sets you up well relative to the Q1 guide that you are giving us today on revenue. Eva C. Boratto: Sure. Let me take that question in a couple of ways. First, on the Disney Princess 2.0 launch, we built on our learnings from last year and our insights. We offered a broader range of accessories. Last year, those accessories sold out very quickly, within a day or a couple of days. Overall, the launch has resonated with existing customers and is overall in line with our expectations. I would say you cannot just look at Disney in isolation as to how it is affecting the overall shop. Q1 to date is tracking in line with the expectations that we just set. While Q1-to-date top line is running above our guidance range, that is consistent with our internal cadence of assumptions, and if there is some movement in timing of key events, that can affect the quarter. Overall, we are running in line with our expectations. Operator: Thank you. Our next question comes from the line of Matthew Boss with JPMorgan. Please proceed with your question. Matthew Boss: Great. Thanks. So, Daniel, maybe taking a step back, what signposts should we look for to know that your Consumer First Formula is working here? What gives you confidence in the plan, or any green shoots that you are seeing at this point? Daniel Heaf: Good morning, Matt. Yes, great question. Let me give you a little bit of color on that. Let me start by saying I am really pleased with how fast the whole company has moved from strategy to action. We are all collectively motivated and aligned behind the four pillars. We are focused on the Consumer First Formula, and I believe we are moving with real pace and discipline. The most important signposts are very clear and measurable, and we expect to see an acceleration in new-to-brand customer growth. We expect stronger pricing power and sell-through behind our core innovation. We are definitely looking for improved performance in our hero category, specifically body care in 2026, and expanded reach and incremental sales from the new distribution channels that we will open this year, like Amazon, which we opened on February 20. These are just some of the tangible proof points that the Consumer First Formula is working. As I have said a number of times, we expect the change to be visible to the consumer before we see the full benefits of our new strategy in the financials. I believe there are things that the consumer is already starting to feel. We talked about the moisturizing hand soap—it is a new formula, efficacious, benefit-led marketing—and we are seeing great customer reaction from that. It is just a signal of the things that we have to come. As I said in Q3, we are really ramping into product innovation in the back half of this year. As Eva mentioned, we talked about the iconization of our fragrances. If we put the right level of marketing, if we build multi-plan behind some of our iconic fragrances, we believe we can make big bigger. We started that with Champagne Toast last year almost as a test, and it had its best year ever. We have a way to go to deliver that, but we will show that in 2026. We talk about winning in the marketplace. International continues to be a great opportunity and grow nicely. We saw system-wide retail sales up double digits, which gives us confidence in the global opportunity for the brand. I would say Amazon is an important structural proof point, one that we have already launched early into the fiscal year, and we know it is an opportunity to acquire new-to-brand customers as well as service existing customers at a speed and convenience that this brand has not offered in the past. That is a little bit of color behind some of the proof points. Eva C. Boratto: And, Daniel, can I just add a couple of additional points from the points you made? As you look at international, our partners are showing confidence in the strategy with acceleration of new store openings next year. We are expanding in new markets, and our store openings will be at least 60 net new store openings. On the point that Daniel made about the moisturizing hand soap, as we look at the productivity of that, the productivity of that is double the gel soap that it is intended to replace. It is just an early proof point of real, tangible benefits when you bring the product to the market that resonates with the consumer. Operator: Thank you. Our next question comes from the line of Mark Altschwager with Baird. Please proceed with your question. Mark Altschwager: Good morning. Thanks for taking my question. Starting with margin, guidance implies low-teens EBIT margin this year. Do you view this as a durable base for the business? And then what is your philosophy on driving faster top line versus EBIT margin expansion in fiscal 2026 and into fiscal 2027? Eva C. Boratto: Sure, Mark. I will start with margin. This business has been a very healthy margin business for a long time. We need to invest for growth responsibly while we are funding the journey through our Fuel for Growth, but we must invest in this business to get the business back to growth, and when you do that, this business leverages nicely. As we think about margin expansion beyond 2026, we will come back to you as we continue to execute on the Fuel for Growth strategy. I would think about it as there is leverage to be had as we drive growth in the business. Daniel Heaf: It is growth and margin, but growth must come first. Mark Altschwager: Thank you. And then a follow-up on capital allocation. You are pausing buybacks, redeeming the nearly $300 million in debt in Q1. But if free cash flow tracks toward the $600 million guide, would you intend to remain out of the market for the full year, or is there a path to resuming some opportunistic repurchases through 2026? Or how are you thinking about the longer-dated maturities on the debt side just as you update your buyback plans? Thank you. Eva C. Boratto: Sure. Thanks, Mark. Our priorities remain the same: investing in the business, returning cash to shareholders, and maintaining a strong balance sheet. We are committed to our 2.5x gross leverage. We repurchased those bonds—earlier in the process of doing so was earnings accretive. We were reserving the cash for those bonds. Of course, as we progress through the year, we will maintain the flexibility to return cash to shareholders after funding our Consumer First Formula priorities. Operator: Thank you. Our next question comes from the line of Simeon Siegel with Guggenheim Partners. Please proceed with your question. Simeon Siegel: Thanks. Hey, everyone. Good morning. Daniel, and sorry if I missed it if you said this—obviously early—but is there any way to quantify the initial reads from Amazon? Maybe how you are thinking about both Amazon and the other incremental wholesale partnerships within the full-year guide for next year? And then just when thinking about wholesale, I am curious, maybe higher level, can you share your thoughts on whether this is something you want to drive customers to wholesale, or is it more so a function of you want to be able to meet your customers where they are? And then just, Eva, just quickly, it was nice to see the B&O leverage, and I heard the comment for go forward. Curious if you could tell us what the leverage point is now for occupancy and then maybe for SG&A as well. Thank you. Daniel Heaf: Hi, good morning. I will take the strategic question and maybe, Eva, you can follow up. The third pillar of the strategy is really winning in the marketplace, and the ambition here is to make discovery effortless. We are focused on meeting consumers where they are and where they choose to shop—online, in our own stores, and across third-party platforms—and Amazon is an important part of the strategy. We have only been live for a couple of weeks, so it is a bit early to be able to assess performance, but there is no question that the channel meaningfully extends our reach by giving us access to Amazon's broad consumer base and helps us connect, as I said, with both new and lapsed shoppers to drive brand discovery. I am particularly pleased with the response that we have had from the way that the brand looks. If you think about when I started here, our own website offered one photograph per product, and I think it was seen very much as a way for store shoppers to replenish. If you look at how our assortment—and it is a limited assortment to start with on Amazon, there are 50 SKUs—looks, the product photography is incredible. You can see the scent stack. You can see the benefits with lifestyle photography. We are starting to sell the brand through an elevated positioning and product storytelling in a way that we have not done so before, and once we have done that at Amazon, of course, it is relatively quick and cheap to start to roll that out across our existing touch points. Amazon is both a place to drive brand and consumer discovery, no question, and we are competing in the marketplace for traffic on Amazon. For too long, we have allowed our competitors to use our keywords and the fact that we did not have an official brand presence to take the demand that was rightfully ours and funnel it towards their product. That is now no longer happening. We have high expectations for this. It will make a meaningful financial impact in the year, and we are ramping into it. Eva C. Boratto: Great. And, Simeon, good morning. To your question about the full-year guide, inherent in our guide is about $50 million, or a half a point of growth, from our expanded distribution efforts. I would note our Amazon partnership is a wholesale model, so we are not realizing full retail sales. We are excited about the start to the launch, and the teams are highly engaged to continue to drive this strategy forward. On leverage points, I would say we do not really have any changes to our leverage point—B&O at about 2% to 3% sales growth and SG&A at about 2.5% to 3.5% sales growth. Thank you. Operator: Thank you. Our next question comes from the line of Kate McShane with Goldman Sachs. Please proceed with your question. Kate McShane: Thank you. Good morning. Thanks for taking our question. Daniel, you mentioned a few times the words luxury and pricing power, and I wondered if you could drill down a little bit more about what specific initiatives center around these strategies. Daniel Heaf: Hi, Kate, yes, I think that is a great question. For too long the brand has not listened to the consumer, and that is what we mean when we talk about putting the consumer at the center of everything that we do. We are taking consumer insights and directly translating that into our new and disruptive, innovative product. This is a new process that we are operating. For too long I think that we have looked at mass as the competition, which of course it is, but really the USP of our brand and what we are getting back to is bringing cues and scents from luxury and making it available at accessible price points. That is really the opportunity that we have in front of us. It is not that we are looking to reposition the brand as prestige or move into luxury price points. That is absolutely not what we are doing, but it is luxury scent with benefits at unbelievable value for consumers. Kate McShane: Thank you. And just as a second question, Eva, we wanted to ask about the international outlook. Is there any risk to the numbers you gave today just given the current circumstances in the Middle East? I know there was a little bit of a drag last time we saw conflict in that region on your international sales. Eva C. Boratto: Yes, thanks for the question, Kate. It is quite early. Let me take a step back. We are pleased with the rebound of our international business. In Q4, all geographies delivered growth, and our partners are starting the year in a healthy inventory position. As we look at the Middle East, today, international represents, as you know, about 5% of our total net sales, with the Middle East currently representing about 40% of the portfolio. That is down quite a bit from where we were a couple of years ago. We have a strong, diversified international portfolio. We are expanding our markets, and we have strong, compelling consumer demographics. I think it is too early to comment on the current dynamic in the Middle East. We will continue to monitor it and pivot. Our stores are open and continuing to function, and we are focused on our partners and our associates, of course. Operator: Thank you. Our next question comes from the line of Jonah Kim with TD Cowen. Please proceed with your question. Jonah Kim: Daniel, as we think about the collaborations and Amazon, how is your retention strategy different, if at all, and how do you think that will evolve over time? And in terms of the core offering, as you continue to evaluate, what is the right mix of body care, candles, and soap and sanitizer going forward? Thank you so much. Daniel Heaf: Hi, Jonah. Let me expand a little bit on collabs. As I said in Q3, we are thinking about collabs differently. We love collab. We want to use them differently and more strategically. We want to use them to drive energy into the things that are permanent about this brand—driving energy into our priority franchises, driving energy into our iconic fragrances, or driving energy into a seasonal collection that we are known for. The good news is we have more collabs this year than we did last year, and we are starting to use them strategically already. A really good example of this is live right now. We launched our Peak collab, which has had really excellent response from consumers. What it is doing is not standing alone as a collab, as a separate thing that is used to drive a quarter, but it is actually set up to drive energy into our Easter collection, and we are starting to see good results from that already. When it comes to Amazon, I do think, as I have said in the past, it is predominantly about meeting new and lapsed consumers. We have a very powerful and very successful rewards program with over 40 million members, and over 80% of our transactions in our own network flow through that. That is an excellent tool for continuing retention, but Amazon does not offer our rewards program. We are getting a benefit of having improved AUR on that. That is what the consumer is getting at the balance for speed and convenience. It really is about new and lapsed consumers on Amazon. On the second part of your question with regards to the core offering, we are focused together on making sure that we are taking share. To take share, we should be growing in line or better than the marketplace. That is the standard we expect of ourselves, and that is what the Consumer First Formula will deliver. I do not really think about what is the right balance for the business. I think: where is the consumer demand, where is the growth in the marketplace, and how are we going to claim our rightful share of that? Eva C. Boratto: And just to repeat what you said earlier, Daniel. Particularly as you look at body care and soaps and sanitizers, these are nice, growing markets out there that we can win in. Daniel Heaf: Absolutely. We do so from a position of strength. Operator: Thank you. Our next question comes from the line of Sydney Wagner with Jefferies. Please proceed with your question. Sydney Wagner: Just one more kind of on the pricing architecture. How are you thinking about the price taking with newness and what your right to pricing is there? Is there any learnings you have had as you have rolled out some of the brand refresh product? And then just as you work to shift brand perception toward being benefit-led, adding dermatologist-approved claims in store, do you feel the consumer is following you there? What has been the early feedback on those specific claims? Thank you. Daniel Heaf: Hi, Sydney. With pricing, I think our strategy is very clear. We have relied too often in the past on deeper and more frequent discounts. As we go into 2027, we are expecting AUR improvement on our innovative products. We are expecting to get paid for our innovation, and that product is not just great, innovative, disruptive product in and of itself. It will be wrapped in new energy and new brand identity. I do believe that when you get it right—great product, great brand—brought together in the marketplace, we can start to regain pricing power. That is absolutely the strategy. As Eva and I have both said, across the whole business, it is not our intention in this financial year to use deeper and more frequent discounts as a lever to growth. We know that is not in the best interest of the business long term. That is how we are thinking about pricing. It is not that the pricing or the tickets will be materially different on innovation. It is the fact that it will not be included in some of the more aggressive discounting that we may do. When it comes to benefit-led, it is very clear in our consumer insights for many years that this is a critical thing that we must crack for new and younger consumers to consider the brand. It is really a multipart, 365 strategy. We have rolled out new claims and new levels of ingredient transparency on our product. You can see it today on our labeling, and the presentation that we showed as part of this call gave a couple of highlights of that. It is now prominent and permanent in stores. Our website just launched what we call the Feel Good Formula, which is giving a much more detailed look into our ingredients and our commitment to a cleaner product. It is early days. We are getting good consumer feedback, and we expect this to be a core part of our brand identity as we move through the year. Critical for us. Operator: Thank you. Our final question this morning comes from the line of Krisztina Katai with Deutsche Bank. Please proceed with your question. Krisztina Katai: Hi. Good morning, and thanks for squeezing me in here. So, Daniel, with the emphasis on attracting new, younger consumers, and I believe I heard you say a roughly tenfold increase in leveraging content creators, can you maybe just talk about your expectations around new customer acquisition, how you see changes in your consumer demographics by age, by income, and then how you are tracking engagement rates on social media platforms that you expect to see as a direct result of these efforts in 2026? Daniel Heaf: Great question. Our expectations on new consumers are that we are expecting to see a trend break in the levels of new consumers that we are attracting to the brand. We are really focused on that. We welcome all consumers to the brand, and that is what I love. We are a broad church when it comes to consumers. We have propositions like Disney Princesses, which clearly skews younger, and we have a very loyal consumer that we love that skews slightly older. Where we want to play, of course, is where the market is growing, which is in the 25- to 30-year-old female demographic, and that is where our innovation in the back half is truly targeted. When it comes to brand, of course, we are tracking new-to-brand consumers. We have really good new metrics on brand health, and we are expecting improvements in that also. When it comes to social media, there are many metrics that we track, but I would say the most important one is going to be number of posts from the influencers. We are really looking for those thousands of influencers that we recruit to be posting their content about our product and our brand in their voice, because we know from having seen this playbook run with other competitors and those insurgent brands I talked about, that is the secret to success in that area. Thank you for your question. Okay. Thank you, everybody, for your questions. When we work in retail, the holidays do not mean a break. With that in mind, I want to take this last moment to extend a heartfelt thanks to our associates across stores, across distribution centers, and our home office for their continued commitment, passion, and determination. We are acting with urgency and clarity against the Consumer First Formula—creating disruptive and innovative product, reigniting our brand, winning in the marketplace, and operating with speed and efficiency—all to attract new and younger consumers. Our expectations for our business and our brand are high, and this work will take time, but we are confident that we have the platform, the plan, and the team to win. Thank you very much, everybody. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, welcome to the Rayonier Advanced Materials Inc. Fourth Quarter 2025 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, as a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mickey Walsh, Treasurer and Vice President of Investor Relations. Thank you, Mr. Walsh. You may begin. Mickey Walsh: Thank you, and good morning. Welcome again to Rayonier Advanced Materials Inc.'s Fourth Quarter 2025 Earnings Conference Call. Joining me today are Scott Sutton, our President and CEO, and Marcus Moeltner, our CFO and Senior Vice President of Finance. Last evening, we released our earnings report and accompanying presentation materials, which are available on our website at ryam.com. These materials provide key insights into our financial performance and strategic direction. During today's discussion, we may make forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our earnings release, SEC filings, and on Slide 2 of the presentation. We will also reference certain non-GAAP financial measures to offer perspective on our operational performance. Reconciliations to the most comparable GAAP measures can be found in our presentation on Slides 21 through 24. We appreciate your participation today and your ongoing interest in Rayonier Advanced Materials Inc. I will now turn the call over to Scott. Scott Sutton: Yeah. Thanks, Mickey. Good morning, everyone, and thank you for joining us. Since stepping into this role, I have interfaced with many Rayonier Advanced Materials Inc. employees and visited every site, and I will start with three things. First, I mean, what a great team we have. I am quite lucky to have the opportunity to hold hands with the Rayonier Advanced Materials Inc. employees and make us the absolute leader in cellulose and derivatives. Second, we have exceptional capabilities and adaptability to produce the broadest portfolio of cellulose products. Third, we have urgent work to do to get out of the ditch. I am going to keep my prepared remarks focused on Slides 4 through 7. As you can see on Slide 4, our free cash flow in 2025 was negative $88 million, and we also carry plenty of high-cost debt. That combination is not sustainable. So priority one on Slide 5 is simple: deliver positive free cash flow in 2026. Every group in the company is executing on priority one as a mission-critical activity. We are not just aiming to get out of the ditch. We are aiming to exit 2026 with significant momentum with a heavy focus on execution. That brings me to priority two: assert our leadership and lift our value equation in cellulose specialties. We are making great progress. Eighty-five percent of the specialties business is now arranged at an average price increase of 18% over 2025, with expected volume loss of about 20% compared with 2025. The other 15% is still in discussion and may not be decided until the back half of this year. If we are successful in those discussions, the remaining 15% will only come at an average price increase significantly higher than the 18% level. A great characteristic of Rayonier Advanced Materials Inc. is that everyone wants to contribute to our success, and that shows up in priority number three. You should expect every business to improve EBITDA in 2026 relative to 2025 through a broad playbook of leadership initiatives, active portfolio management—in other words, leveling up and leveling down market segment categories to maximize contribution profit—and new product commercializations across the portfolio shown on Slide 6. Slide 6 shows the new product work across the company. The point is that one business does not carry the load. The point is that we have multiple levers, and we expect every business to take a step forward. We will execute our way to the outcome shown on Slide 7. The summary is every business improves EBITDA over 2025. We bridge a near-zero EBITDA first quarter as our leadership initiative kicks in, and we deliver a full-year EBITDA substantially better than 2025, along with solid positive free cash flow. And we intend to hit 2027 running hard. That is the plan, and it is what we are executing right now. Operator, please open the call for questions. Operator: Thank you. We will now open for questions. If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw any questions, please press star 1 again. Our first question comes from Daniel Harriman from Sidoti. Please go ahead. Your line is open. Daniel Harriman: Hey, guys. Good morning. Thank you for taking my questions and Scott, congratulations on the new role. I have two questions that I will start with, and then I will get back into the queue. But, Scott, setting aside the near-term noise and the stock move following last week's AIP announcement, I am curious to know what you have observed internally that gives you confidence in the company's underlying earnings power and the long-term shareholder value that the company can produce. And then as you assert leadership in cellulose specialties, how should we think about a ceiling for pricing in that market? And do you think there is a point at which higher prices could invite some competitors to add capacity over time? Scott Sutton: Yeah. Okay. Thanks a lot, Daniel. You know, great to be here. Look, I mean, you know, I think early observations are that our best opportunity really comes from the team. I mean, look, the team here is incredible. They have been able to flip to an execution model almost overnight and really drive the free cash flow that we need. I know that the team is capable of more, and you should expect to see more. I would just say the other surprise, and I mean, it is really a positive surprise, is there is more value here than I thought. And we have significant opportunity to execute on that. We are updating our forward plans. You should expect to see more details about those forward plans on our upcoming earnings calls. And, you know, those plans will be built mainly around, you know, four themes. And hopefully, we get a chance to talk more about those four themes today. I think, Daniel, that was your first question. And the second one, you know, the price increase question and how much might be too much. I actually think the best question is maybe what kind of price increase is necessary just to keep really the remaining domestic producers of cellulose specialties in business and healthy. Because if you think about it, before we have achieved this 18%—which, by the way, leaves us far, far short of reinvestment economics—but before we achieved that, if you look at the last four years, you have seen specialty sites and businesses shut down in the state of Washington. They shut down in Tennessee. They have shut down in Florida. We also permanently ceased production of dissolving wood pulp in our Temiscaming facility. So you are really left with two domestic sites, and those two sites are both Rayonier Advanced Materials Inc.'s. We have the capability to fully supply the whole domestic market, but we are not. In fact, we are kind of set up now as an export facility, and it is really because of so many subsidized imports coming in. So I guess that is a long way to say that we have got a long way to go before we get to reinvestment economics, and really encourage anybody else to expand or enter the market. Daniel Harriman: Really appreciate that color, Scott. Thanks again. Scott Sutton: Sure. Operator: Next question comes from Matthew McKellar from RBC Capital Markets. Matthew McKellar: Hi, good morning. Thanks for taking my questions. I would like to ask first, just—I mean, recognizing that the process seems to have played out before you joined the company—can you maybe provide some perspective around the recent filing that indicated you would reject a potential offer and maybe with that, speak to why you see continuing to progress as an independent company as the superior option to that offer? Thanks very much. Scott Sutton: Yeah. Yeah. I mean, hey, Matthew. Yeah. You know, I am probably not going to comment on a specific shareholder or any specific offer, except what I will say is, you know, we have plans that will deliver substantially more value. I think a good reference point for you in terms of that target is maybe my inducement agreement, so that sets a place that, you know, I think—and the team thinks—that we can get to. You are going to hear more about those plans as we are updating them in upcoming earnings calls. I know I just answered Daniel's question by saying that it would be good to talk about some of those themes today, and we have four of them. Maybe I just outline them here since it has already come up twice. But those four themes are really based on the following. Number one, we are going to have leadership initiatives where we go out and extract the most value we can from the landscape that is there. Those are going to be a lot more sophisticated than what we are doing today. We are sort of using a blunt instrument to lift value today. Those will be more specific and sophisticated. Just like, you know, we will look at nitration grade cellulose into propellants, particularly for the U.S. That may be some initiative we work on, and you should expect to hear about playbooks set up around that. The second theme is that we are going to get a lot more skilled at leveling up and down across all our product groups. And if you think about the product groups across cellulose, you know, you are familiar with them. There is acetate grade, ether grade, nitration grade, and so on, but it also includes viscose grade, fluff grade, paperboard grade as well. And we are not going to keep our specialty capacity reserved and not operating while we go out and run an initiative, nor will we run it and just push material into a leadership market. So some of those areas have a 30% market share. Some of those areas, we have a 3% market share. But we are going to run our assets all the time and go in and out of those different market areas as necessary to maximize contribution. And you can almost think of it as—like, if you watch professional golf, you can think of it as a leaderboard. You know, if you like F1, the F1 leaderboard, NASCAR leaderboard, you know, you are going to see which markets we are going in and out of move up and down that scale as we fully run our assets all the time without damaging where we have a leadership position. So in other words, in those 30% market share areas. The third theme of that plan will be around new products, new cousins of the products we have, new tweaks on those products to deliver maybe what others cannot. And then finally, the fourth theme, you know, we will have a very active idea pipeline across the whole company that always offsets inflation. So those are the main themes of the plan that you should expect to hear more about. I mean, Marcus, anything to add or— Marcus Moeltner: Yeah. Matt, one other fifth that I would add that is very complementary to the items that Scott covered is, you know, that improved performance based on execution on those themes will position Rayonier Advanced Materials Inc. for a refi to really address the capital structure and drive down our interest expense and fixed charges. So very complementary in nature and fits well. Matthew McKellar: Great. Thanks for all the commentary. Very thorough. Marcus Moeltner: Did we answer your question, Matthew? Matthew McKellar: Yeah. That was helpful and thorough. Thank you very much. Maybe next for me, and then I will jump back in the queue. Could you just touch on demand conditions and, I guess, market conditions you are seeing in a couple of CS products? Maybe first in Ethers—one of your competitors, I think, recently called out seeing increased competition from Chinese CLP producers in European markets. Are you seeing something similar? And if so, can you speak to how significant this phenomenon is and how it is affecting the market? And then second, you mentioned nitrocellulose in your previous remarks. Could you just give us a sense of what conditions in that market are like with some of the geopolitical events we are seeing? Thanks very much. Scott Sutton: Yeah. Sure. I mean, look, ether grade cellulose is challenged a bit. It is particularly challenged in Europe, but it is mainly because of the ethers coming out of China. In other words, our customers' products are under attack, and therefore, their demand for ether grade cellulose is less. But I will say, even with that, we have still been able to achieve that near 20% price increase across ethers in Europe, which I think is quite different than what others have said. Again, it is just a demonstration that these products can command more value even when there is demand pressure and even when others may have said that pricing is actually going down. I mean, that is a testament to our team, I think. The other part of that—the nitration grade cellulose—yeah, there are lots of new inquiries around that, I would say. There is lots of demand coming from domestic producers of propellants as well. I would say that is an area where we have been able to achieve more than that 18% price increase that we quoted in the prepared remarks. Matthew McKellar: Thanks very much. I will get back in queue. Operator: Our next question comes from Dmitry Silversteyn, Water Tower Research. Please go ahead. Your line is open. Dmitry Silversteyn: Good morning, gentlemen, and Scott, welcome to Rayonier Advanced Materials Inc. Quick question. There has been some discussion about—not discussion, but you announced that you are not going to be participating in the energy project in Georgia. There have been some issues with Tardis plant, as far as skipping production and getting the raw material sufficient to produce the bioethanol business there. Can you talk a little bit about your strategy for biomaterials broadly? And then maybe more specifically, how these decisions are impacting the BioNova joint venture? Scott Sutton: Yeah. Sure. Hey, Dmitry. Good to meet you. Look, I would say just broadly across biomaterials, I mean, it is an important business for us today. It is an important part of our growth story in the future. But I would just say that it is really one contributor to our growth. If you think back to the slide that we had put in the earnings deck, you see new products or new cousins across every business. And that is what you should expect to see going forward. We are going to be talking much more about an integrated model across cellulose specialties, commodities, and biomaterials that gets run under the same value creation model. And all of those items will contribute to our growth. But here, if you go back to the leveling up/leveling down—in other words, like the NASCAR leaderboard that I just talked about before—by running Tardis much more and much stronger, not only are we able to get the value we want in specialties by being able to hold out and not push volume into that leadership market, of course, we are able to access other product groups like fluff. But at the same time, that provides an increased feedstock that goes into the biomaterials business, and in particular, it goes into BioNova there. And we sell more ethanol, and we sell more ligno—lignosulfonates as well. So we are actively working on a plan to run Tardis harder, have basically a crisis management team, and we are having success in doing that. Dmitry Silversteyn: Understood. Thank you. And then the second question, to follow up on your remarks about pricing getting so low that even an 18% price increase still does not put you at reinvestment economics. There has been an antidumping case that you filed against Brazilian and North European importers. I think that has been positively decided, but it has not been adjudicated yet. So can you talk about where you think or when you think the remedies are going to come in to allow you to restore pricing in North America? Scott Sutton: Yeah. I will. And by the way, we are going down a path of restoring prices with or without the antidumping and the countervailing duties case. It is just that success in those cases would certainly help us close the remaining 15% of business likely sooner than we otherwise would, and success in those dumping cases would also make our 2027 improvement and next steps in value likely better as well. But the situation around those—and I will just start with the countervailing duties case—there is likely there will be, we believe, a preliminary determination of those duty rates later this month. So, just as a reminder, that applies to exports out of Brazil from the subsidized state-sponsored producer that has sort of taken over the North American market. So those, we believe, will come in March. The antidumping duties are applicable to both Brazil and Norway, and we believe that there will be preliminary determinations of those rates in May. And by the way, those things are stackable. In other words, the countervailing duties and the antidumping duties can stack on top of one another, as could other things around tariffs as well if they were enacted. So that is the status of the duties. Dmitry Silversteyn: Understood. Thank you very much. I will get back into the queue. Operator: Sure. Our next question comes from Daniel Harriman from Sidoti. Please go ahead. Your line is open. Daniel Harriman: Just a quick follow-up. Scott, we have talked a good amount on specialties and biomaterials. But I am curious to know, with the new product initiatives and cost actions underway within the paperboard and high-yield pulp businesses, how do you see them fitting into the company portfolio longer term? And specifically, do you still see them as potential divestiture candidates? Or is there a role for them longer term in the Rayonier Advanced Materials Inc. portfolio? Scott Sutton: Yeah. No. Thanks for the question. I would just say across all of Rayonier Advanced Materials Inc.'s portfolio, we are not selling any business, and we are not closing any assets. All of them right now are certainly sources of improvement for us, and we expect to improve them all. Both the paperboard business and the high-yield pulp business—yeah, look, they are certainly challenged, and they are still absorbing new capacity, particularly in paperboard. But we have new products there that we are being successful at commercializing. So the source of improvement in 2026 over 2025 for paperboard will be those new products. One is associated with an oil and grease board, and the other one is a foldable freezer board, all of which can carry a unique set of printing and coatings on them. So that will be the source of improvement. We expect to do more volume in paperboard as that other capacity is getting absorbed. High-yield pulp, yep, there is a lingering oversupply issue there as well, but we also have a significant new product that is under customer testing, and we have sold some trial quantities there already. And we will expect to see price start to move back up as that oversupply issue gets addressed. Daniel Harriman: Okay. Thanks again, Scott. I really appreciate it. Scott Sutton: Yep. Sure. Operator: For any additional questions, please press star followed by 1 on your telephone keypad. Our next question comes from Matthew McKellar from RBC Capital Markets. Please go ahead. Your line is open. Matthew McKellar: Hi. Thanks again for taking my questions. Scott, you made an interesting comment there about a more integrated model across CS and even biomaterials. Could you maybe expand on that a bit? I think the current segmentation has helped make clear there are products with very different margins within the business. And that segmentation maybe masked to some degree that commodity pricing is very outside your control, and maybe you need higher CS margins still to justify continued investments. And I guess, would you even make an argument that maybe the commodity side has become structurally more challenging and what that—again, that kind of would suggest CS margins need to go higher. Scott Sutton: Yeah. Sure. I mean, look, our forward model is going to be one value creation model in this area. And, you know, you look at the scale and scope of our assets. We have got to be successful on every kind of product that can come out of those assets, whether it is the seven or eight market segments that we previously classified as specialties, or whether it is the three or four segments that we previously classified as commodities, or whether it is the four or five other segments that we have called biomaterials. So we are going to be setting those assets, and we are going to be setting our market participant strategy in whatever configuration gives us the most contribution at the time. So sometimes, we are going to be running more fluff and more viscose. That is just like today. I can tell you for 2026, our highest-volume product by far is cellulose fluff. And that is because we are going through this leadership initiative, and we are able to not rush that leadership initiative, not push production out into a market where we are trying to increase the value of it. So it is serving us very well in doing that. You also heard me speak about Tardis for the biomaterials—the coproduct or the black liquor that comes off the production of the other serves as the feed for that. So we can balance all that together instead of isolating those and showing isolated results. It does not really matter what we produced. We are just going to be showing a better and better result each time. Marcus Moeltner: Yeah. And Matt, as you know, our breadth in production capability, as Scott mentioned, we can make a myriad of products. We have got a sulfite and kraft process. We have got hardwood and softwood capabilities. We are just going to look to optimize that contribution margin across our footprint while driving down absolute fixed cost. Right? We must drive down fixed costs, be profitable across the footprint, and be more— Matthew McKellar: Great. Thanks very much for that perspective. Last question for me. It was interesting to see your paperboard volumes and prices increase sequentially in Q4. Would you attribute that mostly to the introduction of the freezer board product you mentioned previously? Is there anything else we should understand about your results in that business? And then, I guess, with the recently announced closure of a competitor's SBS mill in Northern Quebec, do you see opportunities to potentially win some attractive business there that could further support results? Thanks. Scott Sutton: Yeah. I think that—and maybe Marcus has a comment more. I mean, there is some mix issue there. We were successful with the freezer board new product introduction as well, because you are speaking about the third quarter of last year compared to the fourth quarter. Marcus Moeltner: Yeah. And I will add to that, Matt. There is an element of mix as it relates to quality as well. Better productivity and better quality at the plant results in less culls, so that is going to drive your mix as well. So we have seen the plant performance better and improved. Scott Sutton: Hey, Matt. Ask your second question. Matthew McKellar: Yeah. Sure. So I guess with the closure of a competitor's SBS mill in Quebec, do you see some opportunities to win business that could further support results in that—thanks. Scott Sutton: Yeah. Okay. Thanks. I think there are opportunities. But at the same time that is going on, we are having to absorb the new capacity up in the Northeast U.S. as well. So it is sort of maybe helping offset the negative from that. Matthew McKellar: Okay. Fair enough. Thanks very much. I will turn back— Scott Sutton: Alright. Operator: And we have no further questions. I would like to turn the call back to Scott Sutton for closing remarks. Scott Sutton: Yeah. Okay. Yeah. Thanks. I mean, there are just a couple things I would like to add here at the end, maybe things that did not really come up. We did comment that we still have 15% of the expected cellulose specialties business to place, and I just wanted to relay that I think we have options for that. Clearly, the first option is to get that in the specialties area. It is mainly a shortage in the acetate area, and it is mainly a shortage in the U.S. And all I would say there is it is going to take some time to be successful, but I would hate to really be the last demand standing there, like maybe the U.S. TOE producers are going to be. It is sort of like there is a game of musical chairs and someone is going to be left standing without a chair. And we are going to see where that goes. And that is why I made my earlier comments that the remaining 15% is only going to come at a higher price increase than the 18% that we have already achieved. The other option that we have if we are not successful at getting that remaining 15% is we will run our, you know, NASCAR leaderboard strategy, and we are already practicing at that some. We will level up and level down as necessary. And we will go do some more fluff business, where we only have a 3% or 4% global market share, and we can enter that market basically without damaging the pricing profile of it. So I think that is something that did not come up, but it is important because how we manage that is important to our EBITDA profile going forward through the rest of 2026. Okay. So look, with that, I guess I will just end where we began. And I will just say, look, what a great team we have. We have a lot of value here. But we have really urgent work to do. And our priorities are really clear. Deliver positive free cash flow in 2026. We are going to assert our leadership and lift value in cellulose specialties. And we are going to improve EBITDA across every business. We are executing on that now. We intend to exit 2026 with significant momentum and hit 2027 running really hard. You should also expect us to continue to update these plans where we hinted on the four themes that they will contain, and Marcus added a fifth very important value creation theme to that as well. And that is what we will be talking about in our upcoming earnings calls. So anyway, with that, I will just say thanks a lot for your questions, and thanks a lot for your interest in Rayonier Advanced Materials Inc. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Welcome to Nexxen International Ltd.'s fourth quarter earnings call. At this time, participants are in a listen-only mode with a question-and-answer session to follow at the end of the presentation. This call is being recorded, and a replay of today's call will be made available on Nexxen International Ltd.'s investor relations website. I will now hand the call over to Billy Eckert, Vice President of Investor Relations, for introductions and the reading of the safe harbor statement. Billy, please go ahead. Billy Eckert: Thank you, Operator. Good morning, everyone, and welcome to Nexxen International Ltd.'s fourth quarter earnings call. During today's call, we will discuss our financial and operating results for the three and twelve months ended 12/31/2025 as well as our forward-looking guidance. With us on today's call are Ofer Druker, Nexxen International Ltd.'s Chief Executive Officer, and Sagi Niri, the company's Chief Financial Officer. This morning, we issued a press release, which you can access on our IR website at investors.nexxen.com. During today's conference call, we will make forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. We advise caution in reliance on forward-looking statements. These statements include, without limitation, statements and projections regarding our anticipated future financial and operating performance, market opportunity, growth prospects, strategy, and financial outlook. These statements also include, without limitation, statements regarding our partnerships and anticipated benefits related to those partnerships, anticipated benefits related to the company's intended growth and platform investments, forward-looking views on macroeconomic and industry conditions, as well as any other statements concerning the expected development, performance, and market share, or competitive performance relating to our products or services. All forward-looking statements are based on information available to us as of the date of this call. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those implied by these forward-looking statements, including unexpected changes in our business or unexpected changes in macroeconomic or industry conditions. More detailed information about these risk factors and additional risk factors are set forth in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Risk Factors” in our most recent Annual Report on Form 20-F. Nexxen International Ltd. does not intend to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in IFRS and non-IFRS terms. We refer you to the company's press release for additional details, including definitions of non-IFRS items and reconciliations of IFRS to non-IFRS results. At this time, it is my pleasure to introduce Ofer Druker. Ofer, please go ahead. Ofer Druker: Thanks, Billy. I am pleased to report that we met our updated full year guidance and are seeing strong momentum in early 2026. In Q1 to date, contribution ex-TAC and programmatic revenue are trending ahead of our initial expectation following the strongest January and February in our history. This performance reflects the payoff from infrastructure investments made in 2025 to support long-term programmatic trading growth, as well as our ability to form new and expanded partnerships with leading DSPs driven by our differentiated CTV media assets and data. These efforts, along with our strategic differentiation, continued innovation, and a favorable advertising backdrop featuring incremental growth catalysts like the Winter Olympics, FIFA World Cup, and especially the U.S. midterm elections, position Nexxen International Ltd. for a strong 2026. In 2025, we meaningfully upgraded our infrastructure and expanded platform scale, roughly doubling SSP capacity. This positions us to better monetize publisher relationships and support growth in 2026 and beyond. We also increased focus around our enterprise solutions and plan to continue doing so. Over the past several years, we have enhanced our combined DSP and data capabilities through innovative new solutions and deeper AI integration to fuel enterprise adoption. In 2025, we saw early results and expanded on these efforts by adding experienced talent across our go-to-market and product teams and shifting internal sales resources towards our enterprise offering. This combined initiative led us to more than double our enterprise customer base in 2025. We plan to expand these efforts in 2026 to capitalize on the strength of our unique enterprise solutions built on proven technologies developed over the years. While enterprise growth is a long-term process, we believe now is the right time to invest to capture the vast opportunities ahead. Additionally, as AI reshapes how consumers engage across the open internet, we invested in expanding into less-affected formats that offer strong growth potential and revenue durability through exclusive smart TV home screen partnerships and scaled mobile in-app relationships. In 2025, we announced the launch of what we believe is the industry's first programmatic smart TV home screen advertising solution, providing scaled programmatic access to home screen inventory on CTV OEMs. I would like to provide some background, as this type of CTV media has not historically been available for programmatic activation. When a user turns on their smart TV, they land on the operating system home screen, which presents them with a menu of apps and content to consume. According to Nielsen, viewers spend an average of about ten minutes per day on this screen deciding what to watch, making it a highly visible and valuable surface. Until now, advertising space on this page has been sold and managed through direct deals and ad servers. Our innovations transform this surface into a fully programmatic advertising opportunity. It creates a significant new growth channel for advertisers using the same programmatic workflow they already rely on, while enabling OEMs to monetize their home screen inventory more efficiently and effectively. Vidaa, which rebranded as V, is a CTV operating system for Hisense and other OEM brands, and is our first OS partner to adopt this technology, which is now integrated across V-powered devices globally. As announced by The Trade Desk last week, we are pleased to welcome them as our first strategic DSP partner to adopt the solution following an agreement between V, The Trade Desk, and Nexxen International Ltd. to bring this inventory into The Trade Desk Ventura ecosystem. Together, we are collaborating to establish standardized DSP capabilities and drive industry awareness. We have strong conviction in this partnership, believe it is fundamental to building a new ecosystem for programmatic smart TV home screen advertising, and are proud to work with The Trade Desk to bring this opportunity to their vast global customer and partner network. By working directly with the leading enabler of programmatic advertising on the open internet, we believe we can accelerate awareness and adoption of our solution, support industry standardization, and enable trading across both our customer bases. We view this as a pivotal milestone in expanding high-quality programmatic advertising on the open internet through a new, engaging channel that is more resistant to AI-driven disruption. V’s footprint combined with programmatic activation creates a compelling opportunity for advertisers to drive brand impact and ROI. Our V partnership also continues to drive data momentum as we jointly market ACR data in North America and globally. In Q4, we entered a licensing agreement with Yahoo DSP, expanding our TV data partnership with major DSPs, which already included platforms like The Trade Desk and StackAdapt. Together, our smart TV media assets, proprietary data, and strategic partnerships reinforce our ad tech leadership while strengthening our opportunities with brands, agencies, and leading DSPs. In 2025 and early 2026, we partnered with leading mobile in-app ecosystem players to support long-term growth, diversification, and revenue durability with strong early results. Mobile in-app remains a strategic focus, as it is less exposed to AI-driven disruption than browser-based traffic. According to eMarketer, over 80% of mobile ad spend occurred in apps in 2025, and mobile is expected to account for over two-thirds of total digital ad spend by 2027. To capitalize on this shift, we built infrastructure to scale in-app media, enabling us to support growing supply and demand in a channel with strong tailwinds. We will continue enhancing our mobile in-app capabilities and will pursue new and expanded partnerships in 2026 to build on our progress. Next.AI continues to evolve across our platform and is receiving strong client feedback. Customers are achieving better results with less effort while unlocking new capabilities. Our DSP assistant is delivering efficiency gains of up to 97% and satisfaction scores over 90%, helping users act on real-time insights faster while improving outcomes and usability. Our Discovery assistant is also driving operational savings, with some clients reporting reductions of up to 45% in audience research time. Through Next.AI, we are building a difficult-to-match AI advantage across our DSP, SSP, and data platform by streamlining workflows and enhancing supply chain-wide performance, positioning us to win larger enterprise budgets. In 2026, our AI investments and releases will focus on driving growth and generating scalable cost benefits. We are introducing Next.AI to our SSP to optimize publisher performance and revenue. On the DSP side, we will continue integrating our insights and segmentation tool, Discovery, with our DSP so audience data flows directly into our buying platform, supporting accelerated enterprise adoption. Finally, our DSP assistant will expand to include AI-driven QA and campaign troubleshooting, automatically flagging errors to reduce waste and maximize buyer budgets. Internally, Next.AI is becoming more embedded across our sales operations, product, and data teams, driving efficiency and cost savings. AI-assisted coding is accelerating development, enabling faster release of revenue-generating solutions while reducing prior investment needs, freeing up capital for specialized data and AI tools. We have continued releasing solutions designed to capitalize on sector growth trends and major 2026 advertising events. The health vertical has emerged as a growth engine following the release of Nexxen Health, with new measurement and optimization capabilities introduced in Q4 2025, including the first-to-market auto-allocate feature powered by Phrama/health partners. This allows advertisers to optimize spend in real time using real-world health signals and verified outcome data, improving targeting and full-funnel performance, and reinforcing Nexxen International Ltd. as a leading health DSP. We plan to continue investing in vertical-specific solutions to drive growth across additional sectors. We also launched Nexxen Sports in Q4, combining large sports inventory with data-driven insights, targeting, retargeting, and dynamic creative. This solution helps brands drive engagement during live events while enabling advertisers to reach consumers beyond the live window, positioning Nexxen International Ltd. for the biggest live sports advertising year on record, highlighted by events like the FIFA World Cup. Finally, our political advertising solutions position us to capture spend during the 2026 U.S. midterm elections, which we expect to be a major cycle, especially for CTV. While still early in the year, we are very encouraged by our strong start to 2026 and what it signals about the direction of the business. Our momentum validates the strategic decisions made in 2025 and the quality of the product offerings we have built and acquired over the past several years. It also highlights our progress in building a more diversified and durable revenue base as the industry adapts to AI-driven disruption. Our differentiators, including our end-to-end model, V partnership, home screen solution, and platform-wide data and AI integration, are creating growing competitive advantages. Our DSP is now deeply integrated with our exclusive data and media, positioning it to expand our end-to-end enterprise revenue opportunity. This combination is already helping us win larger budgets and deliver stronger outcomes for advertisers and publishers, and we expect scaling benefits in 2026 and beyond. We remain focused on execution and innovation to drive sustainable growth and strengthen our leadership as we help define the future of programmatic advertising. With that, I will turn the call over to Sagi Niri. Sagi Niri: Thank you, Ofer. Before I discuss Q4, I want to remind listeners, as noted in our Q3 earnings call, that results were impacted by several factors. These factors included reduced spending from one DSP customer amid their FPO initiative, softness in our non-programmatic business line, more competitive CPMs, tariff-driven reductions from certain partners, and the absence of political advertising spend compared to Q4 2024. While non-programmatic weakness has persisted and some customers remain cautious due to tariffs and seasonality, I am pleased to report that contribution ex-TAC and programmatic revenue to date in Q1 are trending ahead of our initial expectations, driven by broad-based strength across our programmatic business line. The impact from the DSP customer also appears isolated to Q4. The customer has increased its year-over-year spend with us so far in Q1, and based on this trend and our ongoing discussions, we believe they will contribute positively to our expected growth in 2026. In Q4, we delivered contribution ex-TAC of $97.8 million, reflecting a 7% year-over-year decrease, or a 1% decrease ex-political. Programmatic revenue was $94.3 million, down 4% year over year but up 2% ex-political. Despite this decline, we saw strength in data products and desktop video, along with growth across our health, business, and finance verticals. In contrast, contribution ex-TAC from our non-programmatic business line declined by approximately $3 million year over year. We also experienced year-over-year decreases in CTV, mobile video, and display alongside reduced spending within our retail and government verticals. CTV revenue declined 19% year over year in Q4, or 12% ex-political, to $30.1 million, as results were impacted by several of the factors I mentioned, particularly the DSP customer. Importantly, we are not seeing a negative CTV revenue impact from these customers to date in Q1, and we feel well positioned for CTV revenue growth in 2026 and beyond through the catalysts Ofer discussed. We continue to believe CTV will represent the core long-term growth engine for Nexxen International Ltd. Elsewhere in Q4, desktop video revenue increased 21% year over year, mobile video revenue declined 9%, and overall video revenue represented 72% of programmatic revenue. Contribution ex-TAC from data products increased 51% year over year, self-service contribution ex-TAC declined 5%, and contribution ex-TAC from PMPs and display each decreased 9%. For full year 2025, our contribution ex-TAC retention rate declined to 92% from 102% in 2024. This primarily reflects our decision to discontinue smaller customer relationships that were not generating meaningful contribution ex-TAC, allowing us to focus on larger customers with greater spend potential. Contribution ex-TAC per active customer, however, increased to approximately $563,000, reflecting a 7% year-over-year improvement. We believe we remain well positioned to grow both our retention rate and ex-TAC per customer over time through continued focus on driving full-stack enterprise adoption. Adjusted EBITDA for Q4 was $33.9 million, representing a 35% margin as a percentage of contribution ex-TAC. We remain confident in our ability to expand margins over time through contribution ex-TAC growth, increased enterprise adoption and end-to-end spending, disciplined cost management, and anticipated benefits from our AI initiatives. In Q4, we generated $37.7 million in net cash from operating activities compared to $52.3 million in Q4 2024. As of December 31, we had $133.3 million in cash and cash equivalents, no long-term debt, and $50 million available under our undrawn revolving credit facility. Non-IFRS diluted earnings per share was $0.33 in Q4, compared to $0.48 in Q4 2024. We repurchased 1,440,000 shares in Q4, investing approximately $10.8 million. From March 2022 through 2025, we repurchased approximately 38.5% of our outstanding shares, investing roughly $258.2 million. As of February 28, approximately $2 million remained under our current repurchase authorization, and a new program of up to $40 million has been approved to begin after the current program concludes. Following our additional $20 million of investments in V in Q3, we will invest another $15 million in Q3 2026. Once deployed, we expect to hold an approximately 6%, or $60 million, equity stake, making us the largest shareholder outside of Hisense. Alongside the anticipated benefits from our commercial agreement with V, we continue to expect attractive long-term returns on our investment, which we view as an underappreciated component of our story. This year, we plan to leverage our investment to expand retailer relationships and grow its North American CTV footprint, which we believe will enhance the long-term value of both our data and ad monetization exclusivity, as well as our equity stake. We believe our investment in V provides multiple paths to future value creation for Nexxen International Ltd. and its shareholders. In addition to share repurchases and increasing our reinvestment, we will continue exploring strategic opportunities to accelerate programmatic revenue growth and strengthen our CTV, data, and mobile in-app capabilities. With that, I will turn to our outlook. For full year 2026, we expect contribution ex-TAC in the range of $375 million to $390 million, representing over 8% year-over-year growth at the midpoint, and programmatic revenue in the range of $370 million to $381 million, representing approximately 10% year-over-year growth at the midpoint. Programmatic revenue is expected to continue extending as a percentage of total revenue as we actively evaluate strategic options for our non-programmatic business line and deliberately shift our mix towards higher-growth, higher-quality revenue. In 2026, we expect growth across enterprise self-service, data products, and CTV, driven by focused sales execution, our expanded partnership with V, and growing adoption of our programmatic smart TV home screen solution. We also expect adjusted EBITDA in the range of $122 million to $132 million, representing approximately 33% at the midpoint of our contribution ex-TAC and adjusted EBITDA guidance. As I mentioned, contribution ex-TAC and programmatic revenue have trended above our initial expectations to date in Q1, driven by broad strength within our programmatic business line. We believe this momentum is sustainable, supported by the anticipated payoff from infrastructure investments made in 2025 to scale platform capacity, our extension within mobile in-app, our V partnership, growing adoption of our smart TV home solution, and deeper expected penetration with enterprise customers. In 2026, we expect OpEx as a percentage of contribution ex-TAC to decrease modestly from 2025. Research and development is expected to remain relatively consistent as a percentage of contribution ex-TAC, depreciation and amortization and sales and marketing are expected to decrease slightly as percentages of contribution ex-TAC, and G&A is expected to increase as a percentage of contribution ex-TAC. We also anticipate stock-based compensation will rise. We will continue investing in data, technology, infrastructure, and AI, including further integrating Next.AI across our platform, to improve performance and usability for customers. We believe these investments and our upcoming Next.AI releases will support both long-term revenue expansion and operating leverage. 