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Operator: Welcome to the IMCD 2025 Full Year Results Conference Call, hosted by Marcus Jordan, CEO; and Hans Kooijmans, CFO. [Operator Instructions] I would now like to give the floor to Marcus Jordan. Mr. Jordan. Please go ahead. Marcus Jordan: Thank you very much, Elba. Good morning to you all, and a warm welcome. I'm Marcus Jordan, and I'm here today with our CFO, Hans Kooijmans, for the 2025 results, which we published in a press release earlier this morning. After a positive start to the year with good first quarter results, the following quarters of 2025 were challenging amid macroeconomic conditions, tariff uncertainty and geopolitical unrest. This resulted in softer demand across a number of markets, limited order visibility and continued just-in-time deliveries. Looking at our business segments. We saw Pharmaceuticals and Food & Nutrition have the most solid performance in 2025, and our Beauty & Personal Care and Industrial segments being generally soft in demand across all 3 regions. Moving on to the 2025 numbers. You will find a summary of our financial results on Slide 4. Gross profit at almost EUR 1.2 billion is slightly down versus last year, but up 3% on a constant currency basis. The gross profit margin is down from 25.4% to 25%, primarily as a result of the impact of acquired companies and product mix. EBITA was down 3% on a constant currency basis to EUR 498 million. This is a result of a slightly lower gross profit combined with inflation-driven cost growth. As mentioned in the Q3 call, we optimized our structure during the second half of the year to further intensify our sales efforts and to drive cost effectiveness throughout the company, resulting in an overall reduction in the number of FTEs. I'm happy to report that we increased our cash -- our free cash flow to EUR 465 million, leading to a cash conversion margin of 91.4%. We proposed a dividend of EUR 1.81 per share, the payout ratio being 35%, which is at the top of the 25% to 35% range of the adjusted net income, as mentioned in our dividend policy. If we now look at M&A, we completed 7 acquisitions in 2025, with the 2 largest being Tillmanns and Ferrer, both in Europe, which, as you know, is our most mature region. Tillmanns in Italy operates across a broad range of markets, including coatings, construction, food and nutrition and water treatment, and in 2024, had 78 people and a revenue of EUR 143 million. And Ferrer, a distributor of food and beverage ingredients in Spain, with 37 employees and EUR 112 million revenue in 2024. On a full year basis, the 7 acquisitions completed add about EUR 320 million revenue and 200 employees based on their last full year numbers before acquisition. Recently, in January 2026, we also completed a further acquisition, Dang Yong FT in South Korea, a company active in Beauty & Personal Care with 14 people and EUR 34 million in revenue. With this acquisition, we strengthened our position in South Korea, which, as you know, is one of the most innovative and largest beauty and personal care markets in the world. If we now go to the next slide. Having defined our 6 strategic growth pillars, which we presented during our Investor Day in Milan in 2024, I'm pleased to share some highlights of our progress in these areas. I am particularly proud of the complete rollout of the sales assistant product recommendation tool, which empowers our people to easily identify the right solutions for our customers. We have seen good traction with the tool and are confident that this will improve our ability to increase our right first-time product recommendation and thus, our cross-sell ratio. Behind every success within our company are our people. And in 2025, our people completed more than 175,000 hours of learning, leading to a 57% increase in training hours per employee with a particular focus on sales and operational excellence topics. We also continued our focus on developing talent from within through 2 Rising Leader programs. We also further strengthened our supplier partnerships, and I'm encouraged with the number of positive discussions we are having with both existing and new suppliers to further expand our business. In summary, we are confident in our asset-light business model, which enables us to stay adaptable to ever-changing market needs and reinforce our focus on customer centricity and supplier expansion. We also continue to invest in the tools and platforms that keep us both efficient and agile with a focus and commitment to creating long-term value for all IMCD stakeholders in the years ahead. I would now like to hand over to our CFO, Hans Kooijmans, who will give you an update on the numbers. Hans Kooijmans: Thank you for the introduction, Marcus, and good morning, ladies and gentlemen. And as you have seen earlier today, we issued a press release summarizing IMCD's financial results for 2025. And on the 4th of March, we will publish IMCD's annual report, a more than 300 pages report, including more detailed financial info, nonfinancial info and various business examples. In this call, I will take you through a summary of the financial numbers before we move to Q&A. On Page 8 of the presentation, you could see a ForEx adjusted revenue increase of 5% and a gross profit increase of 3%. And this increase in gross profit was a combination of 1% organic decline and a positive 4% as a result of the first time inclusion of acquisitions. The year started strong, as Marcus mentioned, with 6% organic growth in the first quarter, followed by modest growth in the second and single-digit negative organic growth in the last 2 quarters. And as Marcus already indicated, we saw demand softening in the course of this year due to ongoing tariff discussions, geopolitical unrest and related uncertainty, which had a significant negative impact on customer demand. Further, the weakening of currencies like the U.S. dollar did not help and resulted in a negative impact of the absolute amount of revenue and gross margin. Then the 4% acquisition growth is the balance of the full year impact of acquisitions done in 2024 and more recent acquisitions signed and closed in 2025. And you could find an overview of the 2025 acquisitions on Page 5 of this presentation. Gross profit in percentage of revenue slightly decreased to 25% in 2025. About half of the 0.4% decrease is the impact of the first-time inclusion of acquisitions and higher additions to provisions for slow-moving stocks. The other half of the 0.4% is the result of usual changes in product mix, changes in local market circumstances, currency impacts, partly offset by continuous internal gross margin improvement initiatives. I skip the operating EBITA line, which we included for your convenience and would like to move to operating EBITA, where you can see that ForEx adjusted operating EBITA decreased 3% to EUR 498 million. And this decrease was... [Technical Difficulty] Operator: Ladies and gentlemen, hold on. It appears we have some technical difficulties. Hans Kooijmans: Good morning, ladies and gentlemen. Hans Kooijmans again. I hope you can hear me right now because we have the impression that the line broke when I started talking on Slide 9, where I went through the segments. And I first wanted to start with the overall currency impact. And as mentioned earlier, we had some currency headwind when translating local results into euros, most significant in APAC and the Americas. This currency translation impact is easy to quantify, and in 2025, resulting in a minus 4% on revenue and EBITA and a minus 3% on gross profit. In absolute numbers, in 2025, we lost all in all, about EUR 20 million of EBITA as a result of negative translation differences when comparing with 2024. Weakening of the U.S. dollar and the Indian rupee since the second quarter of 2025 were the most important drivers. I realize also that nobody can predict exchange rates going forward, neither the impact on the EBITA for this year. At the same time, as most of the non-euro exchange rates further weakened in the course of 2025, it's easy to predict that we might expect negative currency translation losses again in the first half of 2026. And just to get a feel for a number, and please see this as an indication, I recalculated first half 2025 EBITA at the exchange rates prevailing end of January this year. When doing so, I arrived at a negative currency translation impact for our first half 2025 EBITA somewhere between EUR 13 million and EUR 15 million. This is something to keep in mind when talking about the first half year result. Where this currency translation impact is easy to quantify and also reported as a separate line, the operational impact of these currency fluctuations is more complicated to calculate. But I think it's obvious that these currency fluctuations had a negative impact in regions where it is common to quote in dollars and to invoice in local currency. Therefore, it's fair to assume that these currency fluctuations negatively impacted our top line results in countries in LatAm, APAC and a few of the EMEA countries. Then going to the columns and the segments. In the first column, EMEA, the only segment where we report modest but positive organic gross profit growth. Unfortunately, this 1% growth was not enough to compensate for inflation driven on cost growth. And as a consequence, there is a negative organic EBITA growth and lower EBITA and conversion margins in the EMEA region. The decrease in gross margin percentage in EMEA that you saw in the second half of the year is mainly the result of the impact of the first-time inclusion of acquisitions with on average lower gross margin percentages. Then in both Americas and APAC, organic gross profit growth was slightly negative. And in both regions, the positive impact of acquisitions on gross profit and EBITA was more or less wiped away by negative currency translation impact of the total region. For the same reasons, as mentioned before, EBITA and conversion margin slightly decreased in both regions. And in the last column then, you will find the holding companies. As you know, the nonoperating companies, including the head office in Rotterdam and regional offices in Singapore and the U.S. and holding cost as a percentage of total revenue slightly decreased from 0.8% in 2024 to 0.7% of revenue in 2025. Then on the next page, you will find a couple of P&L lines from EBITA to the net result for the period. Some general remarks by -- I will summarize net finance cost and income tax expenses on a separate slide. On this slide, amortization of intangible assets are noncash costs related to the amortization of supplier relations, distribution rights and other intangibles, and the increase is mainly a result of acquisitions done. Then the EUR 25 million of nonrecurring expenses, and this includes about EUR 15 million severance costs related to one-off adjustments to the organization, EUR 7 million related to successful and unsuccessful acquisitions and a few other small one-off items. Then on Slide 11, a breakdown of the 2025 net finance cost, adding up to EUR 80 million, and this is about EUR 35 million more than previous year. And as you can see on this slide, our real cash interest cost decreased by EUR 5 million. And the remainder, about EUR 40 million noncash cost is a combination of EUR 20 million changes in deferred considerations and EUR 16 million more negative currency exchange results. As you might remember, a part of our net debt referred to deferred purchase price considerations of acquisitions done and related potential earn-out obligations. At the end of 2024, we reported a deferred consideration of EUR 99 million, which came down to EUR 36 million end of 2025. And this decrease was a combination of payments made in 2025, additions due to new acquisitions and changes in estimated future payments of existing deferred considerations. And especially these changes in estimates will, as you know, flow through the P&L through the interest line as a noncash cost item. When making your financial model, I could imagine to adjust for these noncash IFRS-related adjustments. The hyperinflation adjustment that you see is a result of hyperinflation accounting mainly related to Turkey and currency exchange results relate to realized and unrealized currency exchange differences on our monetary assets. Then on the next page, a summary of our income tax expenses. On the regular income tax expenses, we report a decrease of EUR 20 million. The tax credits related to amortization, a noncash tax component, increased in line with amortization. And as a guidance for our tax cost, you might remember, we always indicated to expect a blended tax rate in the range of 24% to 28% of result before tax. And this result before tax is then calculated as EBITA minus finance and nonrecurring costs. On the bottom of this page, you could read that IMCD's blended regular tax rate in 2025 was 22.9%, which is slightly below the '24 level and also below the low end of our guidance. Then on the next page, the calculation of cash earnings per share and our dividend proposal. As you can see on the slide, we report EUR 5.19 cash earnings per share in 2025. And at the AGM in April, we will propose a dividend of EUR 1.81 in cash per share. The company has a dividend policy with a target annual dividend in the range of 25% to 35% of adjusted net income. And this dividend proposal leads to a payout ratio of 35%, which is at the top of the range that we set ourselves as a policy. Then on Page 14, a summary of IMCD's balance sheet. Property, plant and equipment mainly increased due to acquisitions done and limited investments in the IT infrastructure of the buildings and labs. As a result of the asset-light business model, the absolute amount is still relatively low compared to the size of our business. Then right-of-use assets, that's, as you know, the result of the application of IFRS 16, and this EUR 98 million reflects capitalized operational leases and the related lease liability of EUR 104 million is included in the net debt line. The increase in intangible assets and changes in related deferred tax liabilities are mainly a result of acquisitions done. Then I will come back on working capital in a minute. Then you see a solid equity position of about EUR 2 billion, covering 57% of capital employed, and therefore, working capital and also net debt, I would like to go to the next 2 pages. Page 15, you will find a summary of the absolute amounts of the various working capital components and these amounts translated in days of revenue. As you can see, the absolute working capital amount increased EUR 27 million. And this increase in net working capital reflects the positive impact of further optimization in net working capital days in 2025 compared with last year, then the positive impact of the exchange rate differences on year-end balance sheet positions and as a negative, the impact of acquisitions completed in 2025. At the bottom of this slide, the development of the most important working capital components in days of revenue. And we report, as you can see, an improvement on stock and debtor days and reduction of the creditor days. On Page 16, a summary of our net debt position. At the end of 2025, we report EUR 1.6 billion of net debt. And the majority of this net debt position consists of EUR 1.3 billion of corporate bonds. Further, it includes, as mentioned before, the EUR 104 million of operational lease liabilities and about EUR 36 million of deferred considerations. On the same page, an overview of the maturity profile of our debt structure as per December 2025. In Q1 2026, so at the first quarter of this year, we increased the maximum amount of our revolving bank facility with an additional EUR 100 million to EUR 700 million. And the revolver facility bar that you see in the chart on the right reflects the old EUR 600 million maximum amount we can use as per the end of 2025. Reported leverage at the end of 2025 was 2.8x EBITDA and the leverage ratio based on definitions used in the IMCD loan documentation was slightly lower at 2.7x, which was well below the required maximum as set in the loan documentation. I would like to finish this financial summary with the cash flow overview on Page 17. And as you can see, the absolute amount of free cash flow in 2025 was EUR 465 million which results in a cash conversion ratio of 91%. The change in conversion ratio versus last year is a combination of lower operating EBITA combined with lower working capital investment compared to last year. And then finally, on the last slide of the