2026 is shaping up to be an exciting year for Nexxen International Ltd. The mix is improving. The model is scaling. Our recognition is growing, and we are entering the year with momentum, operating leverage, and multiple growth catalysts already working in our favor. Our extended partnership with V and our programmatic smart TV home screen solution are expected to drive meaningful contribution ex-TAC that we believe will scale throughout 2026 and beyond. We believe both strengthen our differentiation while positioning us for accelerated long-term growth across enterprise, CTV, and data products. These initiatives have already attracted strategic partners from across the ecosystem, and based on strong inbound interest and active discussions, we expect additional partners to follow. At the same time, we are also well positioned to capitalize on major advertising events in 2026, including the FIFA World Cup and U.S. midterm elections, building on the strength we saw during the Winter Olympics. After several years of building our platform, business, and brand, and securing important partnerships, we see multiple opportunities for long-term customer and shareholder value creation. As always, we thank our shareholders, employees, and partners for their support. We will now open for questions. Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We do request for today's session that you please limit to one question only and one follow-up. We will pause for just a moment to compile the Q&A roster. Operator: Your first question comes from the line of Matt Swanson with RBC Capital Markets. Your line is now open. Please go ahead. Matt Swanson: Great. Thank you so much. Ofer, I would like to follow up on a couple of comments you made about specific formats. The first is I think we talked a little bit more than usual about having some more defensive strategies to how AI is reshaping the open internet. So if you could just give us some more color maybe on how that AI reshaping has maybe impacted the 2025 results or what you are seeing out there? And then just a little bit more, too, on CTV growth within 2026. If it is more about some of these headwinds diminishing, or if it is more about the company-specific tailwinds that you have built up for this to be more of a secular driver. Thank you. Ofer Druker: Thank you very much for the question, and of course I will explain. So when we are looking at AI, in general, we feel that some of these effects already happen in the market. Some of them will grow over the next twelve months or so. We see that the touchpoint between the content and the user and, of course, the advertisers and the users is changing, meaning people are less surfing on the web. They are looking for answers through ChatGPT, and basically the traffic on what we call desktop is going down, and also mobile desktop is going down. So browsing in general is going down, and I think that most of the companies are talking about it and feeling it. So what we did basically in order to encounter this issue, we are increasing our efforts on CTV, which is less affected by AI, and we opened last year the first programmatic marketplace with what we call on-screen native, meaning when people launch their TV, there is a screen that shows all the apps that you can basically consume content from. On this screen, basically, the OEMs are already showing ads, but what we did, we turned this surface into a programmatic surface that we can basically manage through our DSP and connect this surface to other DSPs, like the partnership that we did with The Trade Desk, which is very meaningful, of course. And just to give you some indication, Nielsen, according to their studies and research, says users are facing this surface for about ten minutes a day. So the number of impressions that we see that is coming from V—we are already connected to Vidaa, which rebranded to V—and we see the numbers of impressions that people are generating through these platforms, it is immense. So, of course, this is something that will be less affected by AI, and we took a step last year to be the first company, as we understand it, to offer that on a programmatic level. We believe that this will help us first with AI, but also will help us to grow CTV, which is your other touchpoint that you asked about, and I will elaborate even more on that. Apart from that, when we analyze what other channels or what other type of media will be less affected by AI, we understood that in-app mobile is less affected by AI. So early last year, we started partnering with in-app mobile companies to work with them in order to place their media and to work with their publishers, and our publishers now, because we are basically creating direct relationships with the publishers, in order to place them in our programmatic ecosystem. We see very good initial results that we believe can drive immense growth in the years to come, and this area, from what we understand and see and analyze, is less affected by AI. So I think that these two channels, apart from the in-stream CTV that we are already running and apart from other things that we are already running and less affected, when we are looking at native CTV and in-app mobile, it is increasing our resilience basically to AI disruption and giving us room to grow our business in the coming years. Regarding growth of CTV, this marketplace that we spoke about, this programmatic home screen marketplace that we spoke about, is helping us to build relationships with a lot of partners in the ecosystem that are interested in order to monetize this type of media. As part of that, they will increase their work with us not just on this specific media, but also on in-stream and everything else, which will grow our presence in CTV. The fact that we are unique in our offering, and it is also complementary to what we call in-stream because this same media, which is native on CTV, is very good for performance advertising. Basically, people can buy complementary media positions on the in-stream and on the home screen in order to deliver the results, and our DSP is also very impressive in these results and performance. It is helping clients to basically grow their presence and, of course, to other DSPs to start increasing spend on CTV with us. So I think that, in general, we are in a good spot, and this marketplace will help us and is already helping us to grow our presence in CTV and overall. Apart from that, our teams are working very hard to close the gap on some publishers that are still in a process to be integrating with us in order to grow our reach. But if you check, our reach is also already very massive on CTV, and we believe that this development, this technology, this product that we are issuing is getting the attention of the big DSPs and the big brands that want to participate in that, and they will grow their spend on CTV with us in the future. Thank you. I hope that answers your question. Operator: Your next question comes from the line of Laura Martin with Needham & Company. Please go ahead. Laura Martin: Okay. Can we get an update on data? I know you took the V data and you put it onto The Trade Desk platform. Can you tell us what the revenue stream for data is running at these days? And then for Sagi, could you tell us IFRS revenue was 0% for growth for 2025 and down 10% in the fourth quarter? Could you tell us what it requires for your guidance to hit the sort of up 7%–8% growth rate for 2026? Thank you. Ofer Druker: No problem. So, basically, ACR, that—hi. We are in Israel, so we are sorry that we are not in New York, but we could not basically fly to New York this time. We are staying with some of our families, of course. Anyway, when I am touching the data issues, the data point that you—when we are looking at that, ACR is becoming something that DSPs want to utilize in their platform. There are a few levels of data that we can offer to partners, and, as we indicated also in my script, we are already working with three top DSPs, which are The Trade Desk, StackAdapt, and now Yahoo DSP that joined the project, and we believe that we will be able to add more DSPs and more partners. We see this coming also not just in the U.S., but also internationally, and, of course, we will announce these partnerships in the future. It is helping us in two elements. First of all, direct revenues that are coming from the ACR and the data itself that we are basically reselling or doing activity with the partner. Basically, this type of cooperation is increasing the media spend of these companies on our media positions, which, of course, is a first priority for us. In general, we believe that this type of unique data—there is not a lot of data like that in the open web—is helping us to get the attention of brands, the attention of DSPs and SSPs, and also agencies that are increasing their spend with us in general. It is very hard to give you a number, but the net revenues of the data, of course, are high margin because we are basically selling data here. But we are looking at that as a whole, and it is very meaningful. As I indicated several times, today, data is in more than 80% of our campaigns. We are integrating data, which is one of our advantages, because when you are running an end-to-end solution and you have a strong DMP, you basically can move the data between and also the DSP and SSP with data, and enhance the results of clients and brands and generate more revenues for publishers. So it is not fair to look at it just as the money that we are selling and licensing the data itself. It is connected also to enhance spend in general on media that all these DSPs, brands, and agencies are basically working with us in order to increase their reach together with unique data that we enable them for targeting and measurement. Sagi Niri: Thank you, Ofer. I will take the second question. So, regarding your question on numbers, IFRS, you know, is a different way of reporting things. I want to explain what we are doing on the contribution ex-TAC because it makes more sense and it is apples to apples with our peers. We grew only 3% contribution ex-TAC in 2025. We are not saying otherwise. I think that what you saw on the IFRS side is mainly because we are reporting some of our revenues on a gross basis, and some of the data that we got in 2025, I am reminding you from the previous earnings, was the performance activity, which we did. It is a non-core activity, which we are not too much focused on, and we got a big hit in 2025 on those activities. Some of them, of course, we are looking to understand what we are doing with them, and some of them probably will leave very soon, unfortunately. Having said that, I think that what Ofer just laid out with the growth engines into 2026—which are the in-app mobile partnerships that we signed already in 2025 and we are signing much more in 2026, the V investment and, for the first time, exclusive monetization of their North American inventory, the native display home screen ecosystem which we built, which is unique and nobody else has this solution because of our end-to-end ecosystem and service—brought already The Trade Desk in, and probably it will bring more demand partners and more supply partners into this ecosystem, which can be huge. So I think that having these growth engines in place and, on top, a big focus and restructure of our enterprise business and putting a lot of emphasis on the product over there—we just announced a new UI—so I think all of that will take us to a very good 2026. We are already seeing the first fruits in January, which was the best January we ever had, and February, which was the best February we have ever had. We are seeing the first signs to a really pivotal 2026. So we are quite confident that we can reach this 8% of general growth and almost 10% in our programmatic growth. Laura Martin: Thank you. Operator: Your next question comes from the line of Andrew Marok with Raymond James. Please go ahead. Andrew Marok: Hi. Thanks for taking my questions. Maybe one more on the CTV topic, if we could, just to get a sense of the various moving pieces that are in the 2026 outlook between the macro, the 2026 events, the Ventura integration. Is there any sense of maybe rank ordering those in order of their importance or their upside potential for the 2026 guide? And then maybe separately, you called out the desktop video growing over 20% year over year in 4Q. How sustainable is that? We have seen that format be pretty volatile in the past. How well does that need to do in order for you to hit your 2026 assumptions? Thank you. Ofer Druker: First of all, thank you for the question, but I did not understand the point of what you felt that is volatile in the past. Sagi Niri: The desktop video component. Billy Eckert: Which one? Sagi Niri: Desktop video. What do you mean by that? Desktop. Ofer Druker: Maybe we are not looking at the same thing, but I will explain and then tell me if I touch your concern or not. Our main revenue source and revenue generation also in 2026 will be in-stream that we are managing and selling by our own sales teams and, of course, getting a lot of demand from direct brands that are using our enterprise solution, from DSPs that are basically buying media from us. Overall, this is the majority of our revenues. We feel, as Sagi just mentioned now, a very strong January and February when you are looking at the programmatic level on all fronts and all types of media that we are running, including CTV. When you are looking at the growth that we are now going to bring into the system, it is coming from the native ads, and the amount of media that is associated with that is huge. On this ground, we basically built a partnership with Ventura with The Trade Desk, which we are very proud of to be their first partner because we believe that The Trade Desk can make a very big difference for us because they are the major enabler of the agencies in the world to buy media from companies like us also. I think that the type of discussions and relationships that we are building with them around this unique media will bring us a lot of value in the years to come. Now, this type of media—starting with Vidaa, with V as they rebranded their name now—we already see a lot of growth that will come from more OEMs and publishers that are interested in using this technology, which is making it more efficient. When you are more programmatic and you are turning your media into commodity, you are able to basically monetize much more of your space than when you are doing it manually. In the past year, most people did it with ad servers or manually selling deals on their type of media. Now they can basically integrate programmatically to their sources or our sources and generate more revenue. The second thing is also from big DSPs, other DSPs that want to join this. The first is, of course, The Trade Desk, and more will come, and the others that will come will basically increase the liquidity of the platform and will generate more demand into the platform. We believe that it is a win-win situation, meaning the OEMs that have so much media that they never monetized fully, now they can do that in a very effective and efficient manner, and the advertisers, the agencies that are basically looking at this media, looking at a new channel that they can basically trust. We are working with Ventura to create also standardization of this type of media, which is super important, and education and getting the attention of the agencies and brands into that, and it will increase the usage of the big advertisers and brands and agencies in this type of media and will grow our CTV revenue. So, again, not to confuse: the main revenues this year, in 2026, come from the things that we have done in 2025, meaning in-stream—growing it, building it more, building more relationships. Also, as I mentioned, when people will buy from us native ads, they will increase also their exposure on our in-stream media because it makes sense to run on the same systems and the same reporting. What we start growing now, our revenues, and support our growth in 2026 and years to come, will be the native ads that we are running basically on the operating system screens around the globe and mainly in the U.S. and North America and Canada. I hope that I answer your question. Operator: Your next question comes from the line of Jason Kreyer with Craig-Hallum. Please go ahead. Jason Kreyer: Hi. Thank you, guys. You have talked about the strengths that you have seen early in Q1, and you talked about the record January and February. I am just wondering if you can give more details on what channels are driving that strength. With that, I know you are not giving a quarterly guide, but I just wanted to try to square things between the contribution decline that we saw in Q4 relative to the high single-digit growth that you are guiding to for the year. Where is Q1 shaping up within that continuum? Ofer Druker: We see the growth coming from everywhere, basically, meaning not a specific vertical, not a specific format. It is coming from across the board from all the major partners that we are working with. They are increasing the level of work with us. They are increasing their level of investment in media with us, which is, of course, great. Our salespeople are able to deliver very good results until now in Q1, bringing in the advertisers that we work with and others into the system. We feel that it is a combination of two—or three—things that happen. One is that the fact that we increased our infrastructure last year, almost doubled it, is helping us on the programmatic level because now people can see the real size of our media and they can buy more media from us. It is a process that is taking time. You are not lighting it in one day. It is a process of several months and a lot of investment in the data centers and so on, but we see that it is already generating results very quickly, which is great. The second thing is we are now putting much more effort also on our enterprise solution, meaning our DSP and Discovery tool, which is basically segmentation and data platform. We feel that with all the sessions that we have done with our salespeople and leaders in sales, our message to the market is resonating much better, and we deliver better results by our salespeople, which is, of course, very important, and we feel encouraged by that. The third element is the market itself, which seems to be better than we saw last year, meaning it is more positive. The sentiment is better for advertising until now, and I think that it is basically pushing all the numbers up. As we mentioned, January was the best ever. February was the best ever. The reason that we are keeping our forecast for the year and thinking about this number is that it is only two months. We want to be conservative. If it continues like that and we generate amazing results in Q1 and we see the trend going through also the beginning of Q2, we will look at the numbers for the year and, of course, adjust them accordingly. Operator: Your next question comes from the line of Maria Ripps with Canaccord. Please go ahead. Maria Ripps: Great. Thanks so much for taking my questions. I just wanted to follow up on Jason’s question regarding Q1. How should we think about incremental demand from the Olympics versus the broader underlying trends? Any color on that would be helpful. And then can you maybe share a little bit more color on your enterprise offering? You mentioned that you more than doubled the number of customers last year. I know the sales cycle here can be a little bit longer, but how should we think about it becoming a larger contributor to growth over the next year or two? Ofer Druker: Thank you for your questions. I think that will help us and help people understand better what we are doing, which is great. Again, when we are looking at everything that is happening in the market and how we prepare ourselves, we are always thinking ahead in our strategy. Almost three and a half years ago, when we acquired Amobee and we turned it into our DSP—enterprise DSP—we had the idea that we need to be closer to the brands that are buying media. We need to provide them the best solution in order for them to invest in media, to generate results, to get the performance that they are looking for from their investment. We saw very big progress over the last few years. In the end, last year, and mostly in the end of last year, we also shifted more resources from other sales channels to this sales channel. We brought additional talent into the main points of engagement with the market, and we feel a very big response to that, because what we are talking about for many years about integrating data into the mix of buying media, and smart data into that, is starting to resonate, and people are looking for that. Apart from that, the Next.AI tools that we developed are very practical, generating amazing feedback and results and helping the buyers to buy media better as we see that. When you are looking at that, we believe that—yes, as you indicated—it is true that the growth cycle of these partners takes a little bit longer than when you are launching programmatic activity with someone, because they need to learn the system, they need to train, they need to gain confidence and start moving their budget into that. But a good indication is when we are able to get many more clients to test and run on this platform, and we believe that this is the main growth engine for us in the years to come, meaning we will work with more and more agencies and brands for them to adopt our technology, to generate great results, to run and to incentivize them to run on our media, consume our data, and work together with us in order to achieve that. All of that together is driving great results. Regarding your question about CTV and the quarter, we believe that it is the beginning of the year, so it is two months. This year, we are reporting earlier than we used to, but we see that the fundamental changes we have made with our sales, with our platform, with our programmatic, with interesting products that are able to gain the attention of the big DSPs and brands to work with us, are super important and are driving results for us across the board. We believe that it is something that will continue during the year and the years to come. I hope that I answered your question. Operator: Your last question comes from the line of Barton Crockett with Rosenblatt. Please go ahead. Barton Crockett: Thank you for taking the question. Since this is the end, maybe one and a half or so. I was curious about your guidance. I was wondering if you could parse out a little bit what portion of the growth you are seeing is political, and in general, how the political that you are seeing for this year would compare to what you have seen in the past, and whether you have any early indications, given that there has been some meaningful activity in some of the early primaries in Texas, whether that gives you any learnings in terms of how to think about the political contribution to your growth this year. Also, your growth— you have spoken in the past about a desire for acquisitions, potentially. I assume that guide is excluding any acquisitions that you might do, but if you could confirm that and maybe just update us on where your current stance is about interest in acquisitions, given there has been a lot of reset in valuations of late and maybe rethink as the LLMs ramp. Where you stand on that would be interesting. Thank you. Ofer Druker: Of course. Regarding political, in general, when we are looking at what we learned to do in the last couple of years and in the last round of the last election, we saw that basically our setting—that we have a strong segmentation tool and data that enable the partners to onboard their data in order to target their audience to general channels and so on—is very useful for political use. We built dedicated teams for that. Already last election, they generated the best ever results that we saw from a political cycle. Our focus right now is not taking it into account in a very big manner because we spoke about the first two months. It is not strong in political yet, but we feel there is a lot of interest. There are a lot of partners that are joining our platform now in order to use our technology, which is a great solution for DSPs, which enables you to target audiences in a very smart manner, with a segmentation tool that enables you to launch your data in order to reach the users that you want to reach in these campaigns that you are running. Of course, the media reach that we can offer to these clients. We believe that this political season will be strong and assist us. It is always dependent on what will happen from a political level to see how much money the parties will engage in these campaigns, but we have a sense that it will be a fairly good and rewarding season that will enhance our revenues in 2026. Regarding your other question about acquisitions, we are always open to look around and see. We do not have any target in our mind, and, of course, if we did not speak about it, we are not sure it is active. But we are looking always at how we can grow organically but also non-organically. There are many ways to do that, and our eyes are open in order to see what can be done, because we believe that in this market, of course, you need to evolve all the time and to add mostly size in this case, because we feel that we have the technology that we need in order to compete and win in the market. Barton Crockett: If I could just follow up, on the commentary you had about the DSP pacing up here as we start the year, my recollection is that the DSP really started to hit you in the middle of last year. So the fact that it is pacing up even before you comp that is interesting. Does that imply that you are on pace to recoup everything that you lost from the DSP as you go into the back half, given that you are pacing up here to start the year? If you could elaborate on that, it would be interesting. Sagi Niri: Hey, Barton. Yes. First of all, this one DSP that hurt us in 2025, mainly in Q4, was isolated. Yes, this DSP is now going back into the level of spend that we are used to. It is not there yet, but it is on the right trend. Hopefully, yes, if they will continue as it started with this DSP and, of course, all the other programmatic lines of business that Ofer discussed and shared, we can recoup most of the money. Hopefully, until Q4 it will be the same, but hopefully we can recoup most of the money that we got hit in 2025 for sure. Operator: That concludes our Q&A session. I will now turn the call back over to Ofer Druker for closing remarks. Ofer Druker: Thank you, everyone. Again, sorry for some of the miscommunications—sometimes maybe a bit of a line issue or something like that. In general, we feel that 2026 started very strong for us. We had a record month. We feel that it is across the board. It is not coming from a certain partner or a certain client or a certain vertical. It is across the board, which is great. I feel that it is coming from our technology that is being adopted more in the market, our people that trained, the people that we added adding the value that we expected them to add, and we feel that also the messaging, the brand, is starting to take off, which is great news for us, and we feel positive about 2026 right now. Thank you very much. Operator: Ladies and gentlemen, that does conclude our conference call today. Thank you all for joining, and you may now disconnect. Everyone, have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Dycom Industries, Inc. fourth quarter 2026 results 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. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Callie Tommaso, Dycom Industries, Inc.'s Vice President of Investor Relations and Corporate Communications. Please go ahead. Callie Tommaso: Thank you, operator, and good morning, everyone. Welcome to Dycom Industries, Inc.'s fiscal 2026 fourth quarter and annual results conference call. Joining me today are Dan Peyovich, our President and Chief Executive Officer, and Drew DeFerrari, our Chief Financial Officer. Earlier this morning, we released our fiscal 2026 fourth quarter and annual results, along with certain outlook information. The press release and accompanying materials are available in the Investor Relations section of our website, including a new outlook expectation summary document which provides additional outlook metrics beyond what will be discussed on today's call. These materials, which we will discuss during today's call, include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our discussion and these statements reflect our expectations, assumptions, and beliefs regarding future events and are subject to risks and uncertainties that could cause actual results to differ materially. A detailed discussion of these risks and uncertainties is included in our filings with the SEC. Forward-looking statements are made as of today's date, and we undertake no obligation to update them. Additionally, we will reference certain non-GAAP financial measures during today's call. Explanations of these measures and reconciliations to the most directly comparable GAAP measures can be found in our press release and accompanying materials. Before I turn the call over, I would like to note an update to our segment reporting implemented during the fourth quarter. As a result of the recent acquisition of Power Solutions, we are now reporting our business in two reportable segments: Communications and Building Systems. This new segment reporting reflects how Dycom Industries, Inc.'s business is managed and the positioning of the company's strategies and expanding platform to provide comprehensive solutions as we address the growing demands for digital infrastructure. The Communications segment provides specialty contracting services for telecommunications providers, underground facility locating services for various utilities, including telecommunications providers, as well as other construction and maintenance services for electric and gas utilities. The Building Systems segment provides comprehensive building infrastructure solutions including electrical, energy management, security, and fire safety systems for data centers and other critical facilities. This segment includes the results of Power Solutions, following the closing of the acquisition on 12/23/2025. With that, I will turn the call over to Dan Peyovich. Dan Peyovich: Thank you, Callie. Good morning, everyone, and thank you for joining us. Dycom Industries, Inc.'s fourth quarter results are an excellent finish to a record year as we set new benchmarks across nearly every financial metric we track. We exceeded the high end of our annual revenue outlook, and our performance highlights our unique ability to capitalize on a diverse and intensifying demand environment. We delivered on the two pillars we set as priorities: meaningful margin expansion and improved operating cash flow. Our strategy and focus on scaled efficiencies strengthened our balance sheet and built a platform for sustained, high performance growth. Beyond our solid organic growth, we fundamentally broadened Dycom Industries, Inc.'s reach through strategic M&A. The acquisition of Power Solutions, which closed on December 23, positions us squarely at the intersection of digital infrastructure and the burgeoning data center market. Capitalizing on industry tailwinds, we are aggressively architecting our own trajectory, ensuring Dycom Industries, Inc. and our robust skilled workforce remain the indispensable backbone of the next generation of digital connectivity. I will start by covering our fourth quarter and full-year consolidated results, and then I will move to our fiscal 2027 financial outlook and our objectives for the year ahead. After that, Drew will provide further financial details and insights. For the quarter, we delivered all-time record fourth quarter revenue of $1,460,000,000, an increase of 34.4% compared to Q4 fiscal 2025. Of note, this was a Q4 record both in total and on an organic basis. Organic revenue increased 16.6% for the quarter, a testament to the strength of our backlog and the momentum going into the next year. Adjusted EBITDA was $162,400,000 and adjusted EBITDA margin was 11.1%. EBITDA margin increased by 41 basis points compared to Q4 fiscal 2025. Significant additions to our workforce position us well for next year's growth, but did have some impact on margins this quarter as they are working through the severe winter storms. Non-GAAP adjusted diluted EPS was $2.03, a 42% increase compared to Q4 fiscal 2025. DSOs were 101 days, an improvement of 13 days year-over-year, and operating cash flow increased 27.7% to $419,000,000 for the quarter. As I mentioned, the fourth quarter capped a year of exceptional performance for Dycom Industries, Inc. in which we capitalized on growth opportunities across our demand drivers, while also enhancing our underlying business to deliver stronger margins and improved cash flow. For the full year, we delivered all-time record revenue of $5,550,000,000, an increase of 17.9% compared to fiscal 2025. Organic revenue increased 6.5% for the year. Non-GAAP adjusted EBITDA was $737,700,000 and non-GAAP adjusted EBITDA margin was 13.3%. EBITDA margin increased by 105 basis points compared to fiscal 2025. Non-GAAP adjusted diluted EPS was $11.97, an increase of 29.7% year-over-year. We ended the year more than doubling free cash flow to $435,300,000. Fiscal year 2026 set new records for Dycom Industries, Inc., and importantly, positioned us for continued growth, margin expansion, and further cash flow improvement in fiscal 2027. Shifting to our backlog, our approach to the pipeline remains disciplined. We are optimizing for high-value engagement that balances risk with superior returns, as evidenced by our fiscal 2026 margin performance. Communications demand drivers remain robust, and we moved aggressively to expand our footprint. With the strategic addition of Power Solutions, we successfully entered a new high-demand sector with a distinct customer base, significantly broadening our total addressable market. In addition to diversification, we are capturing new territory, highly focused on digital infrastructure from a position of strength. Our year-end numbers confirm the velocity of our growth. We concluded the year with a record $9,500,000,000 of total backlog, of which $6,300,000,000 is expected to be completed over the next 12 months. Book-to-bill for the year was 1.3x in total and 1.2x on an organic basis, reflecting the increasing demand for our services. As we turn the calendar to the new fiscal year, Dycom Industries, Inc. is strategically positioned for strong growth across multiple demand drivers, led by significant increases in fiber-to-the-home deployments, as well as increasing demand for communications and building systems services to support data center and hyperscaler builds. For fiscal 2027, we expect total revenue between $6,850,000,000 and $7,150,000,000, representing year-over-year total revenue growth of approximately 23.6% to 29%, or approximately 6.6% to 10.3% on an organic basis. We also anticipate continued adjusted EBITDA margin expansion. In Communications, we expect modest adjusted EBITDA segment margin gains driven by operating leverage offsetting continued investment to support our growth. We expect Building Systems to deliver a mid-teens adjusted EBITDA segment margin as we scale the business to capitalize on favorable sector tailwinds. Our strategy remains focused on driving long-term value for our shareholders and providing industry-leading opportunities for our people. Our execution consistently sets the standard for our industry, and we are focused on continuously enhancing the solutions we provide to our customers as their businesses evolve. This operational foundation allows us to be disciplined in our growth. We are high-grading our pipeline and diversifying across robust demand drivers. Collectively, these demand drivers have never been stronger, and neither has Dycom Industries, Inc.'s positioning within. Our service and maintenance work remains the bedrock of our Communications business, delivering over 50% of our Communications revenue in fiscal 2026. This recurring base provides a scaled national footprint of facilities, equipment, and skilled workers, enabling us to aggressively pursue larger capital programs. Our unmatched local knowledge provides significant value for our customers as they plan their network builds across the country. While the growth rate for maintenance naturally trails our high-velocity build program, as it scales with new plant installations and geographic expansion, we will continue to grow this segment with purpose to lock in long-term recurring revenues as our customers' networks expand and densify. We see significant ongoing opportunities to further deepen these relationships and amplify Dycom Industries, Inc.'s role as a long-term partner in our customers' ecosystems. Fiber-to-the-home deployment remains the most mature and dominant driver of growth in our Communications segment heading into fiscal 2027. This quarter, our customers again either affirmed or raised their passing goals. With recently completed customer consolidation, we are seeing the same commitment to fiber infrastructure investment, further reinforcing our strategy. Current industry commitments represent nearly 6,000,000 additional fiber-to-the-home passings. Dycom Industries, Inc. is a leader in this deployment, and our large skilled workforce enables us to meet the growing demand for this critical infrastructure. Virtually, the passing is only the first phase of the revenue life cycle. We are also accelerating our work on customer drops, the lateral connections required if subscribers sign on to the network. Following the initial build, these connections typically take an average of four years to reach terminal penetration, the point at which most potential subscribers in an area are connected. This creates a powerful multiyear tail of quality work. Simply put, Dycom Industries, Inc. is well positioned to lead the fiber-to-the-home market for the next decade. We believe that our strategy, deep customer relationships, and proven performance will enable Dycom Industries, Inc. to be a leader in the BEAD program as it enters the funding phase. The NTIA has already cleared the large majority of states, representing more than $30,000,000,000 in total spend, and NTIA has moved over $17,000,000,000, or more than half of that amount, into the funding stage. Our teams are in active discussions at the state and subgrantee levels, which has translated to additional verbal awards with subgrantees, increasing the $500,000,000 of verbal awards we noted last quarter. We believe these verbal awards will begin moving to contracted backlog in Q1 or Q2. Our customers are choosing Dycom Industries, Inc. because they recognize that delivering on these massive individual programs requires a specialized, high-capacity workforce that only we can provide at scale. We continue to expect the first revenue opportunities in Q2, and we anticipate revenue to ramp as programs move from the planning phase into active construction. In the 2026 bill, the wireless equipment replacement program is transitioning into its next phase in accordance with the original build plan. While Drew will provide further details on this program, we remain ready to capture any future surge in network densification or new infrastructure initiatives. Shifting to the long-haul to middle-mile fiber opportunity. Recent hyperscaler announcements by Verizon, AT&T, Meta, and Corning confirm our thesis. Existing networks lack the capacity and latency required to support growing data consumption and AI inference. This quarter, hyperscalers collectively raised their CapEx guidance to nearly $718,000,000,000, representing an approximate 70% increase year-over-year, affirming both the need and the capital behind it. The $20,000,000,000 addressable market that we identified across long-haul, middle-mile, and inside-the-fence fiber infrastructure continues to grow as it progresses through the ecosystem. We are seeing more activity today than ever before, giving further confidence in the revenue opportunities now and in the future. As we have said before, these large programs have a longer planning phase than fiber-to-the-home or other programs. We see their pace ramping considerably for builds that would start in earnest in calendar 2028. Dycom Industries, Inc. is uniquely positioned for the long-haul, middle-mile, and inside-the-fence opportunity set. First, we believe we were first on the field executing Lumen's overpull program. Their program continues, with Lumen announcing that they received another $2,500,000,000 of awards this quarter to bolster their current build. We expect our revenue to continue to ramp this year as we look to deliver on Lumen's overpull program. Second, both overpull and new construction builds require massive foresight, geographic scale, and technical sophistication. Complexity favors Dycom Industries, Inc. While the incubation period from inception to construction is longer than fiber-to-the-home, these programs generate elongated build cycles that provide revenue visibility well into the next decade. Lastly, the surge in long-haul capacity must be matched by the fiber density inside the data center campus. We continue to secure new awards inside the fence, validating that hyperscalers require a strategic, scaled partner to sustain their build pace. Our strategy is to position Dycom Industries, Inc. as the indispensable partner for hyperscalers and carriers alike. We have deployed dedicated teams to work directly with customers and the supply chain, ensuring we proactively plan and precisely execute every program. Our recent acquisition of Power Solutions and entry into the data center space is one way we are leaning into those partnerships. Dycom Industries, Inc. now offers an extended suite of solutions across the digital infrastructure space, and we are already seeing opportunities to bring our Communications and Building Systems services together to meet the intensifying requirements of hyperscalers. Specifically, they are looking for Dycom Industries, Inc.'s breadth, scale, and proven execution, whether it is inside the four walls or interconnecting the fiber between data centers. We view this as a substantial growth driver and are executing a clear, disciplined strategy to capitalize on this demand. Since closing the Power Solutions acquisition just over two months ago, the business is performing well, and the integration has proceeded on schedule. We are leveraging their specialized expertise to sharpen our approach to the data center and digital infrastructure markets. The strong cultural and operational alignment between our teams has allowed us to hit the ground running, and we are very pleased with its initial contributions to our broader portfolio. As we look to the year ahead, we are focused on four core strategic priorities. First, talent and workforce development. We are investing heavily in our workforce, now over 19,500 strong, to meet intensifying customer demand. In the coming weeks, we will break ground on a new state-of-the-art training facility outside of Atlanta. While we operate numerous facilities nationwide, this center represents a major step in staying ahead of evolving technical demand. Designed to house employees for immersive, multiweek programs, the facility will provide hands-on training in real-world environments to ensure our teams consistently deliver the safety, quality, and expertise that define the Dycom Industries, Inc. brand. This investment is part of our overall strategy, which includes significant enhancement of our benefits package as we continue our efforts to remain the employer of choice in our space. As diverse demand drivers intersect and overlap, we anticipate an industry-wide shortage of skilled labor that will favor Dycom Industries, Inc.'s scaled workforce and proven execution. As a trusted partner, we maintain constant dialogue with our customers to build our talent ahead of the curve. Second, expansion of our Building Systems segment. With Power Solutions as our foundation, we are actively pursuing opportunities to drive their organic growth beyond their current footprint as well as pursuing additional complementary acquisitions, while remaining committed to our strict criteria and long-term debt leverage target. Third, margin expansion. We will continue to drive margin improvement through productivity gains and operating leverage. Our commitment to field efficiency is unwavering, rooted in our disciplined approach to safety, quality, and financial performance. This past year, we delivered significant margin expansion and are applying that same discipline to fiscal year 2027. Fourth, operating cash flow and fleet optimization. We have made significant strides in our cash position by improving internal processes and controls and sharpening our cash conversion cycle. We have driven significant improvement in our net DSOs, which are nearing a range we expect to remain relatively steady. We will continue to identify and execute on opportunities to further enhance operating cash flow. This includes capturing additional efficiencies within capital expenditures, as reflected in our reduced spend last year and our outlook for fiscal 2027. This reduction is a result of long-term strategic planning, not short-term cost savings. As a leading customer for many of our equipment suppliers, and the strategic decision to favor ownership over leasing, we hold a unique position in our R&D cycles. R&D partnerships have led to advanced telematics that provide real-time insight into usage, maintenance, and diagnostics. By leveraging these insights, we have optimized our fleet, allowing us to maintain high performance levels with a lower capital footprint. In summary, Dycom Industries, Inc.'s strength is rooted in the expertise of our large workforce and our proven ability to raise the bar for our customers. In striving to deliver at the highest possible level, we believe we are setting the industry standard for what focused scale and high-quality execution looks like. Our record performance and historic backlog are a direct reflection of the trust we have earned as an indispensable partner to the world's leading carriers and hyperscalers. As we move into fiscal 2027, we will continue to leverage our scale and technical sophistication to solve the industry's most complex challenges and meet commercial opportunities, from the massive fiber-to-the-home buildout to the critical infrastructure requirements of the data center and AI economy. We remain committed to the disciplined growth and superior execution that define Dycom Industries, Inc., drive long-term value for our shareholders, and long-term opportunities for our people. I would like to thank the entire Dycom Industries, Inc. team across all 50 states for your relentless commitment to safety and quality, and to delivering at the highest level for our customers and communities, as we pursue our vision to be the people connecting America. With that, I will turn the call over to Drew for a deeper look at the financials. Drew DeFerrari: Thanks, Dan, and good morning, everyone. We delivered record annual results in fiscal 2026 with strong revenue growth, significant margin expansion, and robust free cash flow. We executed well in Q4, and we are excited to welcome Power Solutions to Dycom Industries, Inc. Together, we are positioned at the center of the powerful secular trends driving growth in digital infrastructure services. For the fourth quarter, we delivered strong growth in revenue, adjusted EBITDA, and adjusted EPS. Consolidated total contract revenues were $1,458,000,000, a 34.4% increase over Q4 2025. Organic revenue exceeded the high end of our expectations, growing 16.6% after excluding the acquired revenues from Power Solutions of $95,800,000 and the extra week in our 53-week fiscal year. Consolidated adjusted EBITDA of $162,400,000 increased 39.6% over Q4 2025. Adjusted EBITDA margin of 11.1% was within our range of expectations and increased over 40 basis points compared to Q4 2025, even as we increased our workforce to meet the growing demand for our services and experienced severe winter weather at the end of the quarter. Consolidated adjusted net income was $60,500,000, and adjusted diluted EPS was $2.30 per share. These results are adjusted to exclude nonrecurring acquisition-related items and the amortization of intangible assets. For the segment results, Communications revenue was $1,362,000,000, driven by continued execution of fiber-to-the-home programs, wireless activity, fiber infrastructure programs for hyperscalers, and maintenance and operations services. We are pleased with the strength of our relationships and diversification across our customer base. AT&T and Lumen each exceeded 10% of total revenue for the quarter, contributing $350,500,000 and $147,700,000, respectively. Following Verizon's acquisition of Frontier during our fourth quarter, their combined revenue was $205,600,000, also exceeding 10% of total revenue. Customers exceeding 5% of total consolidated revenue for the quarter were BrightSpeed, Charter, Comcast, and Uniti. Adjusted EBITDA for Communications increased 30% to $151,300,000, or 11.1% of segment revenue. The Building Systems segment includes Power Solutions results from the date of acquisition on December 23 through January. Revenue was $95,800,000, and adjusted EBITDA was $11,100,000, or 11.6% of segment revenue, with results impacted by several seasonal holidays during the abbreviated operating period. This acquisition fundamentally broadens our reach into the data center market. The integration is proceeding on schedule, and the business is performing in line with our expectations. Backlog at the end of Q4 was $9,542,000,000, including $8,333,000,000 of Communications backlog and $1,209,000,000 of Building Systems backlog. Backlog expected in the next 12 months was $6,358,000,000, including $5,250,000,000 from Communications and $1,108,000,000 from Building Systems. Strong cash flows remain a primary focus, and we delivered excellent results. Operating cash flow totaled $642,500,000 for the full fiscal year, and free cash flow increased 216% to $435,300,000 after capital expenditures net of disposal proceeds. The combined DSOs of accounts receivable and contract assets, net, improved to 101 days, a 13-day improvement over Q4 2025. We made solid progress improving our cash conversion cycle in the Communications segment and of the newly acquired business, which is further bolstered by the lower DSO profile in our Building Systems segment. I am pleased to report that our ERP implementation is on track, and we are actively deploying additional phases during fiscal 2027, further enabling future operational efficiencies. As we previously disclosed, the $1,950,000,000 acquisition of Power Solutions was completed in the quarter on a cash-free, debt-free basis, subject to working capital and other post-closing adjustments. The purchase price consisted of approximately 1,000,000 shares of Dycom Industries, Inc. common stock, with the remainder of consideration paid in cash. The net cash payment at closing of $1,630,000,000 was funded with a mix of proceeds from a $1,100,000,000 senior secured term loan A facility, a $600,000,000 364-day bridge loan facility, and cash on hand. During January, we raised $800,000,000 of senior secured term loan B, repaid the bridge loan facility, and added the remaining net proceeds from the debt issuance to cash on the balance sheet. We ended the quarter with cash and equivalents of $709,200,000 and total liquidity of $1,460,000,000. The maturity of our senior credit facility has been extended to December 2030, and we had a total of $1,540,000,000 term loan A outstanding and an undrawn $800,000,000 revolving credit facility. The term loan B balance was $800,000,000 outstanding with a maturity in January 2033. Additionally, we have $500,000,000 senior notes outstanding that mature in April 2029. Pro forma net leverage at the end of the quarter was approximately 2.3x adjusted EBITDA, and we see a clear path to delever further to approximately 2.0x net leverage over the next 12 months, in line with our expectations at the time of the transaction and maintaining our financial flexibility for continued strategic growth and investment. Going forward, we remain committed to our capital allocation priorities of investing in organic growth, pursuing strategic M&A, and opportunistically repurchasing shares. We continue to observe strong demand across a diverse set of drivers, creating significant opportunities for continued strong growth and performance. For fiscal 2027, we expect total contract revenues to range from $6,850,000,000 to $7,150,000,000. For the Communications segment, we expect contract revenues to range from $5,700,000,000 to $5,900,000,000, increasing approximately 6.6% to 10.3% organically when compared to $5,350,000,000 of fiscal 2026 Communications revenue after excluding the extra week in our 53-week fiscal year. For the Building Systems segment, we expect contract revenues ranging from $1,150,000,000 to $1,250,000,000. We also anticipate continued adjusted EBITDA margin expansion. For Communications, we expect modest adjusted EBITDA segment margin improvement as operating leverage offsets continued investment in our workforce to meet growing demand. For Building Systems, we expect a mid-teens adjusted EBITDA segment margin as we scale operations to capture increasing market opportunities. To highlight some of the expectations driving our outlook range for fiscal 2027, within Communications, we expect continued strong demand from fiber-to-the-home programs, increasing demand from long-haul and middle-mile fiber infrastructure builds, growing inside-the-fence opportunities, and modest growth in our service and maintenance business. We expect revenue from wireless equipment replacements to decline by approximately $100,000,000 in fiscal 2027 as the program transitions into its next phase, in accordance with the original build plan. We expect a further step down in fiscal 2028 as this program moves towards completion. Our strategy positions us well for future wireless opportunities, whether other equipment upgrades or overall densification. And for the Building Systems segment, we expect exceptional demand for electrical services in a growing data center market. We expect annual capital expenditures, net of disposal proceeds, to range from $210,000,000 to $220,000,000 for fiscal 2027 as we efficiently utilize our fleet of assets and strive to continue to reduce our capital intensity. For Q1, we expect total contract revenues of $1,640,000,000 to $1,710,000,000, adjusted EBITDA of $200,000,000 to $220,000,000, and adjusted diluted EPS of $2.57 to $2.90 per share, excluding the impact of intangible amortization expense. Dan Peyovich: We encourage you to review the outlook summary document newly available on the company's Investor Center website for additional metrics. With a record fiscal 2026 behind us, Dycom Industries, Inc. enters fiscal 2027 with solid strategic positioning and a strong financial foundation. We remain focused on the disciplined execution necessary to convert robust industry demand into long-term value for our shareholders. Operator, this concludes our prepared remarks. You may now open the call for questions. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. We will now open for questions. Our first question will come from Sangita Jain from KeyBanc Capital Markets. Your line is open. Sangita Jain: Good morning. Thank you for taking my question. Dan, can you talk a little bit about how you plan to increase the scope of work that you are doing inside Power Solutions? I know Dycom Industries, Inc. has telecom expertise, so maybe you can expand into cabling or something else that you are currently not doing there? Any color there would be helpful. Dan Peyovich: Good morning, Sangita. First, I just want to say Power Solutions acquisition is going incredibly well. The integration is going just as we expected it to be. This is an incredibly strong, very deep leadership team that has been in that market for a very long period of time. So we are excited about how they are performing. We are excited about the opportunity set in front of them. And if you probably heard me say, the demand, especially in the DMV right now, is just off the charts. So plenty of opportunity there. As you can see, we are outlining significant growth for them this year. You know, with the range we gave is 15% to 25%. Really, that is about trying to ramp into that over the year and set us up for the future and what that looks like. So we are investing in that business. You know, we are certainly adding resources to that business. And then to your question, the cross-sell is quite frankly taking flight even earlier than we anticipated. The reaction from the hyperscalers has been fantastic. You know, where we can bring our inside-the-fence Communications work and couple that with what Power Solutions is doing inside the four walls, we think that is a recipe that wins over time. And again, with both of our proven expertise, the response has been fantastic. If you think about inside the four walls, one, I would point to how we named the segment. So Communications, obviously, for the Dycom Industries, Inc. business that is in the legacy side, but Building Systems, we wanted to be specific. So first, you know, we are really architecting Dycom Industries, Inc. around digital infrastructure. It is about both the compute of data and the transmission of data around the country, getting it all the way from the data centers themselves to the end consumer or to the end business. That is really our playbook. We want to be straight down the fairway as we are thinking about it. With Power Solutions, obviously, there are opportunities for organic expansion, and we are going to look into that. It is continuing to work on that over time. And we are also looking at M&A opportunities, and we have been vocal about that. That is not just limited, to your point, not just limited to electrical. We call it Building Systems for a reason. We are not thinking about civil infrastructure. We are not thinking about getting outside of digital infrastructure. But there are other opportunities inside the four walls at a data center that could make sense. And as everybody knows, it is a very active space right now. And, you know, we are optimistic. Again, we have got discipline around what we are looking for, strategy around what we are looking for. It has got to have really strong culture. It has got to fit, you know, with the growth opportunities that we see. But, yes, there could be other disciplines that we bring into the fold. Sangita Jain: Thank you for that, Dan. And then on the fourth quarter organic growth, which was especially strong given winter weather and the holidays, etcetera, can you talk a little bit about where you were most surprised versus your internal expectations? If there was any notable project pull forward that came in? Thank you. Dan Peyovich: No pull-forwards. And, yes, we are obviously very pleased with the overall performance, exceeding the high end of our range that we gave at the beginning of the year, giving that revenue outlook at the beginning of the year that we raised after Q1. But notably, for the fourth quarter, as you point out, one, we had to work through significant winter weather. What it shows really, one, the ability of our team to execute even in those conditions. We did get a little bit of margin pressure from that, but the ability to keep that going. But, importantly, the demand from our customers. The demand coming out of Q4 and the demand going into this year, you can see it in the guide that we gave for fiscal 2027. You can see it in the organic growth that we are talking about in the Communications side and the outlooks for 2027. So it really just shows all of these different demand drivers as they are coming through the business, and the opportunity set there. So nothing specific. Really, I would say, points to the overall demand. One thing I would point out, you know, we did have wireless that increased in Q4. And you do have to think about that. As Drew talked about, you know, we expect about $100,000,000 of deceleration in line with the original expectations of that program. But since we got that work and have been executing, we have talked about back half in the four years that it is going to start to taper off. So you do have to include that going the other direction. Sangita Jain: Thank you. Operator: Our next question comes from Eric Luebchow from Wells Fargo. Your line is open. Eric Luebchow: Great. Thanks for taking the question. Dan, I wanted to just ask about the long-haul, middle-mile, and inside-the-fence work. I know you quantified the $20,000,000,000 TAM a few quarters ago. Sounds like you are optimistic that that is going to prove conservative, and we have seen some interesting announcements from the likes of Meta and Corning recently. So maybe any kind of quantification on how that program is progressing? And where you think that addressable market ultimately goes? It sounds like $20,000,000,000 is just the start. Dan Peyovich: It really is, Eric. If we think about the $20,000,000,000, and remember that is back-half weighted because these programs are complex. They take a while to get off the ground. But what you have seen since the last quarter, and I think we put that number out a couple quarters ago, in this last quarter you saw a number of our customers now talking about it and talking about significant opportunities and appetite for hyperscalers. As recent as yesterday at some of the conferences, even more demand that they are seeing on their side. It does take time for that to get through the ecosystem, and that is what we tried to talk about early on when we identified the $20,000,000,000. You know, we really think that we were first on the field with what we have been doing for Lumen. Saw another nice increase to their PCF that they are going to continue to build on over time. And then you have the new construction work, which again just takes further time to come in. I would really think about ramping this year, continuing to ramp this year, continuing to ramp in 2027, and a lot of that really taking flight in calendar 2028. Is it more than $20,000,000,000? We strongly believe that. Is there going to be more that comes there? What I would tell you is today, we are getting more phone calls and seeing more opportunities than we saw even a quarter ago or, frankly, even a week ago, the demand is that strong. And it comes back to a little bit of what I talked about at the beginning. This is about a change in how they need to transmit this data. They need more capacity. They need ultra-low latency for these applications and for the future of AI. So we are excited that we can be a trusted partner there, and we really think that over time that is going to continue to grow, and we will continue to update as we see that move. Eric Luebchow: Great. Thank you, Dan. And maybe we could just touch on the BEAD program. You talked about it a little bit. Sounds like the verbal award balance is above that $500,000,000, but it also seems like it is taking a little longer for the funds to actually get dispersed. I think Louisiana is the only one that I have seen. So maybe you could just talk about the construction timelines there, when you think that is really going to ramp and kind of hit a more full run rate. Dan Peyovich: We still believe Q2 that we have some revenue opportunities to be putting work in place overall. But as we talked about, and really unchanged from what we have been saying for a bit now, if you really think about that in calendar 2027, it is getting some momentum. So it is great to see progress. You know, nearly all the states and territories are approved. So to your point, funding, this has pushed the funding down, and that continues to grow over time. We think that the addressable market is approaching $20,000,000,000, but it is going to take some time for those to get off the ground. You have got numerous states at different paces, the way that they are pushing it down to the subgrantees, and then those subgrantees also at different paces. Within that, I will just frame the context for you. If you think about a local cooperative where they own their own poles, they have probably already done the engineering today. As soon as they get the funding pushed down, they can hit the go button, and that is why we talked about something in Q2. But the bigger program, the longer duration build, those are probably going to come on much later in the year. So, again, great to see progress. We all wish it would go a little bit faster. Absolutely. But we have a lot of confidence in that coming through the supply chain soon. Eric Luebchow: Thanks, Dan. Thank you. Operator: Our next question will come from Joseph Osha from Guggenheim Partners. Your line is open. Mike Spressody: This is Mike Spressody on for Joe. Just to kind of follow up on that BEAD program, is it fair to say that the big guidance does not imply the full potential impact for this year? And then also, how do margins from this program differ from your traditional work? Are they more accretive or anything like that? Thanks. Dan Peyovich: Mike, I think you are breaking up just a little bit. I think you are referring to the BEAD program again and just how it is built over time. Mike Spressody: Yeah. Exactly. Thank you. Dan Peyovich: Yeah. First, on the margin profile, similar to all of our work. We think about everything on the Communications side very similarly. If it is taking the same type of skilled workforce resources, if it is taking similar types of equipment, then the margin profile and that return ends up in a similar range. So that does not mean every project is exactly the same, but it is in the same similar bandwidth. And we believe BEAD will play out that way over time. But, and I think this is an important point, you have got fiber-to-the-home demand that is really just reaching another level. And, again, I do want to point out, it has not peaked yet. You still have a ton of growth that is happening in that program. You have got everything going on with the hyperscalers and those long-haul, middle-mile builds that is significant. You still have a lot of activity on the wireless work today. We continue to add to our service and maintenance platform. When you put all those together and you start adding them up and showing the increases over time, without question, there is going to be pressure on labor. So if you think about skilled workforce, as you get later this year and really starting in calendar 2027, that is where we think Dycom Industries, Inc. is exceptionally well positioned. And we have been investing heavily in our workforce to make sure that if you think about BEAD and the needs that our customers can have there, when you already have these other programs going fast, we need to have been investing years ago. We need to be thinking about having a strategy that was very long term. You probably heard me in my prepared remarks talk about, and I am really excited about this, a new training facility that we are opening outside of Atlanta. This is something you are going to hear more about in the coming days, and we have numerous training facilities around the country. But this one is really taking it to the next step. So picture a Hollywood-style town where our folks can be working in the front yards and backyards of America in a simulated environment, where they are going to stay on site for a multiweek training curriculum so that we can get them very quickly oriented to the work, highly skilled to deliver at the level that Dycom Industries, Inc. is expected to do overall. I should point out, this facility is also not just what we are doing on the Communications side, but the Building Systems side as well. That is just another example of how we invest in front of programs to make sure that we will have the skilled workforce that our customers need, and that the partnerships that we have and the depth of those partnerships allow us to plan those very far into the future. So back to your original question on BEAD, just really think about it lightly coming in this year. It is just going to take a while for these programs to start. Again, we are excited about backlog that we have verbally awarded, and I want to point out that it is still verbal to date. We think those should transition to actual awards and move to backlog in either Q1 or Q2, with some activity starting in Q2. But think about calendar 2027 as really when those projects are going to come online. Mike Spressody: Thank you. Dan Peyovich: Thank you. Operator: Our next question comes from Frank Louthan from Raymond James and Associates. Your line is open. Frank Louthan: Great. Thank you very much. Can you comment on what the current growth rate is at Power Solutions today versus what it was when you acquired the business? And then secondly, can you characterize your exposure to EchoStar, any project that they have currently, and if you have removed any of that from your guidance? Thanks. Dan Peyovich: No exposure to EchoStar, so nothing to think about there for Dycom Industries, Inc. On Power Solutions growth rate, we talked about their trailing four-year CAGR at about 15%, Frank, and that is what we gave as we were doing the acquisition and announced it for folks to look ahead. Obviously, as you saw in the guide, we are looking at that really as the bottom end of the range, so 15% to 25%. But here is the really important point. This is an organization that is delivering across around 3,000 skilled workforce, so 3,000 electricians, over a billion dollars of revenue. That is a very large base. And when you think about growth as a percentage, remember, you add the skilled workforce by the person, and doing that on a much larger base is something that you really have to lean into. So, you know, if you think about how we are looking at the year, how do we continue to invest in Power Solutions, a fantastic business that has got great leadership, a fantastic strategy that they have proven over time, but we want to really lean in with them so we can think about future growth and future growth opportunities. And I just want to come back to Dycom Industries, Inc. as a whole. When we think about growth, there is a right way to do growth and there is a wrong way to do growth. We have had a ton of discipline around our backlog. You see that in our margin profile. You see that last year, not only did we significantly increase our backlog, not only did we continue to diversify our backlog, but we also improved our margin profile. And this year, as we look at the year out in front of us, we are telling you again that we continue to improve that margin profile as we continue to grow, but as we invest in the business to ensure future growth too. So just a couple important points there. Frank Louthan: Great. Thank you very much. Operator: Thank you. Our next question comes from Michael Dudas from Vertical Research. Your line is open. Michael Dudas: Yes. Good morning, Callie, Dan, and Drew. Morning. Maybe a follow-up on Frank's, you know, on your answer to Frank on the margin front. Maybe talk a little bit, you know, you are investing in the business for the future. How much relative to fiscal 2027 versus 2026? And I think just also on the Power Solutions side, historically, in their self-perform capabilities, have they, what has been their growth rate on the labor front? And is that within expectations on, you know, from hiring and getting folks in to execute the backlog, not just for this year, but for several years out? Dan Peyovich: Thanks, Mike. So on margin profile, you know, you look at last year, we grew over 100 basis points year-over-year. Very pleased with the overall results, and that has been a year of change and growth. We did a major acquisition, and I think, again, I would just point to how well Dycom Industries, Inc. is executing overall to be able to do all of those things at once. As you look towards this year, again, we have big ideas and big initiatives that continue our growth and continue that long-term strategy. What is really important, and to the point of your question, is that we have to continue to invest ahead of that. We added a lot of headcount for the Communications side in the back half of last year. We see that continuing as we continue to get ahead of these programs that I talked about early on that are starting to stack on top of each other. That takes an investment. We have to invest in training. We have to bring those folks on. They are obviously not as productive day one as they are six months in. So when we think about that and we add it into the growth profile of the overall enterprise, that is when we say, hey, we are going to continue to grow margin. But I would not set expectations to be going as fast as we did last year from a raw dollars or a percentage profile, but still to grow, to have that into our backlog when I think a lot of others, during periods of growth, maybe struggle with improving those margins. We feel really good about that. Going to Power Solutions, they are really about labor. A lot of people know the hyperscalers buy all the big electrical equipment directly. That does not come through the P&L of Power Solutions. So it really is about workforce. So if you think about 15% to 25% growth that we are projecting for this year, you are growing labor in a very similar range to that. And as I mentioned to Frank, you think about that on a raw number of skilled workforce headcount, when you get to the size of Power Solutions, they are working on dozens of data centers. Those are really big numbers in the DMV. We are partnered with the local union. We are getting well in front of that. But at some point, again, this goes back to responsible growth. You want to grow at the right rate where you continue to deliver and, quite frankly, differentiate the level of service that we deliver to our customers over time. And that is what you see in the outlook. Michael Dudas: I appreciate it. It makes sense. And just my quick follow-up. You mentioned a little bit about acquisitions in some of your prepared remarks in response to questions. Maybe you could share a little bit on the timing on getting to that 2.0 level, the size, the cadence, you know, what should we anticipate maybe over the next 12 to 18 months? I am assuming maybe there is another Power Solutions out there. I am thinking a bit more modest in cadence and size. Dan Peyovich: I think it is important to go back to the long-term strategy that we operate and talking about long-term returns for our shareholders and long-term opportunities for our people. Obviously, we did the Power Solutions acquisition. That was a very large acquisition for Dycom Industries, Inc. historically. But what we did well ahead of that, Mike, we were very intentional to drive our net leverage down before we did the acquisition. I do not remember the exact number, but I think it was about 1.2x, maybe 1.2x and change when we did that. And then we talked last quarter about our ability to bring that net leverage down quite quickly. We talked about 12 to 18 months, but really what you heard Drew say earlier was to do that inside of 12 months. To finish the year with a very strong cash position and already get that down to 2.3x, pro forma. We feel really good about the opportunity set that allows us to think about from an M&A perspective. Long-term strategy includes improving our cash flow. And if you look at our free cash flow, I am incredibly proud of what our team was able to accomplish there. Our free cash flow increased 216% year-over-year, and I would point to these are durable changes that we have built into the business. These are not simply pulling a lever or taking a one-time thing. This is really about how we change, one, how we collect cash, we change our operating cash collection profile and how we are thinking about that. So, again, durable. On the free cash flow side, you heard me talk a little bit about how we are thinking about our fleet differently and using technology differently there, so we can optimize that as well. And what that does is it positions us in a place where those are big changes in cash position overall, sets us up much better when you think about M&A. So those are things that we set in motion quite some time ago to enable us to be able to continue the path that we are on today. When it comes to size, again, we have got a strategy around it. We are looking for very specific cultural fit, very specific growth opportunities. It could be something else in a factor range of the size of Power Solutions, and there could be other opportunities that are much smaller than that. It is really going to depend on, and there is obviously no guarantees about timing or how these work out. We are going to be patient, but we are seeing some attractive things in the space. Michael Dudas: Understood, thanks, Dan. Dan Peyovich: Thank you. Operator: Our next question comes from Judah Aronovitz from UBS. Your line is open. Judah Aronovitz: Hey, good morning. Thanks for taking my question. On for Steven Fisher. Just on the Building Systems margin guidance, can you talk about how you are thinking about the margin potential in that business, and how quickly can you improve kind of the mid-to-high teens level that you have talked about? And related to that, what investments need to be made, and if you can quantify the margin drag from those investments in 2027, that would be helpful. Dan Peyovich: This is really, again, about having a long-term strategy to do this. So when we think about that business, we did talk about mid-to-high teens margin profile that they have delivered historically. Mid-teens is really the right way to think about it today. We are talking about significant growth opportunities. We want to do that right, maintaining the level of service that they have proven over decades is so imperative in a market where the demand is surging at the level that it is today. We are going to have that discipline. We are going to have that patience. We are very pleased, obviously, with the growth profile for 25% from a revenue perspective. But we feel like mid-teens is a very strong return in that space. And I think if you look, comparatively, you would see that as well. So we feel very pleased with that. Over time, obviously, we are going to, just like we are on the Communications side, work to improve that. But right now, I think that is a really good starting point. Judah Aronovitz: Thanks. And then I was just curious about SG&A as a percent of sales in Q4. A bit higher than it has been in quite some time, and I assume that is reflective of the headcount you are adding, but I was wondering if there is anything else in there, maybe something related to Power Solutions mix or anything else? And then what is the expectation kind of going forward? Thanks. Drew DeFerrari: Yeah. Judah, thank you for the question. This is Drew. I would just point out we did have some transaction costs that we called out in the quarter, and that was in G&A, so over about $18,000,000 in there. And then as we think about the Building Systems segment, the G&A profile does come into the business as well. So if you are looking at the just total overall dollars, there will be some increases there as well. Judah Aronovitz: Thank you. Operator: Our next question will come from Richard Cho from JPMorgan. Your line is open. Richard Cho: I just wanted to get a little bit on the hyperscale opportunity. As we look through this year, and then into next year and 2028, it seems like there is a lot of this build that is coming back-half weighted, and it could be a big change. But what is kind of driving the near-term hyperscale revenue, and how should we think about its growth for this year and then into next? Thank you. Dan Peyovich: So today, you have, obviously, the Lumen overpull that does not have the same kind of new construction logistics or permitting around it. So that program that we have been working on for over a year now, that is going to grow this year. I would think about that first, Richard. And then you do have smaller legs. You know, the way that these long-haul, middle-mile routes are working, there are some very big programs like Lumen is talking about, there is everything in between, and then there are some that are just, you know, 100 or 200 miles. Those much smaller distances can be added in more quickly, obviously. But when you are looking at routes that are thousands of miles or much longer, those are the ones that are going to push further on duration. And then, as you would expect, there are also the pricing dynamics. So routes that are easier are going to cost less, so those can come online a bit quicker. The more expensive routes are going to take time and have higher revenue profiles, those out years of 2027, 2028. Richard Cho: Got it. And the clarification on the acquisitions, are you looking in the DMV area for acquisitions, or could this be a new geographic location? Dan Peyovich: So we are nonspecific just to DMV. You know, there are obviously a number of other markets. But I would say what was important to us with the Power Solutions acquisition was starting in a market that has been there for a very long time. This is a market that has been around for decades. It has sustainability, it has a future build profile. With that now, we can certainly be thinking about some of these frontier markets or markets that are newer and ramping up considerably. They are all on the table as we think about it going forward. Richard Cho: Yeah. Those markets seem like they are going to be building for a while. Thank you. Dan Peyovich: Thank you. Operator: Thank you. Our next question comes from Adam Thalhimer from Thompson Davis. Your line is open. Adam Thalhimer: Hey, good morning, guys. Dan Peyovich: Good morning. Adam Thalhimer: Also had a question on the M&A pipeline. Dan, is that all within the Building Systems segment, and then what should our expectations be on timing? Dan Peyovich: Yes, we are predominantly looking in the Building Systems segment, and that is mostly, Adam, as you know. Dycom Industries, Inc. has been a major acquirer and consolidator of the Communications space. There are still some opportunities out there, but, quite frankly, when you are in all 50 states and you are across the same kind of customer base that we have today, we do not need to do those from an M&A perspective. Those are places where we can and have shown we can grow organic. So thinking a lot more about the Building Systems space, as I mentioned in response to Sangita's question earlier, it does not just have to be electrical. There are other systems that happen in that digital infrastructure space or inside the data center. From a timing, you know, these things do not pace out some particular way you want them. I mean, we closed Power Solutions two days before Christmas. This is how things time out. We are active in the space. There are a number of opportunities that are out there. There are a number of really strong businesses that are coming to market for all the reasons you would expect. Sure, the multiples are higher, but the businesses are more valuable and the growth profile is stronger. So we are optimistic, but, you know, there is no guarantees on time. We are going to be patient and make sure it fits. Adam Thalhimer: Good color. And then I think you mentioned Power Solutions geographic expansion. Just curious what you are thinking there. Does that mean just starting to pick up some work in West Virginia, North Carolina, sort of building out from the DMV? Dan Peyovich: Exactly. They are not in every space. Even if you think about the DMV itself, you know, you could still continue to expand. And as everybody knows, that space itself is expanding. You mentioned West Virginia; there are other markets that are really kind of coming online more in that territory. So today, you know, we feel really good about the growth profile they have. There are opportunities for future organic expansion. That group, because they have been around for a very long time, they have got a ton of talent. So those are all things we are thinking about as we layer that together with M&A. What I would just say is we are very optimistic in the continued growth of the Building Systems segment. Adam Thalhimer: Thanks, Dan. Dan Peyovich: Thank you. Operator: And our next question comes from Liam Burke from B. Riley Securities. Your line is open. Liam Burke: Thank you. Good morning, Dan. Good morning, Drew. Dan Peyovich: Good morning. Liam Burke: Dan, with your growing EBITDA and your growing cash flow, as you balance opportunities through acquisitions and managing the balance sheet, how are you balancing your current leverage ratios versus what you see in the potential acquisition pipeline? Dan Peyovich: Yeah. I think about it the same way as we always have. We are going to be very responsible on our net leverage. I think you have to think about it over time because we might do acquisitions that could come through that are going to push it up a bit when we know, just like we did with Power Solutions, that we can bring that down. And I mentioned, Liam, this is a strategy that goes back so that we have these improvements in the business. So we can do more M&A and stay ahead of it without really changing the way that we look at our overall net leverage profile. Liam Burke: Great. And when you are looking at the traditional business, when negotiating longer-term contracts, are you seeing more favorable terms of pricing now that the scale is getting bigger, projects are more complex, and you seem to be the leader in the space here? Dan Peyovich: Yeah. You know, I think we are the only ones that are across all 50 states, and we certainly have a number of customer relationships. If you think about the margin improvement last year, you think about the margin improvement this year, I do want to be really clear about this. This is not coming from us increasing pricing with our customers. This is coming from, obviously, operating leverage, but also internal efficiencies that we are improving. Now over time, can those pricing dynamics change? We will see as these different programs come online and ramp up. But right now, one, we feel really good with our return profile. You know, we have a long-term view with our customers. We want to deliver and execute for them across cycles, certainly across decades. We have shown that we can do that. But I would not think about it from purely us having an opportunity to continue to raise pricing. And, also, I would point out that we do not need that to continue the margin improvement that we are on. Liam Burke: Great. Thank you, Dan. Dan Peyovich: Thank you. Operator: Thank you. And I am showing no further questions from our phone lines. I would now like to turn the conference back to Mr. Dan Peyovich for closing remarks. Dan Peyovich: Thank you all for your time today. We look forward to talking to you again in around 90 days. Thank you all. Be safe, and be well. Operator: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to Wix.com Ltd. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentations, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 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, Emily Liu, Investor Relations. Please go ahead. Emily Liu: Thanks, and good morning, everyone. Welcome to Wix.com Ltd.'s Fourth Quarter and Full Year 2025 earnings call. Joining me today to discuss our results are Avishai Abrahami, CEO and Co-Founder, Nir Zohar, President and Co-Founder, and Lior Shemesh, our CFO. During this call, we may make forward-looking statements and these statements are based on current expectations and assumptions. Please consider the risk factors included in our press release and most recent Form 20-F that could cause our actual results to differ materially from these forward-looking statements. We do not undertake any obligation to update these forward-looking statements. In addition, we will comment on non-GAAP financial results and key operating metrics. You can find all reconciliations between our GAAP and non-GAAP results in the earnings materials and in our interactive analyst center on the investor relations section of our website, investors.wix.com. With that, I will turn the call over to Avishai. Avishai Abrahami: Thanks, Emily. 2026 is shaping up to be a defining year and the start of a new chapter shaped not just by the continued shift toward AI, but by AI beginning to prove its real-world value and utility more broadly. At Wix.com Ltd., we expect to begin to see the bold bets we have made over the past few years translate into measurable impact. When we founded Wix.com Ltd. twenty years ago, our vision was straightforward. Make Wix.com Ltd. the go-to platform for anyone, anywhere to create online. Over the years, we have delivered on that ambition. What started as a simple do-it-yourself website builder has grown into the leading online presence creation platform serving not just self creators, but also businesses of all sizes as well as professional designers and developers. In recent years, the web has undoubtedly become much more AI-first. That shift is redefining how and what people build online. AI has dramatically expanded the world of what is possible and created new dimensions that had not existed before. As a result, Wix.com Ltd.'s market opportunity today is exponentially larger than in 2025, primarily driven by our expansion into the application space facilitated by our acquisition of Base 44. This total addressable market expansion has advanced us leaps and bounds towards achieving that long-term vision of being the go-to place for anyone to build whatever they can imagine online. With the addition of Base 44 to our platform, users can now build tailored software applications, smart mobile applications, pro-level visual content, and, of course, websites, but so much more powerful and sophisticated than ever before. These are all things you can create on Wix.com Ltd. today, which is incredible, but the possibilities ahead are much, much bigger. Importantly, as our business and time have evolved over the past twenty years, and will continue to evolve over the next twenty, we remain focused on simplifying very complex technologies and making them accessible to anyone and everyone. Today, there are two new cornerstone offerings to advance our vision. The first is Wix Harmony. Wix Harmony is the first-of-its-kind website creation platform that blends intuitive visual editing with the flexibility and power of Vibe coding. Wix Harmony provides a unified AI layer that spans across the full Wix.com Ltd. experience, allowing for a real AI partner to be with you every step of the way as you create, manage, and grow an online presence or business. After launching in English in January, we are now expanding Wix Harmony globally in other languages, and I am very pleased with the early performance we are seeing, particularly across conversion and monetization metrics. We believe Wix Harmony has the potential to fundamentally reshape how individuals and small businesses build and scale online, not just on Wix.com Ltd., but across the Internet as it becomes increasingly AI-driven. Over time, we plan to gradually make Harmony the default experience for new and existing users, an evolution we anticipate will drive meaningful long-term impact across conversion, engagement, retention, and monetization. The second new pillar of our strategy is Base 44, our leading Vibe coding platform that expands our reach into the vast world of software creation and significantly grows our TAM. We are equally ambitious in this new world as we are in the world of website creation. Through innovation and strong marketing execution, Base 44's user base is scaling rapidly. Today, the number of new users joining Base 44 is nearly two-thirds of the number of new users joining Wix.com Ltd. This is an indicator of the platform's accelerating momentum and highlights the opportunity ahead to empower a massive and compounding cohort of users to build whatever they want online. Just one year after Mauer founded the company and nine months after our acquisition, Base 44 recently reached approximately $100,000,000 of ARR, placing it among the fastest growing software platforms in history. While Base 44 is already emerging as a top platform to build lightweight personal projects, we are seeing adoption from a growing community of businesses and enterprise-sized organizations too. Companies in the tech, banking, and healthcare industries, as well as government organizations and nonprofits, are using Base 44 to build customized software solutions. We are seeing users develop their own CRM capabilities, product and project management tools, ERP systems, workflow automation frameworks, and financial reporting applications. Importantly, this momentum and growth is completely organic. With no sales team at Base 44 today, self-propelled adoption by enterprise-size organizations demonstrates the strength of the platform as well as our successful marketing execution. As much as we are pleased by the success so far, I believe the real potential still lies ahead as Vibe coding permeates beyond early tech-forward adopters to the broad online population. I have not been this excited to kick off a new year in a long time. In just the first two months, we have made bold moves across both our product roadmap and capital strategy, which Nir will speak about shortly. We are confident in our strategy, our ability to execute, and the opportunity in front of us as the Internet shifts further towards AI. Wix.com Ltd. is reshaping how people create in this AI era and significantly expanding what is possible to build online. With that, I will turn it over to Nir. Nir Zohar: Thanks, Avishai. I would like to start with Q4 user cohort trends and what we are seeing there today before discussing our capital strategy and the announcement made today. As we closed out 2025, our new user cohorts exited the year with strong momentum. In the core Wix.com Ltd. business, new cohort bookings maintained double-digit growth in the fourth quarter, fueled by a healthy top of funnel, higher conversion from free to paid subscriptions in key markets, and increased monetization per user. When we include Base 44, new cohort bookings growth accelerated very meaningfully quarter over quarter, driven by particularly robust demand for Vibe coding capabilities. This strength we saw in our new cohorts also extended to existing core Wix.com Ltd. users. Our users are more active, engaged, and impactful than ever, demonstrated by resilient revenue retention in 2025. With net revenue retention of 105% in 2025, we nearly matched the strong retention we saw in 2024 despite the persistent GPV headwinds throughout 2025. This demonstrates that the inherent stickiness and creation power of our user base continues to improve. The strength of this user base supported by high retention and growing user value is also reflected in the projected ten-year value of existing cohorts, which grew 14% year over year. For the first time ever, we now project over $20,000,000,000 in future bookings over the next decade from current Wix.com Ltd. users. This opportunity exists within just our core Wix.com Ltd. business and does not yet include Base 44, where the potential is both new and much larger. Throughout the year, we continued to increase user value as both new and existing users demonstrated better monetization. This was a result of a steady shift toward higher-tier subscriptions, greater adoption of business solutions, and GPV growth. Paid subscription volume in our key markets, particularly in the U.S., where we generate a majority of our revenue, increased year over year in 2025. Additionally, business subscriptions made up a significantly larger share of our total subscription mix in 2025 compared to 2024. Looking into 2026, these positive cohort dynamics are gaining more momentum in these early months of the year. New cohort bookings growth in the core Wix.com Ltd. business has accelerated compared to last year's already very strong cohort growth. This is a direct result of Wix Harmony, which is helping both new and existing cohorts convert more effectively, build more, and capture greater value. Finally, before I turn it over to Lior to walk through our financial and 2026 expectations, I would like to make a few comments on our repurchase plans for this year and the equity investment we announced this morning. As you heard from Avishai, we have a bold and ambitious strategy centered around reshaping the possibilities of online creation over the next few years. We believe the products we are building today will drive accelerating growth in the core Wix.com Ltd. business over time, as we extend our leadership as the go-to AI-powered online presence creation platform globally, notably with Wix Harmony. In tandem, we are seeing explosive growth at Base 44, which we expect will become a profitable and meaningful long-term growth engine. Accordingly, we believe that our current stock performance greatly undervalues these opportunities as well as the fundamental strength of our business. So, taking full advantage of this and demonstrating our immense conviction in our strategic plan, we expect to complete the large majority of our $2,000,000,000 repurchase program this year. We plan to do this as quickly and aggressively as we can. Sharing in our conviction, Durable Capital Partners has led a $250,000,000 equity investment in the form of a private placement of our ordinary shares and warrants. In addition to being highly respected equity investors, Henry, Anuk, and the team have been longtime supporters of Wix.com Ltd., and developed a deep understanding of our business. Their investment is a powerful endorsement of our long-term vision and ability to execute as we build the next era of the Internet. We are thrilled to partner with them as we pursue our strategy, accelerate growth, and create lasting value for our users and shareholders. With that, I will hand it over to Lior. Lior Shemesh: Thanks, Nir. We exited 2025 with strong cohort momentum, a clear strategic plan and poised for continued growth in 2026. We are delivering on our ambitious product roadmap. At the same time, our cohorts are strengthening, as Nir discussed, driven by positive early behavior from Wix Harmony and continued outperformance of Base 44 as we expand our reach across the entire online creation journey. We expect 2026 to be a pivotal year as we make category-defining innovations and expand our leadership across the broader online ecosystem as AI tech increasingly makes the impossible now possible, setting the foundation for long-term growth acceleration. Before I get into our expectations for 2026, I want to quickly recap our Q4 and full year 2025 results. Bookings and revenue growth were healthy in the fourth quarter, building on the incredibly strong growth we saw in the same quarter last year. Total bookings in Q4 were $535,000,000, up 15% year over year, while total revenue was $524,000,000, up 14% year over year. Top-line growth was driven by strong new cohort behavior and solid retention of our existing user base in our core Wix.com Ltd. business as well as Base 44 outperformance. Base 44 finished the year with approximately $59,000,000 of ARR, above our expectations at the time of acquisition. Excitingly, Base 44 recently reached approximately $100,000,000 in ARR, a major milestone that underscores our rapid growth and growing market leadership. Strong ARR growth was driven by product innovation that has resonated, a rapidly expanding user base, improving conversion, and consistent upgrade and renewal trends. Overall strength in Q4 was tempered by continued GPV headwinds, as SMBs on the platform saw macro pressure resulting in seasonally softer than anticipated GPV on the platform. Encouragingly, higher-selling and larger businesses increasingly come to Wix.com Ltd. to build and operate their storefronts. GPV grew 11% year over year to $3,700,000,000 in the fourth quarter, and 11% year over year to $14,300,000,000 for the full year. GPV growth coupled with a steady increase in take rate throughout the year drove year-over-year transaction revenue growth of 18% in Q4 and 19% in the full year. Partners revenue grew 21% year over year to $203,000,000 in Q4, driven by solid studio performance as well as strong adoption of Google Workspace and marketing solutions. This was partially offset by the GPV headwinds I just mentioned. Turning to margins, fourth quarter total non-GAAP gross margin ticked down slightly sequentially and year over year to 68% as expected, and total non-GAAP operating income came in at 15% of revenue. Lower total non-GAAP gross margin was driven by investments in Base 44 to support its rapid growth. We continue to incur elevated AI compute cost as we scale to meet stronger than expected Base 44 demand and maximize gross profit dollars. We believe these AI costs to be front-loaded as new users consume more AI inference bandwidth during their initial build phase. We anticipate non-GAAP gross margin for Base 44 to improve sequentially throughout 2026 as we proactively optimize AI model usage and costs primarily through enhancing prompt caching, batching requests, focused model routing, and more favorable pricing from LLM providers. Approximately one-third of Base 44's AI inference cost today is attributed to token consumption of free users, and included under S&M expenses in the fourth quarter to align with industry standards. We believe AI costs incurred by free users as a percentage of total AI cost will decline over time as conversion improves. Even after incorporating AI-related costs associated with free users into cost of revenue, Base 44's non-GAAP gross margin is already positive today, reflecting healthy underlying unit economics that we believe will continue to improve. We expect Base 44 gross margin to increase as the year progresses. Higher operating expenses in the quarter were driven by accelerated advertising and branding investments into Base 44 against our tROI target, which currently stands at less than twelve months. These increased investments were anticipated as we captured elevated top-of-funnel traffic exiting the year. Non-GAAP gross margin and operating profit margin in our core Wix.com Ltd. business improved sequentially and year over year, driven by healthy top-line growth paired with a stable and disciplined operating cost base. We exited the year with free cash flow of $156,000,000 in Q4, or 30% of revenue. Fourth quarter free cash flow in the core Wix.com Ltd. business was stable compared to the previous quarter. Moving on to 2025 full year results, total bookings in 2025 grew to $2,070,000,000, up 13% year over year. Total revenue in 2025 was $1,993,000,000, an increase of 13% year over year. Total consolidated ARR was $1,836,000,000 at the end of year, up 14% year over year. Total non-GAAP gross margin was stable for the full year, while non-GAAP operating margin declined modestly as investments in Base 44 offset non-GAAP growth and operating margin expansion in the core Wix.com Ltd. business. We generated free cash flow excluding acquisition-related expenses of $605,000,000, or a milestone 30% of revenue in 2025. Turning now to what we expect in 2026. With new cohort momentum driven by Wix Harmony and the continued outperformance of Base 44, we anticipate bookings and revenue growth to accelerate this year. Before I get into the numbers, I want to comment quickly on our updated guidance philosophy. As innovation evolves our opportunity set and expands Wix.com Ltd.'s TAM into new areas, we are refining our guidance approach to reflect a broader range of potential outcomes. So for the full year 2026, we expect bookings and revenue for the consolidated business to grow at mid-teens percentage year over year. For 2026, we expect revenue for the consolidated business to grow at a mid-teens percentage on a year-over-year basis. We expect innovation-driven growth to be accompanied by high-impact but disciplined investments to fully unlock the market opportunity ahead for both Wix.com Ltd. and Base 44. For the full year 2026, we expect free cash flow margin in the low to mid-20% range assuming current capital structure excluding acquisition expenses. This wider than normal guidance range reflects the dynamic hyper-growth trajectory of Base 44 and the inherent variability that accompanies this level of rapid growth. We are playing to win and are willing to make the necessary investments in order to scale Base 44 into the market leader. So if Base 44 top-line growth outperforms more meaningfully, we may experience further pressure on near-term free cash flow margins. In our core Wix.com Ltd. business, we expect solid bookings and revenue performance with flat to expanding free cash flow margin for full year 2026. In addition to accounting for our current capital structure and the exclusion of acquisition costs, this expectation also takes into account, one, a material currency headwind on our total payroll expense base net of our hedging activity as the U.S. dollar continues to significantly weaken against the Israeli shekel; two, negligible AI inference costs associated with Wix Harmony as a result of proactive infrastructure optimization completed last year. 2026 is shaping up to be a foundational year as we drive forward innovations that we believe will cement Wix.com Ltd.'s leadership and expand our role across an evolving online creation ecosystem. Operator, we are now ready for questions. Operator: Thank you. As a reminder, to ask a question, 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 the line of Brad Erickson with RBC Capital Markets. Your line is now open. Brad Erickson: Guys, thanks for taking my question. I have a couple. First, if we look at the organic growth you are embedding into the full year bookings guide, can you lay out and maybe rank some of the contributors there between, you know, thinking about things like payment volumes or subscriber mix shift or pricing? So start there. Lior Shemesh: Hey. This is Lior. So we do not assume a significant change. We do not assume any increase in pricing or change in pricing. I believe that the entire guidance that we provided for 2026 actually reflects the growth that we see within the Wix.com Ltd. core business and Base 44. But beside that, I cannot indicate something that is kind of extraordinary. The same goes for GPV payments and so on. Brad Erickson: Understood. That is helpful. Thanks. And then just stepping back, what types of businesses or applications are you seeing users set up with Base 44? And how much crossover is there with what you see on Wix.com Ltd.'s core platform? Are they, would you say, kind of a decidedly different customer profile, or do you see some of those folks making a choice between the two? Thanks. Avishai Abrahami: We see many different kinds of applications. People are building things for themselves, their family, and then personal growth applications, all the way for applications for the business, for their enterprise application machine. And replacement in companies, SDR, estimations, a lot of different things. Really, it is a huge variety. I think that is one of the things that makes us so excited about Base 44. It looks like people are so creative and the TAM for that, because of that, is essentially infinite. We do not see any kind of competition, and you can see that they are very mostly different usage also, as you can see now. Clearly, Harmony is accelerating, Base 44 is accelerating. So, obviously, we do not think they take from each other. Right? Brad Erickson: Got it. Thanks. Operator: Thank you. Our next question comes from the line of Josh Beck with Raymond James. Your line is now open. Josh Beck: Thank you for taking the question. Kind of a higher-level question with Base 44. It seems like it is skewing upmarket, and then, obviously, Harmony is kind of more geared towards the self creator. So do you see those trends persisting in terms of the segmentation? And how far upmarket do you expect Base 44 to go? And then a financial question related to Base 44. Lior, I believe you said about a third of the inference costs are coming from the free users. I think that is kind of a snapshot for today. Is that happening maybe quicker than you had anticipated, meaning the conversion of free to paid is happening at a pace maybe above your expectations? Would love some comments there. Thank you. Nir Zohar: Hey. It is me. I will take the first one. In terms of the self creators question and the more upmarket, I think definitely on the Harmony side, Harmony is a product we built for the self creators. So I think the association you are making between self creators and Harmony is the right one. For Base 44, as Avishai just said before, the range of opportunities in terms of the kind of usage is still extremely wide. And it makes sense. It is really a very vast TAM in the making, and it is expanding all the time. So we are seeing all kinds of usages. By the way, I think we are definitely also seeing a lot of personal use as well on Base 44. And there, I think it is too early to say whether it is more of one or the other. And to be honest, I think we are going to work very hard to help it segment over time to try and win on both ends for Base 44. Lior Shemesh: I will take the second question. Yes, about one-third as of now is related to free users. Look, I believe that when we started it was higher than that. I think that we keep on increasing conversion, which is a really, really good sign. And we also become much more efficient in terms of how we use the model between the different types of users. So I do believe that the portion related to that will decrease in the future, as the overall cost will decrease. Josh Beck: Very helpful. Thanks, guys. Thank you. Operator: Our next question comes from the line of Ken Wong with Oppenheimer and Company. Your line is now open. Ken Wong: Thanks for taking my question. Great to see the amazing Base 44 outcome. Can you give us a sense for what accelerated that growth sequentially? And I realize you are still working through some of the details, would love to get a sense for what the Base ARR bookings look like in fiscal 2026 that is reflected in the free cash flow margin guide of low to mid twenties? Lior Shemesh: So, yes, we do see an acceleration and, in a way, also better than what we expected. I think that the fact that we have already gotten to $100,000,000 of ARR actually reflects that. And with regard to the assumptions about the bookings, we do not break it down between Wix.com Ltd. and Base 44. You know, we believe that it is already an organic product internally, and we are not relating it separately. You know, a big part of Base 44 growth is actually based on the synergy with Wix.com Ltd., and it is super important to understand it. Therefore, we are not going to provide separately between Base 44 and Wix.com Ltd., but we did mention the ARR and also the growth of the ARR that should give you a very good indication of what we assume with regard to that. We are very optimistic about it. Ken Wong: Fantastic. And then if I could have just a quick follow-up. I think the early guide was that you would see second-half acceleration of the core, specifically partners. It does seem like it maybe downticked a little bit. We would just love to get any color from you in terms of what you saw in Q4 on the core legacy base business? I mean, Wix.com Ltd. business. Sorry? Lior Shemesh: Yeah. Sure. We actually saw acceleration in Q4 from partners. I mean, we said from the very beginning of the year that we will see acceleration of core Wix.com Ltd. in the second half of the year. This is exactly what happened. The only thing that was not expected is some kind of modest softness in GPV. That was partially compensated by the fact that we see a better growth in terms of subscriptions. So I think that if you look at the second half of the year for Wix.com Ltd., we actually did see some acceleration also in the fourth quarter, mostly coming from our creative subscriptions. Ken Wong: Fantastic. Thank you very much. Operator: Thank you. Our next question comes from the line of Andrew Boone with Citizens. Your line is now open. Andrew Boone: Thanks so much for taking my questions. I am sorry, I am at the airport; there is a little bit of conversation going on. Can I ask, in terms of Base 44 and LTV, if I think about the payback period of one year, how do we think about that now that you are just having customers that are hitting that one-year mark? How are you guys estimating the LTV or the payback period using that framework as you guys define CAC for Base 44? And then I would love to ask, it looks like about $30,000,000 of acquisition cost in 2025. Can you guys ring-fence what that would look like for 2026 and how we should think about that within the free cash flow guide? Lior Shemesh: Thank you so much. Sure. So you are right. I mean, Base is a very young company, very young product. And, by the way, this is why we are very also conservative about the guidance. But right now, based on the information that we have, based on the history that we already have, we are looking at less than one year of tROI and this is how we manage the acquisition cost. I think that it is very important to mention right now that we are investing for growth. We are not necessarily trying to optimize our gross margin. We are optimizing dollar profit. And right now, we intend to invest in growth. And, by the way, you can see that also reflected in part of our free cash flow guidance. So with regard to the tROI, by the way, it is the same Wix.com Ltd. playbook that we have used for many, many years, and we are very good at it. With regard to the $30,000,000 acquisition cost in 2025, definitely, it is going to be higher in 2026 because we see the demand in the market and, as I mentioned before, we plan to pursue that. We plan to go and make sure that we will continue to get a lot of market share and expand this business. We see a great potential about this business. Andrew Boone: Thank you. Operator: Thank you. Our next question comes from the line of Deepak Mathivanan with Cantor Fitzgerald. Your line is now open. Deepak Mathivanan: Hey, guys. Thanks for taking this. So one on Harmony and then one on OpenAI partnership. First, you noted that with the early region Harmony, you are seeing improving conversion. What type of users are you seeing initially? Are you seeing perhaps more sophisticated tech users adding advanced capabilities to their websites with some of the more traditional SMBs? Is Harmony helping the capabilities of the websites become more at all in the early days? Can you talk a little bit about that? And then on the partnership with OpenAI for Apps SDK, in addition to just integrating for a new website creation when Wix.com Ltd. is invoked as an app, what are some of the other benefits in terms of how ChatGPT is navigating the website created by Wix.com Ltd. that you are potentially seeing? Any color you can add on how deeper this partnership can evolve over time. Thank you so much. Avishai Abrahami: Of course. So for the first part, we are pretty much seeing everybody using Harmony that was using Wix.com Ltd. before. So it is everything from personal websites to the hair salon website to large company and enterprises, so pretty much everybody. At this stage, Harmony does not support a database, but that will be added soon. So a bit less ticketing and websites, but nothing major. As for your other question, can you repeat it, please? It was breaking for me. Deepak Mathivanan: Sure. In addition to the apps partnership with OpenAI, do you see potential opportunities in terms of how Wix.com Ltd. websites are navigated and searched by OpenAI in the future, particularly ChatGPT? Avishai Abrahami: Well, yeah, of course. I think that it is a very big subject. I think that all we are seeing, and if you remember a year ago, I spoke about the fact that it is very unlikely that the LLM companies will build in back for the various services, and so they are probably not going to build all the e-commerce stuff and are not going to build databases for businesses. They are going to bring the layer of intelligence on top of that. And this is just one example where we allow Wix.com Ltd. users to build, with the intelligence that OpenAI provides, their website. Right? It is even more interesting because it is an intelligence which is talking to the intelligence of the site. I mean, this creates tremendous opportunities for the future. There is so much more we can do there. And because it is not APIs in the standard way, it is essentially two intelligences that are discussing and working together to give you a website. And that is a fantastic pattern that can be grown a lot. As for how OpenAI or any other LLM can read Wix.com Ltd. sites, we support pretty much everything. We support, of course, make text. If our customers choose so, we can make the text visible and easy to crawl and built in a way that is very easy for the LLMs to process. And we also have ways so we can give the LLMs more than just the content that we normally offer over the website, because LLMs like to read a lot of content, when humans tend to want to read less. So this is one option. We, of course, support the ICP on every Wix.com Ltd. website and pretty much every ad standard. I think that this is not a small step in the long roadmap of how we collaborate and create the new Internet, an agent Internet, but for humans. So you still need the visualizer, still need the designer, still need to buy products. However, you want to create the ability for it to work together for humans to have a better experience. Got it. Thanks, Deepak. Operator: Thank you. Our next question comes from the line of Trevor Young with Barclays. Your line is now open. Trevor Young: Great. Thanks. First question, just on premium subs. The decline persisting there even when layering in Base 44. I appreciate the commentary that growth in key markets like the U.S. was positive. That metric is still negative for the second year in a row. Why is that? And how much more churn is there among these lower-value subs? Nir Zohar: Hi, Trevor. It is me here. So I think, as a reminder, this is very much aligned with our strategy around bringing value to the cohorts and prioritizing, I think, cohort value over the subs. And it is something we have been pursuing for a few years now and have been talking about. And, again, throughout the year, we have seen more opportunities around geographies and areas where we can go higher-value subscription, which is why we prefer to go after those. So you can, obviously, see the lower net subs, but you are seeing the higher value that comes into the cohorts over time. Trevor Young: Thanks for that, Nir. And just a follow-up question. How should we think about the composition of growth between self creator and partner in 2026? Is partner now kind of like a low-twenties grower, or could that slow further? And then on self creator, clearly, that will pick up from the contribution from Base 44. But should we assume that the core Self Creator business remains stable given that Harmony is coming in at the same price points as the older Editor product? Thank you. Lior Shemesh: Yes. I think that for self creator, you should assume that it is stable. Actually, when you think about it, we do see some acceleration in terms of the new cohorts. I think that we already indicated that in the performance of Harmony. So it mostly has a very positive impact on self creators, especially for the new cohorts. Remember that most of the cohorts are already performing, meaning that most of the effects of Harmony is on new cohorts. So we are going to see that over time. With regard to partners, we have a lot of innovation that we are going to do in the near future. But also, Trevor, remember that Base 44 has a ton of interesting things for our partners that they can actually use for their customers, and it is more revenue stream for them. So we believe that although right now most of it is self creator-led, we believe that it is a great opportunity also for partners to use Base 44 in the future. Trevor Young: Thanks, Lior. Thank you. Operator: Our next question comes from the line of Mark Zegutovich with Benchmark. Your line is now open. Mark, do you want— Mark Zegutovich: Thank you. Question on Harmony, then I had a follow-up on your partnerships. But on Harmony, just curious what the early cohort KPIs that you are seeing there in terms of conversion, ARPU, attach rate, churn, relative to the traditional cohorts and how durable you see these KPIs across your geos? Lior Shemesh: So I will start with Harmony. As we mentioned, we see a very good performance of the new cohorts. We actually see a better conversion, faster monetization, and also higher ARPU. So we believe, we hope that this strong trend will continue. Again, I think that it is too early, but we feel very positive about the first reaction and performance of this product, which, in a way, we expected that, but it is always nice to see that. Mark Zegutovich: Got it. And then in terms of the LLM partnerships you have, OpenAI with Harmony and Anthropic via Base 44, curious how the economics work here and specifically the revenue split with these partners. And then within Wix.com Ltd. and ChatGPT, that framework there, what percent of new Harmony sign-ups do you expect to come here over time, and how do you manage a theoretically lower platform or take rate if these AI interfaces become your major distribution partners? Thank you. Nir Zohar: Hey. It is me. So, first of all, obviously, we cannot go into economics we have with different deals and agreements we have with the LLM partnerships. I think it is worthwhile mentioning that we actually have quite a few different kinds of cooperations and partnerships and joint ventures with each and every one of them on completely different areas of the wide range of infrastructure that Wix.com Ltd. has and supports. On the Wix.com Ltd. side, the Base 44 side, we have been doing research with them for many, many years now, so also the research teams are very tightly connected on the Anthropic side, on the Google side, on the OpenAI side, and others. I do not think, and currently we are not assuming, any kind of impact specifically on the Wix.com Ltd. inside GPT thing. So I cannot comment on changes that are being incurred because of it. If it becomes, over time, for some reason, a much more significant stream, then, obviously, we can address that. But for the time being, we do not expect that to be significant. Mark Zegutovich: Got it. Thank you. Operator: Thank you. Our last question comes from the line of Mike McGovern with Bank of America. Your line is now open. Mike McGovern: Hey. Thanks for taking my question. For Base 44, when you think about going from about $60,000,000 in ARR exiting the year to now over $100,000,000, or close to $100,000,000, in such a brief period of time, can you just double-click on what was able to accelerate that growth? I know they have added a couple key features like payments. Is there anything else in there? Nir Zohar: So I do not think we can point to one specific product release or change. And also, you have to remember that the cadence of improvement and innovation there is massive. So there is much more that is happening all the time. But it is a combination of the ability to increase the user base, the increase in incoming first and foremost because there is more and more brand awareness. We did a Super Bowl campaign, which definitely did not hurt and was very beneficial. And the brand awareness grows, and also, I would say, as the awareness to the category grows for more and more people, obviously, the demand is increasing. And then we match that demand with our stellar marketing team that has been working very diligently to ignite and push the Base 44 growth over time. And then I would say definitely the product is improving. And also, we keep on optimizing many, many parts of both the funnel, the product, the business model. We are basically taking so many things out of the Wix.com Ltd. playbook and everything we learned over the past two decades in how to run a successful subscription business, and we applied to Base 44 in the right relevant way. And I think you are seeing the results. Mike McGovern: Got it. And then when we think about tokens and free tokens for trial users within Base 44, much of that, when we think longer term, is somewhat self-inflicted in that S&M expense increase, and you could just lower that over time as Base 44 scales and awareness grows. Nir Zohar: Well, I think it is a great question, and we will keep on testing and understanding where the threshold should be. We can definitely find ways to move the threshold as time progresses. We do think that having the free tokens there and having a freemium model is great because you want to give people the opportunity to test-drive, to pilot the product and try it out. And we think that, obviously, the people who are gaining value from it will continue, and those are the people we will monetize immediately. The ones who do not may come back later on, and we have seen the same thing when we were building the Wix.com Ltd. freemium model. Whereas, again, Base 44 is a very young product, on the Wix.com Ltd. cohorts, we are seeing people who are converting who joined us ten or fifteen years ago. That is amazing. So, over time, building a big cohort base where people can experience your product, love your product, but if they do not necessarily need it right now, will come back to it later is a big benefit. But that being said, we definitely think there are more things we could do to hone the business model over time, and we will align that as we go forward. Mike McGovern: Thank you. Operator: Thank you. This concludes the question-and-answer session. Thank you all for your participation on today’s call. This does conclude the conference. You may now disconnect.