presentation, you will find the outlook in which we, amongst other, indicate that we remain confident that we will continue to contribute value to our stakeholders and to sustain our growth trajectory. So far, a little bit bumpy summary of the 2025 figures with the break in the line. But Marcus and myself are happy to answer any questions that you may have. So back to Elba, the operator. Operator: [Operator Instructions] Our first question comes from Annelies Vermeulen from Morgan Stanley. Annelies Vermeulen: I have 3 questions, please. So firstly, just on customer behavior. I think it's probably clear there was no real improvement in customer order dynamics in Q4, looking at your numbers, but perhaps you could talk about how that's developed year-to-date. Are you seeing any increased signs of optimism or more normalized order patterns? And then secondly, just on pricing. Perhaps could you talk about how that's developed through year-end and year-to-date? And in that context, perhaps a comment on the competitive environment. I know we spoke a lot about more competition in Asia through last year. So wondering how that's developed. And then just lastly, a quick one on the one-off costs. So you mentioned EUR 15 million of severance costs in that acquisition and one-off cost line. But are the majority of those restructuring costs done? Or is there more to go in 2026? How do you expect that number to develop? Marcus Jordan: Annelies, thank you very much for the questions. Firstly, from a customer behavior perspective, what we see there is pretty much a continuation of what we were speaking about on the Q3 call with very muted demand in general. Just-in-time deliveries have pretty much, as we said before, become the norm, a lot of orders shifting from 1 month to the next. So I would say that unpredictability, unfortunately, remains. In terms of kind of the show of green shoots, we don't really see green shoots yet appearing. But I think positively, we hear more conversations from both our customers and suppliers about the anticipation of that coming. So in general, I think the kind of the narrative in the market is more positive. But for us, a little bit early to see -- to say that we see those green shoots materializing yet. On the pricing side, again, if you break it down into 2 different components, the specialty side of the business, whilst, of course, it's not immune to pricing competition, we still see quite a lot of stability there. On the semi specialty side, very similar to what we reported in Q3, basically with the demand being so low, people fighting quite aggressively for a share of a smaller piece of the pie. So it's fair to say, yes, it's a very competitive market. But we're doing everything that we can, of course, to make sure that we remain competitive. And again, focus on the absolute amount of gross margin that we win, not the gross margin percentage. And maybe just on that point on the gross margin percentage to complement to what Hans said, if we win new pieces of business, particularly on that semi specialty side, you can also expect that initially, that would be at a slightly lower GM percentage. So if there is a slight fall away there, we're not concerned also looking again at what that absolute GM amount is. And then maybe, Hans, on the severance side? Hans Kooijmans: Yes, perhaps to add something, Annelies, and it's perhaps more anecdotal than anything else. But a lot of people always ask us, what is pricing and what is volume, what is the impact of both on your business. And I always answer that it's difficult to come to a conclusion because some products we do in kilos, others in grams and others in tons. And then if you add it up, it doesn't make sense. But just as an exercise, I calculated the total volume in kilos that we sold and divided and took the total sales for both 2024 and 2025. And when dividing the 2, the funny outcome is that my on average sales price in the group, which is in itself a ridiculous number because it doesn't say anything, but the average sales price in 2024 and 2025 was exactly the same. So I did not see any change in the average sales price across the group. I saw a huge differences per market segment. I saw also quite some changes between regions, market segments than anything else. And doing the same on the cost price side, I saw an increase -- an average increase, which was below 1%. So if we talk about what did we mainly see last year compared to the year before is a volume issue, not a price issue. For sure, on the different segments and individual product lines, huge differences, but in total, that was more or less the outcome. Again, see this more as anecdotal because I don't like to do that adding up of all these kilos and tons and grams. But this is what comes out if you would do. Then coming back on your one-off, I think we are in the process there. I don't expect short-term additional one-off costs, but we are still in the process of separating from a number of people in our organization. And as you know, in Europe, that often takes a bit more time than in other parts of the world. Operator: The next question comes from Matthew Yates from Bank of America. Matthew Yates: Maybe I'd just like to follow up on Hans, your anecdote, please. So if you look at the year gross margin down 40 basis points, I think you said in the introductory remarks, roughly half of that can be put down to the M&A dilution. So you've got another 20 basis points that encompasses product mix, regional market conditions and FX. So again, is the conclusion from that, that pricing really is not playing a material role in the outcome of your profitability here? And I don't know whether the message or the anecdote would have changed as you went through the course of the year because the Q4 gross margin was down much more significant 140 basis points. I guess you have that more pronounced European M&A in there and the more adverse currency moves. But I was just wondering if you could just elaborate a little bit more on the relative order of importance between those 4 drivers that you've put in the press release about the margin evolution. And then maybe just a second question, just to follow up on that one on restructuring and the cost base. As you look into 2026, is your expectation that your organic cost base is flat, higher or lower, based on that restructuring effort that you were doing in Q4? Do you feel like we're going to see less inflationary pressure on the cost base going into 2026? Hans Kooijmans: Shall I start, Marcus, with the last -- the second one? Marcus Jordan: Yes, and then I'll -- yes. Hans Kooijmans: We go back to the margin percentage and -- Matthew, what -- I think if you look at the development of the cost base, there are a couple of factors there, that is number of people, that is the wage and salary component, there is the bonus item and what I would call all the other operating costs that we have. If I look at the wage and salary component, the combination of the number of people and salary inflation, I think that it's fair to assume that we try to take out of the cost structure, the impact of the wage inflation by doing the reduction in people. But at the same time, I hope that we come back to a situation where we can pay our people full bonuses that we have now 2 or more or less 3 years in a row that people missed their targets massively in certain areas. On the one hand, that leads to a cost saving, and that part of the cost will come back if people reach the targets, and the targets are based on growing compared to last year. And that is -- that, I think, on the cost base. Then on the margin, Marcus? Marcus Jordan: Yes. So Matthew, as I mentioned before, if you look at that kind of product mix, and not to go into too much of the detail, but as I mentioned on the Q3 call with the pharmaceutical market being soft, predominantly related to the India tariffs, we did see that continue quite heavily, I would say, in the fourth quarter. So there was an impact there, which is why we do refer to the product mix, but also market. I think just on that pharma piece, positively, we do see more normal ordering pattern coming back into play at the beginning of this year. But the price pressure is, again, it's really on that semi-specialty component part where there is an aggressive, I would say, competition. And again, it's not to say that specialties are immune from that, but definitely much more protected. And again, to reiterate, the much bigger impact is from a demand perspective. Does that give you the color that you would like, Matthew? Matthew Yates: Yes, that's fine. Operator: The next question comes from David Kerstens from Jefferies. David Kerstens: I've got 3 questions, please. First of all, maybe following up on the gross margins in Asia Pacific. There, we did see a recovery quarter-on-quarter. And Marcus, you highlighted that you do still see that impact from Indian tariffs on Signet. But now with the trade deal in place between the U.S. and China, do you expect that will continue to show further improvements into 2026? And how do you see the competition from Chinese suppliers moving up the value chain in semi specialties? Second question for Hans. You're cutting the dividend by 16% based on the top end of your payout ratio. I think you earlier were indicating that you are contemplating share buybacks as the M&A process takes relatively longer to complete. What made you change your mind? Is that the relatively higher leverage ratio at 2.8x EBITDA? Or do you still have a full M&A pipeline and confidence that these acquisitions will complete? And then maybe finally, Marcus, you highlighted you do see constructive conversations with your suppliers about outsourcing? How do you see these trends in the current environment and particularly in Europe where your suppliers are under substantial pressure? Marcus Jordan: Great. David, firstly, from a pharmaceutical India perspective, as I mentioned, we do see, I would say, more normal ordering pattern at the beginning of this year. Of course, we're only 1.5 month through the quarter. So a bit difficult to say that this is now the new norm. But our general feeling at least today is that there's much more confidence coming back on that front. With regards to competition from China. Firstly, we very much recognize and take seriously both the threat, but very importantly, the opportunity from Chinese suppliers. And as we've spoken about before, we have had our own China sourcing office in place for more than 20 years. In general, we see that, yes, China, in particular, we're not involved with the commodity side, but they're very present there more and more in the semi specialties and, of course, have the ambition to play within the specialty field. We have worked and do work heavily in some cases, with quite some Chinese suppliers through that China sourcing office that we have. And it really, I would say, is a slow process as with actually with Western suppliers when we founded the company, but really building the relationships with those Chinese suppliers over time, where we get to know them, they get to know us, we get more comfort on the quality of the products that they have to supply. And maybe even more importantly, the stability of supply, how committed are they, for example, genuinely in having long-term supply to Europe, to LatAm, or is this just because they have products available today that they're looking for a greater amount of export. But these are relationships, as I said, they're not new to us. Our business with Chinese suppliers continues to grow. As those relationships do develop, there are examples of them offering initially customer exclusivity, and then in some of the smaller countries, again, with many years of relationship building where there are some exclusive relationships coming into play. But their business model, as I've mentioned before, in general, is quite different. But yes, it is an important, I would say, consideration for us. And again, we see this as not only a threat but an opportunity for the future. Maybe, Hans, do you want to cover the leverage and then I talk about... Hans Kooijmans: So David, basically, your question about capital allocation. We have a dividend policy whereby we indicated from the start of our listing that we would use a payout ratio between 25% and 35%. The last 5, 6 years, we have been on the top end of that range, and we did not see any reason to change the dividend policy, neither the place where we are in that range, on the top end of that range. And that's why we pay out what we mentioned in the call and in the press release. At least we proposed it to the AGM. And it is, of course, up to the AGM to approve. Then on the M&A pipeline, we have a healthy pipeline there. We have quite some processes, processes that what we mentioned earlier, sometimes take longer, take longer due to discussions around valuations, about what the sustainable EBIT going forward. And at a certain moment, we need to decide if these processes take longer than expected, what do we find an acceptable leverage and how do we use the cash that we have available for M&A. And I would like to keep all options open there. So I did -- we did not really change our mind, but we always look at the combination of case that we generate, M&A pipeline and opportunities to put the cash at work most efficient for all our stakeholders. Marcus Jordan: And then your last question, David, from a supplier outsourcing trend perspective. I would say here, it's really a bit of a mixed bag. What you see is quite some suppliers making some mass redundancies and therefore, looking to outsource a much greater percentage of their business because, of course, they're reducing quite significantly their own in-house commercial and tech support teams. On the other hand, you also see some suppliers, which are looking at IMCD and the customer base that we've successfully been able to develop and looking at which are some of the larger accounts which we've successfully developed and could they take those accounts back in-house for short-term win for themselves. Of course, those are then healthy conversations that we have with them, a little bit, I would say, of horse trading. And in some cases, you can imagine that there are those bigger accounts taken back in-house, but in return, either for some smaller accounts transferred to us or even, in some cases, product line or geographical expansions. So I would say, in general, there's even more healthy conversations happening with suppliers about further developments and expansion than I've seen for a long, long time. Operator: The next question comes from Anil Shenoy from Barclays. Anil Shenoy: Yes. Just 2 questions, please. First is on costs. Am I right -- I mean, did I understand it right when you said that going forward in 2026 that any kind of a wage hike will be offset by a decrease in FTE? So we can -- on an organic basis, we can expect costs to be flat. And if that is so, given -- I mean I'm trying to understand what kind of a gross profit growth would be required so that you can offset any kind of a cost inflation, if there is any? So sort of like if I'm building a bridge between 2025 and 2026 EBITA, then if EBITA has remained constant between 2025 to 2026, then what kind of a gross profit growth would be required? That's my first question. And the second question is specifically on the organic EBITA decline of 18% in Q4, which has been considerably worse than the Q3 EBITA decline. I know you don't like to talk about the business on a quarter-on-quarter basis. But I'm just trying to understand what has gone worse in Q4 versus Q3. Is there any particular end market or any one-off costs? Just any kind of color on that would be very helpful. Hans Kooijmans: Yes. Perhaps I should come back on the cost side to make clear what I just mentioned that what we see, if I look at -- we are in an environment where people expect a salary increase every year. And what we see is that the reductions that we made in the organization should compensate for the average salary increase. That is the basic work assumption that we have. On top of the salary increase, a lot of people missed their bonus this year. So that is a saving this year, like it was a saving in 2024 and unfortunately, also in 2023. So we have 3 years in a row that people massively missed their bonus targets. We hope that, that will come back. If that comes back, that leads to additional costs. And I'm happy to pay these costs as that is just a sign of a successful outcome of a year, and the successful outcome of a year means that we will grow gross