Operator: Greetings. Welcome to the Horizon Technology Finance Corporation Fourth Quarter 2025 Conference Call. At this time, all participants will be in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, note this conference is being recorded. I will now turn the conference over to Megan N. Bacon, Director of Investor Relations and Marketing. Megan, you may begin. Thank you, and welcome to Horizon Technology Finance Corporation's Fourth Quarter 2025 Conference Call. Representing the company today are Michael P. Balkin, Chief Executive Officer, Paul Seitz, Chief Investment Officer, and Daniel Raffaele Trolio, Chief Financial Officer. Megan N. Bacon: I would like to point out that the Q4 earnings press release and Form 10-Ks are available on the company's website at horizontechfinance.com. Before we begin our formal remarks, I need to remind everyone that during this conference call, the company will make certain forward-looking statements, including statements with regard to the future performance of the company. Words such as believes, expects, anticipates, intends, or similar expressions are used to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements, and some of these factors are detailed in the risk factor discussion in the company's filings with the Securities and Exchange Commission, including the company's Form 10-K for the year ended 12/31/2025. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to Horizon Technology Finance Corporation's CEO, Michael P. Balkin. Michael P. Balkin: Welcome everyone, and thank you for your interest in Horizon Technology Finance Corporation. Today, we will update you on our quarterly performance and the current operating environment. Paul Seitz, our Chief Investment Officer, will take us through recent business and portfolio developments as well as the current status of the venture lending market, and Daniel Raffaele Trolio, our Chief Financial Officer, will detail our operating performance and financial condition. We will then take questions. 2025 was a year of transformation for Horizon Technology Finance Corporation in many respects. While we navigated a number of micro and macro challenges throughout the year, we believe we have been able to successfully lay the groundwork for Horizon Technology Finance Corporation to succeed over the longer term. While the government shutdown in the fourth quarter led to our merger with MRCC being delayed into 2026, we are excited to be holding our special meeting shortly and hopefully closing the merger in the weeks ahead. As a reminder, closing the merger will significantly increase Horizon Technology Finance Corporation's capital available for investment in earning assets and allow it to take advantage of greater economies of scale in the combined vehicle. Additionally, Monroe Capital, which is the parent company of Horizon Technology Finance Management, will be continuing to provide ongoing support to the post-merger company. As a result, we expect you will see an even more coordinated and synergistic effort between Monroe and Horizon Technology Finance Corporation in 2026, which is already evidenced by Horizon Technology Finance Corporation's first quarter co-investment with Monroe in a venture loan to Osseo. With Horizon Technology Finance Corporation's larger capital base and Monroe's ability to co-invest, we expect to originate larger venture loans to cutting-edge early and later-stage venture capital and institutional-backed companies as well as small-cap public companies. The merger, working with Monroe and increasing our ability to fund larger transactions, will allow us to bring the Horizon Technology Finance Corporation platform to the next level. I could not be more excited for Horizon Technology Finance Corporation's future. Turning to our specific results for the quarter, we generated net investment income of $0.18 per share, while our NAV per share ended the year at $6.98. Based on our outlook, our undistributed spillover income, and the anticipated completion of our merger with MRCC, our Board declared regular monthly distributions of $0.06 per share payable in April, May, and June 2026. As we grow our portfolio in future quarters, it remains our goal to deliver NII at or above our declared distributions over time. We achieved a portfolio yield on debt investments of over 14% for the fourth quarter and nearly 16% for the full year 2025, once again at or near the top of the BDC industry. We redeemed our notes due in 2026 with the proceeds of our issuance of 7% notes due 2028. We finished the year with a committed and approved backlog of $154,000,000, and our portfolio returned to growth in the fourth quarter. And finally, we are closing attractive venture debt investments while our pipeline of venture debt opportunities continues to grow. As we begin 2026, we remain excited for our long-term future growth given our numerous strengths including our portfolio yield remains among the industry's highest, which we expect will lead to increased NII over time. Our liquidity and balance sheet are strong, and will further strengthen post-merger. We maintain a strong committed backlog, a robust pipeline, and with the backing of Monroe Capital, we are able to compete for larger, higher quality opportunities to make debt investments to growing companies, which will grow our loan portfolio. And finally, the demand for venture debt capital remains high, and we expect to be a key supplier of such capital in the coming year and beyond. Again, we appreciate your continued interest and support in the Horizon Technology Finance Corporation platform. I will now turn the call over to our Chief Investment Officer, Paul Seitz, to give you the details of our fourth quarter results and progress. Paul? Paul Seitz: Thanks, Mike, and good morning to everyone. As Mike noted, we are preparing for next week's special meeting which, if shareholders approve the proposal to issue more shares, will allow us to close the merger with MRCC. If approved and closed, Horizon Technology Finance Corporation will have the size and scale to originate larger venture loans to growing public and private small companies. It will enable us to grow our portfolio and NII over time. We remain very excited to do so. At the end of the year, our current portfolio stood at $647,000,000 as we returned to growth. In the fourth quarter, we funded nine debt investments totaling $103,000,000, including two refinancings of our existing investments. We also continue to make progress in building our pipeline, including larger venture loan opportunities in our target sectors. Two of our pipeline opportunities, HealthOS and Osseo, have already closed in 2026. In Q4, we increased our committed backlog by $35,000,000 from the end of Q3, which positions us well to further grow our portfolio in the quarters ahead. In Q1, we expect to further grow our portfolio driven by our current pipeline. Along with the venture loans which have already closed since the end of the year, we have been awarded two new venture loan transactions representing $82,500,000 in total commitments. It goes without saying that we will always be disciplined in originating and underwriting new loans. During the fourth quarter, we experienced one loan prepayment and two refinancings totaling $43,000,000 in prepaid principal and collected approximately $1,000,000 in warrant proceeds. Our onboarding debt investment yield of 12% during the fourth quarter remained consistent with our historic levels. We expect to continue to generate strong onboarding yields with our current pipeline of opportunities, which we believe will generate strong net investment income over time. Our debt portfolio yield of 14.3% for the quarter was once again among the highest-yielding debt portfolios in the BDC industry, despite the lower level of prepayments in the quarter. Our ability to generate industry-leading yields continues to be a testament to our venture lending strategy and our execution of such strategy across various market cycles and interest rate environments. As of December 31, we held warrants, equity, and other investments in 97 portfolio companies with a fair value of $51,000,000. Structuring investments with warrants and equity rights is a key component of our venture debt strategy and a potential generator of shareholder value. As mentioned, we ended the year with a committed and approved backlog of $154,000,000 compared to $119,000,000 at the end of the third quarter. We believe our pipeline of investment opportunities combined with our committed backlog, most of our funding commitments subject to companies achieving certain key milestones, provides a solid base to prudently grow our portfolio over time. As of year end, 87% of the fair value of our debt portfolio consisted of three- and four-rated debt investments, while 13% of the fair value of our portfolio was rated two or one, consistent with our levels at the end of the third quarter. We continue to collaborate with all of our portfolio companies in utilizing a variety of strategies to optimize returns and create future value. Turning to the venture capital environment, according to PitchBook, approximately $92,000,000,000 was invested in VC-backed companies in the fourth quarter, driven again in significant part by continued large investments in AI. At $339,000,000,000 of investment, 2025 was the largest year of investment since the record year of 2021, and a positive sign that investment activity has sufficiently recovered from 2023 and 2024. Exit markets remained open, though slow, in the fourth quarter with approximately $100,000,000,000 of exit value driven primarily by tech IPOs. While the M&A market appears to be healthy and the IPO market is open, given the performance of many second half 2025 IPOs, investors and bankers may be more circumspect in bringing companies public in 2026. The life science IPO market remains limited, creating more opportunities for venture loan originations, as evidenced by our loans to Peltos and Osseo. In terms of tech, there remains considerable optimism. We continue to be doing deep due diligence, particularly in AI and defense technology, to determine the best types of opportunities for future investments. We want to take a moment to make a few comments about AI. First, note Monroe Capital published a white paper on AI on February 6, which we believe summarizes our current view on AI and the tech sector. It is obvious to us that AI is changing the game, and AI-related risk has been a central focus in our underwriting process. We believe the claim that the days of enterprise software are over is inflating the risk, and at the same time, those who claim it is business as usual are underestimating the risk. Given Horizon Technology Finance Corporation and Monroe's track record in software investing, we are confident we can navigate this changing environment. As we progress through 2026, we believe venture debt remains a compelling option for companies to access capital with lower dilution to their investors as companies continue to grow and prepare for exits. This compelling option provides significant opportunities for Horizon Technology Finance Corporation to seek high-quality, well-sponsored tech and life science companies to add to its portfolio. To sum up, while 2025 was a challenging year, we have made significant strides to succeed in both 2026 and for the long term. If and when we close the merger, we will have an even greater capacity to target larger venture loans for both private and small-cap public companies. Additionally, we will continue to work diligently on optimizing outcomes with respect to our current portfolio. We are confident that we are on the right path to expand our portfolio over the longer term and remain a leader in the venture lending space. We expect this will lead to increased NII over time and ultimately additional value for shareholders. With that, I will now turn the call over to our Chief Financial Officer, Daniel Raffaele Trolio. Daniel Raffaele Trolio: Thanks, Paul. Good morning, everyone. There were a significant number of positive developments in 2025 for Horizon Technology Finance Corporation, namely our impending merger with Monroe Capital Corporation and our continued ability to strengthen our balance sheet despite the challenging environment. Our actions demonstrate our continued ability to opportunistically access the debt and equity markets. In addition, we continue to diligently work with all of our portfolio companies to optimize outcomes for our investments and improve our credit quality. As such, we believe we remain well positioned to grow our portfolio in the coming quarters and create additional value for our shareholders moving forward. To recap 2025, we further strengthened our capacity in May by increasing the commitment under our senior secured credit facility with Nuveen to $200,000,000. In September, we raised $40,000,000 of debt capital through the issuance of our 5.5% convertible notes due 2030 and used the proceeds to retire our Horizon Funding Trust asset-backed notes which had an interest rate of just over 7.5%. In December, we raised $57,500,000 of debt capital through the issuance of our 7% unsecured notes due 2028, and used the proceeds in January 2026 to redeem our 2026 public notes. Finally, we successfully and accretively raised over $14,000,000 through our ATM program during the year, further demonstrating our continued ability to opportunistically access the equity markets. As of December 31, we had $189,000,000 in available liquidity consisting of $143,000,000 in cash and $46,000,000 in funds available to be drawn under our existing credit facilities. We currently have no borrowings outstanding under our $150,000,000 KeyBank credit facility, $181,000,000 outstanding on our $250,000,000 New York Life credit facility, and $90,000,000 outstanding on our $200,000,000 Nuveen credit facility, leaving us with ample capacity to grow our portfolio of debt investments. Our debt-to-equity ratio stood at 1.5 to 1 as of December 31, and netting out cash on our balance sheet, our net leverage was 1.05 to 1, below our target leverage. Based on our cash position and our borrowing capacity on our credit facilities, our potential new investment capacity as of December 31 was $472,000,000. Turning to our operating results, for the fourth quarter, we earned investment income of $21,000,000 compared to $24,000,000 in the prior-year period, primarily due to lower interest income on our debt investment portfolio. Our debt investment portfolio on a net cost basis stood at $602,000,000 as of December 31, up 3% compared to $585,000,000 as of 09/30/2025. For 2025, we achieved onboarding yields of 12% compared to 12.2% achieved in 2024. Our loan portfolio yield was 14.3% for the fourth quarter compared to 14.9% for last year's fourth quarter. Total expenses for the quarter were $12,500,000 compared to $12,800,000 in 2024. Our interest expense of $8,000,000 was $200,000 lower than last year's fourth quarter, while our base management fee was $2,900,000, $200,000 lower than the prior-year period, due to our smaller portfolio. We received no performance-based incentive fees in the fourth quarter as we continue to defer incentive fees otherwise earned by our advisor under our incentive fee cap deferral mechanism. While we expect that the adviser will return to earning incentive fees, as a reminder, our adviser has agreed to waive up to $4,000,000 of fees, or $1,000,000 a quarter, if the merger is completed. Net investment income for the fourth quarter of 2025 was $0.18 per share, compared to $0.32 per share in 2024 and $0.27 per share for 2023. Prepayment activity and the income that is typically associated with prepayments was lower than our historical experience. We continue to expect prepayment activity will remain modest in the near term. For the full year 2025, we generated NII of $1.50 per share. The company's undistributed spillover income as of December 31 was $0.65 per share. Based upon our outlook, undistributed spillover income, and the anticipated completion of our merger with MRCC, our Board declared monthly distributions of $0.06 per share for April, May, and June 2026. We anticipate that the size of our portfolio, our expectations for growth, and our predictive pricing strategy will enable us to generate NII that covers our distribution over time. To summarize our portfolio activities for the fourth quarter, new originations totaled $103,000,000, which were offset by $13,000,000 in scheduled principal payments and $50,000,000 in principal prepayments, refinancings, and partial paydowns. We ended the year with a total investment portfolio of $647,000,000. At December 31, the portfolio consisted of debt in 38 companies with an aggregate fair value of $596,000,000 and a portfolio of warrant, equity, and other investments in 97 companies with an aggregate fair value of $51,000,000. Our NAV as of December 31 was $6.98 per share compared to $7.12 as of 09/30/2025, and $8.43 as of 12/31/2024. The $0.14 reduction in NAV on a quarterly basis was primarily due to our paid distributions exceeding our NII. As we have consistently noted, nearly 100% of the outstanding principal amount of our debt investments bear interest at floating rates. Of those investments, approximately 71% are already at their interest rate floors, which should mitigate the impact of decreasing interest rates. This concludes our opening remarks. We will be happy to take questions you may have at this time. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question at this time, please press 1 on your telephone keypad. 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 who are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from the line of Michael Brown with UBS. Please proceed with your questions. Cory Johnson: Hi. This is Cory Johnson on for Mike. I was just wondering, can you maybe go into a little bit more about how you decided on the new dividend level, you know, kind of what was the decision-making around that? Daniel Raffaele Trolio: Yeah. Good morning, Cory. As we say every quarter, we review our distribution level with the Board. We look at the current portfolio and the run rate. We look at the spillover. We look at our pipeline and our growth opportunities and determine based on that a level that we think is sustainable and one we can cover over time. Cory Johnson: Great. And then also just a quick follow-up. If I heard this correctly, did you say the percent at contractual floor is 71%? Was that? Daniel Raffaele Trolio: That is correct. Yep. Cory Johnson: Okay. Alright. Thank you. Operator: As a reminder, to ask a question, you may press 1 on your telephone keypad. At this time, the next question is from the line of Paul Johnson with KBW. Please proceed with your questions. Paul Johnson: Yes. Good morning. Thank you for taking my questions. I was just wondering if you could just kind of help me understand here a little bit more just the earnings slide here, quarter over quarter. Because, you know, the portfolio yield of 14% with a, you know, roughly 10% ROE just something does not really fit there, and I am just wondering, you know, aside, I guess, the lower prepayment income, I mean, what kind of drove, I guess, the lower interest income? I guess, was that the driver during the quarter? Because you are not earning incentive fees. You know, there was net portfolio growth in the quarter. You know, the portfolio was roughly flat in terms of loss, so it does not seem like there was much depreciation in there. I was just wondering if we can just kind of understand maybe the earnings bridge a little bit and if maybe we could expect that this is maybe somewhat of a trough, and we could potentially see a little bit more. Daniel Raffaele Trolio: Yeah. So, Paul, all those things you stated were correct. You know, quarter over quarter, we grew the portfolio. You are right, the net realized and unrealized for the quarter was flat. And so there is, you know, positive movement in the quarter. Most of the fundings were towards the end of the quarter, so that had some impact. And, really, the major impact when you are looking quarter over quarter was the prepayment and the activity that occurred each quarter. We had some significant prepayments and refinancing on a couple of names in Q3. And then in Q4, we really had one prepayment, a couple of opportunistic refinancings that we did with our own portfolio companies. That had a lower income level than we typically receive on prepayments. And so when you add up the timing and the lower prepayment rates and the income related to that, that kind of connects the difference between the NII. Paul Johnson: Okay. Got it. So if I am just thinking about the $102,000,000 of origination this quarter, that includes a number of refinancing within the portfolio where, I guess, the return is structurally lower somehow. Daniel Raffaele Trolio: So, yes. It included a couple refinancings. They are positive in the event where we accelerate fee income on the previously outstanding debt investments, and we are able to rewrite with a full, new, fully loaded fee new debt investment. It is just lower income related to a prepayment where we will receive a prepayment fee, but with refinancing, that is one of the fees that we do not get. Paul Johnson: Okay. Got it. Thank you for that. And then my other question was just on the opportunity for public company financing. Are those opportunities where you are refinancing or taking out existing debt or is it more of an opportunity where you are providing new capital to those companies? Paul Seitz: Yeah. Hey, Paul. Thanks for the question. It can be a combination of all of the above. But I think the opportunities we are seeing in the market, and there are a significant number, is that many of these companies do not even realize there is an opportunity to use debt capital like ours where they cannot go to a bank because maybe they are not profitable today, or what have you. So in many cases, they will issue equity which is much more dilutive. So what we are offering out to these companies is a more flexible capital structure that is less dilutive and gives the company an opportunity to have some growth capital here. So we believe this is a very fertile market for us. And again, the opportunity set is fairly wide. Paul Johnson: Okay. That is great. Thank you very much. That is all for me. Paul Seitz: You bet. Operator: Our next question is from the line of Sean Paul Adams with B. Riley. Sean Paul Adams: Hey, guys. Good morning. It looks like you guys had an aggregate decline in nonaccruals quarter over quarter. Can you just provide a little bit more color on the status of those three remaining portfolio companies on nonaccrual? Daniel Raffaele Trolio: Yeah. You know, what we say each quarter, we are working each one of those nonaccruals and they are all at various levels. We are trying to maximize the recoveries with each one of them. And as you pointed out, we were able to improve the percentage of nonaccruals quarter over quarter. Besides that, we cannot really get into too much detail, as these are private companies. Sean Paul Adams: Got it. Appreciate it. Well, on the actual from the four to the three, can you provide a little bit more detail on that one that came off? Daniel Raffaele Trolio: Again, it is a private company, where we cannot, you know, besides giving names. It was just a deal that we were working on, an acquisition last quarter that was completed this quarter, and we received the amount of our fair value. And so there is no NAV impact. Sean Paul Adams: Got it. Appreciate it. Operator: Thank you. The next question is from the line of Christopher Nolan with Ladenburg Thalmann. Please proceed with your questions. Christopher Nolan: Hi. What was the driver of the realized loss, and was that from Metallic Therapeutics? Daniel Raffaele Trolio: TALIC was a percentage of that, but TALIC was a small position. And, again, the realized losses were realized this quarter at the fair value that we had them going into the quarter. As you can see, Q4 net realized and unrealized was slightly positive. Christopher Nolan: No. Totally understand that. I am just trying to understand what was the driver of the realized loss. Daniel Raffaele Trolio: Yeah. No. TALIC was a small piece of that, and we usually do not give, you know, detail on these private companies and how we have worked out each one of them. Christopher Nolan: Okay. In the earnings release, it highlighted in subsequent events you guys are redeeming some of your 04/2026 notes. How much of that has been redeemed, please? Daniel Raffaele Trolio: The full amount was redeemed in January. Christopher Nolan: Great. And then I guess on the new dividend, am I correct that when the deal was announced, management is indicating that they are going to try to support a $0.33 dividend through 2026, or am I mistaken there? Daniel Raffaele Trolio: So support it in which way? We have agreed to have the adviser waive $4,000,000 of fees for the four quarters following the close, at $1,000,000 a quarter. Outside of that, then we have the repurchase program that we have in place that will support the shares. Christopher Nolan: Great. Final question. Should we look at the new dividend as a reasonable earnings run rate for the company? And does that assume elevated nonaccruals? Daniel Raffaele Trolio: So, as we say, you know, we review the distribution level with our Board. We set it at a level that we believe we are going to cover over time. And so, that is what we did. Operator: Next question is a follow-up from the line of Paul Johnson of KBW. Please proceed with your question. Paul Johnson: Can I just clarify, so on the convertible conversion this quarter, what was the conversion rate there? And I guess, is there any kind of dilutive impact in the first quarter from that? Daniel Raffaele Trolio: The conversions for the converts that we have done are all at NAV. They are required to be converted at NAV. And so in the fourth quarter, the $8.5 million that has been converted, and anytime it does convert, it will be at the stated NAV at that time. There is no dilution. Paul Johnson: Okay. Got it. Thank you very much. Operator: Thank you. At this time, we have reached the end of our question and answer session. I will hand the floor back to Mike for closing remarks. Michael P. Balkin: Thank you all for joining us this morning. We appreciate your continued interest and support in Horizon Technology Finance Corporation, and we look forward to speaking with you again soon. This will conclude our call. Operator: Ladies and gentlemen, thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.
Operator: Good morning, ladies and gentlemen, and welcome to the conference call to discuss Holley Inc.'s fourth quarter and full year 2025 earnings results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session; instructions for asking questions will be provided at that time. We ask that participants limit themselves to one question and one related follow-up during the Q&A period. Please be advised reproduction of this call in whole or in part is not permitted without written authorization of Holley Inc. And as a reminder, this call is being recorded and will be made available for future playback. I would now like to turn the call over to your host, Anthony Rozmus with Investor Relations. Anthony, please go ahead. Anthony Rozmus: Good morning and welcome to Holley Inc.'s fourth quarter and full year 2025 earnings conference call. On the call with me today are President and Chief Executive Officer, Matthew Stevenson, and Chief Financial Officer, Jesse Weaver. This webcast and the presentation materials, including non-GAAP reconciliations, are available on our Investor Relations website. Our discussion today includes forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties including the ones described in our SEC filings. This morning, we will review our financial results for the fourth quarter and full year 2025 and discuss guidance for the full year 2026. At the conclusion of the prepared remarks, we will open the line for questions. I will now turn the call over to our CEO, Matthew Stevenson. Matthew Stevenson: Thank you, Anthony, and good morning to everyone joining us. As we reflect on 2025, I am pleased to report that our disciplined approach delivered strong fourth quarter results in a year of meaningful progress for Holley Inc. This was a pivotal year, and not because of one standout quarter but because of sustained performance across all four quarters. For the first time since 2021, we delivered full year net sales growth while achieving adjusted EBITDA margins above 20%, highlighting the earnings capability of our business model. Our core business generated net sales growth in every quarter of 2025, culminating in double-digit growth in the fourth quarter, our strongest performance of the year and clear evidence of accelerating momentum as we enter 2026. When we refer to core, we are excluding divested operations and strategically rationalized product lines. Four straight quarters of core growth demonstrate that the underlying business is performing and that our strategy is producing measurable results. Throughout the year, we operated with focus and rigor, driving volume-led growth, sharpening pricing execution, strengthening operational capabilities, and maintaining financial discipline. Full year net sales growth was driven primarily by volume, complemented by pricing, a balanced mix that reflects solid underlying demand for our leading brands. In the fourth quarter, we saw growth across B2B and direct-to-consumer channels, underscoring the resilience of our omni-channel platform and the strength of our relationships with distributors, e-tailers, marketplaces, installers, and our own digital ecosystem. This strategy centered on serving enthusiasts wherever they choose to engage drove growth across all four divisions and 22 key brands in 2025. Just as importantly, we reinforced our financial foundation. We generated meaningful free cash flow and ended the year with net leverage below the target we set out at the 2025, demonstrating balance sheet discipline and strong financial control. Consistent growth, expanding margins, strong cash generation, and leverage reduction all achieved simultaneously. That combination reflects disciplined, focused performance. Let us turn to slide five which outlines how the sustained performance translated into measurable financial results for both the fourth quarter and full year 2025. As noted, for the first time since 2021, we delivered both full year net sales growth and adjusted EBITDA margins above 20%, a clear indication that our multiyear transformation is taking hold. Core net sales grew in every quarter of 2025, accelerating to 13.5% growth in Q4, reflecting solid demand and stronger commercial execution. For the full year, net sales totaled $613.5 million. Core net sales increased 6.6%, driven primarily by 3.8% volume growth with an additional 2.8% contribution from pricing, a healthy mix that speaks to the quality of our growth. Performance was broad-based, with growth across all divisions, 22 key brands, and in both the B2B and direct-to-consumer channels, demonstrating the strength and diversification of our portfolio. Our strategic initiatives continue to drive tangible results. Revenue programs contributed meaningfully in 2025, while cost and efficiency actions delivered approximately $20 million in savings through purchasing discipline, tariff mitigation, operational improvements, and productivity efforts. We generated $34.2 million of free cash flow for the year, including $3.9 million in the fourth quarter, an improvement year over year even as we continue investing in the business. We also prepaid an additional $10 million of debt in Q4, bringing total prepayments to $100 million since September 2023. We ended the year below 3.8 times leverage, achieving our stated target and enhancing our financial flexibility. The takeaway from this slide is alignment. Revenue growth, margin expansion, cost discipline, cash generation, and leverage reduction all progressed together, reinforcing the durability of our operating model. Turning to slide six, let us take a closer look at the fourth quarter results. Net sales were $155.4 million, increasing 10.9% year over year with 13.5% core growth, our strongest core growth performance of 2025. Gross margin expanded to 46.8%, up 120 basis points versus the prior year, driven by pricing discipline, favorable mix, and continued operational improvements across sourcing and manufacturing. Adjusted EBITDA margin improved to 21.4%, up 56 basis points year over year, with adjusted EBITDA increasing to $33.2 million from $29.1 million last year. We delivered net income of $6.3 million in the fourth quarter, representing a meaningful year over year improvement. Innovation remains central to our strategy. During the quarter, we launched new products from all four divisions, including multiple Snell 2025-certified motorsports helmets such as the popular Stilo ST6, new APR power packages for Volkswagen, Audi, and Porsche platforms, and plug-and-play Edge modules for late model GM trucks and SUVs enabling consistent full-time V8 performance. New product launches contributed approximately $23 million in new product sales for the full year, underscoring the ongoing vitality of our portfolio. Operationally, we maintained an average in-stock rate of approximately 91% across our top 2,500 SKUs, supporting performance through disciplined inventory management and strong product availability. In addition, we completed approximately $20 million in combined purchasing savings, tariff mitigation, and operational improvements during 2025, structural actions that strengthen the business for the long term. The fourth quarter is also an important engagement period for our brands. We participated in both SEMA and PRI, two of the industry's most significant events, further deepening relationships with enthusiasts, installers, and distribution partners. Taken together, our fourth quarter results reflect strong commercial performance, expanding margins, operational discipline, and continued investment in innovation and brand engagement. Turning to slide seven, you can see how fourth quarter core growth translated across each division. American Performance increased 10% year over year, with several lifestyle and power brands delivering double-digit growth. Truck and Off-Road grew 5.4%, led by Baer Brakes as new truck-focused offerings gained traction, 21.5%, and capped a solid year for the division. Safety and Racing faced earlier headwinds as we navigated the October transition to Snell 2025 Motorsport Helmet Certification. Following the launch, performance accelerated driven by new helmets and continued strength in motorcycle safety. The division closed the quarter up 13.3%. Importantly, every division contributed to fourth quarter growth, underscoring the breadth of our portfolio. We have structured the organization around focused divisional leadership with clear accountability, supported by shared capabilities across multiple centers of excellence. Fourth quarter results demonstrate the model is working as intended, driving divisional performance while maintaining enterprise alignment. Let us move next to slide eight, where we revisit the strategic framework that continues to guide our execution and support long-term growth. At the foundation of our approach are three clear priorities: fueling our teammates, strengthening customer relationships, and accelerating profitable growth. These are not abstract concepts. They shape how we allocate capital, how we measure performance, and how we prioritize initiatives across the organization. Throughout 2025, this framework provided clarity and consistency in decision making; it aligned our teams, sharpened our focus, and ensured the progress you have seen across revenue, margins, cash flow, and leverage was intentional, not incidental. As we walk through the strategic initiative tracker, you will see how these priorities translate into measurable actions and tangible results. Turning to slide nine, the strategic initiative tracker quantifies the impact of our execution in the fourth quarter and across the full year 2025. Under Trailblazing Trusted Partner, we generated revenue of $14.7 million in Q4 and $43.9 million for the year, driven by improvements in product data quality and deeper collaboration with key customers. Under Premier Consumer Journey, Q4 contributed $4.1 million, bringing the full year total to $12.5 million. Third-party marketplaces grew 24% in 2025, led by strong Amazon performance. Under Product Innovation and Portfolio Management, we delivered $10.8 million in Q4 and $40.3 million for the full year. Approximately $23 million came from our new product launches, with an additional $16 million driven by focused portfolio management across our B2B network. Under Global Expansion and New Markets, we contributed $1.2 million in Q4 and $3.7 million for the year, reflecting continued progress in Mexico and expansion within powersports. Under Fund the Growth, we generated $7 million in Q4 and approximately $20 million for the full year through purchasing savings, tariff mitigation, and operational efficiencies. On I am in a great place to work, employee engagement improved by four points while revenue per employee reached approximately $460,000, exceeding our 2025 objective and reinforcing our focus on culture and productivity. Collectively, these initiatives delivered meaningful revenue contribution and significant structural cost savings in 2025, clear evidence that our strategic framework is translating into measurable financial results. Turning to slide 10, our strategic framework and eight key focus areas continue to guide execution and long-term value creation. This slide outlines several of the priority initiatives that will drive performance in 2026. Under Premier Consumer Journey, we are continuing to optimize our product launch process to accelerate adoption and improve speed to market. At the same time, we are enhancing digital merchandising and expanding our presence across key third-party marketplaces, ensuring we meet enthusiasts wherever they choose to shop. Within Trailblazing Trusted Partner, we are deepening relationships with our largest B2B customers while applying the same structured data-driven approach to mid-sized accounts. We are also expanding the reach of our direct sales organization and advancing meaningful growth initiatives with national retailers to further strengthen our brick-and-mortar presence. Product innovation remains central to our strategy. In 2026, we will expand our Performance Chemicals portfolio, including new vehicle care products, while continuing to grow packaged solutions and modern truck through partnerships serving both OEM dealers and consumers. We are applying a similar approach in Euro and Import, working closely with leading dealers alongside our direct-to-consumer efforts. International expansion continues to represent opportunity as we introduce more of our portfolio to enthusiasts globally. Powersports also remains a growth priority, supported by deeper collaboration with major distributors to increase awareness and adoption of our UTV and safety offerings. While remaining committed to our deleveraging objectives, we will selectively evaluate strategic M&A opportunities that strengthen priority growth categories and unlock operational synergies. Supporting these growth initiatives are focused operational actions eliminating non-value-added costs, reducing tariff exposure, driving strategic sourcing savings, improving facility efficiency, and optimizing our manufacturing footprint. In 2026, we will also begin the early stages of implementing a new ERP and warehouse management systems to support scalable, long-term operational excellence. Collectively, these initiatives position us to deliver over 4% revenue growth and more than $15 million in cost synergies this year. Now with that, I will turn it over to Jesse to review our fourth quarter and full year 2025 financial results in more detail, and provide additional perspective on our outlook for 2026. Jesse? Jesse Weaver: Thank you, Matt, and good morning, everyone. Before diving into the details, I want to reinforce Matt's earlier comments that we closed 2025 having achieved several meaningful financial milestones. We delivered four consecutive quarters of core business growth, and returned to full year reported net sales growth for the first time since 2021, driven by the focused execution of our strategy across both our D2C and B2B commercial engines. Importantly, the quality of this growth reflects the transformation of our company across virtually every department, creating a durable growth engine and a level of operational excellence that simply did not exist before. We also strengthened the balance sheet, completing $25 million of debt prepayments in 2025 and surpassing $100 million in total prepayments since September 2023. And importantly, we achieved full year adjusted EBITDA margins above 20% for the first time since 2021. Taken together, these milestones reflect tangible progress against the strategy. And with that context, I would like to walk through our progress in more detail, starting with an update on progress against our 2025 financial priorities on slide 12. Our efforts in 2025 remained centered on reinforcing the core strengths of our business, restoring historical profitability, improving working capital management, and deleveraging the balance sheet. On profitability, the team delivered $10 million in operational savings during the year, achieving the top end of our stated target. These results were driven by optimized staffing models and sustained efficiency gains across our manufacturing and distribution network. We also advanced facility consolidation and disciplined network-wide cost actions that further strengthened the structural profitability of the business and enhanced our operating foundation. Turning to working capital, excluding tariff impacts on product costs, we closed the year with a $9 million improvement, including $4.5 million realized in the fourth quarter alone. While inventory levels did not fully reach our original reduction targets for the year, the outcome reflects deliberate operational decisions aimed at improving supply chain efficiency. These actions temporarily elevated inventory that represents important steps towards building a more resilient and consistent operating model. We also made meaningful progress in strengthening the balance sheet. During the fourth quarter, we prepaid $10 million of debt, bringing total payments for the year to $25 million and over $100 million since 2023. As a result of our transformation focused on restoring profitability, improving working capital discipline, and executing targeted debt reduction, we reduced leverage from a peak of 5.67 times in 2023 to 3.75 times at year end in 2025, a significant improvement in the strength and flexibility of our capital structure. On slide 13, I will review our key financial metrics for the fourth quarter. Net sales for the fourth quarter increased 10.9% to $155.4 million compared to $140.1 million in the prior year period. Growth was driven by a healthy balance of price and volume, contributing approximately 5.6% and 5.4%, respectively. It is worth noting that the way the Christmas and New Year holidays fell this year provided an estimated two to three percentage points of benefit from incremental in-off days from our major partners. Even adjusting for that timing impact, growth was solid and reflects continued underlying momentum in the business. This marks our second consecutive quarter of reported net sales growth, which is the first sustained growth we have delivered since 2023. Excluding approximately $3 million of prior year sales related to divestitures and strategic product rationalization, core sales increased approximately 13.5%, representing our fourth consecutive quarter of consistent growth in the business coming from a combination of price and volume, contributing approximately 5.7% and 7.8%, respectively, in the quarter. We are particularly encouraged that this growth was broad-based across both B2C and B2B channels and throughout all divisions, reflecting the continued impact of our commercial transformation initiatives. Gross profit for the quarter was $72.8 million, an increase of 14% versus the prior year. Gross margin reached 46.8%, expanding 120 basis points year over year. Margin improvement was supported by the flow-through of pricing actions as well as operational gains across our facilities, lower excess inventory write-downs, and continued enhancements in product quality reflected in reduced warranty claims. SG&A, inclusive of R&D, was $47.9 million compared to $39.4 million in the same period last year. The year-over-year change reflects the comparison against reduced payroll expense in the prior year due to furlough actions, lower incentive compensation accruals in 2024, and increased 2025 investment in SOX readiness, cybersecurity, and tariff mitigation initiatives. Net income for the quarter was $6.3 million, representing an improvement of $44.1 million versus the prior year period when we had a combined goodwill and trademark impairment of approximately $49 million. Adjusted net income was $4.6 million compared to $12.6 million last year. Adjusted EBITDA for the fourth quarter was $33.2 million, up from $29.1 million in the prior year. Adjusted EBITDA margin reached 21.4%, expanding 56 basis points year over year. On slide 14, I highlight continued positive cash generation with fourth quarter free cash flow of $3.9 million compared to $1.8 million in the prior year period. For fiscal 2025, free cash flow totaled $34.2 million, marking our third consecutive year of positive cash generation, and this performance reflects strong execution and disciplined financial management across the organization. On slide 15, we continue to reduce our covenant net leverage at the end of the fourth quarter to 3.75 times, versus 3.91 times in Q3 and 4.17 times a year ago. Our leverage continued to decline as a result of stronger operating performance and disciplined cash management. We achieved our goal of being below 4.0 times by year end, which reflects continued progress in strengthening our capital structure. We ended the quarter with $37 million of cash on hand and no outstanding balance on our revolver. Our liquidity position remains solid, and we remain committed to maintaining a conservative balance sheet posture as we continue to execute on our broader financial priorities. Now turning to financial results for full year 2025. Net sales for fiscal 2025 were $613.5 million, representing 1.9% growth compared to fiscal 2024, making this the first full year of reported top line growth since 2021 and a testament to the organization’s focused execution against the strategic initiatives targeted at driving the commercial engine of the business. Excluding approximately $26.8 million of divestiture-related and strategic product rationalization sales from the prior year period, underlying core growth was approximately 6.6%, coming through a combination of price and volume, contributing 2.8% and 3.8%, respectively. Once again, business momentum was broad-based across divisions and channels, reflecting continued traction from our commercial transformation in both B2B and D2C. Gross profit for the year was $266.2 million, an increase of $27.7 million versus the prior year. Gross margin reached 43.4%, an expansion of 378 basis points year over year. Margin performance reflects a combination of pricing benefits and ongoing operational progress, specifically facility-level efficiencies, lower excess inventory adjustments, and improved product quality evidenced by reduced warranty claims. Year-over-year improvement also reflects the absence of the $8.2 million in strategic product rationalization charge recorded in 2024, which had negatively impacted gross margin and EBITDA in the prior year. SG&A, inclusive of R&D, was $165 million for the year compared to $150.9 million last year. Year-over-year changes largely reflected comparison against lower payroll expense in 2024 related to furlough actions, reduced 2024 incentive compensation accruals, increased investment in external sales support, and higher 2025 investment in SOX compliance, cybersecurity, and tariff mitigation initiatives. Net income for the year was $19.2 million, representing an improvement of $42.4 million versus the year end of 2024. Adjusted net income was $21.2 million compared to $24.8 million last year. Adjusted EBITDA for the year ended 2025 was $124 million, up $13.5 million from 2024. Adjusted EBITDA margin was 20.2%, an increase of 191 basis points year over year, and delivering on our commitment of achieving at least 20% EBITDA on an annual basis since the transformation began upon Matt’s appointment in June 2023. Turning to slide 17, where we will walk through guidance for 2026. As we enter the year, the consumer backdrop remains uneven in this increasingly K-shaped economy. Middle- and lower-income households continue to face pressure from elevated prices and tighter credit, while higher-income consumers remain willing to spend. While overall sentiment is still subdued, recent improvements and stable spending trends suggest conditions are gradually stabilizing as we move into the year. We are incorporating these dynamics into our 2026 guidance and outlook, while also recognizing that significant winter weather events impacted consumer spending as we began the year. For 2026 revenue, we are expecting a range of $625 million to $655 million, which implies approximately 4% to 4.5% growth at the midpoint of the range. Our adjusted EBITDA guidance is $127 million to $137 million, representing approximately 6.5% growth at the midpoint. As it relates to capital expenditures, we expect to invest between $15 million and $20 million this year, modestly above our historical range. This increase reflects targeted investments in facility consolidations to drive structural efficiencies, ERP implementation to enhance operational scalability, and incremental product development to support our next-generation EFI platform. We view this as a temporarily elevated level of investment tied to high-return initiatives that strengthen the operating model and support long-term growth, not a structural shift in the capital intensity of the business. In support of this outlook, the financial priorities that have underpinned our transformation remain firmly in place for 2026. On slide 18, you will see the specific objectives aligned to each of these priorities. First, as it relates to profitability through operational efficiency, we are targeting an incremental $5 million to $7 million in savings through continued network optimization, facility consolidation, and disciplined cost actions. Second, improving working capital remains a key focus area. Through enhanced forecasting, tighter safety stock management, supplier negotiation on minimum order quantities, and continued refinement of our SIOP processes, we are targeting $10 million to $15 million in inventory reduction by year end. And third, the combination of earnings growth, working capital improvement, and disciplined capital allocation is expected to further strengthen the balance sheet, positioning us to exit the year below 3.5 times leverage and continue progressing toward our longer-term objective of approximately three times in 2027. Taken together, these priorities reflect a continued commitment to profitable growth, stronger cash generation, and a more resilient capital structure. As we conclude fiscal 2025, we are encouraged by the progress we have made and the foundation we have built for the year ahead. Our focus remains centered on reinforcing our balance sheet, driving sustainable free cash flow, and allocating capital with discipline, all of which support our long-term growth trajectory heading into 2026 and beyond. We are proud of the team for closing the year on a strong note and continuing progress in 2026. This concludes our prepared remarks. We will now open for questions. Operator: Certainly. We will now be conducting a question-and-answer session. As a reminder, a confirmation tone will indicate your line is in the question queue. Our first question is coming from Brian McNamara from Canaccord Genuity. Your line is now live. Brian McNamara: Hey, good morning, guys. Congrats on the strong year and the progress on your initiatives here. So market growth in 2025, can you guys quantify that and what your expectation is for 2026? I know I see a plus 4.3 at the midpoint for guidance versus your historical kind of mid single-digit market growth number? Just trying to assess relative conservatism here relative to market growth. Great. And then secondly, on pricing, 2025 volumes were better than we would have thought. Can you remind us of the timing and frequency of pricing you take in a typical year and how much pricing growth is contemplated in guidance? And is that 8.5 pricing you took last June kind of still working through the P&L? Thanks, guys. Yes, I will see. Jesse Weaver: Yes. I would say market growth last year, I mean, obviously we did pretty strong. And core growth of 6.6%. I want to say based on our intel from the market, out-the-door sales were probably in the 3% to 4% range. So we continued to take share throughout the year and I think that partnership with distribution partners is really paying off there. I would say for next year, Brian, our plan would indicate that the share gains continue, maybe not to the pace that we saw last year, but it is implicit in what we have guided to right now. That. Typically, the pricing cadence is middle of year. We did, obviously, in Q4, sorry, the end of Q2, take some price in the 8.75% and then the Q3 call, we talked about how it was not all completely flowing through. Obviously, we picked up more of that flow-through in Q4. And this year, we are recognizing the market probably does not have a stomach for the level of pricing that we took last year to kind of support the tariff impacts that we are all experiencing. We did take a modest price increase at the very beginning of the year, but I would suspect that that is going to be slightly offset with continued sort of partnership with distribution partners and selective channel margin enhancements to continue to drive growth. So not a lot anticipated there. Or price increase middle of the year at least at this point. Matthew Stevenson: Thanks, Brian. Operator: Thank you. Next question today is coming from Christian Carlino from JPMorgan. Your line is now live. Hi, good morning. Thanks for taking our question and congrats on a strong year. Could you talk about how you are thinking about elasticity as you annualize the impact of tariffs into the second half? Less apparent right now seeing that eight to nine points part because of B2B growing faster. But compared to your typical low single-digit price increases, as that normalizes over the year, to what extent are you assuming an improvement in unit trends to offset this as maybe real wages theoretically tick up later in the year? And just any broader comments on maybe cadence of the year would be helpful. Jesse Weaver: Yes, I would say, Christian, obviously, we talked about the strategy around the pricing increase to make sure we were able to maintain margin and free cash flow. And you can see in our guide, that is playing out. To your question around volume impacts, continuing