margin substantially compared to last year. And that is the working assumption that we have. And then you were talking about an 18% miss and things that went wrong in the last quarter. I think it's first important to take into account that the base number of result is much lower than the quarter before. So mathematically, already the percentage goes up. At the same time, we are not happy with the development of gross profit. The organic decrease in the third quarter was minus 3% and minus 7% in the last quarter. Basically, yes, that's not good. And we had a bit of a weak finish of the year. October, pretty okay, November, soft, December, well, very soft, I would go like that. Marcus Jordan: And again, in general, we would say that the pharma market was surprisingly soft for us again in the fourth quarter, as we mentioned on the Q3 call. But yes, I think -- and to support it, it was really a surprising lack of demand again from customers. And yes, it wasn't a particular market segment or region, it was pretty much across the board. Anil Shenoy: Yes. Got it. If I could ask a very quick follow-up. How has the trading in January been? I mean you mentioned that November and December have been soft and very soft. So have you seen -- have we started seeing any kind of improvement in January? Or is it similar? Marcus Jordan: Well, as you know, the first quarter of last year was our strongest quarter, and January was actually the strongest month within that quarter. Hans also has already spoken about the significant currency headwinds that we're facing on a like-for-like basis. So that comp is very tough. But I would say, look, beginning of the year, January looked pretty okay. We're only halfway through Feb. So we have limited variability. So it's a bit too early to comment. But we're very much focused on the things that we can control, the commercial team activity, developing and converting the new opportunities, both with the customers and the suppliers that I've mentioned, and of course, being cost-conscious. Operator: The next question comes from David Symonds from BNP Paribas. David Symonds: Maybe I could just dive into that January comment. Could you talk about different -- I know it's early in the year, but could you talk about the different end markets and what you're seeing changing? I think you said Pharma was looking a bit more positive. But maybe you could give some views on the industrial side of the business. We've seen obviously U.S. ISM was much more positive. There are some European sentiment surveys, which are looking a bit better in January. So is the industrial side also coming back? Secondly, if I look at the implied margins of acquired businesses in EMEA, then actually -- obviously, it's still quite dilutive, but Q4 was less dilutive than Q3. I think implied margin was like 6.5% EBITA versus 5% in Q3. Is that the early impacts of cost being taken out of that business? And sort of how quickly would you expect the sort of acquired businesses to come back to group levels of margin? And then if there's anything you could say about price decreases with supplies in January? Should we expect a sort of step down in your COGS as you sort of negotiate new terms of suppliers at the start of this year? Marcus Jordan: Thanks, David. I think firstly, if we look across the various markets, as you say, it's a bit early to really look at what the market trends are, but I think we're seeing, with the exception of Pharma, pretty much a continuation of the trends that we saw coming out of last year, where we see Food & Nutrition, I think being very stable to actually some pretty nice growth on a global basis across all 3 regions. Pharma, I spoke about globally, I think we're seeing more normal order patterns beginning to come back into play. Beauty Personal Care, it was a soft market for us last year. I would say when I spoke about the green shoots and people talking about green shoots, the beauty market is definitely one of those markets where people are beginning to talk about an upturn coming. And as I mentioned on the previous call, again, we see a lot of reformulatory activity coming through our labs. So I'm pretty excited about the beauty opportunity. So we're confident about that market for the longer term. The industrial side, unfortunately, is the one that's more difficult to predict. We likewise hear, again in the U.S., things like the coatings and construction market, which has been very depressed, and we all know about the stagnation from a housing market perspective. We hear people talking about, again, these green shoots coming, but we don't yet see them. So I think, unfortunately, on the industrial side, it's a case of wait and see. But of course, I mean, we're confident that it will come. Hans Kooijmans: Then you had a question about the integration of M&A and if that -- how quickly you can bring them back to more average IMCD levels. Most of the acquisitions that you referred to, either we did in December or in the third quarter of last year. So there is -- it will take a bit of time. We are, especially on the Ferrer side, in the process of integration. We are also cautious. It's always important in the first year that you don't lose your customers and your suppliers by massive price increases to get margins up to a more IMCD average level. So it's more important that to stabilize the business there where we can get our cost benefits we will do, but we don't want to lose critical people, critical suppliers and customers in these processes. But for sure, over time, you could expect a bit more normalization of profit levels in these activities. Marcus Jordan: Yes. And then, David, on the pricing side, you speak about price decreases at the beginning of the year, but what we've actually seen is quite some price increases. Of course, it's not across all product lines and all markets. But I think it's fair to say that, particularly outside of the semi specialty side, we've seen more price increases than decreases. And interestingly, that also includes from Chinese suppliers. So let's wait and see how much of those price increases really stick, but there's certainly ambition from our suppliers to try to push pricing up. Operator: The next question comes from Suhasini Varanasi from Goldman Sachs. Suhasini Varanasi: Just a couple for me, please. It's just a follow-up to some of the previous questions. If we think about your 2025 results and the tariff-related uncertainty that you saw impacting numbers, would you see that tariff-related uncertainty being -- representing more of a one-off kind of a weakness and that hit your numbers and potentially hit your numbers in 1H '26? If that eases, would you expect volumes to improve? Just trying to understand what went -- what changed in '25? What is the catalyst to help it the change in '26, I suppose? And then the next question is on gross margins. What do you think is more important for the gross margin percentage? Is it pricing of chemicals? Or is it volumes? If, let's say, we see further chemical price deflation, especially on the semi commodity side of things, but volumes recover, do you think gross margins can see some improvement underlying organic FX adjusted? Marcus Jordan: Thank you for your questions. I think with regards to the tariff uncertainty and the impact that, that had, I mean, of course, it was a big shock wave that came into the market. And I think the biggest impact of that was it really damaged consumer confidence. My own personal feeling is that as we get and are beginning to get already some more certainty around what the tariff numbers are, I think that we will gradually get better consumer confidence back, and therefore, the volume demand will follow. And it's that volume demand, which we need in order, I would say, to re-kickstart the business. So again, I think the talk of the green shoots are definitely there. Let's see when those green shoots do actually develop. But yes. And on the gross margin, I think, again, really important that we don't focus just on the GM percentage because you could imagine that as demand does pick up, particularly on the industrial side, and the industrial side, as we mentioned before, does tend to have a slightly lower GM percentage, as those markets do pick up, there could be a slight drop in the overall GM percent. So important that we really focus on what the absolute gross margin amount is. Also, again, to make sure that we're taking advantage of gaining new business because typically, when you gain a new piece of business, particularly on that semi specialty side, again, the GM percent can be a bit lower. And then over time, as we build the relationship with the customer, we then look to increase that over time. Operator: The next question comes from Luuk Van Beek from Degroof Petercam. Luuk Van Beek: First of all, I've a question about your working capital. I noticed that the payables increased significantly year-on-year. So can you give a bit more color on the working capital developments that you saw in Q4 and what you expect in '26? And my second question is on the bonuses. You mentioned those as a potential dampening impact on the stabilization of operating costs. So can you give a rough indication how much lower they were in the last 2 years versus the previous period, for example? So how big can that swing factor be? Hans Kooijmans: Yes. Luuk, thanks for the questions. First, working capital. I think, and you specifically referred to creditor days. And as a company, IMCD is always -- we pay our creditors in time on the due date, and we don't want to play around with that. And if the due date is just before Christmas, then we pay just before Christmas, and we don't want to push the payment in the first day of the new year to show a better number there. So this is more timing difference than anything else. I don't see a change in the behavior of suppliers there. On the bonus component, in previous calls, we have mentioned a couple of times that if you look at the average bonus amount, I think if you look across the company, we talk about somewhere between 1.5, 2.5 months of salary that people can make. At least half of the target is linked to financial performance, reaching your financial targets, and there are always individual targets in there. And that is a bit of flexibility that we have there. I don't want to mention a specific number there, but that should give you a bit of a feel of the magnitude we are talking about. Operator: The following question comes from Nicole Manion from UBS. Nicole Manion: Just 1 question, please, on the Americas business as regionally, that's where you've seen perhaps the biggest slowdown through the latter part of the year. I wonder if you could give any detail on what you're seeing in LatAm perhaps compared to North America through Q4. Obviously, aware that markets like Brazil, you've called out some pressure from increased competition, but you've also maybe got pressures on the U.S. consumer side too. If you could help us isolate some of that maybe. Marcus Jordan: Yes, I would say from a U.S. perspective, the biggest impact there is on the industrial side, particularly, I would say, Coatings & Construction. Beauty Personal Care also being fairly muted throughout last year. And then moving on to LatAm, yes, Brazil most definitely, one of the more impacted countries that we have. As we've mentioned before, through the acquisitions that we made quite some time ago, a little bit more of a higher industrial semi specialty component there and quite some price pressure. So yes, Brazil definitely, as a result of that price pressure, I would say, one of the poorer performers. Hans Kooijmans: And for me also, Nicole, Brazil is one of the areas where we saw quite some operational currency impact. That is typically a market where we quote in dollars and then invoice in the local currency. And if I look at -- if I compare the exchange rate, U.S. dollar, euro, versus what happens in Brazil, we saw a 13% drop in the dollar and only a 3% drop in the reais. And you can imagine then you already lose 10% of your sales value locally with the same cost structure. And so these type of things people often forget how important local currencies versus the dollar, how that plays a role in the day-to-day business environment. And that is one of the things that also really hit hard the P&L in that country. Operator: The following question comes from Eric Wilmer from Kempen. Eric Wilmer: I was wondering, are you seeing a difference between larger and smaller Chinese suppliers in their willingness to go exclusive? Are the bigger ones also as willing to go exclusive? I can see the smaller ones wanting this, but what about the larger ones? Would this be for them, perhaps something that is seen as a potential sales limitation when you bet in one distributor? And then yesterday, I think a key food ingredient supplier highlighted a deterioration in Q4 with regards to food ingredient volumes in EMEA and then particularly in food service. And I think you actually stuck a bit more optimistic tone. I was wondering, is this because you're perhaps differently exposed? And then lastly, maybe a bit of a silly question, but I believe you generally talk about 20% of your business being geared to semi specialties. I was wondering, is this 20% still 20% or more like 15%, perhaps given the underperformance? Or is it actually still 20% due to recent M&A? Marcus Jordan: On the food ingredient volume side, I would say that we haven't seen a big impact there. I mean when we talk about food ingredients for us, it's also the nutritional side. So we see, for example, quite some nice formulatory opportunities as people are looking to increase the amount of protein and fiber within their diet. Similarly, by the way, for the U.S. where GLP-1 drugs have quite an impact, I would say, on consumer behavior. But again, similar to Beauty Personal Care, a lot of formulatory work going through our labs as people are really looking to, I would say, enhance the quality of the products that they eat. Larger versus smaller... Hans Kooijmans: Chinese suppliers. Marcus Jordan: Chinese suppliers, sorry. Eric, definitely, in our experience, the smaller Chinese suppliers are much more, I would say, willing to build a closer relationship. Again, this is not something that happens overnight, but over a time frame of a few years as we get to know them and vice versa. In our experience, the smaller ones are more willing to give the customer protection and in some cases, the country exclusivity. The larger ones, I would say, it's pretty rare. In our experience, almost never happens. But yes. And then the final question on the semi specialty to specialty. It really differs by market, where I think we've said before that things like the pharmaceutical market, you could imagine, is a much smaller semi-specialty percentage. But I think fair to say that across the board, that roughly 20% still stands. Operator: The following question comes from Chetan Udeshi from JPMorgan. Chetan Udeshi: I had a few questions. First on the trend of outsourcing, Marcus, I think I'm hearing this for the first time you referring to some sort of a horse trading with a few suppliers trying to gain the access back to some of the bigger accounts. And I'm just curious, what is the net impact of that on IMCD? Are you seeing more, let's say, cannibalization or accretion in your customer relationship because of those changes or it's not meaningful in terms of impact? I'm just curious if this is a new trend of maybe customers wanting to in-source? Or it is something that you would say is part and parcel of the negotiations that you generally do? The second question was, and Hans, you highlighted this a couple of times during your notes, which is the operational impact from currency. And I'm just curious, and this is just my impression speaking to my colleagues in India, correct me if I'm wrong, but even Signet in India prices in euros or dollars and then invoiced in rupee. Is this -- beyond just the P&L impact, is this creating some sort of a competitive pressure as well? Why would customers not look to source from local distributor or supplier who can quote them in rupee rather than having to pay in euros or dollars given the rupee in India has depreciated by 15% to 20% in the last 18 months? I'm just curious is this coming with some competitive pressure on top? And the last question on Signet. Is Signet back to growth now in Q1, do you think? Hans Kooijmans: You're very specific on Signet. Marcus Jordan: Maybe if I begin with the outsourcing, I think firstly, Chetan, when I talk about this