to see on the out-the-door sales continued growth. I would say there has been in some select areas some volume implications there. But the team is maniacally focused on taking surgical pricing actions to address those things as they come up. You take a shot here and then you kind of refine along the way. I think as we talked about just in the previous question, we do anticipate some volume increases here to achieve our guidance. In terms of the actual cadence of the sales throughout the year, I think as we have talked about in the past, in a perfectly normal year, which no years we all know is perfectly normal, it would be about 52%, 48%. I think that is what we hit last year. Then just depending on inventory levels and how the weather is doing in a particular period, that could shift a bit. And I think you probably heard in my remarks Q1, with the January weather event and then a double whammy with early February weather event in the Northeast, I would say this year is probably going to shape up more like a 51/49 with more of the sales kind of shifting to the back half, but not to veer too far off from that. Christian Carlino: Got it. That is really helpful. And I guess, could you, to the extent you can, quantify the impact from the weather so far this year? And then my question was going to be about are distributors ordering any more aggressively in anticipation of stronger demand during tax refund season or would you expect them to chase if they need to? And, I guess, what is your assessment of both channel inventory levels in terms of their need to potentially chase and then your own inventory levels in terms of your ability to fulfill that if they end up needing to chase inventory? Thanks. Matthew Stevenson: Yeah. Sheila. You want to go for it? Yes. Christian, generally speaking, what we are seeing, to Jesse's point, is the out-the-doors are pretty healthy. With that said though, there were some weeks there in late January and early February that impacted all of us, including our distribution partners, quite significantly as people were bearing out from either ice or snow. And so if you take those out of the equation, like I said, the out-the-doors are pretty healthy. And then the month of March, just for the seasonality of the business, the month of March is a big month and at the same time we run a promotional event or marketing calendar to capture that demand as the season starts to pick up. Now in terms of any out of the ordinary stock-ups or anything for tax refund season or anything, we are not seeing anything out of the ordinary there. And then generally speaking, inventory levels, taking into consideration those weeks that were quite slow due to the weather conditions, they are a little heavier. But that would be the only real indication of impact on the inventory levels. Christian Carlino: Got it. Thank you very much. Best of luck. Operator: Thank you. Next question is coming from Bret Jordan from Jefferies. Your line is now live. Bret Jordan: Hey, good morning, guys. Hey, Brett. Good morning. You commented on seeing some recent consumer improvement. I guess when you think about the four segments of the business, are any of those more cyclical than others? Is Euro and Import more of a luxury buyer who is less sensitive? I guess, when you look across the portfolio, are there areas that are brighter than others? And then within chemicals, I guess it looks like a sort of an expansion year for that. Could you talk about the TAM and sort of maybe the margin profile of that category and has it become a fifth segment? Or is this sort of just overlaid across the existing business lines? Matthew Stevenson: Yes, Bret. And, you know, I think in Jesse's prepared remarks, she talked about that K economy. We see it in our portfolio. In the Euro business, you saw the robust growth there that we had in 2025, significant double digits there on the core up over 20%. And so those buyers of Euro cars tend to be more affluent. We are also seeing some of those patterns in our safety business around our Stilo brand, which is ultra premium. You almost consider them luxury helmets in the motorsports segment. We are seeing phenomenal growth on that segment as well. But generally speaking, things are still generally healthy across the portfolio per numbers that we provided there for 2025, but you are definitely seeing some spikes driven by more of that K economy phenomenon with a more affluent customer. Yes. We have actually bucketed it in our American Performance vertical under our accessories group, just because the kind of the legacy nature of some of our existing portfolio focuses there. But on chemicals, they are great margin products for us. And we just saw natural expansion opportunities based on our enthusiast consumer base. So we recently introduced the NOS Octane Booster, which is now getting placement in retailers, which is very exciting. And then as we get into 2026, in the back half of the year, we will introduce a new car care line, which with the reach we have with millions and millions of enthusiasts just makes complete sense. So we are really excited about that. And eventually, we will have a strategy; it takes a little longer to get into national retailers and such, but eventually that is the goal to get that on shelves as well as third-party marketplaces and our own e-commerce platform. Bret Jordan: Okay. Great. Thank you. Matthew Stevenson: Yes. Thanks, Bret. Operator: Thank you. Our next question is coming from Joe Feldman from Telsey Advisory Group. Your line is now live. Joseph Feldman: Hey, guys. Good morning and congrats on the quarter and the year. Wanted to ask, can you share a little more color on the ERP and the WMS system? Maybe just remind us what is the plan for that this year, like, how that gets implemented, because, you know, occasionally, that can be a little bumpy and I know you guys said you have more work to do there. Just curious if you could share more thought on that. Okay. That is helpful. Thanks. And then with that, I know everybody asks about AI these days, so I figured I will ask too. But are you incorporating or will the new systems allow you to incorporate AI to maybe for better design or better, you know, demand visibility, things like that. Got it. Thank you. And then maybe just one quick one for Jesse. Well, I do not know it is quick, but can you share a little more color? You talked about, I guess, some operating expense savings. Presumably, does that mean we will see that line versus gross margin? Like, maybe you can share a little color on the collection for 2026, how those should shape up? Matthew Stevenson: Yes, appreciate the question. Joe, this year, it is mostly just preparation alignment that also drives some capital expense in Jesse's outlook. Really for the implementation go-live more in early 2027. But right now, the team, of course, has a lot of work to be done prior to going live, and that investment will happen. But in terms of any potential business impact, our job, of course, is to make sure that does not happen, but that would not even be on the table here for 2026 regardless. Yes. I mean, the team is already using AI in various facets. But, yes, the more modern ERP will allow other API plug-ins and AI to continue to evolve our competencies around that. So that is one of the many benefits that we see in the new ERP implementation. Jesse Weaver: You are asking, Joe, where will the $5 million to $7 million in operation savings come in and the timing of that? Yeah. I mean, obviously, we do not break those out in our guidance, but it would be pretty much like the operating savings line is also kind of helping with mitigating some of any pressure that would be residual from tariff mitigation actions as well. So you will see most of that just flow through the gross margin line. And then on the SG&A side, it is just more the margin expansion there is just through leverage on fixed cost. Joseph Feldman: Got it. Okay. Thank you, guys. Good luck with this quarter and year. Operator: Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over for any further or closing comments. Matthew Stevenson: All right. Thank you, Kevin. Slide 20 underscores a compelling investment narrative for Holley Inc. We operate in a nearly $40 billion passion-driven market where loyalty runs deep and performance matters. With a portfolio of iconic, innovation-led brands, Holley Inc. holds a clear leadership position. In addition, we have a proven track record of disciplined M&A and value creation through integration. Looking ahead, we see meaningful opportunity to expand our digital ecosystem, enhancing how enthusiasts and distribution partners engage with our brands and further strengthening our competitive advantage. Our long-term commitments are clear: deliver mid single-digit organic top line growth, maintain 40% gross margins, maintain at least 20% adjusted EBITDA margins, generate sustainable free cash flow, and pursue disciplined, value-creating acquisitions. In closing, 2025 was defined by consistency and discipline. We delivered core growth every quarter, expanded margins, generated meaningful free cash flow, and reduced leverage below our target, all while continuing to invest in innovation, customer relationships, and operational excellence. We enter 2026 with a stronger foundation, greater financial flexibility, and a clear focus on disciplined, profitable growth. Thank you to our team members, our passionate enthusiasts, and our longstanding distribution partners for the commitment that drives our collective success. We thank you for your participation today and have a great day. Thank you. Operator: Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good morning, and welcome to The Eastern Company Fourth Quarter Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode, and the floor will be open for questions following the presentation. If anyone should require operator assistance during this conference, please note this conference is being recorded. Marianne Barr, Treasurer and Corporate Secretary at The Eastern Company, the floor is yours. Marianne Barr: Good morning, and thank you, everyone, for joining us this morning for a review of The Eastern Company's results for the fourth quarter and full year 2025. With me on the call are Ryan Schroeder, Chief Executive Officer, and Nicholas Vlahos, Chief Financial Officer. The company issued its earnings press release yesterday after market close. If anyone has not yet seen the release, please visit the Investors Information section of the company's website at www.easterncompany.com, where you will find the release under Financial News. Please note that some of the information you will hear during today's call will consist of forward-looking statements about the company's future financial performance and business prospects, including, without limitation, statements regarding revenue, gross margins, operating expenses, other income and expenses, taxes, and business outlook. These forward-looking statements are subject to risks and uncertainties that could cause actual results or trends to differ significantly from those projected in these forward-looking statements. We undertake no obligation to review or update any forward-looking statements to reflect events or circumstances that occur after the call. For more information regarding these risks and uncertainties, please refer to risk factors discussed in our SEC filings, including Form 10-Ks filed with the SEC on 03/03/2026, for the fiscal year 2025. In addition, during today's call, we will discuss non-GAAP financial measures that we believe are useful supplemental measures of The Eastern Company's performance. These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from, GAAP results. A reconciliation of each of the non-GAAP measures discussed during today's call to the most directly comparable GAAP measure can be found in the earnings press release. I will now turn the call over to Ryan Schroeder. Ryan Schroeder: Thanks, Marianne. 2025 is a year defined by two things: challenging end markets, particularly heavy truck and automotive, and significant operational progress that positions us well for the future. Our primary end markets remained under pressure throughout most of the year, though we began to see early signs of stabilization in November and December. At the same time, we were navigating tariff impacts and broader macro uncertainties. As a result, our financial performance reflects both the difficult environment and the actions we took to respond decisively. For the full year, revenue was $249 million, down 9% year over year. Adjusted EBITDA was $19.4 million, representing a 7.8% margin, compared to $26.3 million, or a 9.6% margin last year. Importantly, the performance represents roughly a 7% margin on reduced operating scale, which we view as a commendable outcome given the revenue pressure. Encouragingly, the fourth quarter showed sequential improvement. Revenue increased 4% from the third quarter, rising from $55.3 million to $57.5 million. Adjusted EBITDA improved by $1.1 million sequentially. That reflects a 50% margin on the incremental revenue in Q3, clear evidence that our cost actions are working and flowing through to the bottom line as volumes stabilize. While we could not control when the markets would turn, we made sure that 2025 would be the year we prepared The Eastern Company to win going forward. Here is what we did. In 2025, we made the decisive structural changes to The Eastern Company's cost base, portfolio, and operating model. As a result, The Eastern Company is leaner, more focused, and better positioned with a solid foundation for its next chapter of growth. First, we lowered our cost structure. We reduced our cost base, generating approximately $4 million in annual savings from restructuring and footprint optimization initiatives. At the same time, we strengthened leadership. We hired Zach Gorney to lead Everhard, promoted Emilio Ruffalo to lead Big 3, and added two strong commercial leaders to drive growth in both of those businesses. Second, we streamlined the portfolio. We divested the underperforming Centralia Mold division of Big 3, a business that was a drag on earnings. This allowed us to concentrate capital and management attention on our high-conviction core businesses. Third, we addressed tariffs head on. We neutralized approximately $10 million of tariff exposure, offsetting substantially all of the impact through pricing actions and supply chain cost reductions. We are also building more flexible and resilient supply chains, giving customers multiple sourcing options, both domestic and offshore, so we can pivot as the trade environment evolves. Fourth, we invested in future revenue. We executed a commercial realignment to strengthen our go-to-market capabilities going into 2026, expanding new customer relationships and targeting new end markets. We maintained our investment in product development throughout 2025, with output that will become increasingly visible in 2026 and beyond. Notably, our Asia business grew 25% year over year following the deployment of dedicated sales resources in the region, a geography where we see opportunity for incremental profitable growth going into the future. Fifth, we strengthened the balance sheet. We enhanced financial flexibility by refinancing our credit facility. The incremental capital supports organic growth, provides a buffer against macro uncertainty, and positions us to act decisively when the right M&A opportunity arises. Finally, we demonstrated capital discipline. We reduced debt by $8.7 million, returned $2.7 million to shareholders, and repurchased approximately 153,000 shares, or about 2.5% of shares outstanding. Our operating model demonstrated resilience. A 9% revenue decline resulted in only a 20-basis-point gross margin erosion in the fourth quarter. Sequential financial improvement and momentum in our sales funnel suggest the third quarter represented the trough. To summarize, we exited 2025 with a leaner cost structure, a more efficient operational footprint, a stronger balance sheet, and a leadership team that is action-oriented and focused on results. 2025 was the year we built the foundation. I will now turn the call over to Nicholas Vlahos to review our fourth quarter and full year financial results in more detail. Nick, over to you. Nicholas Vlahos: Thanks, Ryan. Before I review the company financial results from continuing operations for the fourth quarter and full year 2025, please note that fiscal year 2025 was a 53-week year with the fourth quarter spanning 14 weeks compared to 13 weeks in the prior-year period. Beginning with net sales, in the fourth quarter of 2025, net sales decreased 13.7% to $57.5 million from $66.7 million in the fourth quarter of 2024. This was due to lower shipments of returnable transport packaging products and truck mirror assemblies. For the full year 2025, net sales decreased 9% to $249 million from $272.8 million in 2024, also due to lower shipments of returnable transport packaging products and truck mirror assemblies. Our backlog as of 01/03/2026 was $81.1 million, a decrease of 10%, or about $48.0 million, from $89.1 million as of 12/28/2024. The decrease was primarily driven by lower orders for returnable transport packaging products. Gross margin as a percentage of sales for the fourth quarter of 2025 was 22.8% compared to 23.0% in the fourth quarter of 2024. This decrease was primarily due to higher material costs on lower sales volume. For the full year 2025, gross margin as a percentage of sales was 22.9% compared to 24.7% in 2024. The decline was attributable to the same factors. As a percentage of net sales, product development costs were 1.6% in the fourth quarter of 2025 compared to 1.7% in the prior period. For the full year 2025 and 2024, product development costs as a percentage of net sales were 1.6% and 1.8%, respectively. Our investment in new products remains disciplined relative to the revenue base during the year. Selling and administrative expenses in the fourth quarter of 2025 decreased $1.2 million, or 10.5%, compared to the fourth quarter of 2024. The decrease was driven by lower commissions, legal fees, and personnel-related costs. For the full year, selling and administrative expenses were essentially flat versus 2024, though 2025 included $2.5 million of restructuring charges, primarily related to the reduction in force in the second quarter and facility cost actions. Operating profit for the fourth quarter of 2025 was $2.2 million, or 3.8% of net sales, compared to $3.0 million, or 4.5% of net sales, in the prior-year period. Other income and expense for the fourth quarter of 2025 was $200,000 of expense compared to $300,000 of expense in the prior period. For the full year 2025, other expense was $500,000 compared to $400,000 of expense in 2024, an increase of $100,000. The increase was driven primarily by a one-time $500,000 write-off of unamortized deferred financing fees associated with the termination of our prior TD Bank agreement, recorded in the fourth quarter of 2025 in connection with our refinancing into a new $100 million five-year revolving credit facility with Citizens Bank. Partially offsetting this charge was a recovery of employment tax credits during the year. Interest expense in the fourth quarter of 2025 was $700,000, unchanged from the same period in the prior year. For the full year, interest expense was $2.7 million, essentially flat with $2.7 million recorded in fiscal 2024. Net income from continuing operations for the fourth quarter of 2025 was $1.2 million, or $0.19 per diluted share, compared to $1.6 million, or $0.26 per diluted share, for the same period in 2024. For the full year 2025, net income from continuing operations decreased 57% to $6.0 million, or $0.98 per diluted share, compared to $13.2 million, or $2.13 per diluted share, for 2024. Turning to our balance sheet, during the fourth quarter, we refinanced our credit facility. In October, we entered into a new $100 million five-year revolving credit facility with Citizens Bank, which supports our long-term growth and enhances our financial flexibility. As of 03/03/2026, we had $66.0 million of availability under the Citizens facility. At the end of Q4 2025, our senior net leverage ratio was 1.35 to 1, compared to 1.64 to 1 at the end of the third quarter of 2025 and 1.23 to 1 at the end of 2024. During the year, we returned $2.7 million to shareholders through dividends. We also repurchased approximately 153,000 shares, or about $3.7 million, of common stock under the repurchase program authorized by our board in April 2025. That completes my financial review. I will now turn the call back to Ryan Schroeder. Ryan Schroeder: Thanks, Nick. So turning to 2026, after spending 2025 doing the structural work, we entered the year with a leaner cost base, a strengthening commercial pipeline, and end market conditions that, while still evolving, are moving in the right direction. The leading indicators we monitor most closely, including order flow, particularly in November and December, OEM production signals, and the depth and quality of our opportunity funnel, are pointing in a more favorable direction than they were a year ago. We remain disciplined in our outlook, but we are cautiously optimistic that we are entering a more constructive demand environment. M&A continues to be an important component of our long-term value creation strategy. We are actively evaluating opportunities that meet our strategic and financial criteria. The pipeline of potential transactions has grown meaningfully over the past year. That said, our approach remains highly disciplined. We are focused on targets that are strategically aligned and immediately accretive. We will update shareholders when there is something meaningful to share. Before opening the call for questions, I would like to briefly address the board and governance matters. In 2025, we welcomed Chan Galvado to our board. Chan brings significant experience that is highly relevant to our end markets and long-term strategy. Earlier this week, we announced that Charlie Henry and Mike Marty will not stand for reelection. I want to sincerely thank both Charlie and Mike for their years of service and meaningful contributions to The Eastern Company. We also used this opportunity to thoughtfully reduce the size of the board, improving agility and decision-making effectiveness. In parallel, we conducted a careful review of our corporate bylaws and implemented several updates designed to enhance shareholder alignment and governance transparency. We will provide additional details in our upcoming proxy filing. With that, operator, please open the line for questions. Operator: Thank you very much. We will now be conducting a question-and-answer session. If you would like to ask a question, a confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Just a reminder, it is star 1 if you would like to ask a question. I am not seeing any questions in the queue at the moment. There are no questions at the moment, Ryan. Ryan Schroeder: Thank you, Jenny, and thank you, everyone, for joining us today. To close, 2025 was the year that we built the foundation. We took decisive action to lower costs, strengthen our portfolio, reinforce our balance sheet, and invest for future growth, all while navigating a challenging market environment. As we enter 2026, we do so as a leaner, more focused, and more resilient organization. Early indicators are encouraging. Our commercial pipeline is strengthening, and our operating model has demonstrated its ability to perform across cycles. We remain disciplined, focused on execution, and committed to delivering long-term value for our shareholders. With that, I would like to say thank you for your continued support in The Eastern Company, and we look forward to updating you next quarter. Operator: Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Stevanato Group Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Lisa Miles, Chief Communications Officer. Please go ahead, madam. Lisa Miles: Good morning, and thank you for joining us. With me today is Franco Stevanato, Chairman and Chief Executive Officer; and Marco Dal Lago, Chief Financial Officer. You can find a presentation to accompany today's results on the Investor Relations page of our website, which can be located under the Financial Results tab. As a reminder, some statements being made today will be forward-looking in nature and are only predictions. Actual events and results may differ materially as a result of the risks we face, including those discussed in Item 3D entitled Risk Factors in the company's most recent annual report on Form 20-F filed with the Securities and Exchange Commission. Please read our safe harbor statement included in the front of the presentation and in today's press release. The company does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law. Today's presentation may contain non-GAAP financial information. Management uses this information in its internal analyses and believes this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. For a reconciliation of these non-GAAP measures please see the company's most recent earnings press release. And with that, I will now hand the call over to Franco Stevanato. Franco Stevanato: Thank you, Lisa, and thanks for joining us. Today, we will review our 2025 performance, address current market dynamics, discuss our fourth quarter results and provide 2026 guidance. We finished fiscal 2025 with another solid quarter that led to positive full year performance and positive momentum as we start 2026. For the fiscal 2025, total company revenue increased by 9% at constant currency rates and 7% on a reported basis compared with 2024. This growth was consistent with our expectations and reflects the execution of our strategic priorities throughout 2025. The biopharmaceutical and Diagnostic Solutions segment delivered another solid year with double-digit top line growth for fiscal 2025. This offset the expected revenue decline from the Engineering segment. Revenue growth in the BDS segment was driven primarily by strong market demand for high-value solutions, which increased 29% in fiscal 2025, and represented 46% of the total company revenue for the year. The strong performance in High Value Solutions was also the main driver for margin expansion in the year with gross profit margin rising by 160 basis points compared to 2024. These results demonstrate the company's ability to execute against our strategic priorities and to grow our innovative premium offerings positioning the business for sustained success in the evolving market environment. At the same time, as we continue to move up the value chain, we are pivoting away from certain non-high-value product categories that we consider not aligned with our strategy, and we may consider additional action in the future. Since our IPO in 2021, we remain committed to meeting customer demand for high-value solutions, which meant investing in key projects in Fishers, Indiana and Latin Italy to spend capacity for high-value syringes. In 2025, the Nexa syringe was our fastest-growing product driven primarily by growth from GLP1s. This should come as no surprise as the syringe is by far the most prevalent format for GLP-1s in United States today. There's no doubt that we've been successful in winning our fair share of the GLP-1 market. This success is rooted in our long history of being a trusted partner to customers. Our global footprint, which provides supply chain security and the quality of our products, which have a characteristic that resonate with our customers. For example, our Nexa platform feature high mechanical resistance. It can be produced at scale, and it is ideally suited for an auto-injector. In fiscal 2025, our revenue from GLP-1s accounted for approximately 19% to 20% of total company revenue. growing more than 50% compared with 2024. We currently expect that the GLP-1s will serve as a meaningful tailwind as special demand continues to grow in the years to come. With the launch of the Wegovy pill, patients now have more options for GLP treatments. The general consensus among industry experts and our customers is that injectables are expected to be the preferred format for treatment lost while our GLPs will enable market expansion and support patients with specific needs. We also anticipate the market for GLP-1 will continue to evolve over the next decade, primarily driven by the different commercial and supply chain strategies among the originators, biosimilar launches, the expected expansion of treatment indications and next-generation [ incretin ] still in clinical phases. We are already seeing some of these dynamics play out in the market today. As we noted on prior calls, recent demand for cartridges has outpaced our prior expectation, and we are expanding our capacity to satisfy demand. We see this trend aligned with the introduction of new pen injector formats with various treatment plants as well as the expected growth of biosimilars, especially in APAC. We currently expect that we will continue to benefit from GLPs in the future. We also believe that the market will continue to evolve and mature. We see a pipeline of opportunities where we are well positioned with a deep expertise, a global footprint and a comprehensive portfolio of products from primary packaging to our platform drug delivery devices. While GLPs represented the largest top line growth contributor in 2025, we continue to increase our participation in other injectable biologics with our premium best-in-class high-value product portfolio. In fiscal 2025, we realized a 40% increase in the number of customers ordering premium ranges, both Alba and Nexa platforms for biologic application that were unrelated to GLP-1s. These 2 customer projects are expected to play an important role in the future growth. We continue to expand our participation in the broader set of biological applications with new customer programs, unlocking incremental value and setting the path for sustainable growth in the coming decade. As a result, in fiscal 2025, Biologics represented 41% BDS revenues, up from 34% in 2024. Third, to the next slide for an update on our strategic growth investments. In Latina, the past year was dedicated to the installation and production of syringe capacity and customer validations all of which will continue in 2026. The next phase in Latina is devoted to increasing capacity for EZ-fill cartridges to meet rising global demand. Turning to Fishers throughout 2025, the teams were focused on core activities, including the ongoing line installations. In parallel, customer validations and audits continue and in 2025 we doubled the number of customers that are now validated in features. Looking ahead, line installations and customer validation activities are expected to continue all year. We continue to advance the build-out for contract manufacturing activities in support of a couple of large device programs for a key U.S. customer the build-out is going well. Nearly all of the injection molding machines are installed, and we started producing components for qualification activities. The first phase of new clean room is completed. We still expect the commercial activities to begin at the end of 2026 or early 2027 for the first device program. Please turn to the next slide for a status update on the Engineering segment. Over the past 12 months, we've made meaningful progress advancing our optimization efforts and improving execution. In 2025, we rightsize operations streamline processes and increase standardization across delivery teams. We reinforce our project management office, driving improvements in project planning, process harmonization, contract management and customer engagement. We also consolidated offices in Denmark, move the visual inspection activities to Italy and acquired a new location in Bologna to access strong technical talent. This section have contributed to double-digit growth in site acceptance rates, an important KPI. Nevertheless, our 2026 guidance assumes a revenue decrease from the Engineering segment due to lower order intake in the prior months. While our efforts in 2025 were focused on execution we recently stepped up our sales and marketing efforts, which has led to a more robust opportunity pipeline. Converting opportunities into new firm orders has been slower than we anticipated. But our pipeline is especially strong in pharmaceutical visual inspection, underpinned by innovation and superior technology. All in all, getting the business back to historical performance is taking longer than we expected and we're working to best position the segment for long-term success. In summary, 2025 was a successful year, characterized by robust top line growth, a favorable mix and ongoing margin expansion. Double-digit growth in our BDA segment more than offset the expected revenue reduction in engineering and enable us to navigate the favorable effects from foreign currency. High-value solutions were the primary driver of revenue growth and margin expansion, reflecting our ability to scale our main investments and perform in full alignment with the strategic direction set at the time of our IPO. We expect that GLPs will remain an important tailwinds, having anchor our position as a market leader in high-value products. Importantly, our best product set enable us to achieve strategic position beyond GLPs, allowing us to participate in the broader global market for injectable biologics and biosimilars. Looking ahead, we will continue to execute our strategic priorities, including aligning growth investments with customer demand trends. I will hand the call over to Marco Marco Dal Lago: Thanks, Franco. Before I begin, I want to clarify that all comparisons refer to year-over-year changes unless otherwise specified. Starting on Page 10. We ended fiscal 2025 with positive financial results for the fourth quarter. Total company revenue grew 7% at constant currency and 5% on a reported basis to $346.5 million for the fourth quarter of 2025. Foreign currency translation was a headwind throughout fiscal 2025 with an higher impact in the second half of 2025 due to a weaker U.S. dollar. Our BDS segment delivered another solid fourth quarter with revenue increasing 13% at the constant currency and 10% on a reported basis. This offset the expected 23% revenue decline in the Engineering segment. For the fourth quarter of 2025, revenue from high-value solutions grew 31% to EUR 171 million, represented approximately 49% of total company revenue in the quarter. The strong performance was driven by continued growth in our premium performance Nexa syringes and, to a lesser extent, EZ-fill cartridges. For the fourth quarter of 2025, gross profit margin increased 120 basis points to 30.9%. This was mostly driven by 3 factors: first, a favorable mix of high-value solutions. Second, the year-over-year improvements in Latin and Fishers as we scale production in our new facilities. But together, they remain dilutive to the corporate margin. And third, the improved market landscape for vials which led to higher vial production and better utilization. This was partially offset by tariffs and unfavorable effects of foreign currency. For the fourth quarter of 2025, operating profit margin was 20.2%. As a result, net profit totaled EUR 47.6 million and diluted earnings per share were EUR 0.17. On an adjusted basis, net profit was EUR 49.8 million and adjusted diluted EPS were EUR 0.18 for the fourth quarter of 2025. Adjusted EBITDA increased 7% to EUR 97.7 million, and adjusted EBITDA margin increased 70 basis points to 28.2%. Let's review segment results on Page 11. The BDS segment finished strong with double-digit growth in the fourth quarter. Revenue grew 13% at the constant currency and 10% on a reported basis to EUR 307.1 million. Segment growth was led by a 31% revenue increase from high-value solutions to EUR 171 million, which accounted for 56% of segment revenue. This offset the 9% revenue reduction in other containment and delivery solutions as we prioritize the production of premium products. For the fourth quarter of 2025, gross profit margin for the BDS segment improved 50 basis points to 31.6% led by a favorable mix, operational gains in our new facilities as we scale commercial production and an improved vial market. These positive trends were offset by the unfavorable impact of tariffs and foreign currency translation. This resulted in an operating profit margin of 23.8% which improved 50 basis points in the fourth quarter of 2025. The BDS segment continues to perform well, reflecting the successful execution of our strategic priorities and a strong position to capitalize on future opportunities. For the fourth quarter of 2025, revenue from the Engineering segment decreased 23% to EUR 39.4 million due to lower revenue in glass conversion and assembly, offsetting growth in pharmaceutical visual inspection. For the fourth quarter of 2025, segment gross profit margin decreased to 15.8%. And as a result, operating profit margin was 9.1%. Ongoing efforts under our business optimization plan have yielded the improvements in execution and meaningful operational progress. However, the unfavorable portfolio mix coupled with low order intake continues to put pressure on margins. The team has been very focused on securing new orders which will help refresh and reposition the portfolio for long-term success. Please turn to the next slide for a review of balance sheet and cash flow items. We ended the year with cash and cash equivalents of EUR 130.6 million and net debt of EUR 337.7 million. With our current cash on hand, cash generated from operations, available credit lines and our ability to access additional financing we believe, we have available liquidity to fund our strategic and operational priorities over the next 12 months. For the full year 2025, capital expenditures totaled EUR 294.9 million, of which approximately 89% were deployed for growth projects to support customer demand. These investments are related to capacity expansion for high-value solutions and supporting future DDS commercial activities. For the full year 2025, cash from operating activities totaled EUR 286.1 million. Cash used in the purchase of property, plant, equipment and intangible assets was EUR 275.1 million. The combination of increased cash flow from operations and lower CapEx and drive a significant year-over-year improvement in free cash flow, and we exited fiscal 2025 with positive free cash flow of EUR 18.4 million for the full year. Lastly, turn to the next slide, we are establishing 2026 guidance. We expect revenue in the range of EUR 1.260 billion to EUR 1.290 billion. On a constant currency basis, revenue will range between EUR 1.278 and EUR 1.308 billion. Adjusted EBITDA in the range of EUR 331.8 million to EUR 346.9 million, and adjusted diluted EPS in the range of EUR 0.59 to EUR 0.63. Our 2026 guidance considers headwinds and tailwinds, and we have assumed the following factors: revenue will be stronger in the second half of 2022 and compared with the first half. The effects from foreign currency translation are expected to be a headwind of approximately EUR 18 million for fiscal 2026 with an impact of approximately EUR 10 million in Q1. As a result, in the first quarter, we expect mid-single-digit revenue growth on a reported basis compared to last year based on the midpoint of our guide. For the full year, the BDS segment is expected to grow on a reported basis, high single to low double digits and double digits on a constant currency rate. Engineering is expected to decline by mid-single digit to low double digits. For fiscal 2026 High-value solutions are expected to range between 47% to 48% of total company revenue. And in 2026, we are assuming a tax rate of approximately 26.8%. And finally, capital expenditures and free cash flow. We have assumed CapEx in the range of EUR 270 million to EUR 290 million before customer contributions and prepayments. Net of contributions and payments is expected to range between EUR 240 million and EUR 260 million. Regarding free cash flow in 2026 we are modeling breakeven to positive free cash flow of approximately EUR 20 million. I will hand the call back to Franco. Franco Stevanato: Thank you, Marco. In closing, we remain focused on executing our key priorities supported by strong business fundamentals. We operate in attractive growing end markets. with favorable secular tailwinds, innovation across the industry continues to advance patient care, and we remain mission-critical to the delivery of biologics supporting new therapeutic areas, expanding global access to treatments and improving standards of care. Demand for innovative drug products remain strong. There are more than 9,000 injectable assets in the global drug pipeline undergoing clinical evaluation or being registered and more than 60% are biologics. We believe we are well positioned to serve this demand through our integrated value proposition, differentiate the portfolio and long-standing commitment to science and technology-driven innovation. Biologics, our fast and growing segment is expected to remain a key driver of top line growth and margin expansion as we continue to move up the value chain. At the same time, we're making meaningful operational progress, and we expect to increasingly benefit from new capacity coming online, productivity gains and improvements within our Engineering segment. Together, we expect that these efforts position us to deliver long-term sustainable growth and shareholder value. Operator, we are ready for questions. Operator: Thank you. This is the Chorus Call conference operator. [Operator Instructions] First question is from Michael Ryskin, Bank of America. Michael Ryskin: Great. Congrats on the strong end of the year. I want to start on sort of parsing out your guide for 2026. I appreciate you provided a lot of color in the deck and in your prepared remarks. I'm curious if you would comment on your expectations for GLP-1s in 2026. I think you said for 2025, it was up to 19% to 20% of revenues and grew 50% year-over-year. So at the midpoint of your guide for 2026, what is your assumption for GLP-1 growth next year? And I have a follow-up. Franco Stevanato: Thank you, Franco speaking. Revenue from the GLP1s accounted in 2025, approximately between 19% to 20% and we have delivered our growth in 2020 compared to the '24 about 50%. If you do an estimation and look at our outlook of 2026, we think that will be a growth in the range of mid-teens. Michael Ryskin: Mid-teens. Okay. That's great. And then a follow-up on the Engineering segment. I mean, on the one hand, encouraging, it sounds like you're making a lot of progress in terms of the operational plan, the optimization moving to the facilities around rightsizing operations. All of that is encouraging, but then the guide for engineering for 2026 and the color on low order intake that's a disappointing update. So on the order intake side, we just love to -- this is engineering specific, I would just love to get a better sense of what you think is behind that. Is that some weakness in the market? Is it as simple as you guys were so focused on getting the operational things right, that you missed a few opportunities? Just get a sense of why that suddenly turned bad in the second half of 2025 and how quickly can you regain the momentum on the commercial side of things? Franco Stevanato: So first of all, the pharmaceutical market, in particular, biologics, is also robust in terms of demand for new machines that need for spectrum machine, assembly technology is very robust today. Most of the biologic market is it will move to injection and when there is also self administration and it's going to require a new special machine. So today, the order intake and the pipeline that we have in the engineering is healthy, is [indiscernible] what is the big -- nice KPI is the fact that there are repetitive orders with our historical bigger clients. So what was the same point is the fact that the sales cycle because of technicality of this line is taking a little bit longer than was expected, translating water instead to maybe receive the order, the confirmation of the order in January, February can be easily postponed a few months. This is going to -- there is why we took some more prudent approach. Another important element that we'll have to underline in 2025, the big focus of the engineering division is really to make a strong operational progress in terms of management and execution and the good KPI that we can translate to share with you is the number of site accepted tests that increased more than double in 2025 compared to 2024. This is extremely important. At the end of again, the company '25 focus our attention to execute and deliver this line. Now we are entering the new ways to new orders, repetitive orders with our clients. This take a little bit more muted what are our expectation. But the outlook in the medium term is strong growth in the engineering division. Operator: Next question is from Patrick Donnelly, Citi. Patrick Donnelly: Maybe one on the high-value solutions side, it seems like you guys are guiding 47%, 48% of revenue for that segment. Can you just talk about where we are on kind of the utilization capacity side? I know you guys are ramping Fishers you're renting Latina in terms of utilization. Are you still capacity constrained with the high value side? Just wondering where we are on the capacity side versus the demand? Are there areas where demand is outpacing capacity would be helpful just to talk through that piece? Franco Stevanato: So capacity in Stevanato Group in particular for prefilled syringes through the format of Nexa syringes, Alba syringes and cartridges to play a role in 2025, practically, we run approximately full capacity intervenor. And also this is translating the ramping up that we're doing in Latin in particular with good success, the ramp-up that we are doing in Fisher. So also in 2026, we will follow this nice positive momentum where the demand is robust, practically in all our high-value product, but the capacity have played a role '25. It will play a role also in 2026 for Stevanato Group. Patrick Donnelly: That's helpful. And then maybe one for Mark. Just on the margin expansion here. Again, obviously, the mix helps to degree within the high-value stuff that is helpful here with GLP growth. Can you just talk about the moving pieces on the margins the right way to think about the path forward here as high value becomes a bigger and bigger piece of the pie? And then I guess, flowing that into just the cash flow piece, how you continue to drive an inflection there? It seems like a little bit positive this year. Lisa Miles: Patrick, just to clarify, I think you're asking about '26 or are you asking about '25? Patrick Donnelly: Yes. '26 margin expansion and just the drivers of cash flow into '26 as well. Marco Dal Lago: Yes. Thanks for the question. So overall, Stevanato Group level, we are assuming in our guidance as mentioned, the center point of the guidance, 7.5% revenue growth and 8.3% on a constant currency basis. About margin, we see margin expansion from 0 to 30 basis points on a consolidated level. Operating profit margin ended 50 basis points at the center point of our guidance and adjusted EBITDA margin expanding for approximately 150 basis points. Gross profit margin, we can put together some headwinds and tailwinds. On the headwind side, for sure, we can mention higher depreciation were compared with 2025, we expect approximately 150, 170 basis both more in depreciation on industrial business. We have currency headwind embedded in our guidance. And on the positive side, instead, we have on top of the 2 new facilities where we can see quarter after quarter, the financial performance is improving, both in Latina and Fishers. So we are on the right track there to keep on expanding profitability -- and that's briefly also engineering. Frank already mentioned the market and revenue guidance. What I can tell is that we anticipate better margin in 2026 compared to 2025, mainly driven by the project mix. We are targeting more textile contracts with respective customers. So not really customized mines as we did in the past. And also, we will leverage the optimization plan we executed in 2024 and 2025. So we have -- this is embedded in our model and in our guidance for 2026. Operator: Next question is from Doug Schenkel, Wolfe Research. Douglas Schenkel: Good day, everybody, and thank you for taking the questions. I have 3, I'll just throw them out there and then listen to your answers. So one, is there any change in how you're thinking about the long-term growth outlook for GLP-1s for your business? Two, more near term, how strong is your visibility on demand pursuant to the assumption you embedded into guidance for GLPs, which I think is high teens growth in 2026. And then third, thinking about Lilly's multi-dose quick pen format, how do the economics differ between formats for Stevanato and really getting at vials versus cartridges? Franco Stevanato: What is related to the GLP-1 in 2026, practically were just executing the foreign cast that we share with our clients today and have already everything is embedded in our guidance that we are sharing with you today. We have already all the problem that was clear our clients. So what is beyond the 2026 it's a little bit too early to make any type of grand because there are a lot of moving pieces in the GLP-1. We see the big originator that are moving between, also the pen injector, they're launching also cartage new requirement, thanks to their fixed dose span. -- also, we see a lot of biosimilar in the market that continues to be very, very active to put capacity both for syringes, for cartridges, also from the devices. So the GLP-1 in the next decade, it will continue to be a powerful tailwinds for Stevanato, for all the industry but it's a little bit too early to understand what to be the final configuration between originator, biosimilar pen versus out injector. Lisa Miles: I think that answer covers all of your questions, just to confirm. Douglas Schenkel: Yes. I think the only thing, Lisa, was just the economics of the different formats. Lisa Miles: In terms of syringes, cartridges vials, so on and so forth. Douglas Schenkel: Also here, sorry. Franco Stevanato: Most of the GLP-1 products are under syringe Nexa that's a high-value product or cartridge is to feed that is also a high-value product. We have biosimilar a lot of requirement through our Alina's a high-value product this is practically the tendency is to answer to you that GLP-1 is going to be in a configuration of high-value products because of the EZ-fill or through Alina for Stavanato Group. Operator: Next question is from David Windley. David Windley: I just wanted to clarify definitionally, when you are talking about GLP-1s, are you including the full gamut of mechanisms that are kind of pursuing obesity. So GLP-1 glucagon non-incretinglucagon. Are we kind of generally bucketing all of that together for definitional purposes? Franco Stevanato: Correct. I confirm. David Windley: And then as you think about -- I think you talked about Nexus syringe being the strongest driver of growth in '25. Franco, you just commented to Doug's question about the kind of '27 and beyond outlook being a little less clear because of the transition, I guess in '26 on that guidance that you're giving for this GLP-1 or obesity category, is that still driven by Nexa syringe or do you see that start -- you mentioned in the prepared remarks some uptake in capacity in cartridge in your next phases of capacity, is cartridge kind of overtaking the growth lead as we move into '26 and beyond? Franco Stevanato: In 2026, Nexa syringes, it will continue to play an important role in the GLP-1s, David. Beyond the 2026 is also true that we are building a lot of capacity on the cartridges to fill, still minor compared to syringe Nexa but we are starting also to see that the customer originator and also biosimilars, they're starting to put new capacity not only on syringes but for cartridges in the next year to come beyond '26. David Windley: And if I could just sneak in a follow-up on the margin question. Would you be able to size -- maybe this is a Marco question, but size the tariff and FX headwinds to margin so we kind of understand what the gross improvement was from the mix shift to HBS, but offset by tariffs and FX, please? Marco Dal Lago: Yes. Sure. We mentioned the top line about EUR 20 million currency headwind, assuming our model, EUR 1.20 exchange rate that you know in the last days there was volatility, but this is what we have in our model. You can assume about 30% of that is impact in margins for 2026. About tariffs, we have been able to have a good dialogue with our customers, mainly predominantly transferring the effect of tariffs to customers in 2025, we had about 4 million headwinds, but it was mainly related to supply chain and the time to transfer the different scenario. So we are assuming limited impact from tariffs in 2026. Operator: Next question is from Paul Knight, KeyBanc. Paul Knight: Franco, after the 50% growth in GLP-1 last year, your mid-upper teens guide on '26 seems a bit conservative. Is it because Fishers is just ramping or what's behind this guide on GLP ones for this year? Franco Stevanato: No, I think it's core because the pharmaceutical industry, in particular, all the originators, the launch the product on the market in 2025. There was a massive preparation of the supply chain. Now to have a mid-teens growth in this in this category of drugs is still very important. I think it is a realistic number, Paul. When there is a takeoff of the product, when starting the product as to really go commercial. So this is what we see through our originator also to our biosimilar clients. Lisa Miles: Paul, perhaps it's best to think about it of an initial surge, followed by a period of normalization where growth slows a bit. Paul Knight: Yes. And then you had mentioned earlier a 45% increase in customers using high-value product. What's driving that? Is it share gain is [ NX1 ] regulations? Is it recent approvals that have been the right ones for you? What's behind that 45% customer gain? Franco Stevanato: On the non-biologic, you mean? Yes, this is our most important KPI in Stevanato Group. So the strategy that we're building since the day of the IPO of Stevanato Group is to become the partner of the pharmaceutical industry and everything that is around biologic where the good news that more than 60% of biologic, it will be through injection through a certain indication for devices. This has to become our big #1 strategy. And this is exactly what we are executing. Today, we are deeply engaged on Nexa syringes program. We are deeply engaged on Alba program. Syringes can move from 1 ml to 2.25 ml to 3 ml to 5 ml cartridge is the same format because both cartridges and syringes are going to be inserted on pen on auto-injector. Also, we are heavily investing in capacity for device space to our Alina clean room that we are building up in Germany and also for other selective program of [indiscernible] in Germany. Also, we have a big contract with American client in Fisher. So everything is going to summarize that where there is an injection want to be in. The real future in the next 1, 2, 3, 4, 5 years are the incremental value that we'll be able to generate spread through several tens of hundreds of programs worldwide through biologic and biosimilar, mostly United States, in Europe and also is growing rapidly. This is a big long-term strategy of Stevanato. Operator: Next question is from Calum Times, Morgan Stanley Unknown Analyst: Beyond GLP-1s, I'd love to get a better sense of what you're seeing across the biologic category today. I realize there's a lot of GLP focus just given the relative growth profile. But curious how other biologic categories have been performing, how customer discussions have been trending? Any positives? Any pressure points? And then what's just being assumed from these categories in the guide for. Franco Stevanato: So the category are practically monoclonal antibody. We have a wide range of biosimilar spread in a different region of the world. We are focused on mono infirmatory rare disease, all products that are going to require an injection or a certain medication. So there's a combination for Stevanato over Nexa syringes, [indiscernible] fill with at or injectors will be great to a little later thought as well on U.S. onshoring. Unknown Analyst: Obviously, Fishers should be well positioned for that. Any early discussions or insights you could share with us to just better understand the time lines for benefits here and when we could expect something to appear in the P&L. Do you want to say sure you mean? Franco Stevanato: Yes. Today, the price of Fishers play an important role when we decide in 2002, and we started to develop these plans -- this was really the purpose to be the campus that was going to mirror exactly the same capability that we have in Europe in particular for easy-fitchnology. -- with a different range of syringes, vary to files for devices. Today, what we see that many clients that are addressing their supply chain in United States and the fact that we are present in future with this why the capability is play all translating water, we can really accelerate additional opportunity for customers on to utilize the supply chain. Operator: Next question is from Larry Solow, CJS Securities. Lawrence Solow: Great. I guess just lots of information GLPs and all that. I really appreciate it. I guess from your seat today, and I won't hold you to this, but as we look out over the next 5 years, do you think the GLPs in summary, will, in aggregate, will still be driving 10% plus growth to Stevanato on a top line basis? What's your confidence level on that? Franco Stevanato: So we -- I think it will be -- continue to benefit on the GLP-1 in the future like a tailwinds. So the good news of the GLP-1 is this is information that we share constantly with our clients. We see quarters after quarters that the number of patients are going to increase and the large. So this is the good news. So from the moment that they launched, we also all our clients that they see more upside downside a number of the new customers. More and more, what we see that there are new opportunities for Stevanato on Nexa syringes, the opportunity for cartridges to fill and also for our device space. So I can see that it will be a long always for Stevanato that we help to further boost our biological revenue I don't know if after 5 years, it will continue to be in double digit because in [indiscernible] is also rapidly growing in other therapy that is so-called biologic. And this is are all high-value product like albacore our pen Liana or high format on cartridges. Lawrence Solow: That's all fair. What about just the RTU vials you mentioned 2025, obviously, had a nice rebound 24 down years. What can you give us a little more granularity on sort of how the year finished up and your outlook for '26 in that market? Marco Dal Lago: Yes, Marco speaking. As forecast, let's say, we went up about 6% in 2025, predominantly, we grew in asteric ratio. And this is where we see more traction also for 2026 where we expect a mid- to high single-digit growth, predominantly driven by the configuration. Another other point, orders intake in '25 was double digit higher than 2024. So we see the to is not a sharp increase, but we see increasing [indiscernible] demand. Lawrence Solow: Got you. And then if I could just squeeze one more in. Just Latina Fishers the trajectory of profitability. Where do we kind of stand? And I know Latin is a little bit ahead and Fishers is larger. But where do we stand and when do we kind of hit full run rate profitability? When do you think we can start closing in on that? Marco Dal Lago: We are going to the right direction. We see quarter-after-quarter better financial performances, the side operational performance, and we are growing quantities and that leverage our fixed expenses. We are very well positioned in Latina, where we are getting close to our average gross profit margin. Fishers, we are a little bit behind, but we see steady improvement of Fishers. That's difference as mentioned many times between the 2 plants. Latina is a smaller plant is about field, and we ramp up more rapidly than in Fishers. Fishers is a more complex plan with different type of products, syringes, vials, [indiscernible] , the drug delivery system. So we are progressing. We are improving going to the right direction, but it will take longer compared with Latina. Today, the gross profit margin is positive on the combination plants still dilutive compared to the average of the company and the average of this segment. Franco Stevanato: If I can give a sort of business angle. In Latin, we have continued the installation of the line for high-speed line for syringe. We are continuing to orient our regional customers to national customers. And this year, we're going to install the first high-speed line forecast is way to fill, but the goal is to do the validation is yet to start to do commercial revenue in the beginning of 2027 and in Fisher continues to perform audit to our big international clients in order to become particular domestic United States. In fact we have doubled the number of audit validation in 2025. Important milestone that we are advancing with the build-out of this bigger apartment production that is still expected to produce out in get for one big U.S. client at the end of this year. Operator: Next question is from Matt Larew, William Blair. Matthew Larew: The first is starting on GLPs, maybe the question on historically Lisa Miles: I'm sorry. We cannot hear you at all. Can you speak up a little bit? Matthew Larew: Sure. Can you hear me now? Lisa Miles: A little bit better. Matthew Larew: Okay. So you've historically said that you expect orals to be about 30% or 1/3 of the market. And I would say, investor expectations on that metric have moved quite a bit since the oral [indiscernible] launch. So