horse trading and kind of the discussions that we have with suppliers, when we grow accounts to a certain size, that's nothing new. I mean that's been with us since the foundation of the company. I think what I was referring to there is that there's more and more discussions with suppliers about expansions and opportunities as I think they themselves also struggle significantly with their own performance, I think that they are more open to making change. And as I mentioned in my initial starting speech, I'm encouraged by the number of positive supplier conversations that we've got ongoing. So I would say generally very positive about that outsourcing trend. And Hans, on the India and Signet? Hans Kooijmans: Yes. Now perhaps more in general around currencies, Chetan. That is -- in a lot of countries, we import material, and then in a lot of countries, it's common to quote in either euros or dollars and then invoice in the local currency. We see that in India with Signet, we see that in Mexico, I see that in Brazil, I see that in Poland, I see that in Turkey. In a lot of B2B environment, this is quite a common practice. If you then compete with a local producer that produces locally and always quotes in the local currency, that could be a positive or a negative. I think if I specifically look at the segment, there the risk is remote because basically, we import their material from American and European suppliers that are part of the formulation, part of an FDA-approved recipe. So the customers are, they are more or less obliged to use that material because the final product is then sold back to the American market or to the U.S. -- to the European market. But if I look, for instance, at the coating business in Mexico, there, we quote -- everybody quotes in dollars, and then you invoice in Mexican pesos. And if I look at the exchange rate, again, as an example, U.S. dollar versus the euro versus the Mexican pesos versus the euro. If I see a drop of 13% in dollars and I see more or less a flattish Mexican pesos, I basically lose about 13% of my top line, and my cost base is still in Mexican pesos. So what you then see is lower organic growth because of this currency impact, and you see the same cost base because in the end of the day, all these companies report in euros, and that is for me always difficult to explain the impact of these changes, but it definitely had a negative impact in the second half of last year on top line growth and margin growth, but by the cost line still remains in the local currency. But there is always that competitive element if there is a local producer that still quotes in local currency. Operator: The following question comes from Stefano Toffano from ABN AMRO ODDO BHF. Stefano Toffano: Yes. Two questions remaining for me. So I mean, the first one. Taking a step back, I'm curious to see if you can highlight where do you think we are in the cycle? Because obviously, end of Q1 last year, Q2, lots of volatility due to tariff discussion, et cetera. And I think many thought Q2, Q3 would perhaps be the bottom. And I think today's surprise is mainly to see that it's getting worse. But looking at your free cash flow conversion up in the 90-plus percent, et cetera, it's very high, maybe signaling really, really low demand. So just we can't see the future, obviously, but I'm just curious where do you think we are in the cycle today? And then the second question is on the, let's say, headroom for M&A. How much headroom do you really have? The question here is because 2.8x, obviously, compared to your bank covenants, you still have some room. But in my experience, particularly European investors, when the leverage gets to 3x, they get nervous. Maybe in the U.S., they say it's still too low. But in Europe, that's my experience at least. Also thinking again about the high free cash flow conversion. If should demand come back, you need to invest something in your working capital. So overall, on the base of 2.8x, it might be that your headroom for acquisitions might be lower than it looks. If you can please comment on that. Marcus Jordan: The first question relates to where do we think we are in the cycle. I think we would also love to know that ourselves. But I think when we look at all of the different market reports and as I mentioned before, speaking to customers and suppliers, I generally feel that there's more optimism than there was certainly during Q3 and Q4. And I think that the market reports, as was previously mentioned on this call, was an indicator of that. So we don't have a crystal ball. But as we said, I think people talking about the green shoots coming, we've definitely heard more of that since the beginning of this year. And Hans, on the... Hans Kooijmans: And also a nicely building order book, a bit more positive there. Stefano, the headroom on M&A. I understand your question. At the same time, I think you also saw that we generate quite a bit of cash every quarter, creating additional headroom. With looking at the pipeline and the speed of executing the M&A opportunities, there is room for us to maneuver, sufficient room to maneuver. And if for whatever reason we see something that drives our leverage temporary just over 3x, we are not shy to do a transaction if that really -- if we really feel this is needed to further grow the business. But then we will also explain to the market how we will bring leverage back to below the 3x that you just mentioned, mainly because of European investors. Because the American investors always tell me that we are -- the leverage is much low and the business can have much more. But yes, we need to take into account all stakeholders in this respect. But I feel confident with the room that we have to maneuver there. Operator: The following question comes from Tristan Lamotte from Deutsche Bank. Tristan Lamotte: Two questions, please. The first is on 2025, you talked about relative price stability. But at the same time, you're saying explicitly that there's continued pricing pressure in semi specialties. Are your European producers losing market share because they are pricing above Asian competitors? And therefore, effectively, although your pricing might look stable in some areas, effectively, the net impact is the same as prices basically traded for volumes lost? So really still the leading indicator here is pricing even if that is kind of indirect. Is that fair? And then second question. We're back at pre-COVID conversion margins in Q4, so kind of around your long-term average. Is this kind of a normalized level for the business? Or was Q4 a bit of a one-off due to some destocking? And what kind of range could you see on that margin in 2026? Hans Kooijmans: Yes. Perhaps first, let me answer your last question. Q4 is for us always a quarter whereby the December month is more or less half a month. And for the cost base, we need to pay the full salaries in third quarter -- the fourth quarter. And so the conversion margin in the last quarter is always the lowest in the year. So this is not the new normal going forward as far as we see it. Pricing, pricing stability? Marcus Jordan: Yes. Tristan, I think, I mean it's a very complicated question to answer, as you can imagine, because with over 50,000 products within the portfolio. But in general, as I've mentioned before, what we see is on the specialty side, pricing stability during 2025 with, I would say, quite some price increases coming through the beginning of this year. But you're right, on the semi specialty side, there is pricing pressure, has been pricing pressure. But again, it's early stage, but we have seen some price increases at the beginning of this year coming out of China. So let's see again if that sticks. But yes, with such a diverse portfolio, it's difficult to be specific. Hans Kooijmans: Did we now create more confusion, Tristan? Or did we try to answer your question? Tristan Lamotte: That's very helpful. Operator: The last question comes from Quirijn Mulder from ING. Quirijn Mulder: Of course, a lot of discussions. First of all, Marcus, maybe can you tell me something you presented, let me say, at the Capital Markets Day in September 2024, the new tools and the high expectations you had from that. Is there anything visible yet on the rollout of that and the successes of that? That's my