you've addressed GLP growth for next year and reference for the next couple of years, but how do you feel about that metric? And I guess, in discussions with your customers, how are they viewing that metric? Franco Stevanato: Yes. So for sure, this is -- we are putting a lot of attention on this evolution of the pie, and we have a lot of point of contact with our clients, both the originator and the biosimilar. We look at what are the key opinion leaders are sharing. Our peers are customers also, I know that all the banks are very well prepared on this. [indiscernible] we are going to confirm that the share between injection spread between cartridges or syringes, which we represented the majority in the range of 70% and oral to be the minority in the range of 30%. Now what also we see, like I also mentioned to all of you before, we see this is information that we receive from the market the number of total patients worldwide, it will continue to increase month after month. And we don't see cannibalization between injection to the order because they are targeting to different type of patients today. So this is our internal estimation. From a supply chain point of view, what do we do because this is another important [indiscernible] if you look at the number of lines that the pharmaceutical industry is installing for syringes, for cartridges, and the number of lines for assembly technology for pen injector both into the originator into the biosimilar and to the CMO is still high. There's a big program of massive investment for injection in the next year to come on a worldwide basis. Matthew Larew: Okay. And on non-GLP biologics, sort of backing into maybe that being up mid-teens. Does that sound right? And then you referenced in the deck large global pipeline, I think, 60% of the 9,000 molecules. So what's your expectation for non-GLP biologics going forward. And I think that's generally speaking, all high-value demand. I guess if you could confirm that as well. Franco Stevanato: Usually, this non biologic product are a very rich that are maybe not in big size, it's difficult that to go in the range of hundreds of millions, in the range of tens of millions. They're looking -- because of the specific of this large molecule, they're looking for particular drugs, particular primary packaging with particular coating, particularly, for example, we are engaged with our Alba syringe because they have a special plasma coating. We are engaged with particular [indiscernible] silicon syringes with particular Nexa syringes and also different format. We see more and more moving to 3 mls to 5 today. That's something that is a little bit new on the market, usually the autoinjector pen used to stop at 3ml. So all overall, we see several hundred of programs spread to many customers meet the top 25 customer and some hundred of biosimilars that are extremely active to build capacity in this way. So what we are doing in Stevanato Group, we are building a supply chain through our engineering division, with particularly line dedicated to be able to be fast and flexible to serve these customers. So we want to keep a few [indiscernible] Latina in particular United States to be able to serve this wide range of products that are moving from syringes to [indiscernible] fee through our device colleagues. We are ready with our out injector, in particular also with our pen Alina or in a selective way when we already serve the syringes of the cartridges, we afflict CMO. So I want to reiterate our real strategy in Stevanato is really to say where there is an injection, self-administration, we want to be always on the #1 on the #2 for this product. Matthew Larew: Okay. And just one follow-up. You referenced the contract manufacturing opportunities and maybe that will be ramping end of this year into next year. How do you expect the economics of that business to look for you relative to the BDS business and your engineering segment? Marco Dal Lago: So we are not classifying the CMO as IPO. Nevertheless, we see the specific projects in a high range of normal value solutions. And as mentioned many times, we are taking here a selective approach with customers, leveraging this particular case, the integration between syringes and injectors, all the capabilities we have tool with very important customers. So we are using this strategy, taking a selective approach, especially where we can leverage integration. Operator: Last question is from Curtis Moiles BNP Paribas Exane. Curtis Moiles: Great. I think you've already given a lot of color here. But on the High Value Solutions guidance for 47% to 48% of revenue, I just wanted to clarify, are you thinking that will be primarily driven by GLP-1s? Or maybe can you separate the contribution from syringes versus kind of files and cartridges? Marco Dal Lago: It's a level of detail we don't provide. What I can tell you is that we are increasing our high-value solution next year double digit -- low teens if we consider constant currency rate. So we are growing both and other biologics next year. Curtis Moiles: And then also just I think earlier in the call, you mentioned that you could consider some additional actions around permitting away from the non-HPS categories. Can you maybe give a little color about what you're thinking about there? Lisa Miles: I'm sorry, Curtis. We missed a portion of your question as you were dropping out. Can you please repeat? Curtis Moiles: Sorry, Yes, of course, I think in the beginning of the call, you mentioned that you could consider actions around pivoting away from non-high-value solutions categories in the future. I was just wondering if you can comment on what you're thinking about there. Lisa Miles: Yes. Thank you for clarifying that. Franco Stevanato: Yes. Today, the focus in Stevanato Group also the investment or the attention of all our colleagues is on building capacity and to become the partner of this biologic market for high-value product and this is a while, for example, what you had to do to select, we are going maybe to the privatized the [indiscernible] for example, this historical product is good to produce in certain regions of the market, but in particular, in your United States, the goal is to focus to become the #1, #2 in the new product. Or for example, another example, in Germany, we have built this new big [indiscernible] room in order to host the production for line originally in this screen room we used to produce a standard in [indiscernible] forecast. We have decided to use this space, important space this now how to start to ramp up in the next years Salina the type of the prioritization that we are looking in the next year's focus on biologic high-value products. And when there is no strategic customer behind the strategic market, we try really to do some [indiscernible] Operator: Ms Miles, gentlemen, there are no more questions registered at this time. Lisa Miles: Thank you, everyone. That concludes today's call, and we'll be seeing you shortly. Have a good day. Operator: Ladies and gentlement, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ASM International Fourth Quarter 2025 Earnings Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Victor Bareño, Head of Investor Relations. Please go ahead, sir. Victor Bareño: Thank you, operator. Good afternoon, and thank you for joining our Q4 earnings call. With me today are our CEO, Hichem M'Saad; and our CFO, Paul Verhagen. ASM issued its fourth quarter 2025 results yesterday at 6:00 p.m. Central European Time. For those of you who have not yet seen the press release, it is available on our website together with our latest investor presentation. As always, we remind you that today's conference call may contain forward-looking statements in addition to historical information. For more details on the risk factors related to such forward-looking statements, please refer to our press release and our financial reports, all of which are available on our website. Please also note that during this call, we will refer to profitability metrics, primarily on an adjusted basis. Reconciliations to the reported numbers can be found in the press release and in the investor presentation. And with that, I'll now turn the call over to our CEO, Hichem M'Saad. Hichem M'Saad: Thank you, Victor, and thanks to everyone for attending our earnings call. I'll start with a few of the highlights. Even with the revenue at a lower level, results in Q4 remained solid, and the quarter marked a reacceleration in demand. For the full year, our sales increased 12% at constant currency, our ninth consecutive year of double-digit growth and operating profit increased by 17%. Strategically, we strengthened our position with key customers with the current generation of gate-all-around going into high-volume manufacturing and with strong traction in R&D engagement for the next nodes. To power ASM's next phase of growth, we continue to invest in our people, our global footprint and in innovation. I want to thank all our people for their relentless dedication and collaboration, which contributed to another successful year for ASM. As for the agenda today, it's the standard format. Paul will start with a review of our financial results. I will then discuss market trends and provide our outlook followed by the Q&A session. With that, I'll hand it over to Paul. Paul Verhagen: Thank you, Hichem, and thanks, everyone, for joining our call. Let's start with the review of the fourth quarter results. Revenue in the fourth quarter of '25 was EUR 698 million as preannounced on January 19. This represents a 7% year-on-year decline at constant currency, but came in above the guidance range of EUR 630 million to EUR 660 million, which we provided with the Q3 results. Logic/foundry was our largest customer segment in the fourth quarter. Within this segment, advanced logic/foundry accounted for the majority with sales approximately flat compared to the third quarter and somewhat down from a very strong level in Q4 of '24. Mature logic/foundry sales, mostly from the Chinese market dropped sharply as anticipated, both compared to the prior quarter and to Q4 of '24. Memory sales were relatively steady, both year-on-year and compared to Q3 with solid advanced DRAM sales, offset by lower NAND. The contribution from the power analog wafer segment remained at a fairly low level overall. Our spares and service sales were up 22% year-on-year at constant currency. This represents a very strong performance, especially considering the tough comparison with Q4 '24 when sales grew roughly 50%, driven by accelerated demand in China. Gross margin of 49.8% in the fourth quarter was down from 51.9% in Q3, but still at a solid level, supported by a favorable mix. SG&A expenses were down 1% year-on-year, while net R&D expenses increased by 6%, largely due to phasing of R&D investments. Operating margin dropped to 25% in Q4, explained by lower revenue and related gross margin, partially offset by lower OpEx. The results from associates increased to EUR 26 million in Q4, which was for a large part, explained by a one-off benefit in ASMPT's results. Our Q4 net earnings dropped compared to Q3, mainly as that quarter included a noncash reversal gain of EUR 181 million related to the recovery in the market value of ASMPT. Our new orders in the fourth quarter amounted to EUR 803 million, up 19% year-on-year and also better than indicated Q3 results. This was driven by very strong advanced logic/foundry orders. Mature logic/foundry orders from Chinese customers were relatively soft, but showed an acceleration in demand towards the end of the quarter. Memory orders were steady compared to Q3. Power, analog and wafer orders showed some recovery and reached the highest level in '25, but we're still at a relatively soft level. Please note that starting in 2026, we will discontinue reporting of quarterly bookings. This change reflects the high volatility of quarterly orders, which has been driven more by timing effects than by underlying demand trends. We will continue to disclose the year-end backlog as part of our Q4 results. In addition, beginning in '26, we will report sales by key customer segments, logic/foundry, memory and other on a half yearly and annual basis. Let's now have a look at the full year results. At EUR 3.2 billion, our sales increased 12% in constant currency to a new record high. In terms of customer segments, logic/foundry accounted for the largest part of equipment sales. Within this segment, advanced logic/foundry represented the clear majority. Gate-all-around related sales increased very strongly as customers stepped up in investment in 2-nanometer high-volume manufacturing. Mature logic/foundry sales, mostly from the Chinese market also increased but at a more modest pace compared to the leading-edge segments. In memory, sales dropped to 16% of total equipment sales, down from 25% in '24. Advanced DRAM for HBM-related applications continue to be solid and accounted for the large majority of memory sales. However, this was offset by a normalization of memory-related sales in China. As discussed in previous quarters, memory in China is typically a small market for ASM. But in 2024, it showed an unusual high demand. The overall drop in memory sales was also explained by lower 3D NAND sales, which were still at a relatively higher level in '24. Power, analog and wafer sales dropped for the second consecutive year. As part of this, silicon carbide sales, which were still resilient in '24, dropped by more than 50% in '25, reflecting the sharp deteriorization in this market. At constant currencies, equipment sales increased 10% in '25, primarily driven by strong double-digit growth in ALD. Spares and service sales grew 18% at constant currency, an excellent performance, which was driven by strong growth in our outcome-based services. Gross margin for the year increased further, rising from 50.5% in '24 to 50.1% in '25. This improvement was primarily driven by a stronger product and customer mix, including a resilient contribution from the Chinese market. Additionally, the margin benefited from the gradual impact of cost-saving initiatives such as more move to common platforms and ongoing cost optimizations across our manufacturing and supply chain operations. Gross R&D increased 9% in '25, reflecting the continuous growth in our pipeline of new opportunities. As a percentage of revenue, net R&D expenses increased slightly to 12.5%. Our target remains to keep net R&D in a low double-digit percentage of revenue. SG&A expenses decreased 7% in '25 on the back of disciplined cost control as well as the benefits of earlier investments made to scale the organization for growth. As a percentage of sales, SG&A decreased from 10.6% to 9.2% in '25. For 2026, we project SG&A to show a further decrease as a percentage of sales. Operating profit increased 17% in '25, thanks to improvements in revenue and gross margin, SG&A discipline and with continued growth in R&D investments. The operating margin increased from 28% to a record 30.2% in '25. Now turning to the balance sheet. ASM's financial position continued to be in good shape. We ended the year with a cash slightly north of EUR 1 billion and no debt. Excluding M&A-related cash payments totaling EUR 181 million, free cash flow increased 12% to a record of [ EUR 615 million ] in '25. This growth was driven by improved profitability and lower working capital, partially offset by higher CapEx. Working capital decreased to EUR 347 million at the end of '25. This was mainly due to the phasing of revenue during the year with Q4 2025 sales at a relatively lower level, together with very strong cash collection. CapEx increased from EUR 168 million to EUR 280 million in 2025, fully in line with our guidance range of EUR 200 million to EUR 250 million. This increase is for a large part driven by spending related to the completion of our new Korean facility and ongoing construction of our new facility in Scottsdale. 2026 will be a year of continued investments for a large part related to our Scottsdale site, which remains on track for completion in the first quarter of 2027. Regarding cash spent on acquisitions, in December '25, we acquired Axus Technology, a provider of CMP solutions for EUR 81 million, net of cash acquired, along with a potential earnout up to EUR 30 million tied to performance targets over '26 and '27. In addition, we paid EUR 100 million in earn-outs as part of the earlier LPE acquisition and as already communicated with the Q3 reporting. In terms of shareholder remuneration, we spent close to EUR 300 million in cash on dividends and share buyback in 2025. And with our Q4 press release, we announced a new share buyback program for an amount of EUR 150 million as well as a proposed dividend of EUR 3.25 per share, up from EUR 3 in the prior year. And with that, I'll hand over to Hichem. Hichem M'Saad: Thank you, Paul. Let's now review the trends in our markets. In 2025, the semiconductor market continued to be driven by AI, reflected in a wave of new AI data center and infrastructure expansion plans from hyperscalers and other leading industry players. This drove solid capacity investment in leading-edge logic/foundry and in advanced memory, areas where our ALD and Epi technologies play an increasingly central role. At the same time, several other end markets, including smartphones, PCs, automotive and industrial remained relatively soft due to persistent macroeconomic and geopolitical uncertainties. Looking ahead, the fundamental technology drivers remain firmly intact. Demand continues to rise for faster, more power-efficient semiconductor devices capable of supporting the massive growth in data and compute intensity. This will further accelerate the industry's transition towards more complex 3D device architectures and the introduction of new materials. These trends increase the number of ALD and Epi layers required at future nodes, supporting healthy long-term growth in our key markets. The main engine behind our growth in 2025 was the continued strong momentum in leading-edge logic/foundry. Our gate-all-around related sales rose substantially as customers ramped 2-nanometer capacity and started to move into volume manufacturing. At our Investor Day, we reconfirmed the significant expansion of our served available market by about $400 million in the transition to first-generation gate-all-around. We also highlighted the increase in our Epi layer share from 22% to 33% and the reinforcement of our leadership position in ALD. Our product penetrations included new applications such as moly ALD and area selective deposition entering high-volume manufacturing at the 2-nanometer node. In 2026, we expect customers will continue investing in 2-nanometer expansion, supported by rising end market demand across AI, high-performance computing and advanced mobile applications. Based on public commentary from several of our customers, the 2-nanometer technology node is expected to be large and long-lasting. While 2-nanometer will continue to represent the majority of leading-edge logic/foundry investment in 2026, we have also seen an uptick in 3-nanometer related demand. The pace of innovation is not slowing down, and customers are already advancing toward the 1.4 nanometer node with pilot line investments expected to start in the second half of 2026 and volume production in 2027 and 2028. This transition is projected to expand our served available market by a further USD 450 million to USD 500 million. A significant driver of this increase is the rising importance of functional layer in the transition area, which is a core strength for ASM. As also highlighted during Investor Day, we expect these transition-related layers to increase to roughly 60% of all ALD layers at the 1.4 nanometer node, up from about 50% at the 2-nanometer node. Based on the breadth of R&D engagement and the production tool of record selection secured so far, we expect to gain further market share as the industry moves to the 1.4 nanometer node. Let's now talk about memory. Our sales in the Memory segment decreased in 2025. And as discussed, this reflected a normalization in China after an unusually strong 2024. At the same time, momentum in the advanced segment of HBM-related DRAM remained robust. AI-driven data center investments continue to require high-performance DRAM. And in this segment, ALD high-k metal gate has become essential to achieving the performance and power efficiency levels customers demand. During the year, we strengthened our position with new ALD wins for layers that are expected to ramp in 2026 and 2027. And we also recorded our first Epi win in the DRAM segment. We expect healthy growth in our DRAM sales in 2026, even though memory is likely to remain a smaller share of our business than logic/foundry in the coming years. Looking forward further out, DRAM scaling presents a significant long-term opportunity. The transition to the 4F2 architecture will require more complex 3D channel structure and additional ALD and Epi steps, expanding our served available market by USD 400 million to USD 450 million. Let's now look at the power/analog/wafer. In 2025, the power/analog/wafer market remained in a cyclical downturn. In 2026 and based on the early signs of stabilization, we expect for this segment a modest sales improvement. This recovery will be limited to silicon-based power and analog applications. The silicon carbide market will take longer to recover, but we remain well positioned with a strong portfolio, including our PE208 platform for 200-millimeter applications. China remained an important market in 2025. After 2 years of exceptional growth, we had anticipated a period of normalization. Revenue from China did decline in 2025, but the decrease was milder than expected and mostly supported by continued robust activity in the mature logic/foundry segment. Sales softened in the second half of the year, particularly in Q4, but we saw demand accelerating towards year-end. Based on this momentum, we now expect higher sales in China in 2026, an improvement from our earlier forecast of a double-digit decline. As Paul already discussed, we continue to invest in R&D and CapEx to capture the opportunities ahead of us in logic/foundry, in DRAM and also in new areas such as advanced packaging. In 2025, we completed our new expanded innovation and manufacturing center in Downtown, Korea. Combined with our key manufacturing sites in Singapore and ongoing efficiency improvement in our supply chain model, we believe we have sufficient capacity in place to support our growth well into the next decade. I'm also excited to see the progress at our new Scottsdale facility, which will enable substantial expansion of our ALD and Epi product development activity in the coming years. And last but not least, in December, we announced our intention to invest in a new site in the Netherlands, which will house our new global headquarters and a state-of-the-art clean room. In December, we also acquired Axus Technology, a provider of differentiated equipment for chemical mechanical polishing focused on markets such as compound semiconductors and more than more manufacturing. CMP fits well with our capabilities in chemistry and interface engineering and plays an increasingly critical role in emerging technologies such as 3D integration. In 2025, we made further progress in accelerating sustainability, which remains one of ASM's strategic priorities. We maintained 100% renewable electricity for the second consecutive year. We also deepened collaboration across our value chain, including a new initiative to support suppliers with energy efficiency improvement and renewable energy adoption. In addition, we continue to advance product sustainability through initiatives that improve the energy efficiency and precursor consumption of our tools, contributing not only to reduction in Scope 3 emission, but also helping our customers lower operating costs. Let's now look into the outlook for 2026. Let me recap the key points of our guidance as included in yesterday's press release. We expect advanced logic/foundry to be our strongest business in 2026. In memory, we anticipate healthy sales growth. In power/analog, we expect a modest recovery from a low base. And for China, we expect sales to increase in 2026. For the first quarter, we expect revenue to increase to a range of EUR 830 million, plus or minus 4%, with a further increase projected in Q2 compared to Q1. And we anticipate our revenue in the second half to be up from the first half. With that, we have finished our prepared remarks. Let's now move on to the Q&A. Victor Bareño: Thank you, Hichem. We'd like to ask you to please limit your questions to no more than 2 at a time, so that everyone has the opportunity to participate. Operator, we are ready for the first question. Operator: So the first question comes from Tammy Qiu of Berenberg. Tammy Qiu: So first one is on 1.4 nanometer. So I remember that last time when you said you are expecting to ramp up pilot production in the second half of the year, you were talking about only one customer, but hoping for another one. I'm just wondering what is the progress? Did you get more interest of more customer ramping up 1.4 nanometer than just one? Hichem M'Saad: Okay. Thank you for the question. I think that 1.4 nanometer is a technology node that all key customers are looking for. And right now, I cannot really be more specific on whether 1 or 2 or 3 customers are ramping up the 1.4 nanometer node, but we see interest from all leading suppliers for the high-end logic and foundry to work on 1.4 nanometer. So we are very excited about the opportunity, and we see our customers really continuing to increase their investment in the next-generation gate-all-around. The other thing that we see is that the customers are very serious about going into HBM in the 1.4 nanometer node in 2027 and 2028. Tammy Qiu: Okay. And the second question is on China. So your peers also talked of China comparing to their expectation from Q3 last year. But your comment from down year-on-year to growth year-on-year. And also, we all know that China has been a lower visibility market comparing to the rest of the market. Is that something you've seen -- significantly changed over the past few months made you to have this call at such an early stage of the year? Or is that just basically customer conversation has been giving you the confidence that it will happen? Hichem M'Saad: I think that -- I think what we have mentioned before, it was very tough for us to really give a very clear projection for China. We mentioned very, very often that it was very tough because of many factors. One of them is the changing trade restrictions and also the funding releases, which really are very unpredictable from our customer. But we did see that at the end of -- actually at the end of the year that the customers are becoming -- Chinese customers are becoming much more bullish about their business in 2026, which really was very exciting to us, and that's why we feel that 2026 is going to increase with us. For us, we see visibility with them, and we see a strong momentum from that point of view. Operator: The next question is from Andrew Gardiner of Citi. Andrew Gardiner: Sort of related one on China, but really as it pertains to your business mix and how you think that will shape up over the course of 2026. If I go back to how you were framing things in October and indeed at the Capital Markets Day in September, you had cautioned us that business mix as it pertains to gross margin would deteriorate in 2026 and the decline in Chinese revenue was going to be a large part of that. Today, as you just mentioned, China is going to grow, maybe not quite as quickly as the advanced logic demand, but still it's going to grow. And so your mix isn't going to deteriorate as much as you had previously suggested it might. How should we, therefore, take that into consideration when looking at gross margin for 2026? Hichem M'Saad: So I think for our gross margin, it's -- like you mentioned, it really depends on product and also customer mix. And China would actually help our gross margin. So with the change in the mix, then the gross margin will also depend on that. And we see that in 2026, I think we have made -- I think we have made in 2025 and 2024 significant improvement, not only in -- actually, we made significant improvement in reducing our cost structure in our tools with the commonality. So we have initiatives to commonize more and more of our products, giving us economies of scale and more leverage with our supplier base to reduce cost. And I think with the way 2026 will materialize, I mean, if the customer mix goes further and further positive on the China-wise, then yes, we expect our gross margin also to be positive from that point of view. But I think overall, I think that we have made improvement in our basic gross margin in the past few years with better cost control. And I think China also would help in gross margin in 2026. Andrew Gardiner: Just so that I'm clear, Hichem, so -- I mean, you're suggesting with less of a change in customer mix year-on-year and with those structural improvements you've made, maybe we shouldn't see much change at all in gross margin relative to last year. Paul Verhagen: Yes. Let me take that, Andrew. Basically, confirm what Hichem said. So the mix, given that China is now better than what we anticipated before is, of course, a positive plus all the structural measures that we've taken. I think it goes too far to say that it will be the same as this year or maybe even higher at this stage. But I think what is -- what we're confident to say at this point already is that it will be at the higher end of the range that we guided for. And you know that we guided for is 46% to 51%. So at the higher end of that range, I think, is a reasonable assumption to take given what we know today. Operator: The next question is from Didier Scemama of Bank of America. Didier Scemama: I've got 2 questions. First, I think if we take the sort of baseline WFE growing 15% to 20% constant currency, are you comfortable to tell us that you will at least be in line with that at constant currency? Or do you see any reason why it should be better? Hichem M'Saad: So I think that -- okay, thank you, Didier, for your question. I think that for our market -- WFE market in 2026, we see that our growth will be at least at the level of the WFE growth. So if the market is going to grow by 20%, WFE, then we grow at least at that level at the 20% level. We are very, really upbeat about our position and our growth this year and actually in the future. Paul Verhagen: Didier, as you already mentioned in your question, but I want to repeat that because there is quite a difference, of course, between the current rate that we, of course, project going forward and, of course, the average rate of last year. So the question was right at constant currencies. Didier Scemama: And sorry, I don't want to use a follow-up for that. But Paul, since you opened the door, can you tell us what your average was in '25 so that we know what the starting point is? Paul Verhagen: Yes, I think it was around 112. Didier Scemama: 112. Okay. My follow-up is, I think -- there is a bit of confusion in the market as to what you're actually trying to say when it comes to the outlook for '26 because it feels like you're saying, yes, foundry/logic or advanced foundry/logic is going to be the key growth driver for the business. And then memory is going to have healthy growth. So implicitly that memory will grow less than advanced logic/foundry. So I guess, is that the right way to interpret that? And if that's the case, why wouldn't memory outperform given how bad it was in '25 and given that DRAM WFE looks pretty healthy, at least from a top-down perspective? Paul Verhagen: Yes. Let me take that question, Didier. So basically, what we said is that we expect growth almost on all fronts, to be honest. But the base from which the growth starts is very, very different. And I think that's the key. So of course, by far, our largest business is logic/foundry. And within logic/foundry, the largest part is advanced logic/foundry and then in China, in particular, mature logic/foundry. So especially advanced logic/foundry, we continue to see strong investments supported by investments, continued investment in 2-nanometer, but also 1.4 pilot, as we mentioned mature, you just heard our comments on China, we expect to grow. So that's a positive. Memory from a much smaller base, in particular DRAM, we also expect good growth, but it will still be the much smaller part of our overall business, as you've seen also in '25. And in addition to that, although it's still also from a lower base and modest, we also expect this year a modest improvement in power/wafer/analog, excluding silicon carbide. Silicon carbide is still -- that will still take longer, as Hichem already explained, but also power/wafer/analog, which is partially in China, by the way, and partially outside of China. Didier Scemama: Okay. So your commentary was based on euro incremental growth as opposed to percentage of growth. Is that correct? Hichem M'Saad: That's correct. I think that's really what we're trying to say here, Didier. Logic is a higher base. But in percentage-wise, the growth in DRAM is higher than -- percentage-wise than logic/foundry. Percentage-wise, DRAM is higher, but we're starting from a very much lower base. Operator: The next question is from Francois Bouvignier of UBS. Francois-Xavier Bouvignies: My first question is, Hichem on your comment on the AP, you mentioned an AP win on the DRAM side. Can you give more color on what this win is, when it's going to start kicking in? And was it competitive? Just more color on this comment, that would be great. Hichem M'Saad: Okay. Thank you very much for the question. I think that we're really excited of getting win in DRAM, and this is really in HBM, which we have realized in 2025. And it's going to be incremental to our revenue starting this year in 2026. Francois-Xavier Bouvignies: And is it going to be for multiple customers or just one? Hichem M'Saad: So it's -- as I mentioned, okay, so we had the win in 2025 for this particular customer, but -- and HBM is happening this year. But at the same time, we have significant engagement with other customers in high-bandwidth memory with epitaxy, and we expect some good news also happening hopefully in this year, too. Francois-Xavier Bouvignies: Great. And maybe on the advanced logic side, I mean, as the pilot line is getting in order this year, I just wanted to check your market share. You mentioned some moly ALD and area of selective deposition design wins as well potentially. Can you maybe give some color on your market share here? I mean, on the pilot line, how do you think it's trading? Is it higher? Is it similar? And selective deposition, I mean, I thought it was something a bit later on. So I was a bit surprised to see selective deposition in your comments. So just is anything happened? Did anything happen on the selective ALD front to accelerate the road map? Hichem M'Saad: Okay. So let me answer your question first about ASD and then talk about molybdenum. So if you look into ASD or area selective deposition, I mean, to be honest with you, we are -- myself, I'm very pleased that we got some win in area selective deposition in the gate-all-around area. And the reason we saw this win is because actually it's higher yield that's experienced by customers. So I think the simplification of the process flow and the reduction in the number of process steps have given rise to improvement in yield. So we see that happening. And actually, we see that also going to happen more and more into the future, and I see even acceleration in that. A very exciting area, I mean, and there's lots of possibility going on in this realm. And when we talk about the moly, we're also excited about winning HCM capability at the 2-nanometer node. I think we have mentioned very often that the moly adoption in the industry is going to happen, but it's going to be happening in a very slow pace. We mentioned that it started with 3D NAND. The second logic adoption is happening. And third is going to happen in DRAM. The change in the -- for us, this is penetrate -- this win is the first time that ASM has moved into the metal deposition area. So we're very excited about it. It's an area that we have -- we didn't have any experience about many years. We didn't have any experience because we didn't know what -- how to integrate metal layers. We don't know how to characterize that. But right now, I feel this win shows that, okay, yes, not only we can develop this new area, but actually, we can achieve HVM capability at the customers. So we're building the expertise within our development team and our teams, and this is something that really is exciting for us. But as I mentioned, the moly adoption in logic is going to take a while. And I mentioned before, it's going to start a little bit at the 2-nanometer. You're going to have a little bit more at 1.5 4-nanometer node, a little bit more at 1.0 nanometer node, but it's not going to be at the level of what tungsten and copper is. But this is really exciting for us, to be honest with you. Operator: The next question is from Adithya Metuku of HSBC. Adithya Metuku: So I had a couple. Firstly, just on the CMP acquisition, I just wondered, Hichem, if you could give us some color on which end markets you want to focus on, what sort of applications and end markets and whether you intend to have any partnerships with your CMP tool, especially when it comes to advanced packaging. There's a lot of debate there. So any color there will be helpful. And then secondly, I wondered, Paul, if you could give us some color on how you're thinking about your OpEx growth in 2026 with a focus on R&D and SG&A. Hichem M'Saad: Yes. So thank you for the question. We have -- when it comes to CMP, we when we looked into this market, okay, we talked in our Investor Day that we have focused on also some M&A and especially in an area where it can do 2 things for us. It's an area that's strategic to ASM and it's an area where we can add value to it. And also, we mentioned, okay, that when we do some M&A, we really want to make sure that there's some technology component to it. And this is really what we saw in this CMP acquisition. The company has a very good technology, very exciting technology to be honest with you. That's very unique by itself. They have a great footprint and also very good cost of ownership, very competitive cost of ownership. And we think that this technology, CMP is actually -- is complementary to our strength in interface engineering. As you know, that when you do the bonding at the end of the day, it's really to put -- it's like to bond interfaces together. So after you do polishing, you have a new surface. And if you can make the surface better and more -- you can actually control the engineering of the surface, that can help you also do the bonding. And also, it's also complementary to our deposition technology. I mean we have CVD deposition in advanced packaging and CMP would be also complementary to that. So from all this point of view, we think that we can add value to this technology. We are going to see how it works for us in the future. This is a very small acquisition, about EUR 80 million acquisition. And we're going to test it. We mentioned that we're going to test it in the advanced packaging area, and we'll see how it materialized. But definitely, the technology is differentiated. We like the tool architecture. And we think that also cost-wise, it will be very competitive. Paul Verhagen: Yes. And then on the OpEx, what I can say is that let's start with R&D. We will continue to invest in R&D. So that will grow further. And our net R&D will grow at a higher pace than our gross R&D simply because of the increased amortization expense because more and more films that we have been working on in the last few years have entered into HCM. So we start to amortize those. But I think net R&D at constant currency again, because also I'm not going to give you a percentage now, but a decent chunk of R&D cost is also dollar-based and another decent chunk is also euro-based. So net, around 10%, I think, is a good guidance to take into account and gross will be slightly below that because net will grow faster than gross. On the SG&A, we will continue to be very strict on SG&A. There will be some increases, of course, annual inflation, merit, but also we invested in -- as you know, we are the global big bang of our new ERP system that costs under IFRS need to be capitalized. So we will start amortization of these costs as well. We might have some higher variable expenses in '26. But overall, I think if you take into account a few percent increase, that's what we try to manage. We will be very strict on SG&A. And as a percentage of revenue, for sure, that will go below 9%. Adithya Metuku: Got it. Understood. Maybe, Hichem, just to clarify on the Axus acquisition. Is this -- do you have a specific focus on hybrid bonding? Or is it more generally bonding applications? Hichem M'Saad: Yes. I think we -- really we're looking into the advanced packaging as not only hybrid bonding. So it's really packaging as overall market from that point of view. Operator: The next question is from Robert Sanders of Deutsche Bank. Robert Sanders: Maybe just if you could just discuss a bit about what you see in terms of clean room constraints at your customers. Obviously, we've seen some companies talk about that. Obviously, your tools don't take up as much footprint. And -- but in terms of looking into '27, do you see significant capacity opening up? And how does that set you up for next year? Hichem M'Saad: I think that we see -- if you look into 2026, -- we do see there's a constraint in fab space in multiple areas, which limits the really expansion for our customer. I mean it's -- I think it's very clear. It's very public information. And also, we see a growing sense of urgency from our customers really to get some of the tools. So based on that, we see that there is a good momentum as more and more capacity come in, in 2027. So we see momentum really continuing in 2027. So not only we are excited about 2026 and very positive about 2026, but we see the fact that more and more capacity -- the fact that there's a constraint right now in fab space, but that fab space is going to open up in 2027 means that also 2027 is going to be a very good year for our company. Robert Sanders: Great. And just a quick follow-up. Just a clarification on foundry/logic in '26, are you saying that's going to grow? Or are you just saying it's going to remain the largest part? I didn't quite understand. Maybe I missed that if that was asked already. Paul Verhagen: Both, yes and yes, it will remain the largest part, and it will also significantly grow. Operator: The next question is from Stephane Houri of ODDO BHF... Stephane Houri: I just wanted to come back on the decision to stop giving the orders on a quarterly basis because, yes, indeed, some of your -- other players in the industry have done the same. But it seems to me that the volatility was not such a high volatility as for others and that given your lead time, it was a good indicator. So what are you going to give apart from more granularity on the current level of sales? And I have a follow-up. Paul Verhagen: Yes. Let me take that question, Stephane. Actually, we -- multiple, let's say, stakeholders that we have discussions with gave suggestions that we should maybe like our peers, stop with quarterly bookings because the risk of an overreaction is there. As we said already, it's not always demand driven, but it's timing, just phasing, nothing else. So we see overreactions up if it's really good or overreaction down, if it's really not good, which is not helping, of course, the stock increases volatility. So that's a key reason why we're stopping. On the other hand, I think with the hopefully improved transparency on segment information, that might help. We will continue with revenue guidance, of course, like we do today and maybe some qualitative guidance if we believe that is necessary. So with that, I hope that you guys have enough to model and to come to a view on how we will develop in the coming period. But these have been the considerations. And based on that, yes, we have made this call. Stephane Houri: Okay. And what about the evolution of spares and services it has been outgrowing the equipment parts in 2025. So what is your view on 2026? Hichem M'Saad: I think on 2026, I think with the fact that the fabs are at maximum capacity, we expect continued growth in 2026. The other thing, as the market moves more and more into more advanced nodes, we see the service part of our market also growing even higher than the rest because of the complexity of the equipment at the very high-end node, which favor outcome-based services or solutions that are much more valuable and add more value to the customer. So I'm very optimistic also on the service market this year and in the future. Operator: The next question is from Jakob Bluestone of BNP Paribas. Jakob Bluestone: Just on Axus, could you maybe just help us understand how you plan to cross-sell CMP tools? And if you have any idea what share of your customers are currently already using CMP in their processes? Hichem M'Saad: I think that for -- I just want to make very clear for Axus as a company, I mean, it has a very low revenue. I mean we're talking about revenue between USD 20 million to USD 30 million per year. So this is the latest revenue they have in 2025. So this is a very small acquisition from this point of view. And we're going to leverage the -- our expertise to help this technology, bring this technology to a larger customer from that point of view. But as I mentioned, okay, this is all about a technology buy where we think that, okay, we can add some of our strengths into the CMP market. I mean if you look into CMP, it's systems for chemical mechanical polishing and that chemical part that really means chemistry. And that's where we play with. I think we have some idea on how to make the chemistry better, especially when you go into 3D integration whereby the chemical part of the CMP becomes most predominant than the mechanical part, especially as you go to 3D and the structure becomes more and more fragile from that point of view. So we think we can play a role there. We're going to see how it goes. But again, this is something that we think that we can improve. It's a very small acquisition. I think it plays on our street and going into a market that's growing a lot, which is the advanced packaging. So we are very excited to look into how can we make it even better and improve our penetration into the advanced packaging in the future. Jakob Bluestone: Great. Maybe just a quick follow-up as well just on CapEx. Can you provide any commentary on CapEx for '26, I guess, particularly in light of the expansion in Almere? Paul Verhagen: Yes. No. The expenses as per our guidance from the Investor Day, I think it was EUR 200 million to EUR 250 million in the years where infrastructure expansion. So in '26 this year, it will mainly be CapEx related to Scottsdale still. And then very likely, as we see it today, then in '27, you will start to see the first more material CapEx for Almere. Operator: The next question is from Sandeep Deshpande of JPMorgan. Sandeep Deshpande: My question is back to the M&A you've done. I mean has the policy of ASM changed at all with regards to M&A? Those of us who have covered the company for a long time, I mean this -- the company did a lot of M&A, then made a lot of exits. Now you've started doing M&A in a small way again. So has the overall policy towards M&A changed at ASM? And are there more areas apart from now the CMP acquisition that you plan to do? And does the company plan to become stand-alone players in this? Or is this just addition to existing tools, which is probably a less risky proposition. And so I just want to try to understand your thought process behind the M&A. Paul Verhagen: Yes. No. So did it change? At least in the last 5 years, it did not, although indeed, we made 3 acquisitions in the last 5 years. And in the 10 years before that, we made none. So from that point of view, you could maybe think there is a change. But I think there's not really a change because also before that, what I understand from my predecessor, they've looked at certain opportunities, but for whatever reason, they never materialized. So we look into M&A if we see an opportunity where we see clear value-creating opportunities and that helps us to grow and build our position further in certain areas that we have labeled as important/strategic to us, then we want to act. And we did that now 3 times. There's always a very clear link to strength that we have. It leverages, let's say, our strength of the capabilities of the company that we buy. It can build and leverage on our global network that we have. So yes, the logic at least for the last 3 have been actually exactly the same for Reno, for LP and now for CMP, Sandeep. And we will continue to scan the market. We have continuously said that. Our first priority in terms of capital allocation is growth. Number one is organic growth. That's why we continue to invest in R&D, very important and in infrastructure expansion, as we explained. But the second is also inorganic. If we see true value-creating opportunities, we try to do it in a very disciplined manner. We're not throwing money away because we have it, no. We only do it if we truly believe that there is a medium- to longer-term strategic play that can create a lot of value to us based on the capabilities that we have in combination with the targets. So that did not really change as far as I'm concerned, Sandeep. Sandeep Deshpande: And a quick follow-up. I mean, I think a quick follow-up. I mean, in terms of the earlier question on your improvement being seen in the logic/foundry market. Earlier last year, you had talked about a slow start to '26. So did something change in the last few months in terms of the slow start that some key customers changed how the trajectory of how they're taking delivery of the tools? Or was this slow start is what you have already guided? This is the guidance and it was underplaying what the market expected. The market was underplaying what you expected, sorry? Paul Verhagen: No, I think, no, absolutely it changed in the last, whatever, 2 to 3 months. You've seen announcements from some of our customers that have significantly increased their outlook, especially a large foundry customer, which I think that's where it started with. We just explained the improved sentiment in China in combination with a pause of some of the export control measures that were initially put in place, but then paused. Some customers will take advantage of that. But at the same time, also clearly improved sentiment there. You read about the hyperscalers and their investments in data centers and infrastructure, hundreds and hundreds of billions. It's definitely a different situation in the last 2, whatever, maybe 3 months than what we thought before. We always thought '26 would be still a good year, but starting in the slow, as you said, and then accelerating more towards whatever the second half of the year. But that acceleration that we actually had expected maybe somewhere in the course of the year, literally starts now. So there's clearly a change, yes. Operator: The next question is from Timm Schulze-Melander of Rothschild & Company Redburn. Timm Schulze-Melander: I had 2, please, one for Hichem and one for Paul. The first one is just on the CMP business model just with respect to consumables, slurry and pads. I know it's a small business, but is that going to be something that you provide? Or is that going to be provided by an external or a third party? And then I had a follow-up. Hichem M'Saad: Okay. So to answer your question, okay, regarding the CMP part of the business and the acquisition. So the -- once -- as the technology in packaging moves more and more into high end, from -- it's going to move from TCB to hybrid bonding in the future. Then what happened is that we're going to go to lower temperature processing and the surface of the interface becomes a very significant in the hybrid bonding part of the advanced packaging. So for such, interface control is very important. We have solutions, organic solutions from our ALD know-how to engineer interfaces and engineered surfaces. But also CMP is part of that whole the whole process flow. And by definition, CMP also affects the surface of the deposition layers that deposited film. So it's important for us also to understand how that interface from CMP works with our deposition films that we developed in CVD and ALD to engineer a very clear interface. So I hope that's very clear from where we stand. This is a new market for us. This is a new market, and we try to understand this market very well. We have -- as we mentioned, we have organic offering there. This organic offering are in ALD in the area of ALD. This organic offering are also in the area of CVD like PECVD, but also this offering, the organic offering is also in the area of epitaxy and silicon photonics, where we also have some traction in those things. So CMP plays a significant role in engineering the interface. It's complementary to our deposition technology. And it's very important for ASM to really know how CMP also engineers the surface and interface in addition to the offering that we have in deposition, both CVD and ALD. The next thing regarding the question that you have asked about slurry and so on and so forth. As I mentioned, the CMP part is moving more and more into the chemical part. So you have CMP, you're trying to polish. So polishing both with force, okay? That's the mechanical part, but also the chemistry, which is the slurry and so on and so forth. And that slurry thing or the chemical part is becoming much more important than the mechanical part because of the 3D drive that's happening in our device. And when you talk about advanced packaging, you're going to put things on top of each other. And you also have wafers that are very thin, they are very brittle. So you cannot put too much force. So the chemical part becomes much more important. We are a company that knows a lot about chemistry, and we have know-how and knowledge in that, which we have applied for ALD and other parts. And we think we can do the same for the CMP part of the business. Timm Schulze-Melander: Great. That's very clear. Just moving on to Paul. sincerely appreciate the improved disclosures. For one, I'd probably request for a quarterly rather than a semiannual, but the disclosure improvement is much appreciated. I just wanted to ask about the cost saves and the run rate and just kind of get a sense as to kind of what the exit rates were or are for '25 coming into '26. And maybe just trying to think about the cost savings contribution and how that might scale or how that sizes relative to the increase in R&D, which I think you're guiding is going to, on a gross level, rise by about EUR 40 million, EUR 45 million. I just wanted to get a sense of maybe the extent to which cost saves might offset how much of that they might be offsetting. Paul Verhagen: Are you specifically referring to SG&A and R&D or also to cost of goods? Timm Schulze-Melander: I'm referring to the broad A to Z cost savings and efficiency programs that you guys have across the company and just trying to scale those relative to the specific cost increase that you're guiding for in the gross R&D spend. Paul Verhagen: Okay. So on the real cost savings, it's more, let's say, margin related where we have explained before on the -- for instance, the standardized platforms. So we have more and more products now that are qualified by customers based on standardized platforms, which have a better cost structure, lower cost structure, more common parts, et cetera, which leads to cost reduction, but also to a reduction of complexity in terms of logistics will lead to somewhat improved inventory simply because of more commonality. I'm not going to give you a number there, but it's -- yes, it's a meaningful improvement, let me say it like that. The other part, but also that will go slow. So every year, you will see some benefit there is the MIT that we talked about before, the merchant transit, where we don't have everything come to Singapore first, assemble it, test it, but have the platform go straight to the customer, the process chamber that comes from Singapore then straight to the customer and assemble it there and test it there, which skips one big step, which is also a big improvement. Of course, we have value engineering initiatives on our products continuously. We have material cost savings, commercial savings. So there's across the board savings going on. On the R&D part, here, I mean, the name of the game is selecting the right priority from the many priorities and many opportunities that we see, which, of course, to a large extent, are based on the, the overall market opportunity that we see and whether or not we can have a differentiated proposition or not, but it's not so much about saving costs, although we try to be very efficient, of course, in what we do there. For SG&A, it's literally doing more with less. So we grow and grow, but we want to automate more. We want to make our processes better. We want to leverage AI better. So there instead of just adding people more and more, it's all about doing more with less and do maybe more with the same, to be honest, to support this growth without adding too much cost. So every line has a different dynamic, if you wish. Operator: The final question is from Marc Hesselink of ING. Marc Hesselink: First its a follow-up on the market share in memory. I think now you very clearly stated that whatever the industry of WFE is doing, you expect to be growing faster. So does that also imply that in the more advanced parts of the memory market, your market share is getting closer to the market share that you have in the advanced logic/foundry. Paul Verhagen: Let me take this, Marc. No, absolutely not. I wish because then we would be looking at very different numbers. No, no. So what I think we try to say is that on the small revenue base that we have today in memory, especially in DRAM, we expect significant growth -- significant growth even more as a percentage than in advanced logic/foundry. Having said that, for '26, we also expect significant growth, in particular, in advanced logic/foundry, maybe a little bit less maybe as a percentage than DRAM, but still very high. If that growth would, let's say, change significantly during the year, the percentage so that advanced logic foundries, we don't expect that this scenario would grow much lower and DRAM would suddenly go even more and stronger than we are today, then the statement that we make is maybe -- would become maybe invalid because if all the growth would be in DRAM, of course, we would not be saying what we were saying. But also, we say what we say because we believe that also the growth in advanced logic/foundry will be very significant. That is the reason why we say what we say. Marc Hesselink: Okay. That's clear. And then my second question is on -- it's more of an organizational question. So you're adding R&D capacity. You're adding -- you have introduced a new IT system. You have now a new Board member. With the growth of the company, you're adding this kind of, let's call it, another layer of professionalization within the company. Is that the way to look at it? Is there more to come? And is there more that you have to scale in the coming years given the high growth that you have going forward and what you had in the past? Paul Verhagen: Maybe one small adjustment, Marc, we did not add a new Board member. It's a new ExCo member. So senior leadership, but it's not a Management Board member. The carrier that we talked about is an ExCo member. I think what we're doing is we have -- actually, this is something that's happening for many, many years in a row. Of course, we're trying to professionalize the company and trying to get ready to scale the company in an efficient and effective manner. So for instance, the new ERP system, which we have globally implemented through a big bang is, let's say, the foundation for further, let's say, growth in a more automated fashion, in a more productive way than we would have been able to do without this because with the previous system, we had to do much more manual work than what we can do today as an example. Also AI applications, we can leverage better with the foundation that we put in place now than what we would have been able to do without this foundation. So yes, it's all about scaling. Yes, it's about professionalization of the organization. So I'm not sure if that answers your question, but this is what I can say. Marc Hesselink: The question was also a bit, is there more to do on this side? I mean, I think we had quite some announcements over the past few years. Is that -- are the large part behind it now? Or are you still taking another steps here? Paul Verhagen: Yes. I'm not sure you're referring to because so many announcements I don't think we've had. I mean, we have an Expo. We have a number of KPIs. We professionalize, I mean, our way of working, which I guess every company does. So we will continue to do that. We will not stop. It's not like, okay, from now on, you will not see any announcement anymore. But yes, I think what we do is for the reasons that I just tried to explain is to scale the company in a controlled, professional and highly productive manner. That's what we are trying to do. Operator: That was the final question. I will turn it back over to the CEO for any closing remarks. Hichem M'Saad: On behalf of Paul and Victor, I would like to thank everyone for attending today's call. We hope to meet many of you guys very soon in the upcoming investor events. Thanks again, and goodbye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Operator: Thank you for standing by, and welcome to the Daktronics, Inc. third quarter fiscal year 2026 Financial Results 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 star 11 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Lindsey Vetter. Please go ahead. Lindsey Vetter: Thank you, Jonathan. Good morning, everyone, and thank you for participating in our third quarter earnings conference call. During today's presentation, we will make forward-looking statements reflecting our expectations and plans about our future financial performance and future business opportunities. These forward-looking statements reflect the company's expectations or beliefs about future events based on information currently available to us. Of course, actual results could differ. Please refer to slide two of the presentation that accompanies today's call, our press release, and our SEC filings for information on risk factors, uncertainties, and expectations that could cause actual results to differ materially from these expectations. During this presentation, we will also refer to non-GAAP financial measures. You can find the reconciliation of each non-GAAP measure to the most directly comparable GAAP measure in the appendix to the accompanying presentation slides, which may be found on the Investor Relations page of our website at www.daktronics.com. Our earnings release for the 2026 third quarter, which was furnished to the SEC on Form 8-K this morning, also contains certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as a discussion of certain limitations when using non-GAAP financial measures, are included in the earnings release, which has been posted separately to the Investor Relations page of our website. I will now turn the call over to Brad Wiemann, Interim President and CEO through the third quarter, for his review. Brad Wiemann: Well, good morning, everyone. Welcome to our call. Thank you for joining our third quarter fiscal 2026 call. I am joined on the call by Howard Atkins, board member and Acting Chief Financial Officer, along with Ramesh Jayaraman, CEO and President, who is officially in the role as of February 1. We will review our fiscal 2026 third quarter, which ended on 01/31/2026, along with the results and accomplishments, and then take your questions. Turning to our slide presentation on slide three, here are the key messages for the third quarter. The team delivered another quarter of solid results, driving revenue growth of 21.6% year over year, despite the effectively shorter work period due to the three major holidays as well as adverse weather conditions throughout the quarter. Our manufacturing team did a superb job in efficiently converting the order book we have built over the past few quarters. During the quarter, we progressed with several large-scale installations, including five Major League Baseball stadiums, such as the Seattle Mariners, as well as the University of Illinois football's video scoring system. Orders in the quarter were once again over $200,000,000. Our sales and marketing team secured large orders in our Live Events segment. Our Transportation segment had a record order quarter with a good uptake in airports and in intelligent transportation systems. With new order growth in the quarter at 7.6%, our product and services backlog grew to $342,000,000 coming into Q4 and is 25% higher than it was this time last year. In December, we announced our acquisition of the intellectual property and the absorption of associated engineering teams from ex display companies, or XCC, expanding our micro LED and micro integrated circuit capabilities. XTC advances our high-resolution, narrow pixel niche product offerings and provides us a cost-effective pathway to service small volume display opportunities with medium-sized display solutions. While the Supreme Court decision on reciprocal tariffs is now known, the market outcome with respect to refunds is likely to be highly uncertain for the foreseeable future. Turning to slide four. In our Live Events business, as I mentioned, we won another Major League Baseball project in the quarter, making us six for six in large Major League Baseball projects in fiscal 2026. Additionally, we won several other stadium and arena display enhancements, as customers continue to expand their digital display footprint throughout their venues. We continue to enhance our product and service offerings to align with customer needs, such as our narrow pixel pitch product line, advanced control system capabilities to engage fans, and improved seamless control and management of displays from anywhere, giving venue operators greater flexibility and control over their digital assets. Pictured here is the Seattle Mariners slide deck. In our Commercial business, on-premise advertising remained strong. Customers continue the successful transition to next-generation fuel-type products, which was supported by a large order from a national customer. In our Out of Home business, we added several new customers this quarter, but were down overall due to purchase delays from a key account, which we expect to recover in the fourth quarter. Our pipeline of opportunities continues to expand with independent billboard operators, as more and more customers recognize our value proposition based on brand strength, image quality, reliability, service responsiveness, and reputation for innovation with the release of our new billboard products. In our Outdoor Spectacular segment, we booked a large order in Times Square, and we grew our pipeline of projects. We also expanded our indoor business sold through audiovisual integrator channels through our offerings of narrow pixel pitch chip-on-board products. Pictured here is the Miami Beach Convention Center. In Transportation, orders for both intelligent transportation systems and aviation were up a record 130% from last year. We secured a very significant project with one of the top five airports in the U.S., along with new orders from Caltrans in California. Pictured here is a rendering of that top five airport win. In International, after a great order year in 2025, our international business was down from last year. However, we have secured sizable orders from two stadium customers in Spain and Australia as they are expanding their systems. We also see a strong uptake in indoor solutions across multiple markets, especially government entities, through growing our audiovisual integrator channel partners. Pictured here is an indoor video display at the United Arab Emirates University. High school parks and recreation continues to have a solid year with third quarter order growth of 13.4% over the last year. We have expanded our presence among the 30-some thousand high schools in the U.S. and continue to win projects by leveraging our position in the communities we serve and enhancing our differentiating financial service offerings through Daktronics Sports Marketing. We expect continued strong uptake in our leading solutions and adoption of professional services, particularly in high school curriculum development and in-classroom service offerings. Pictured here is Marathon High School in Florida. Turning to slide five. Key product releases. Our commitment to innovation continues to differentiate us as a value provider among our customers. In the third quarter, we introduced our next-generation indoor video solution for high school arenas, as well as a next-generation digital audio facade for outdoor audio solutions. For the remainder of fiscal 2026, we have two additional product launches planned: our next-generation LED street furniture, as well as specialized large-digit fuel price system offerings, which expand our product line for high-rise signage for long-distance viewing. The photos here show an example of our indoor narrow pixel pitch at Eldon High School in Eldon, Iowa, and our new digital audio facade installed at Dallas Independent School in Dallas, Texas. Turning to slide six. Our plan to achieve sustainably higher profit growth for the company remains on track. In the third quarter, here is an update on initiatives and progress. The strategic price adjustments we have implemented align with our value-selling approach. The development of our software-as-a-service initiative augments how we serve the market, developing recurring revenue subscription models and simplifying our customer engagement. We are digitizing most aspects of our business to make it easier and faster for customers to do business with us and to improve internal operating efficiency, and we are actively applying artificial intelligence to improve productivity throughout the company. I will now turn it over to Howard Atkins, our Acting Chief Financial Officer, to review our financials. Lindsey Vetter: Howard? Howard Atkins: Thank you, Brad, and good day, everyone. Thank you for your interest in Daktronics, Inc. The Daktronics team produced another solid quarter in the third quarter. We anticipated the usual seasonal pattern with fewer days to complete order bookings and to fulfill revenue, and also typical adverse weather conditions that did prevail in the quarter. But because this was anticipated, we took steps in the field and in our manufacturing to continue the year-over-year growth that we have now produced over each of the last four quarters. As Brad mentioned, orders grew about 8%. Remember, last year in the third quarter we booked a $30,000,000 stadium order. This year in quarter three, we also had a number of larger orders, including one stadium order on the last day of the quarter, but the single largest deal in the third quarter of this year was $13,000,000. Importantly, our orders have now been relatively broad-based at or over $200,000,000 in each of the last five quarters, including a record Transportation order in the third quarter. As orders have grown, so has revenue. We had $182,000,000 in the quarter, which grew more than 20% year over year, mostly due to efficient order conversion by our manufacturing teams during the quarter, which included working more than one shift at times to fulfill the extra order flow around the holidays. Gross profit margin in the quarter was essentially flat to the year-ago quarter at 24%, reflecting a variety of factors: one, the benefit of operating leverage as revenue rose year over year relative to fixed costs in our cost of goods sold; secondly, the efficiencies we have achieved up and down the supply chain as a result of the business transformation initiatives that have been undertaken in the last year; and thirdly, mix on new business was a little bit better in the third quarter than previously. These margin benefits were offset by the fact that backlog fulfillment in the quarter was largely from the lower-margin Live Events business line. More importantly, last year did not contain any reciprocal tariffs or any other of the newer tariffs that were only introduced late in 2025. We had an extra $6,000,000, for example, of total tariff expense in the third quarter of this year. The sequential gross profit margin declined from 27% to 24%. The main factor there was fixed-cost operating leverage which, as previously described, when revenue is going up, it typically goes up faster than our fixed costs in COGS, and on the way down, it just has the opposite effect. So our revenue declines a little faster than the fixed-cost side of cost of goods sold. Daktronics third quarter 2026 net income after tax was $3,000,000, or $0.06 per fully diluted share. This quarter included nonrecurring expenses related to management transition and acquisition expenses of $1,600,000, or adjusted net income of $4,600,000. Last year's third quarter net loss of $17,200,000 included a $14,000,000 fair value adjustment on the convertible note that has since been converted and also contained $3,600,000 of consultant-related expenses associated with the business transformation initiatives and corporate governance matters that pertained last year. Adjusted net income a year ago, therefore, was about $500,000, so we are up quite substantially from there. After removing the nonrecurring expenses and noncash benefit, our third quarter 2026 net income rose significantly on an adjusted basis. Since we have solid earnings, we are able, starting this year, to take advantage of the new tax laws permitting accelerated depreciation for R&D and other expenses. On a pretax basis, operating income for the quarter was $1,900,000 compared with an operating loss of $3,600,000 in 2025. In addition to the nonrecurring items, the company incurred a $400,000 expense for the first time as it absorbed the expert developers that Brad mentioned before from XPC. The impact of the intellectual property adjustments on the Daktronics balance sheet is negligible. We had a small gain offset by a write-down of the remaining loan that we had to XDC from Daktronics. So negligible balance sheet impact and about a $400,000 impact on operating expenses for the one month that we absorbed so far the new team. Let me now turn to segment revenue. This table, if you remember, shows at the business-line level, over a period of time last year and then sequential quarters as well, the percentage of our revenue coming from each of our business lines and the margin most commonly we are earning on each of those businesses. It also shows the gross profit margin earned in the third quarter. This gives you some sense of how business mix is impacting our revenue. As indicated a couple of times, most of our revenue growth this past year has derived from the fulfillment of Live Events projects, typically lower-margin projects. So that is what is coming through on the revenue line. We did have a small amount of revenue in the quarter coming through the orders, but as Brad alluded to before, this quarter in particular we had a little bit of a skewing towards the back end of the quarter in terms of the new order growth, and as a result, the revenue contribution from that will land in the fourth quarter as opposed to the third quarter. So, again, most of the revenue coming through in the third quarter was from backlog. I should mention that in Live Events, the fulfillment that we have is heavily engineered with high dependence on indirect installation costs. The next slide shows you our segment product backlog, and last quarter we highlighted for you again that most of the revenue coming through from the backlog was Live Events. The product backlog stood at $342,000,000 at the end of the third quarter, continuing to be up—up 25% from a year ago. Particularly with the recent major wins, our backlog remains high and remains weighted towards Live Events. We are now starting to convert the major projects that we have talked about over the past couple of quarters, which will be a feature of our revenue growth in the fourth quarter and into the early part of 2027. This gives us, as you would imagine, a multi-quarter runway on our revenue and a more predictable growth pattern and stronger revenue recurrence over the next couple of quarters. The combination of a high backlog, as I have just alluded to, coming into the fourth quarter with what we are seeing as a good pipeline already in the fourth quarter—good order momentum—sets us up well for a good top- and bottom-line finish to the year. Let me now move to the next slide and talk about our balance sheet, which, as you may remember, has been substantially strengthened over the last three or four quarters. This slide shows you how we are managing working capital and capital allocation. First, our inventory levels have moderated relative to revenue over the past several quarters. Our manufacturing team has done a really good job efficiently managing inventory. This is one of the initiatives that we undertook in the business transformation projects over last year, and this reflects again better alignment and improving efficiency in our working capital management. During the first nine months of the year, we repurchased approximately 1,300,000 shares of common stock at a volume-weighted average price of $17.60. That leaves us with about $17,000,000 worth of open share repurchase authorization. Since the company reinstituted its share repurchase program in late 2024, the company has repurchased 3,360,000 shares of stock at a VWAP of about $15.15. We ended the quarter with a cash balance of $144,000,000, an increase of 13% from 2025. So we continue to run a relatively strong cash balance, even with the share repurchase activity. We essentially are keeping a very strong balance sheet to give us the resiliency and adaptability to continue to generate strong returns for our shareholders going forward as we use cash and capital of the company for shareholder benefit. We have converted our commercial bank backup credit line from an asset-based facility to a cash-flow facility, reducing its cost and providing the company with additional financing flexibility if necessary. We, of course, have no borrowings under the company's bank line of credit, and none are contemplated at this point in time. We now turn the floor over to Ramesh. Ramesh Jayaraman: Thank you, Howard, and good morning, everyone. It is an exciting time to officially join and serve as the Daktronics, Inc. CEO. I am honored to lead a great company at this pivotal time and to work with the talented team that has accomplished a great deal in strengthening a resilient platform for sustainable and profitable growth. As we move to the next slide, I want to start by thanking Brad Wiemann, who presented earlier today and who has served very capably as the Interim President and CEO. Brad has been instrumental in my onboarding, and we have completed a smooth transition and handover of the CEO role. Brad will stay with Daktronics, Inc. as Executive Vice President and adviser, and I will continue to rely on his knowledge and judgment as we move forward. Thank you again, Brad. Moving to the next slide. My first priority, as I joined February 1 officially, was to come up to speed quickly, and I have been on a learning journey—what I call a look, listen, learn tour—as I settled into Brookings, South Dakota, to be closer to the team and to our business. It has been an absolute warm welcome by the past management, the team, and the community as a whole. I have had a chance to travel both domestically and internationally, visiting sites in bidding as well as completed stage to understand our offerings, meet our customers and suppliers, including at a global trade show. In addition, I have spent time in some of our factories and repair centers to look at the operational excellence work that is in progress, and with our frontline—our sales and field service technicians. In addition, I have spent time reviewing plans for our talent as we look at the growth that we are planning ahead. This journey continues to teach me as we continue defining our strategies, all with an intent of being a market-led, technology-driven, and customer-focused difference maker in the AV market space. Turning to the next slide. I have to say, as I get around the company, I have been personally able to witness firsthand the dedication, the focus, and the drive of our team members, and the results they can produce as you just saw in Q3 results. We are entering into the final quarter of the year with very strong momentum, strong end-market demand, and a strong backlog tailwind. We are driving towards a strong finish of fiscal 2026 through efficient revenue conversion, and expense and productivity management, to deliver strong results and continued cash flow generation. We are, in parallel, also formulating our next strategic steps from a customer-led and market-first perspective with the lens on growth—developing products, services, and solutions that extend our competitive lead and building a lens on operational excellence to optimize the profitability and cash generation we deliver. I would like to personally invite you all to our Investor Day on April 9 at the Nasdaq MarketSite, where the leadership team and I will present our joint plans to drive the next phase of Daktronics, Inc. growth. We will offer updates in our vertical market growth opportunities, execution initiatives, innovation priorities, as well as our capital allocation and financial frameworks. We look forward to having you join us. With that, we will turn the call over for your questions. Operator? Operator: Certainly. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press 11 on your telephone. Our first question comes from the line of Aaron Spychalla from Craig-Hallum Capital Group. Your question, please. Aaron Spychalla: Yeah. Hi, Ramesh, Brad, and Howard. Thanks for taking the questions. Maybe first for me on the win rates. You know, they have been really impressive on the large-scale side of Live Events. You know, you talked about six for six. Can you just talk about how that pipeline is shaping up here as seasons, you know, kind of wrap up in the next few months? And then just maybe how would you characterize win rates across the overall business versus historical? Brad Wiemann: Hey. Good morning, Aaron. This is Brad. Yeah. We won another Major League Baseball project, which is excellent. Our pipeline continues to be robust, strong going into this next year, so we are happy about that. Of course, you have seen our backlog, so we have a nice backlog in the business. And then we have the college and university side, and we have talked about that in the past, and some of the headwinds that are in that market, but are being worked out, and that is really around the NIL money that is being spent on coaches and players. We think that all gets worked out. But as you saw, we have the University of Illinois project that we worked out—the largest football stadium build that we had—and there are others in the pipeline, so we are excited that that opportunity still exists. So pipeline overall looks good. And win rate, of course, as you mentioned, we were six of six this last year. So we are excited about that, and that is partly to play with one of our competitors taking a little bit of a backseat in the marketplace this last year, which we have talked about before. Is that helpful, Craig? Ramesh Jayaraman: I am also able to add to it from my perspective. Yeah. I mean, I think we have got strong wins in Live Events as Brad just mentioned, but our high school market and our Transportation market also continue to be strong. And I think it is important to have the fact that as we look at our growth, we are looking with a balanced portfolio—the appropriate portfolio management—as we kind of move ahead to gain market share. As Brad earlier mentioned, we had a massive win in Transportation that we just announced. And, really, as you look at our high school markets, they continue to be strong, driven by this change from scoreboards to video. And I think we see that trend continuing to be strong in the marketplace. So I would say it is balanced overall as we try and look at our growth story, just going through the quarters as they do in terms of how high schools spend and the college, you know, and the football or the NFL or NBA each kind of spend. So that is what we are going with. Aaron Spychalla: Thanks. I appreciate the color on that. And then maybe, you know, on the Commercial market, I know you have been making inroads, you know, expanding the reseller and integrator channel. Just maybe, you know, an update there. And it seems like demand trends are pretty good in that market as well. Ramesh Jayaraman: Yeah. They continue to remain strong. Brad Wiemann: I talked about our on-premise as well as our public spectaculars and Out of Home market. Those are still looking promising. The overall buying position of Out of Home customers—that is the advertising segment—is strong. I did mention one customer that pulled back a little bit in the third quarter. That is one of our national customers, and we believe that recovers this next quarter. So nothing concerning there. Our products that we are bringing to the marketplace for the on-premise segment continue to help us to win projects there, so we are seeing growth on that side of it. But on the spectacular side, we had a nice win in Times Square, as I mentioned, but the exciting part for me is the audiovisual integrator space that we continue to see growth in, and that is on our indoor product lines, which is really a big part of our overall growth strategy. Aaron Spychalla: And just, I mean, on that reseller and integrator channel, I mean, maybe an update on just efforts there—where you are in that journey? Brad Wiemann: Yeah. On the reseller side, we have been in that business for some time, and we, you know, continue—we have salespeople all across the U.S.—to work and develop sales channel partners and to promote more of our products through that channel. So that is going well. The AV integrator is a newer area for us, and we are seeing continued growth. I think this is our—I cannot quite go back through the numbers because I do not have them top of mind—but we are seeing continued growth and expansion in that space in both the number of integrators, number of orders, and the number of quotes. So the pipeline continues to grow. That is really aligning around our indoor product lines and this chip-on-board offering that is really doing quite well for us. That is helping us both in the AV space as well as some of these large projects, which we mentioned, across transportation, airports, and other things. So, yeah, overall, we are going to continue to invest in that area to expand our presence in that particular market space or through that channel partner of AV integrators. Aaron Spychalla: Thanks for the color there. And then maybe one last question on margins. I know you highlighted the tariff impact. So excluding that, another good quarter. Maybe just talk what inning you think you are in from these operations initiatives and just trying to understand where margins can go from here, and then any thoughts more broadly on any oil impact and just what is going on macro-wise—what that could mean for the supply chain, if anything. Howard Atkins: On the first issue, Aaron, in terms of where we are, you know, we have either started or we are on the way on kind of the vast bulk of the initiatives that came out of the project we did last year. And all of what we have either started or are in the process of completing has either been built into or is about to be built into our regular strategic planning process. So that is how we are embracing everything and tracking to make sure that everything gets completed going forward. So I would say, from a starting and along-the-way point of view, we are well into the game. In terms of the realization of the benefit, I would also say we are a year into the effort at this point, and, you know, again, we are more than a third to a half into the actual realization of the benefit. But, again, the important thing is, you know, we are taking what we have done and now building it into a more comprehensive strategic plan because if the world changes—and there are more things that we are thinking of doing for sure about strategically and operational efficiency things as well—and we will continue to talk about that, and we will have some detail around that at the Investor Day. As far as the geopolitical situation in the world, we are monitoring it. You know, there is risk out there, and a lot of uncertainty. Obviously, the uncertainty level has gone up. But as we have described in the past, you know, we intentionally keep things in the company reasonably adaptable, and as the world changes, we will adapt to the world. We have a great manufacturing network that allows us to do that. We have a team that works well together to make sure that it happens effectively. And so being adaptable and resilient here is really important, and also having cash is really important. So that is how we are trying to deal with the answer. Aaron Spychalla: Great. Thanks for taking the questions, and looking forward to the Investor Day. I will turn it over. Operator: Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press 11. Our next question comes from the line of Anja Soderstrom from Sidoti. Your question, please. Anja Soderstrom: Hi, and thank you for taking my questions. I have some follow-ups and then I have some other questions. So on your gross margin, you also mentioned it was due to revenue mix and the Live Events being softer, and given Live Events is a big part of your backlog, how should we think about the impact of that going forward? Howard Atkins: Anja, there is a table in the presentation which shows you, as of the end of the quarter, the mix of revenue in the backlog. So you see actually the number, and we try to give you what might be left of the revenue after the fourth quarter is finished. So we have, you know, somewhat of a hint, if you will, if not a calculation of what you might expect coming through from the backlog and how Live Events might impact that. The point that we would make about the GP margin declining sequentially again has to do with the fact that our gross profit margin—the cost of goods sold side of the margin—does have some fixed cost in it. So when revenue is going up, you get the benefit of that on the gross profit margin. When revenue is going down, as it did seasonally in the third quarter, the opposite effect happens. So that is, and we will have more to say about that as well to help you understand that at the Investor Day. Anja Soderstrom: Okay. Thank you. And then in terms of the facility, is that on track, and would that have any sort of impact on the margins? Howard Atkins: I am sorry, Anja, say again, please. Anja Soderstrom: Mexico facility. Is that on track to be up and running in April, and would that potentially have an impact on the gross margin as well? Howard Atkins: Yeah. Not a significant impact on the gross margin overall. You know, capital expenses are to be capitalized, and we are leasing the facility there. But your question about being on track—yes, it is. We expect to be up and operating in the first quarter of FY '27, so this coming next fiscal year. That is all progressing well, and we expect to be fully operational certainly by the second quarter. Anja Soderstrom: Okay. Thank you. And then you mentioned the delay from a key account in Commercial. What gives you the confidence that that is temporary, and do you expect maybe that shortfall in the third quarter to be made up in the fourth quarter? Brad Wiemann: Yeah. What I am referencing there, without naming the account itself, is that there was an acquisition made in this past year, so they are going through that acquisition phase, and we expect that to fully be in place and orders to continue to come in in the fourth quarter. So nothing new there. We will certainly keep you apprised if something changes, but we do not expect that to be the case. Anja Soderstrom: Okay. Great. Thank you. And then just as we have entered 2026, with everything that is going on and uncertainty, have you felt that the sentiment among your customers has changed at all? Brad Wiemann: Yeah. We work in big projects—large projects that are well capitalized and have been moving along. So the opportunities that are out there, we are not foreseeing any reduction. Now speaking of the U.S. market, which is the majority of our business. As we get to the international side of it, and we do some business throughout the Middle East and Australia, of course, and Europe—we will see how that plays out. But, overall, I think the sentiment is projects are moving forward. They are funded. We are part of a larger overall project, and we are typically on the back end of the project. So those are usually well funded and moving forward. So we are not expecting anything to be delayed at this point. Anja Soderstrom: Okay. Thank you. And then in terms of M&A, what can we expect there? What are you looking at there? And how is the market for M&A? Howard Atkins: As we have said in the past, Anja, we continue to believe there are opportunities to do tuck-ins and fill-ins in each of our businesses. We are obviously looking at that, but the other message I would give you on that is just our flexibility. Again, we have a strong cash position. We, as you know from everything that we do, are return-focused. We are not going to do anything that does not make sense strategically, that does not have industrial logic to it, and it has got to meet our financial return criteria, and we have to be able to integrate properly. So those are important characteristics. But, along the strategic path, there inevitably will be some opportunities for us. Ramesh Jayaraman: I think to add to Howard, this is part of our strategic consideration. Clearly, as Howard mentioned, the industrial logic has to make sense. And as we look at it through all phases—whether it be product, verticals, or geographies—this is something we are considering actively on a daily basis just given our cash position. But, at this stage, we do not have anyone that we could go and say we are right behind. But it is clear that, once one of these comes to fruition, we will be able to talk about our history. Anja Soderstrom: Okay. Great. Thank you. That was all for me. Operator: Alright. Thanks, Anja. Thank you. And this does conclude the question-and-answer session of today's program. I would like to hand the program back to Ramesh for any further remarks. Ramesh Jayaraman: Thank you. Again, thank you, everyone, for participating. Thank you for joining our call today. We will be appearing, as I mentioned, at the Investor Day on April 9, but also at the Roth Conference in March. We look forward to seeing you there, and we clearly look forward to speaking with you all on our fourth quarter call. So thank you again, and have a great day. Thank you. Operator: Thank you. And thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good day, and welcome to the Hyster-Yale Materials Handling, Inc. Fourth Quarter and Full Year 2025 Earnings Call. All participants will be in a listen-only mode. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Ms. Andrea Saba. Please go ahead, ma’am. Andrea Saba: Good morning, and thank you for joining us for Hyster-Yale Materials Handling, Inc.’s Fourth Quarter and Full Year 2025 Earnings Call. I am Andrea Saba, Director of Investor Relations and Treasury. Joining me today are Alfred Marshall Rankin, Executive Chairman, and Rajiv K. Prasad, President and Chief Executive Officer. Yesterday, we filed our fourth quarter 2025 earnings release, which provides a comprehensive overview of our financial results and performance. The discussion in this script serves as a supplement to the earnings release, offering additional insights and context for our results. You can find the release and a replay of this webcast on the Hyster-Yale Materials Handling, Inc. website. The replay will remain available for approximately 12 months. Today’s call contains forward-looking statements subject to risks that could cause actual results to differ from those expressed or implied. These risks are outlined in our earnings release and SEC filings. We will be discussing adjusted results, which we believe are useful supplements to GAAP financial measures. Reconciliations of adjusted results to the most directly comparable GAAP measures are available in our earnings release and investor presentation. First, I will start with a brief overview of our fourth quarter and full year results before turning the call over to Rajiv to discuss the business environment and strategic outlook. During the fourth quarter, we saw several encouraging signs. Bookings in the fourth quarter strengthened significantly, increasing 42% sequentially and 35% year over year, which may signal the early stages of a demand recovery following an extended period of customer caution. Also, the first two months of 2026 continued this trend. Fourth quarter operating cash flow increased to $57 million, driven by meaningful improvements in inventory efficiency. We continue to make progress aligning production with demand, improving finished goods management, and reducing inventory levels, all of which support stronger cash generation. That said, market conditions remained challenging during the quarter. Fourth quarter revenues declined to $923 million, reflecting weaker shipment volumes across the business as customers continue to delay purchases until they have a clear need for new trucks. Tariffs remain a significant headwind, reducing both quarterly and full year revenue and operating profit. In the fourth quarter, the impact of tariffs, combined with lower volumes, resulted in an adjusted operating loss of $16 million. This includes $40 million in gross tariff costs. Looking at full year 2025, revenue declined to $3.8 billion and we reported full year adjusted operating profit of $16 million. This result includes approximately $100 million in gross tariff costs, underscoring the magnitude of the ongoing external pressure on our results. While 2025 reflected a difficult operating environment, our improved bookings, strong cash flow performance, and disciplined cost and inventory management position us well as demand begins to recover. With that foundation in place, I will now turn the call over to Rajiv. Rajiv K. Prasad: Alright. Thanks, Andrea, and good morning, everyone. I will start by sharing how we see the current economic landscape unfolding, how those dynamics are shaping customer behavior, and how we are positioning the company in response. After that, I will walk through our expectations for 2026, before turning over the call to Al for his closing remarks. The global lift truck market remained challenged in the fourth quarter, with year-over-year declines across all regions and truck classes. However, despite that broad pressure, we began to see an important divergence emerge late in the year. North America showed meaningful sequential improvement relative to quarter three. This uptick translated into stronger bookings and a noticeable improvement in customer engagement, as an encouraging contrast to EMEA and JAPIC, where demand contracted sequentially as customers remained cautious amid macro uncertainty. This brings me to the underlying customer mindset. Across all regions, customers are still heavily focused on cash preservation, higher financing costs, and fleet utilization. As a result, many continue to defer capital spending, especially for higher-duty equipment. This has suppressed ordering activity outside of North America. Against this difficult backdrop, our quarter four booking performance stood out as a meaningful positive development. Bookings increased to $540 million, up significantly from $380 million in quarter three and $400 million in the prior year quarter. The Americas drove most of this increase, with particular strong traction in core counterbalance Class 5 trucks in the 1 to 3.5 ton range. Looking at the first two months of 2026, we have seen the positive booking momentum persist. North America industry demand recovery is continuing, outperforming our expectations. The company’s own bookings are ahead of prior year, driven primarily by continued strength in our core counterbalance trucks and solid performance in the Americas. This reinforces our view that the underlying recovery is gaining traction as we enter 2026. But the more notable shift is why bookings have improved. Customers began converting quotes into firm orders at a materially higher rate, suggesting extended backlog delivery is now complete, greater clarity around their operational needs, rising urgency, and early signs that replacement cycles, which have been deferred, are starting to reengage. This shift, combined with the increasingly aged fleet and rising maintenance costs, supports our view that replacement-driven demand may be gaining momentum as we enter 2026. Stepping back, it is important to underscore that 2025 was a difficult year after two very good years, one marked by high tariff costs, softer industry demand, and heightened customer caution. Many customers were still taking delivery of equipment ordered during long lead-time windows, stretching fleet lives, and delaying normal replacement cycles. We now believe many are nearing natural replacement timing. This is a key element behind our cautious optimism going into 2026. As we exited the year, backlog totaled $1.28 billion, reflecting shipments outpacing new orders, especially within EMEA, where recovery will have lagged due to delayed orders and industry shifting towards lighter-duty, lower-priced products. Sequential backlog decline was driven primarily by lower unit volumes partially offset by higher average selling prices tied to material and component costs. Constant movement further reduced the translated value of backlogs. Now let me bridge that to what we are seeing in early 2026. Early-year bookings have been strong across all regions. Even though shipments began the year at lower levels than quarter four, if this trend continues—and we expect it will—bookings should begin to outpace shipments, allowing backlog to rebuild towards a more normalized three- to four-month level. This, in turn, supports more efficient production planning. Pulling these pieces together, we expect quarter one 2026 to mark the trough of the current cycle, primarily reflecting the lower order intake levels from earlier in 2025. As we move through the year, improving customer confidence, stronger bookings, and backlog building should allow production and shipments to expand gradually, with meaningfully stronger volumes expected in 2026. Even as volumes trend upwards, near-term margin pressure is likely to persist. Here is why. The market continues shifting towards lighter-duty, lower-priced models. Competitive pricing, particularly from foreign manufacturers in Europe and South America, remains aggressive, and this has reduced shipments in traditionally higher-margin categories. Despite the challenging backdrop, our approach remains consistent, focused on what we can control, and on making disciplined, forward-looking investments that position the company for transformation which will accelerate when the market turns. Our priorities remain the same: rigorous working capital management, tight operational discipline, accelerated technology and product development, and continuous data-driven monitoring of leading indicators across customers and suppliers. We have been through many market cycles, and that experience reinforces an important point: resilience and readiness matter. While we cannot control external forces, we can control how we operate. That is why we are concentrating on efficiency, productivity, innovation, and responsible cash management. To deliver on these priorities, we are executing transformation programs across several fronts. Product strategy. We have introduced new modular and scalable platforms to address these evolving segments. While these offerings strengthen our long-term competitive position, margins will remain pressured until they gain full market traction. Operational efficiency. We are streamlining operations, managing inventory more tightly, and improving working capital efficiency. These actions help generate cash, even when revenues and profits are under pressure. Manufacturing flexibility. Our modular vehicle platforms allow us to build the same models in multiple regions. This flexibility helps us adapt quickly to tariff changes, logistic challenges, or supply chain disruptions. Customer engagement. We are strengthening our relationships with dealers and end customers. By listening closely and co-developing solutions, we are aligning our product roadmap with the real challenges customers are facing today. Product innovation. We are accelerating new product launches and introducing technologies that improve performance, lower total cost of ownership, and help us stand out in the market. Market readiness. We are watching leading indicators closely so we can scale quickly when conditions improve. Our goal is to be a first mover as soon as demand begins to recover. Global optimization. We are aligning our manufacturing footprint and supply chain to improve cost competitiveness and responsiveness across all regions. These actions are helping us manage the current environment with agility and discipline. They are also strengthening our long-term structure, lowering our breakeven point, and improving product margins so earnings become more resilient over time. Our overarching goal is clear: Hyster-Yale Materials Handling, Inc. is the first mover when demand accelerates, enabled to scale quickly and capture profitable growth. To further support our long-term position, we have taken decisive action to lower our cost structure and strengthen resilience across market cycles, which include the VERA strategic realignment executed in 2025 that delivered $15 million of cost savings in 2025, and redeployed resources to higher-growth opportunities; a company-wide restructuring program launched in 2025 targeting $40 to $45 million of annualized savings beginning in 2026; and manufacturing footprint optimization initiatives that began in 2024 and are expected to deliver $20 to $30 million in benefit in 2027 with full annualized savings of $30 to $40 million by 2028. In total, we expect recurring annualized savings of $85 to $100 million by 2028 compared to the beginning of 2025 before inflationary cost increases. I will now move to discuss tariffs, which remain a major external factor. We have outlined our assumptions regarding tariff costs in the earnings release, which were prior to the IEPA decision. With these assumptions, forecasted tariff costs are expected to remain broadly consistent with quarter four 2025 levels throughout 2026. While we have implemented pricing, sourcing, and cost initiatives, we do not expect to fully offset tariff impacts. Benefits from mitigation actions are expected to increase beginning in quarter two 2026, so year-over-year comparisons will remain unfavorable early in the year. We are also monitoring recent legal developments related to tariffs. The Supreme Court’s ruling was limited to IEPA tariffs and did not invalidate other tariffs or address potential refunds, which, if required, would likely take years to resolve. Broader implications for trade policy remain uncertain, and additional tariff-related decisions will likely continue to be challenged in court. They could affect how certain tariffs are applied and how related costs or potential recoveries are recognized. These mitigation efforts should begin contributing more meaningfully in quarter two 2026, so early-year comparisons will remain unfavorable. Andrea Saba: Bringing everything together, we remain cautiously optimistic. Rajiv K. Prasad: Market conditions are still challenging, but improving bookings and aging fleets provide constructive signals, and volume recovery is expected in 2026. Based on these factors, for the full year, we expect moderate full-year operating profit, a small loss in the first half, followed by stronger revenue and profit improvement in the second half as volumes rise and cost actions take hold. As we move into 2026, the company remains committed to generating strong operating cash flow and allocating capital in ways that enhance long-term value. Management is executing targeted initiatives to improve working capital efficiency, with particular emphasis on aligning production and working capital practices with periods of reduced output. We expect meaningful progress on these initiatives during 2026. As production levels increase later in the year, the focus will shift from conserving working capital to supporting growth, while maintaining the inventory and production disciplines established during the current downturn. Together with continued cost optimization, these actions are expected to drive solid cash flow from operations supported by improving net income. Investment in modular development and critical capital equipment and IT capabilities remains central to the company’s ongoing transformation, enabling advances in new product development, manufacturing efficiency, and information technology capabilities. Capital expenditures for 2026 are expected to range from $55 million to $75 million, with the final level dependent on the pace of production improvements. Management will closely monitor spending throughout the year and may accelerate investment as production levels and market share improve as anticipated. As the company continues to generate cash, it will maintain its disciplined capital allocation framework, prioritizing debt reduction, pursuing strategic investments to support profitable long-term growth, and delivering sustainable shareholder returns. We have managed through cycles before, and we are confident in our ability to do so again by staying disciplined, strategic, and focused on long-term value creation. Now I will hand the call over to Al for his closing remarks. Thank you, Rajiv. As you have heard today, 2025 was a challenging year for our industry. Demand softened, tariffs were a significant headwind, and customers were understandably cautious. Alfred Marshall Rankin: Especially since they were still receiving trucks ordered in earlier years. But it was also a year in which we took decisive actions to strengthen Hyster-Yale Materials Handling, Inc. for the next phase of the cycle. We have used this period to improve the business fundamentally, lowering our cost structure, increasing operational flexibility, sharpening our focus on cash generation, and investing in the products and capabilities that matter most to our customers. These actions are not short-term fixes. They are structural improvements that position us to perform better across cycles. Importantly, we are beginning to see early signs that the market is stabilizing. Things have improved. Customer engagement is increasing, and aging fleets are driving renewed focus on replacement. While we remain realistic about the near-term environment, we are cautiously optimistic that 2026 represents a turning point, with stronger performance expected as the year progresses. Our priorities remain clear and unchanged: disciplined execution, proven capital allocation, and a relentless focus on the long-term value creation of our company. We are committed to maintaining financial flexibility, investing where we see durable returns, and positioning Hyster-Yale Materials Handling, Inc. to be a first mover as demand recovers. We have managed through many cycles over the years, and that experience gives us confidence, not complacency. We know success comes from preparation, discipline, and focus. Actions underway today are transforming our company by building more resiliency, higher profit, higher-margin growth, and a more competitive company. We believe this will all translate into improved earnings power and stronger returns over time. That concludes our prepared remarks. We will now open for questions. Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question for today will come from Chip Moore with Roth MKM. Please go ahead. Chip Moore: Hey, good morning. Thanks for taking the question. Rajiv K. Prasad: Good morning, everybody. Chip Moore: Wondering if you could perhaps expand on the pent-up demand dynamic and potential for fleets to get replaced. Just the conversations you are having, it sounds like things have continued to trend in the right direction here in 2026 so far. And any thoughts around mix and when we might see a bit of a shift to the more profitable list? Thanks. Rajiv K. Prasad: Yeah, Chip. I think, as we talk to our customers, they are transitioning from conserving to really ensuring that they will have what they need for their operations. I would not say it is particularly euphoric. It is still about what must they do, and we are talking about predominantly industrial customers. So, certainly, as I look at our bookings, it is heavy on counterbalanced trucks. So I think that is the nature of it. I would say people are doing it despite their concerns because of the need, and it is mostly industrial customers who are coming back to us. We are also promoting that by launching some programs that will help them do it, so that has been a bit of a catalyst to further engage our customers. Alfred Marshall Rankin: I think I would add just one thought to what Rajiv has said, and that is that the context here is that we have basically now delivered all of the long, high-backlog, early-order trucks. So the customers are now no longer receiving trucks, which they were, I think, Rajiv, just as recently as a month or two ago. So that dynamic changes, in a sense, the backdrop against which they are executing their own plans and thinking through what to do. So I think that is an important consideration. Chip Moore: Yeah, definitely. Thanks, Al and Rajiv. That is helpful. If I could ask one more, maybe can you just update us on new product launches and the pipeline there and, particularly, anything around automation as well? Thanks. Rajiv K. Prasad: Sure. So I think from a new product launch point of view, in fact, just this week, we are launching some new products to our customers. It is really part of our modular and scalable spreading of that platform into our electric counterbalance trucks and also starting to be implemented in some of our warehouse products. So these launches are being introduced to our dealers in the early part of the month, and they will be available for sale by the end of the month so they can go out and take orders. In terms of the automation solution, we have been working with what we would call friendly customers to install the automation as part of a pilot. Those have gone very well. We have started to get orders for the automated trucks, and then we are also now engaging some of our dealers into the selling process of these automated trucks. So I would say that will accelerate throughout the year. The actual official launch of the automated IDA truck is in April. So it is coming very soon. Chip Moore: Okay. Thanks very much. I will hop back in queue. Andrea Saba: Okay. Thanks. Operator: The next question will come from Ted Jackson with Northland Securities. Please go ahead. Ted Jackson: Thanks. Good morning. Good morning, guys. So first, I just want to summarize what I am hearing from you all just to make sure I am getting the message. I am a little slow today. So in the fourth quarter, bookings picked up, driven by North America industrial counterbalance. Outside of North America, bookings did not pick up. They were somewhat stable, but what you are seeing there is a shift towards smaller, more price-competitive product. Going into 2026, bookings continued to strengthen not just in North America, but also seem to be spreading to the rest of the world, although the rest of the world is still seeing smaller, more price-competitive product in terms of what is being booked. You expect your bookings to continue to strengthen as you roll through 2026 as you go through really a replacement cycle. But the mix of your bookings will be towards these smaller, more price-competitive products, which means that although I would expect to see a margin recovery, we will not see a full-blown margin recovery. So is that what I am hearing from all of the dialogue in the press release? And then behind that, if it is correct, then does it mean that it should be as we exit 2026 that we would see your margins move—gross margin—more to the mid-teens into the high-teens? That is my first question. Rajiv K. Prasad: Yeah. So I think that is directionally very correct, Ted. In terms of the margin levels, the 2023–2024 margin levels were out of the ordinary for us. We saw something in the low twenties. I do not think we will see that. We will see, depending on the product line, in that range between mid-teens to high-teens, which is where our targets are. So, yeah, I think that basically everything is normalizing. Our backlog is normalizing. Our margins are normalizing. The one thing that is happening in the market—and we kind of predicted it—is that there is a trend towards lower capability trucks because that is what the customer needs. And so those are going to be the primary path forward. Well, that was the whole point behind the effort to put the products out anyway. So you are absolutely positioned for it. But it is fair to expect, if this scenario plays out, that by the time we get out of 2026, your gross margins should be somewhere in the mid- to high-teens. Ted Jackson: If indeed we are seeing we are at the bottom of the cycle. Rajiv K. Prasad: I think that would be a fair estimate. Ted Jackson: Okay. And then I have a question just on CapEx. I thought that the CapEx guide was—at least the midpoint of it—would have been a little higher than I expected. Can you talk a bit about the thought process within your spend and where you are going with it and why you are ramping it up that much? Rajiv K. Prasad: Yeah. The vast majority of the CapEx is going into really three areas. It continues to be towards product. We continue to scale out the modular, scalable, and our technology solutions now, including automation and lithium-ion batteries and chargers that go with it. The second area is around really upgrading our IT infrastructure. Especially over the coming year, we are going to launch a new CRM system. We are going to really upgrade our data product lifecycle management system, and the parts business will move to a new ERP system. So that is quite a lot of IT-type programs that we are implementing in 2026 and in 2027. And then the last area is optimizing our manufacturing footprint. What that means is we are moving some production globally and putting additional capabilities in geographies that did not have it. So it gives us a full ability to source any type of truck from anywhere to anywhere. And I think, as we discussed in the past, the modular scalable platform was designed to be able to do that, but it does take some capital to spread that capability. The other thing we are doing in our operations is adding more automation—much more automation in the way we manufacture our lift trucks. Ted Jackson: Okay. Those are all worthy investments. And then my last question, just a little more in terms of markets and stuff. How about a little update on the efforts and the progress for the company in terms of penetrating the warehouse segment—the goal of taking some market share there? Can you give us some kind of color on what is going on? That is my last one. Thanks. Rajiv K. Prasad: Yeah. We have made some progress in that area, especially in North America. Our share has improved in the warehouse market. I think the big enablers and accelerators will continue to be some of the new trucks we are launching. We are in the middle of launching a new three-wheel stand, which is going to come with a lot of scalability and address parts of the market we have not been successful in in the past. We will continue to add our safety systems, such as our AI camera and our DSS system. This is to make sure to avoid pedestrian incidents and keep the operator operating in the right stability range, and then our automation solution and the energy solutions are all very targeted towards the warehouse segment of the market. So we think those will help customers and provide us an opportunity to discuss these solutions with customers we have not had a close relationship with in the past. And, in fact, a lot of that is going on as we speak. Okay. Well, thanks very much for the questions. We will talk to you soon. Andrea Saba: Thanks, guys. Operator: The next question will come from Kurt Lutke with Imperial Capital. Please go ahead. Kurt Lutke: Hello, everyone. Thank you. Thank you for the call. With respect to the order rates in the Americas, the pickup is very encouraging. Can you give us a sense for how orders trended by end market—directionally positive or negative—autos, e-commerce, that type of thing? Rajiv K. Prasad: Yeah. Typically, we do not break it down to industries, but I would say that a lot of the recovery has been in what I would term as industrials, and more on the heavy side. Generally, people who are manufacturing things—either equipment or capital goods like metals and paper and lumber, things like that. Hopefully, that gives you a feel. Obviously, that portion of the market were the ones most concerned about some of the things we got into in 2025, whether that was tariffs, and along with tariffs, the confidence in what is going to happen globally in these industrial materials and solutions. I think that has been the case. In the warehouse side of the business, it pretty much stayed steady—maybe a little bit of a dip, but nothing like the industrial side. Kurt Lutke: That is helpful. Thank you. You have mentioned automation a couple times. Sounds like maybe it is still early days, but can you give us a sense for how the shift toward autonomous and lithium-ion will impact the margins and to what extent? Rajiv K. Prasad: Yeah. I think both. The revenue will be higher because, typically, in the past, we have generally sold trucks without—even electric trucks without—batteries and lead-acid batteries. And certainly, when we sell internal combustion engine trucks, they have an engine but no fuel—we do not provide that. Whereas when we implement a lithium-ion solution, we provide a smart energy system. Now you need to put electricity in it to make it work, but the battery comes from us, and then the charger—because it is an intelligent charger—comes from us as well. So it is quite a bump in revenue. Now, for automation, there is a much larger bump in revenue because there are very high-capability sensors, software, and actuation systems in those trucks to automate them. So they are significantly higher, both from a revenue point of view and margin point of view. Kurt Lutke: Interesting. Is it 2x in terms of revenue per unit? Is it that much? Rajiv K. Prasad: Depends on the solution, but in that range, yeah. Kurt Lutke: Got it. And what kind of margin—are the margins higher as well? Rajiv K. Prasad: Yeah. Kurt Lutke: And what percentage of your sales in the Americas would you say is autonomous? It is tiny, right? Rajiv K. Prasad: Yeah. I mean, we are still in the pilot phase. It is tiny. But we expect that to grow over the next two or three years to become an important part of our business. Kurt Lutke: Got it. Excellent. And then, lastly, a follow-up on tariffs. I know you have some flexibility as to where you assemble product. Have all those moves been made? Rajiv K. Prasad: It is a constant juggle. As you saw, the Supreme Court really turned down the IEPA tariff that was having a big impact on where those products should be coming from. Now, the 122 tariffs have gone on, so that has had a bit of an impact on where we source from. But the key thing for us is that we have now the ability to do that. We have a forum within the company where we decide those—in fact, one of those meetings is straight after this call. So we are basically meeting monthly to make those calls, and the plants are being very responsive. Kurt Lutke: Got it. I appreciate it. Thank you very much. Operator: And this will conclude our question-and-answer session. I would like to turn the conference back over to Ms. Andrea Saba for any closing remarks. Please go ahead. Andrea Saba: Thanks to the participants for your questions. We will now conclude our Q&A session. A replay of our call will be available online later today, and the transcript will be posted on the Hyster-Yale Materials Handling, Inc. website. If you have any follow-up questions, please feel free to reach out to me directly. My contact information is included in the press release. Thank you again for joining us today, and now I will turn the call back over to the Operator. Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. A replay of today’s event will be available shortly after the call by dialing +1 (877) 344-7529 or +1 (412) 317-0088 using replay access code 10205863. Thank you for your participation. You may now disconnect.
Operator: Good day, everyone, and welcome to Weyco Group, Inc. Fourth Quarter and Full Year 2025 Earnings Release Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please note, this conference is being recorded. Now it is my pleasure to turn the call over to the Chief Financial Officer, Judy Anderson. Please proceed. Judy Anderson: Thank you. Good morning, and welcome to Weyco Group, Inc.'s conference call to discuss fourth quarter and full year 2025 results. On this call with me today are Thomas W. Florsheim, Chairman and Chief Executive Officer, and John W. Florsheim, our President and Chief Operating Officer. Before we begin to discuss the results for the quarter and year, I will read a brief cautionary statement. During this call, we may make projections or other forward-looking statements regarding our current expectations concerning future events and the future financial performance of the company. We wish to caution you that these statements are just predictions and that actual events or results may differ materially. We refer you to the section entitled Risk Factors in our most recent Annual Report on Form 10-K, which provides a discussion of important factors and risks that could cause our actual results to differ materially from our projections. These Risk Factors are incorporated herein by reference. They include, in part, the uncertain impact of U.S. trade and tariff policies, which remain highly dynamic and unpredictable, the impact of inflation on our costs and consumer demand for our products, increased interest rates, and other macroeconomic factors that may cause a slowdown or contraction in the U.S. or Australian economy. Overall net sales for 2025 were $76,800,000, down 5% compared to $80,500,000 in 2024. Consolidated gross earnings were 44.1% of net sales compared to 47.9% of net sales in 2024. Earnings from operations were $10,200,000 for the quarter, down 12% from $11,500,000 in 2024. Net earnings totaled $8,700,000 for the quarter, down 13% from $10,000,000 last year. Diluted earnings per share were $0.91 per share in 2025 compared to $1.04 per share in the prior year's fourth quarter. Net sales in our North American wholesale segment totaled $56,700,000 for the quarter, down 6% from $60,400,000 last year. Sales were down due to lower shipping volumes, partially mitigated by our July 1, 2025 price increases. Wholesale gross earnings as a percent of net sales were 37.2% and 42.4% in 2025 and 2024, respectively. Gross margins for the quarter were negatively impacted by incremental tariffs. Although selling price increases helped mitigate the effects of these tariffs, they did not fully offset the resulting costs, leading to margin erosion for the period. Wholesale selling and administrative expenses totaled $12,700,000, or 23% of net sales for the quarter, versus $16,700,000, or 28% of net sales, last year, down largely due to lower employee costs this year. Wholesale operating earnings totaled $8,400,000 for the quarter, down 6% from $8,900,000 in 2024 due to lower sales volumes and gross margin. In early 2025, the U.S. imposed retaliatory tariffs on imported goods. Throughout 2025, these incremental tariffs increased the cost of our products by 19% to 50%, resulting in gross margin compression. On February 20, 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act, also known as IEEPA, does not authorize the President to impose tariffs, invalidating the statutory basis for incremental tariffs enacted since February 2025. The matter has been remanded to the Court of International Trade for further proceedings, including issues related to implementation and potential refunds. We paid approximately $16,000,000 of incremental tariffs in 2025. In December 2025, we filed a lawsuit seeking a refund for amounts paid in connection with incremental tariffs imposed pursuant to IEEPA. The President responded to the court ruling by announcing the implementation of a 10% across-the-board tariff under a separate statutory authority. The administration has indicated that rates may be increased further subject to statutory limits. Certain other tariffs imposed under authorities independent of IEEPA remain in effect. U.S. trade policies remain fluid and unpredictable, creating near-term gross margin uncertainty. We have mitigation strategies in place and will continue to adjust as needed in response to future policy development. Net sales in our retail segment totaled $13,300,000 for the quarter, down 5% from $14,100,000 in 2024. Fourth quarter 2025 sales were negatively impacted by an increase in sales reserves related to our e-commerce businesses. Retail gross earnings as a percent of net sales were 64.3% and 65% in 2025 and 2024, respectively. Retail operating earnings totaled $1,900,000 for the quarter and $2,500,000 in last year's fourth quarter. The decrease was primarily due to the sales reserve adjustment described earlier. Our other operations consist of our retail and wholesale businesses in Australia and South Africa, which are collectively referred to as Florsheim Australia. Net sales of Florsheim Australia were $6,800,000 in 2025, up 12% from $6,000,000 in 2024. In local currency, Florsheim Australia's net sales were up 11% for the quarter, driven by growth in both its wholesale and retail businesses. Florsheim Australia's gross earnings as a percent of net sales were 61.5% and 62.5% in the fourth quarters of 2025 and 2024, respectively. Its quarterly operating losses totaled $100,000 in 2025 versus operating earnings of $100,000 in the prior year. We will now discuss our full year 2025 results. Consolidated net sales for the full year were $276,000,000, down 5% compared to sales of $290,000,000 in 2024. Consolidated gross earnings were 43.2% of net sales compared to 45.3% of net sales in 2024. Full year 2025 operating earnings were $29,200,000, down 20% from $36,600,000 in 2024. Net earnings totaled $23,100,000, down 24% from $30,300,000 last year. Diluted earnings per share were $2.41 per share in 2025 and $3.16 per share in 2024. North American wholesale net sales were $217,000,000 in 2025, down 5% compared to $228,000,000 in 2024. We are pleased to announce that despite the challenges of 2025, our Florsheim brand achieved record wholesale sales. Sales of our Nunn Bush, Stacy Adams, and BOGS brands decreased in 2025. Wholesale gross earnings as a percent of net sales were 37.5% in 2025 and 40.2% in 2024. Gross margins for the year were negatively impacted by incremental tariffs. Wholesale selling and administrative expenses totaled $4,054,600,000 for the year, and $60,100,000 last year, down largely due to lower employee costs. As a percent of net sales, wholesale selling and administrative expenses were 25% and 26% in 2025 and 2024, respectively. Wholesale operating earnings totaled $26,600,000 in 2025, down 16% from $31,500,000 in 2024 due to lower sales volumes and gross margins. In our North American retail segment, net sales were $35,700,000 in 2025, down 8% from a record $38,700,000 in 2024. The decrease was primarily due to lower direct-to-consumer sales of Florsheim, BOGS, and Stacy Adams footwear. BOGS website sales were also impacted by fewer promotional activities in 2025. Retail gross earnings as a percent of net sales were 65.7% and 65.9% in 2025 and 2024, respectively. Retail operating earnings totaled $3,300,000 for 2025 and $5,300,000 last year. The decrease was primarily due to lower sales volumes. Net sales of Florsheim Australia remained relatively flat at $23,700,000 and $23,600,000 in 2025 and 2024, respectively. In local currency, Florsheim Australia's net sales were up 2% for the year, driven by growth in its retail businesses. Florsheim Australia's gross earnings as a percent of net sales were 61.5% in 2025 and 61% in 2024. Florsheim Australia generated an operating loss of $700,000 for 2025 and $200,000 in 2024. Our effective tax rates for 2025 and 2024 were 28% and 23.9%, respectively. Our 2025 income tax provision included a charge to establish a valuation allowance on Florsheim Australia's deferred tax assets. Our 2024 tax provision was reduced by deductions related to share-based compensation. At December 31, 2025, our cash and marketable securities totaled $101,000,000, and we had no debt outstanding on our $40,000,000 revolving line of credit. During 2025, we generated $37,300,000 in cash from operations and used funds to pay $7,700,000 in dividends. We also repurchased $5,300,000 of company stock and had $1,800,000 of capital expenditures. We estimate that 2026 annual capital expenditures will be between $1,000,000 and $3,000,000. During January 2026, we paid our February and special cash dividends totaling $21,400,000 to shareholders. On March 3, 2026, our Board of Directors declared our first quarter cash dividend of $0.27 per share to all shareholders of record on March 13, 2026, payable March 31, 2026. I will now turn the call over to Thomas W. Florsheim, our Chairman and CEO. Thomas W. Florsheim: Thanks, Judy, and good morning, everyone. Our overall company sales were down 5% in the fourth quarter and 5% for the full year. While we are never content with the decline, given the challenges we faced related to tariffs and dampened consumer sentiment, we are proud of the work done by our production and sales teams to navigate these economic headwinds. For an extended period during the second quarter, we faced tariff rates that rendered trade with China, our largest sourcing country, commercially prohibitive. Because the second quarter is a primary manufacturing period for our key fall shipping window, this created a strong likelihood of disrupted deliveries to both our wholesale partners and our direct-to-consumer business. By strategically keeping production running on key programs and holding finished goods overseas, we positioned ourselves to deliver nearly 100% of our fall shipments on time once tariffs were reduced to commercially viable levels. Throughout 2025, new tariffs increased the cost of our products by 19% to 50%, resulting in gross margin compression despite a 10% price increase that took effect in July. Over the past year, we have made significant progress in diversifying our manufacturing base to be less China-centric. Sales of our combined legacy business declined 7% in the fourth quarter and 4% for the year. Given the uncertain economic environment, particularly in soft goods, our accounts continue to take a conservative approach to inventory management, which negatively impacted fourth quarter shipments. The Florsheim division reported a 1% decrease for the quarter and a 2% increase for the year. The brand achieved $92,000,000 in sales in 2025, an all-time record, making it one of the few men's brands outside of the athletic category to sustain this level of post-pandemic growth. While the nonathletic brown shoe category has been in secular decline, Florsheim has bucked the trend and gained market share. Sell-throughs of traditional dress and refined casual footwear have been strong, and the brand continues to make progress in the hybrid and dress sneaker categories. Our Nunn Bush business declined 13% for the quarter and 10% for the year. The mid-tier trade channels, which account for the majority of Nunn Bush's volume, remain under pressure, negatively impacting sales. As an opening price point brand with major retailers, Nunn Bush also faces increased competition from private label programs as stores seek to improve margins. We believe we are taking the necessary steps to return Nunn Bush to growth, including value-engineering product to meet key price points while delivering attributes and benefits not typically found in private label offerings. Retail sell-through of Nunn Bush remains solid. Stacy Adams sales declined 13% for the quarter and 9% for the year, reflecting continued challenges in the fashion dress shoe market. While the Stacy Adams brand remains a leader in this category, retailers are devoting less inventory and shelf space to dress shoes. Our focus with Stacy Adams continues to be on expanding categories beyond its core elevated dress offerings. The BOGS business remains difficult with sales down 6% for the quarter and 11% for the year. While early winter cold and snowfall resulted in strong sell-through of BOGS product, fall selling declined year over year as retailers maintained a conservative, chase-based inventory strategy for seasonal product. Retailers ended the season with exceptionally clean inventories, and we are now seeing strong bookings for fall 2026. While we are optimistic about improvement this year, we remain mindful of the long-term impact of climate change on the weather boot category. Our priority continues to be the development of footwear designed for multi-season use. Net sales in our retail segment declined 5% for the quarter and 8% for the year. In 2025, our e-commerce consumer was increasingly value-oriented. Our overall inventory position is significantly cleaner than the prior two years, which is a positive; it resulted in lower conversion among consumers motivated by clearance discounts. As we enter the new year, we remain disciplined in our approach to inventory management and anticipate a lower level of clearance sales. We believe that there is a meaningful opportunity to drive full-price sales through improved storytelling across our brand portfolio and clearer communication of product attributes and benefits. Florsheim Australia's net sales increased 12% for the quarter and 11% in local currency. For the year, net sales were flat, increasing 2% in local currency. Florsheim Australia, which includes New Zealand, South Africa, and our Asia wholesale business, remains a work in progress. While certain areas such as Australian e-commerce delivered solid gains, we continue to face challenges in our Australian wholesale business, where improvements are necessary to drive profitability. Our overall inventory as of December 31, 2025 was $65,900,000 compared to $74,000,000 at December 31, 2024. We think our inventories are at a healthy level as we move into the first quarter of this year. Our overall gross margins were 44.1% for the quarter and 43.2% for the year. Our margins were down 200 basis points for the year due to incremental tariffs. With the IEEPA tariffs ruled unlawful and the administration implementing new tariffs, we are expecting continued cost uncertainty in 2026. We are prepared to continue to adjust our margin and pricing strategy with the goal of maintaining historical margins. This concludes our formal remarks. Thank you for your interest in Weyco Group, Inc., and I would now like to open the call to your questions. Operator: Thank you so much. And as a reminder, if you have a question, simply press 11 to get in the queue and wait for your name to be announced. To remove yourself, press 11 again. One moment, please. Again, that is 11 if you have a question. One moment for our first question. The line of John Eric Deysher with Pinnacle Value Fund. Please proceed. John Eric Deysher: Good morning, everyone. Judy Anderson: Good morning. John Eric Deysher: Solid year in a difficult market. Just a couple of quick questions. You mentioned you paid approximately $16,000,000 in incremental tariffs. How much of that did you recover in terms of price increases? Thomas W. Florsheim: I would say that, you know—Judy, I do not know if you—our wholesale margin is down about 400 basis points from last year, more or less. You know, so we had a 10% price increase, but it did not cover a significant portion of how the tariffs impacted our business. Are you—yeah. That was John speaking. John, are you looking for a dollar amount? John Eric Deysher: Well, a percentage would help. In other words, did you recover 50% with price increases, 30%, 70%—just the rough percentage. Thomas W. Florsheim: Yeah. It is hard. It is a confusing answer because the tariffs from different countries varied a lot. You know, the last several months from India, we had a 50% tariff, so the 10% increase just got us a small percentage of the tariff back. And most of the other countries were at around 20%. But that also varied during the several months of the second half where China—China was originally higher and went down to 20%. I believe it was 30% for a period, and then it was over 100% for a period. And so we took a very methodical approach to increasing prices because we are in a tough market as far as consumer sentiment. And so what we were trying to achieve with that was mitigate part of the tariff impact but also maintain market share as best as we could. And so it is not an easy answer, and I am sorry if we are not giving you exactly what you want there. John Eric Deysher: Oh, okay. That is understandable. The lawsuit for the refund—about how much are you looking to retrieve with that lawsuit? Thomas W. Florsheim: Well, we are hoping to retrieve the whole thing. As the administration's attorneys took this up through the court system, they—I cannot remember if it was the federal appeals court or the Court of International Trade—but they basically said to the court, please do not stay this because if the Supreme Court rules this unlawful, we will pay back these incremental tariffs, the IEEPA tariffs, with trust. And so they are on record in the court system as saying they would pay this back. Once the Supreme Court ruled, the tune changed a little bit from the administration, saying they might litigate it. And I think that is going to be difficult for them because they were so clear in what they said to the court as this moved up to the Supreme Court. Now it goes back down to the Court of International Trade for remedy. And so we are optimistic, but we have also seen that things can get tied up in litigation no matter what. So we are going to wait and see, but we are optimistic about getting back the whole $16,000,000. John Eric Deysher: Oh, okay. So that was the refund that you are seeking, $16,000,000 or so? Thomas W. Florsheim: Exactly. You state a number when you file the lawsuit. It is just a refund on all the IEEPA tariffs. John Eric Deysher: Right. Okay. That makes a lot of sense. You mentioned China. I am just curious. Last year, what percentage of the cost of goods sold were imported from China roughly? Thomas W. Florsheim: I would say it was about 65% to 70% from China. What we have done, John, last year was a busy year for sourcing. And what we have done is we have established a much better footprint in Cambodia and Vietnam than we had prior to 2025. So we are in a really good position to continue to grow our sourcing outside of China. You know, we were thrown a little bit of a wrench into the works because we have a big base of manufacturing in India. And when China was hit with tariffs early on at very high levels, we moved product to India, and then India got hit with 50%. So the uncertainty around these tariffs makes it difficult. But we are learning to live with that uncertainty, and we have set up a much more flexible supply chain for the future. John Eric Deysher: Okay. Great. That is good to hear. And I guess finally, on the e-commerce business, the increase in sales reserves—can you give us some color on that? Why that was necessary? Judy Anderson: That was just a standard adjustment that was made in the fourth quarter. It just happened that our sales declined by not that much, a small amount, and it is just that adjustment to the sales reserve was a little bit more than that. So it seemed significant in relation to the change in the sales for the quarter. John Eric Deysher: Okay. Are any of your e-commerce customers facing any kind of pressure at this point? Thomas W. Florsheim: John, do you mean our actual direct-to-consumer customers? Or— John Eric Deysher: Well, both, actually. I know it is a pretty competitive business, and I was curious if there is any pressure on either the wholesale business or the e-commerce side. Thomas W. Florsheim: I think what we are seeing out there is that our end customer is shopping for deals. And two things are going on. One is our inventory is extraordinarily clean right now. In 2025, we had more clearance, but it really dwindled throughout the year. And so we just do not have as much clearance to offer customers, and, as such, they are moving to look for deals on Florsheim or BOGS or Stacy Adams on other sites. The other thing in that dynamic is that, as the owner of the brand, we are trying not to be out there discounting as much in terms of our ongoing line. But we do have wholesale partners out there that carry our ongoing top patterns, top styles, that will discount from time to time. We are seeing a migration of our consumers from our site to other sites in terms of purchasing. So I think our overall wholesale e-commerce business is holding up relatively well. Our own websites are down just because of the two reasons I just communicated. John Eric Deysher: Okay. Good. Very helpful. Just one more quickie if I might. We are all hearing about higher oil prices, and I was just curious if that impacts your vendors in terms of, I do not know, foam costs or anything like that. Have you thought about how that dynamic might play out? Thomas W. Florsheim: As far as what cost did you say? John Eric Deysher: Foam costs or any other, you know, parts of the shoe that are oil-impacted. Thomas W. Florsheim: Yeah. No. I think that there are two impacts that I can think of. The first one is that if this goes on for a while, it is going to reduce discretionary spending on the part of the consumer because more of that spending is going to go to filling up their car and for heating bills and everything. The second impact, as far as our products go, is really more with shipping. I mean, you might see the shipping lines raise their prices if it goes on because that is a big part of their cost. As far as the actual impact on components going into footwear, unless this goes on for a long time, I think that would be very minimal. And so we do not see a major impact other than maybe the consumer being more stretched. Other than that, from the standpoint of the cost of the shoes, we do not really see a big impact. John Eric Deysher: Okay. Good. That is it. Thanks for taking my question. Thomas W. Florsheim: Thanks, John. Operator: Thank you. Our next question comes from Christine Sutton with Shopify. Please proceed. Christine Sutton: Yes, thanks for the context, and I appreciate the discipline around not discounting directly as you just explained, which protects wholesale partnerships as well as the brand. But I wanted to ask about the dynamic of customers who already buy bypassing the wholesale and coming directly for the e-commerce, seeing that that was just asked. My question is if the customer is already coming to your brand sites, would being able to increase the conversion size directly while circumventing the discount shopping—would that be a helpful aspect to layer on while still keeping the wholesale partnerships, which is obviously a critical part of the earnings success for the last quarter? Is that something that will help? Thomas W. Florsheim: Yeah. We are always looking for ways to increase conversion. I want to do that in a way that is healthy for the business. I think the situation right now is we just have less clearance, and the consumer is under pressure right now. And I think that is affecting soft goods in general. So when consumers have less money in their pocket, they are looking for deals. And if we have less clearance, it lowers our conversion rate, and that is just something that we work through. But we feel actually pretty good about how our e-commerce business is performing, but you are going to have these types of changes based on the obsolescence in your inventory. Christine Sutton: I appreciate that. Thank you for the answer. Operator: Thank you. And this concludes our Q&A session. I will turn it back to Judy Anderson for closing comments. Judy Anderson: Thank you for your support of Weyco Group, Inc., and everyone have a great day. Operator: Thank you. And this concludes our conference. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to Gran Tierra Energy Inc.'s Conference Call for Fourth Quarter and Year End 2025 Results. My name is Shannon, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the initial remarks, we will conduct a question-and-answer session for securities analysts and institutions. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being webcast and recorded today, Wednesday, 03/04/2026 at 11:00 AM Eastern Time. Today's discussion may include certain forward-looking information, oil and gas information, and non-GAAP financial measures. Please refer to the earnings and operational update and press release we issued for important advisories and disclaimers with regard to this information and for reconciliations of any non-GAAP measures discussed on today's call. Finally, this earnings call is the property of Gran Tierra Energy Inc. Any copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy Inc. I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra Energy Inc. Mr. Guidry, please go ahead. Gary Guidry: Thank you, Shannon. Good morning, and welcome to Gran Tierra Energy Inc.'s fourth quarter and year end 2025 Results Conference Call. My name is Gary Guidry, Gran Tierra Energy Inc.'s President and Chief Executive Officer and with me today are Ryan Ellson, our Executive Vice President and Chief Financial Officer, and Sebastien Morin, our Chief Operating Officer. Yesterday, we issued a press release that included detailed information about our fourth quarter and year end 2025 results. In addition, Gran Tierra Energy Inc.'s 2025 Annual Report on Form 10-K has been filed on EDGAR and is available on our website. Ryan and Sebastien will make a few brief comments and we will then open the line for questions. I will now turn the call over to Ryan to discuss our financial results. Ryan Ellson: Good morning, everyone. The company has recently successfully executed a bond exchange of our 9.5% senior secured amortizing notes due in 2029 with a participation rate of approximately 88%, demonstrating high investor confidence in the company's strategy. Combined with our prepayment agreement and recent Simonette disposition, we are entering 2026 with a meaningfully enhanced liquidity position and a stronger balance sheet. Subsequent to year end, we amended our existing prepayment agreement, adding up to $175 million of incremental capacity plus a $25 million accordion, and it was our primary source of liquidity to support the 2029 notes exchange. Concurrently, we terminated our Colombia credit facility, however, kept our C$75 million Canadian facility in place. Importantly, this improved maturity profile and enhanced liquidity position allow us to shift from near-term refinancing considerations to disciplined, opportunistic debt reduction. With extended runway provided from the debt exchange, we can actively pursue bond buybacks at attractive discounts while continuing to allocate capital to the highest return development opportunities across the portfolio, accelerating deleveraging without sacrificing asset progression or long-term value creation. Additionally, we are very pleased to announce our entry into Azerbaijan, which we view as a compelling and capital-efficient addition to our portfolio. Partnering with SOCAR provides an early, scaled entry into a stable and supportive jurisdiction with established infrastructure and a long production history. This opportunity aligns with our strategy of pursuing risk-mitigated growth in proven basins where our operating model and technical expertise can drive value. Given Azerbaijan's role in supplying energy to European markets, we see meaningful long-term strategic potential from this entry. From a hedging standpoint, we continue to layer in hedges to support cash flow stability in 2026. Oil volumes are approximately hedged throughout the year using a mix of three-ways, collars, and puts with an average floor around $60, balancing downside protection with upside exposure. For gas, we have AECO swaps covering on average 14,200 GJ per day at approximately $2.77 per GJ for 2026. Our 12-month rolling program maintains disciplined coverage levels while preserving price upside. Turning now to our financial results for the year. During 2025, Gran Tierra Energy Inc. realized a net loss of $193 million, or $5.45 per share, which included ceiling test impairment losses of $136 million, compared to net income of $3.2 million, or $0.10 per share, in 2024. Gran Tierra Energy Inc.'s capital expenditures increased slightly by $8 million, or 3%, to $256 million compared to 2024, due to a higher number of wells drilled during the year in Colombia, Ecuador, and Canada. The company realized adjusted EBITDA of $284 million, a decrease of 23% from $367 million in 2024. 2025 funds flow from operations was $178 million, or $5.02 per share, compared to $225 million in 2024. Both these decreases were commensurate with the decrease in Brent oil price. The company generated net cash provided by operating activities of $313 million, an increase of 31% from $239 million in 2024. The company had $83 million in cash and cash equivalents as at 12/31/2025, a decrease compared to a cash balance of $103 million as at 12/31/2024. In addition, the company has its Canadian facility fully undrawn with a capacity of C$75 million. During 2025, the company bought back $21.3 million face value of the company's 2029 senior notes. Gran Tierra Energy Inc.'s net oil and gas sales for the year were $597 million, a slight decrease of 4% compared to 2024. Total 2025 operating expenses were $249 million compared to $202 million in 2024, representing a 23% increase, while operating expenses per BOE were $15.17, 6% lower when compared to 2024. The increase in total operating expenses in 2025 was a result of higher operating costs in Ecuador driven by a production ramp-up in 2025 and a full-year contribution from Arcane operations. Taken together, we have had a very busy start to the year with all these corporate actions repositioning the company for a strong 2026 and beyond. I will now turn the call over to Sebastien Morin to discuss some highlights of our current operations. Sebastien Morin: Thanks, Ryan. Good morning, everyone. I will start with our 2025 year end reserves. On January 28, 2026, we announced our year end reserves as evaluated by McDaniel. The results reinforce the strength, depth, and optionality embedded in our portfolio. In South America, we delivered greater than 100% reserve replacement on both the PDP and 2P basis, driven by exploration success and strong asset performance. For 2025, we reported 142 million barrels of oil equivalent of 1P reserves, 258 million barrels of oil equivalent of 2P reserves, and 329 million barrels of oil equivalent of 3P reserves. South American reserve replacement was 101% for PDP, 61% for 1P, and 105% for 2P. These outcomes were supported by multiple exploration discoveries in Ecuador, disciplined management of our low-decline Colombian assets, and successful integration of our Canadian operations into a diversified multi-basin portfolio. In Canada, certain natural gas reserves were reclassified as contingent resources due to current low gas prices under reserve booking standards. As operator of the majority of our assets, we retain the flexibility to reallocate capital towards high-return, quick-payout gas development in a stronger price environment, and we remain constructive on long-term natural gas demand given LNG expansion, structural growth in power demand, and our PDP reserves continue to generate meaningful cash flow that supports deleveraging while our broader inventory, including approximately 0.3 Tcf of unrisked 3C contingent resources in the Glauconitic formation and 0.4 Tcf of 3P gas reserves across our Canadian assets, provide substantial long-term gas development optionality. The organic and inorganic growth achieved over the past several years has created a runway of highly economic development opportunities in proven plays with established infrastructure. With Canadian operations now fully integrated, approximately 18% of production, 19% of 1P reserves, and 22% of 2P reserves are attributable to natural gas, and Canada represents 39% of 1P and 44% of 2P reserves. This diversification enhances resilience across commodity cycles while preserving capital allocation flexibility. From a valuation perspective, year end 2025 NAV per share was $22.61 before tax and $13.61 after tax on a 1P basis, and $51.09 before tax and $31.17 after tax on a 2P basis. Compared to our current share price, this reflects a meaningful discount two to five times across all NAV categories. In terms of production, Gran Tierra Energy Inc. achieved 2025 average working interest production of 45,709 barrels of oil equivalent per day, representing a 32% increase from 2024 due to positive exploration well drilling results in Ecuador and full-year production from our Canadian operations, which was partially offset by lower production in southern Colombia and Ecuador as a result of two major export pipeline disruptions and the Moqueta field being shut-in due to trunk line repairs within the third quarter of 2025. Operationally, we are building off a successful year in 2025 to start off 2026 on a strong note. As Ryan noted previously, with the company fulfilling all 2025 Ecuador commitments and the Suroriente carried work program well underway, we are entering a new phase focused on generating cash flow and maximizing the value of our diversified portfolio. From a development standpoint, we are excited to share that we recently drilled the Rahoo-2 well on the Suroriente block, targeting the northern extent of the Cohembi field. The well is producing approximately 790 barrels of oil per day at less than 1% water cut and is performing ahead of our initial expectations. The result further delineates the field and supports the broader development potential of Cohembi to the north. Rahoo-2 also advances our Suroriente capital carry commitment, which we expect to complete by mid-2026. To close, our operational focus remains on portfolio longevity, asset quality, and disciplined execution. With the addition of Azerbaijan, our portfolio now spans four countries, six basins, and three continents, further enhancing diversification. The company continues to be supported by a strong PDP foundation, meaningful 1P and 2P reserves, and a consistent track record of progressing resources from 2P to 1P and ultimately into producing assets. As we advance our operational and financial objectives, we remain steadfast in our commitment to safe, responsible operations and supporting the communities in which we work. With a stronger capital structure and a clear focus on free cash flow and debt reduction, we believe 2026 marks an important step in enhancing the long-term value of Gran Tierra Energy Inc. I will now turn the call back to the operator, and Gary, Ryan, and I will be happy to take questions. Operator, please go ahead. Operator: Thank you. Ladies and gentlemen, we will now conduct a question-and-answer session for securities analysts. If you have a question, please press the star key followed by 11 on your touch-tone phone. You will then hear an automated message advising your hand is raised. Your questions will be polled in the order they are received. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. One moment please for your first question. Our first question comes from the line of David Matthew Round with Stifel. Your line is now open. David Matthew Round: Great. Thank you. Thanks, everyone. Probably an obvious one to start, but maybe can you just talk about your exposure to near-term prices, please? Specifically, if you can just mention how and when your sales are priced. Secondly, a bit of a follow-on. I appreciate this is all new, but I mean, I see your CapEx guidance is the same in your base case and your high case. But that is up to $75. So I am wondering, $80 plus, does that change? At what point does your thinking around capital allocation change? And a third one just on Azerbaijan, please, if you would not mind just giving us an idea on potential capital allocation there, please? Thank you. Ryan Ellson: Great. Thanks, David. With respect to pricing, you are right, it is fairly new. The way our pricing works is, in Colombia we are paid on the monthly average Brent price, and in Ecuador we are paid at M minus one, which is really the month of lifting; we are paid the prior month pricing. That is how we get as far as the pricing. In Canada, we are paid on the average of WTI for the month. Right now, just for sensitivities, we do have a sensitivity in our corporate deck. If you look at the low case, mid case, and high case, you are right that at the $75 high case, we are generating about $130 million of free cash flow, and capital expenditures are relatively flat. Actually, they are the same across all categories. I think right now it is too early to say what we would do with additional funds. Our capital program for 2026 is pretty well set. I think we would not expect any material changes at all for 2026. It really helps us with our planning for 2027. We are very focused on debt reduction and free cash flow generation, and so I think any excess free cash would either go as cash on the balance sheet or to repurchasing our outstanding debt. Ryan Ellson: And then with respect to Azerbaijan, it is, you know, we are still waiting to get the PSC ratified. So, really, capital, we will come out with capital guidance for Azerbaijan really for 2027 and beyond, with some capital this year, probably most likely some gravity that we will shoot within Azerbaijan. David Matthew Round: Okay. Makes sense. Maybe I can just sneak another quick one just on OpEx. It looks like actually a pretty meaningful reduction in OpEx in 2026. How much of that is structural savings that we can assume will persist, and are there any deferrals we just need to be aware of there? Sebastien Morin: Yes. They are mostly all structural components. Even in Canada, we have reduced, as a whole, about 10% per year on a structural basis. The integration of i3 has been significant, and the same goes in Colombia and in Ecuador. A lot of that is moving from diesel to gas-to-power as we develop the fields in Ecuador. David Matthew Round: Brilliant. Thank you. Operator: Thank you. Our next question comes from the line of Joseph Schachter with Searcy. Your line is now open. Joseph Schachter: Good morning, everyone, and thanks for taking my questions. First one for Ryan. Ryan, with all these higher prices, and you mentioned in your hedge book, how much incremental hedges have you put on, and are you stretching that into 2027? Is this war premium giving the ability to add hedges at very attractive prices? Ryan Ellson: Yes. I think for this year, we have about 50% of our production hedged. We have started to add a few into 2027. I think the reality is, obviously, front month is quite a bit higher, but the curve is steeply backwardated. We are continuing to look at hedges for the latter half of the year, but more so into next year. As I said, we are about 50% hedged already this year. We may do some short-term options, take advantage of it, get above that 50% probably through puts over the next couple of months, but that really is with the curve so steeply backwardated. Joseph Schachter: Okay. Next one. The disruption on the pipelines in the south for Colombia, and then the recent announcements of the Americans being involved with the Ecuadorian military. Is there any concern about Ecuador production, and has there been a recovery from the pipeline disruptions in southern Colombia? Gary Guidry: Thanks, Joseph. I think the answer to that is there is no disruption in Ecuador. We are currently starting our water injection pilot test. We are working with the government to tie into the OSLA pipeline going forward. With the border disruption, the border being closed between Colombia and Ecuador, we have multiple ways to export our crude from Colombia. Now it is all being exported directly from Colombia as opposed to through the OTA and the SOTE lines. So, no disruption to production or exports. It is just different routing. So has production come up materially? What would production be now versus what it was during Q4? In Ecuador, we are still at the 8,500–9,000 barrels a day, but we are quite enthusiastic. We are already seeing response from the injection and the fields that we are on, and our plans are to start water injection pilots in all of our fields. Joseph Schachter: Okay. And in Colombia, production now versus Q4? Sebastien Morin: Yes, Joseph, it is pretty much flat. As we manage the waterflood at Costayaco and Moqueta, we are doing some optimizations on both the waterfloods, and Moqueta is actually back up over 1,100 barrels a day. So, we are essentially flat from Q4 to Q1 now. Joseph Schachter: Super. Thanks for answering my questions. Operator: Thank you. Our next question comes from the line of Rob Mann with RBC Capital Markets. Your line is now open. Rob Mann: Hey, good morning, guys. Thanks for taking my questions. My first one just around the Simonette disposition in the context of your production guidance for this year. It sounds like operations are trending positively so far, but would you anticipate a small change to your production guidance range upon deal close, or look to maintain your current guidance? Gary Guidry: Yes. We will revise our guidance once we have closed that transaction, which will happen here over the next week or two going forward. It is not material, but it is an effective date of January 1, 2026. Rob Mann: Okay. Great. Thanks, Gary. Just one more for me if I could. Can you just remind us of your activity in the Clearwater this year, and is there any potential to accelerate or expand the program there just following Simonette disposition due to the planned activity there? Sebastien Morin: Yes. So right now, we are doing some more core work studies to essentially cost optimization studies for when we go to full-field development. To your point, we have an existing pad with room for up to four to six wells. That is all in the planning stages that we can pull off the shelf with you. Rob Mann: Great. Thanks, guys. Operator: Thank you. Our next question comes from the line of Alejandra Andrade with JPMorgan. Your line is now open. Alejandra Andrade: Hi. How are you? You mentioned debt—I was wondering what would be your target in terms of debt reduction, and when do you think it is feasible to achieve that? Thank you. Ryan Ellson: Yes. Longer term, we are targeting net debt to EBITDA of 1.0x, and we are targeting that for 2028. Obviously, contingent on pricing, and pricing like today accelerates that quite quickly. Alejandra Andrade: Thank you. Thanks. Operator: Thank you. Our next question comes from the line of Chris DiCario with BTIG. Your line is now open. Chris DiCario: I guess, a couple of follow-up questions on topics that have already been asked. On the hedging program, you mentioned, I think, an average floor price of $60. What is the average ceiling price now that we have prices, at least in the near term, where they are? I guess my first question— Ryan Ellson: Yes. About $74 is the ceiling. Chris DiCario: Okay. Thank you. And then just following up on Alejandra's question. To the extent you are focused now on free cash flow and debt reduction going forward, to the extent perhaps we will have a little bit higher oil prices for longer, how do you think about share buybacks versus net debt reduction or debt reduction? To the extent things end up better than your guidance, how do you think of allocating between the two? Ryan Ellson: Yes, it is a good question. I think if you look at where the bonds yield right now, we are very focused on debt reduction, and our first choice would be to repurchase outstanding debt. You will recall in the exchange that we just did, any restricted payments that go out, we have to do two-to-one for debt reduction versus share buybacks. So if we were going to buy back $10 million worth of shares, we would be obligated to buy back $20 million of debt. So you can see the emphasis on debt reduction. Chris DiCario: Yes. Great. That is helpful. Thank you. Ryan Ellson: You are welcome. Thank you. Operator: Gentlemen, there are no further questions at this time. Please continue. Gary Guidry: Thank you, operator. I would once again like to thank everyone for joining us today. I would like to also take this opportunity to thank the entire Gran Tierra Energy Inc. team for their commitment and their hard work in 2025, while thanking stakeholders for their continued support. We look forward to speaking with you next quarter and updating you on our ongoing progress. Sebastien Morin: Thank you. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Kelly Reisdorf: Hello, and thank you for joining us today. My name is Kelly Reisdorf, Head of Investor Relations for SmartRent, Inc. I am joined today by our President and Chief Executive Officer, Frank Martell, and Daryl Stemm, Chief Financial Officer. Before the market opened today, we issued an earnings release and filed our 10-K with the SEC, both of which are available on the Investor Relations section of our website. Before I turn the call over to Frank, I would like to remind everyone that the discussion today may contain certain forward-looking statements that involve risks and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including in our Annual Report on Form 10-Ks and Quarterly Reports on Form 10-Q. We undertake no obligation to provide updates regarding forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in SmartRent, Inc. Also, during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with a reconciliation to the most directly comparable GAAP measure, is included in today's earnings release. We would also like to highlight that our quarterly earnings presentation is available on the Investor Relations section of our website. I will now turn the call over to Frank Martell. Frank Martell: Thanks, Kelly, and good morning, everyone. 2025 marked an inflection point for SmartRent, Inc. Today, I am going to highlight a number of key takeaways from 2025, both operationally and financially, as well as provide comments on 2026 and our strategic plan, we are calling Vision 2028. In many ways, 2025 was a critical year for the company. Through the hard work and dedication of our team and the support of our customers, we made significant progress in virtually all areas of the business. Here are some of the more significant highlights from my perspective. First, the company spent significant time on organization development and improving the effectiveness of key workflows. Second, we expanded our executive leadership bench strength through the promotion of high-performing internal leaders as well as added domain expertise from outside the company. Third, we also expanded our go-to-market capabilities—people, process, and customer outreach—supporting the acceleration of our revenue growth. In addition, we invested in our hardware and software offerings with a focus on customer ROI and increasing our internal operating leverage. And finally, we reset our cost structure, which yielded an annualized cost savings number of over $30 million. From a financial point of view, the company executed against its commitments of returning to profitable revenue growth with positive run rates for cash flow and adjusted EBITDA. Some specific Q4 highlights include our total revenue growth was positive for the first time in seven quarters as we grew SaaS revenue by 13%. ARR grew to just under $62 million, which represents approximately 40% of the company's total revenue. Operating expenses were lower by 22%. We recorded positive adjusted EBITDA, and our net loss was significantly reduced from $11.4 million to $3.2 million. And then finally, we ended the year in great shape from a liquidity standpoint. Daryl will provide a more detailed review of our 2025 results in a few minutes. Looking forward to 2026, we expect to grow total revenues supported by a double-digit growth in ARR, which is made possible by the continuous expansion of our deployed unit footprint. In addition, we should continue to capture the benefits of productivity improvements through optimizing our workflows. We believe a combination of revenue growth and continued productivity benefits will produce positive run rates of adjusted EBITDA and free cash flow on a full-year basis. I will now focus the balance of my remarks today on outlining our strategic plan, which we call Vision 2028. Vision 2028 is built around two clear value-creation priorities. Number one is accelerating growth by reinforcing and expanding our competitive moat. And number two is increasing profitability through a more scalable and leverageable operating model. These priorities will be operationalized through five strategic pillars as follows. First, growing our installed base at a double-digit pace. Second, scaling a world-class go-to-market organization to facilitate increased revenue velocity. Third, deepening platform integration with increasing infusion of data, analytics, and AI, which offer expanded ROI for our customers and an elevated resident experience. Fourth, simplifying hardware architecture while investing in generation capabilities that increase insights and foster a more leverageable platform. And finally, continuing to strengthen our internal operating rigor to drive sustainable operating leverage and free cash flow. I will now spend a few minutes to discuss our focus with regards to the first pillar, which focuses on building scale and our competitive moat that underpins the unique value proposition of 890,000 rental units across the U.S. Additionally, our maintenance and leasing operations solutions support more than 1,200,000 units. Our IoT units are connected to well over 3,000,000 devices across roughly 3,500 properties. Our platform is a significant and critical component of our customers' daily property operations and resident workflows, delivering quantifiable ROI. This represents a significant competitive differentiator for SmartRent, Inc. We believe we are nearing an inflection point in terms of scale. Over the next four to five quarters, we are on a march to 1,000,000 installed units. As part of Vision 2028, we are targeting to grow our installed base at a double-digit compound annualized growth rate through 2028. And assuming our historical low churn rates, we believe this will yield a total installed base of over 1,200,000 units exiting 2028. Our expanded hardware footprint will generate additional software revenues from existing and new solution sets. These revenues should be onboarded at rates above our current average revenue per unit. This should yield an accelerating contribution from our software revenues, which we believe will result in higher margins for the company and more predictable revenue performance. An important benefit of our expanded installed base should be our ability to fund reinvestments in our solutions that capture advances in technology, which allows us to capture more insights and provide those outputs to our customers. We have included further details on Vision 2028 in our investor materials on our website. As our strategic plan unfolds, we will keep you updated on key areas of our progress. In closing, I want to acknowledge the dedication and excellence of the SmartRent, Inc. team. I also want to thank our shareholders for their support as we build a more valuable and durable company in line with our Vision 2028 strategy. We are committed to building something that matters and continuing our vision to bring smarter living and working to everyone. I will now turn the call over to Daryl to discuss our financials in more detail. Daryl Stemm: Thank you, Frank, and good morning. Today I will review the fourth quarter and full-year results, provide context on margins, cash flow, and working capital, and then offer my perspective on the company as we enter 2026. Total revenue for the fourth quarter was $36.5 million, an increase of approximately 3% from $35.4 million in 2024, representing our first quarter of year-over-year revenue growth in the last seven quarters. Hosted services revenue totaled $18.1 million and included $15.4 million of SaaS revenue and $2.7 million of non-cash hub amortization revenue. Hardware revenue was $12.5 million, up 20% year over year, and professional services revenue was $5.9 million. For the full year, total revenue was $152.3 million, down 13% from last year, reflecting our continued transition away from bulk hardware transactions that were not aligned with customer implementation timelines. For the full year, SaaS revenue was $57.8 million, up 12% year over year. As Frank mentioned, ARR now represents 40% of total revenue. This continued expansion of ARR reflects our growing installed base. Hosted services revenue includes non-cash hub amortization associated with non-distinct hubs sold in prior periods. Hub amortization totaled $2.7 million in 2025 as compared to $5.2 million from the prior-year quarter. Total revenue, less hub amortization, or what we refer to as core revenue, was approximately $33.8 million compared to $30.2 million in 2024, representing growth of approximately 12%. We believe core revenue is more reflective of the underlying volume of the business as it excludes non-cash revenue from hubs shipped in prior years. For the full year, hub amortization totaled $15.4 million compared to $21.6 million in 2024. Core revenue for the full year was approximately $136.9 million compared to $153.3 million in fiscal 2024, reflecting the company's continued transition away from bulk hardware transactions. Hub amortization revenue is expected to further decrease to less than $5 million in 2026. We believe separating this non-cash revenue provides clearer visibility into the underlying growth of the business. And now turning to margins. Total gross margin in the fourth quarter expanded approximately 990 basis points year over year to 38.6%. Hosted services gross margin increased to 75.7%, reflecting SaaS ARPU growth and operating leverage within the recurring model. Professional services gross margin improved significantly and was approximately breakeven in the fourth quarter, our second consecutive quarter of profitable professional services operations. Operating expenses in the fourth quarter were $18 million, down 22% year over year. For the full year, operating expenses were $88.9 million, down 13% year over year. These reductions reflect structural cost actions implemented in the second half of the year. Net loss improved to $3.2 million in the fourth quarter compared to $11.4 million in the prior-year quarter. For the full year, net loss was $600,000 compared to $33.6 million in 2024, primarily driven by a $24.9 million goodwill impairment charge recorded in 2025. Adjusted EBITDA improved by 103% to a profit of approximately $200,000 in the fourth quarter, compared to a loss of $7.4 million in the prior-year quarter. For the full year, adjusted EBITDA was a loss of $16.4 million compared to a loss of $9.9 million in 2024. We ended the year with approximately $105 million in cash and no debt under our $75 million credit facility. In the fourth quarter, we grew our cash balance by $4.5 million and achieved our goal of cash flow neutrality on a run-rate basis exiting the year. It is important to note that our business has cash flow seasonality, but we expect to be cash flow positive on an annual basis. Working capital improved year over year. Accounts receivable and inventory levels declined, primarily due to improved collection cycles and improvements in forecast, respectively. SaaS ARPU in the fourth quarter was $5.83, compared to $5.68 in the prior-year quarter, an increase of approximately 3%. On a full-year basis, SaaS ARPU increased approximately 1%. Units-booked SaaS ARPU in the fourth quarter was $7.64 compared to $8.49 in the prior-year quarter. For the full year, units-booked SaaS ARPU was $8.40 compared to $6.44 in 2024. This reflects changes in customer and product mix within new bookings. Turning now to outlook. We are seeing healthy customer engagement. We are seeing improved booking activity. We have a structurally lower cost base. And we have an increasing recurring revenue contribution. At the same time, we remain measured. Deployment timing variability and macro uncertainty warrant discipline. We have a growing deployed base that drives growth in recurring revenue and an improving margin profile. However, as Frank mentioned, we are on a march to a million installed units. We believe our expanded installed base sets us up for accelerated growth and profitability. We will now open for questions. Operator? Operator: We will now begin the question and answer session. If you have registered for today's question and answer session, please dial in now. To ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Ryan Tomasello with KBW. Your line is open. Please go ahead. Ryan Tomasello: Hi, everyone. Nice to see the 2028 targets. I guess, in terms of the unit deployment goals, how much of that is being driven by existing customers versus net new logos? And then in terms of the sales organization and installation—installation teams—how much wood is there still to chop in order to get that capacity built out to execute on these targets? Thanks. Frank Martell: Hi, Ryan. We will answer your question in reverse order. So in terms of the sales organization, as I mentioned, we are making a significant investment, roughly doubling the size of the sales organization. And with that, we are looking at potential partnerships with other firms for local reach, and expect that to materialize toward the end of this year. From my standpoint, we are penetrating additional customers. We have about 600 currently, which is plenty of opportunity. We tend to spend a lot of time on the top 20, obviously, but we are definitely looking to expand our reach into mid and mass market as we build the sales organization and the capability to do that effectively. I will let Daryl answer the longer-range assumptions. Daryl Stemm: Yeah. Thanks, Frank, and thanks for the question, Ryan. Historically, most of our short-term growth in unit deployments comes from existing customers. We are always looking to expand the customer base, but in this horizon that we are looking at for Vision 2028, I would expect that trend to continue. We have got plenty of growth opportunity from our existing approximately 600 customers. But as Frank mentioned, we are also expecting to address with renewed rigor the small and medium portion of the market. Ryan Tomasello: Great. That is all very helpful. And then in terms of SaaS ARPU, I know you are targeting higher attach rates to expand ARPU in these targets. But any color you can give around the types of growth rates and overall CAGR you think is achievable in SaaS ARPU over the next three years? Daryl Stemm: Yeah. No guidance that we want to give you there, although you can tell from Frank's remarks that we are investing in our technology—customer-facing technology—so that we can expand our offerings. We do believe that it will have a positive impact on expanding our ARPU. Ryan Tomasello: And then last one for me. And forgive me, you might have mentioned some of this in your prepared remarks. But for 2026, just any broad commentary on what you think is achievable from a revenue and EBITDA standpoint? And then over the course of the next few years through your 2028 targets, how you are thinking about driving operating leverage and what the ramp in EBITDA could look like? Daryl Stemm: Yes. So starting with 2026, I think we have given some—what I would refer to as soft guidance, no specific numeric guidance. But we expect to reach a million deployed units within four or five quarters. And I think that expanding our installed base remains our primary revenue driver. So you could model first off of the assumption of when we would reach a million. The other guidance that we have provided is that for the whole year, our expectation is to be adjusted EBITDA profitable as well as positive from a free cash flow basis. Ryan Tomasello: Great. Thanks for taking the questions. Daryl Stemm: You are welcome. Operator: There are no further questions at this time. This concludes today's call. Thank you all for attending. You may now disconnect. Frank Martell: Goodbye.