first question. Marcus Jordan: So thank you for the question. Yes. So I presented the Sales Assistant. Delighted, as I mentioned in my pre-commentary, with the full rollout of that internally from a global perspective during the course of last year. And yes, we are seeing very good traction from our commercial teams there, the usage of the system and also the ability to increase the cross-sell rate. That tool has already been rolled out for 4 of our business groups externally on the MyIMCD platform and will be rolled out to the other bigger business groups during the course of the next 1 to 2 months. Quirijn Mulder: Okay. Perfect. And then, Hans, with regard to the restructuring, can you indicate any size of that and how it is spread over the areas? And to what extent is this acquisition-related? Because it's for me not clear what exactly the amounts... Marcus Jordan: Maybe if I could just say a quick word on that to begin with, Quirijn. And it wasn't a significant restructuring. What it was, was us really looking across the whole organization, making sure that we are as sales-orientated and customer-centric as possible to be able to drive the sales activity in the most effective way. So we had a look at this. And in some areas of the business, it meant actually investing in additional highly qualified commercial staff, but also looking at where can we make efficiencies. You mentioned the Sales Assistant, but you can also imagine that we've got quite some work ongoing around AI use on things like the -- on the order to cash or quote-to-cash process. So it's a combination of really looking across the company and making sure that, again, we're as active and proactive as we can be commercially, but also as efficient as we can be from a back-office perspective. Net-net, as we said, that resulted in a reduction in the number of FTEs. But it wasn't so much a massive restructure focused purely on reducing cost. It was really also about making sure that we are that hungry sales organization. Hans Kooijmans: Yes. And if you then ask me, if you look at the regional split, I think it's fair to say it was a bit more EMEA oriented than any other parts of the world. But all in all, the fact that we have a global integrated IT CRM system allowed us to make these efficiency changes across the globe. So it impacted more or less each and every country in the IMCD structure. Quirijn Mulder: Okay. Maybe a final question. So on the M&A, so the pressure on the gross profit margin in EMEA, you mentioned, let me say, was related to the M&A, as I see it. Yes, mainly because -- but it is a little bit strange to me because it was only 2% increase of the revenue because of M&A. And the pressure 80 basis points, something like EUR 4 million. So it's, in my view, a little bit strange that the effect can be so large. Hans Kooijmans: Yes. It was, I think, larger than you would expect. I think I mentioned 2 things. I mentioned a combination of M&A and additional stock provisions. So it's fair to say that you need to take into account both. And in EMEA, we had both. And basically, the stock provision impact is something that happens... Operator: All right. And with that, I would now like to hand the call back over to Mr. Jordan for any closing remarks. Marcus Jordan: Great. I just want to thank you all very much for joining the call this morning and for your questions. And yes, Hans and I wish you all a very good day. Thank you all.
Mattias Frithiof: [Audio Gap] Werner Becher: Thanks, Mattias. As we look back on 2025, we closed the year on a strong footing. Our adjusted EBITA (acq) for Q4 grew 16%, and that momentum has not slowed as we've entered 2026. Since the start of the year, we've added another 4 partnerships, taking us to 15 since the start of Q4. We were also pleased to launch with Ontario Lottery in late January, making another major milestone for the business. So we ended the year with strong operational progress across the business, and we've started the new one with the same pace and conviction. David Kenyon: Thank you, Werner, and good morning, everyone. I'll give you a start with the financial summary for the quarter and for the year. So revenue in Q4 was EUR 42.7 million, buoyed by a strong operator trading margin. We saw a significant decrease in costs in the quarter versus last year, and this led to an increase in adjusted EBITA (acq) -- earnings before interest, tax, and amortization on acquisitions -- from EUR 6.3 million to EUR 7.4 million. The cash flow in the quarter was EUR 6 million. For the full year, revenue this year was EUR 162 million. Last year's number of EUR 176.4 million included EUR 12.5 million transition fees. And excluding these, revenue was down 1.2%. Here, we saw the impact of the Colombia deposit tax, deposit limits in the Dutch market and an increased tax also in that market, plus the migrations of certain Kindred markets away from the Kambi network. And of course, we had a tough comp with the major football tournaments in 2024. This was offset by organic growth in the network, a stronger operator trading margin and launches in 2025 on the network, including in the regulated market of Brazil. For the full year, our cost decreased as our efficiency programs took effect, and we reduced our variable performance-related costs in the business as well. This enabled us to post an adjusted EBITA (acq) of EUR 17.6 million, down EUR 7.8 million year-on-year despite the EUR 14.4 million revenue decrease linked to those transition fees. The cash flow for the year was EUR 21.2 million. And we carried out buybacks in the year to a value of EUR 25.8 million, utilizing excess cash from transition fees we'd previously received. Going forward, we expect to align the level of buybacks with the underlying cash generation in the business. So we end the year debt-free with EUR 32.9 million in the bank and significant customer receipts after year-end. So we finished the year with a very healthy balance sheet. Turning now to the operator trading analysis and aggregated performance of all the operators on the network using our turnkey offering. The orange line shows the operator trading margin across the network, and that was strong this quarter at 11.2% due to operator-friendly results in the NFL and across various European soccer leagues. For the full year, margin was 10.8%, up from 10% in 2024. This was driven by the trend of increased use of high-margin BetBuilder products. And we're raising our guidance to 11% for the operator trading margin going forward on this basis. The increase in margin from Q4 last year contributed to the 3% turnover decrease we see on the blue columns, the aggregated operator turnover. In addition to this impact from the higher margin, we saw the impact of the Kindred migration from certain markets and foreign exchange, mainly the U.S. dollar. These headwinds were offset by growth in the network, especially in the newly regulated Brazil market this year versus Q4 last year. Today, we're setting out guidance for 2026. And our guidance is for adjusted EBITA (acq), excluding FX revaluations of EUR 20 million to EUR 25 million, up from EUR 17.6 million in 2025. We expect to be towards the upper end of this range if there's no introduction of a new sports betting tax in Colombia. Here, we set out the transition from '25 to '26. The first column here is the organic growth in the business. This is broadly driven from the additional revenue from our Odds Feed+ customers and others in the network on the turnkey offering. 2026 launch column includes revenues, both from signed but not yet launched at the start of the year customers and expected signings we expect to make this year. And the largest part of the -- of this column is from the recently launched OLG contract. The third blue column there is the 2026 World Cup, and Werner will talk more about the World Cup. We're really looking forward to it. With this extended format, we estimate this to be a EUR 5 million revenue opportunity this year. The orange columns are the headwinds we're facing. So firstly, the migrations. This largely represents Kindred and LeoVegas. We don't know yet the exact time lines of some of these migrations, so the numbers represent our best estimates. As previously discussed, the Kindred turnkey contract will be fully out by the end of this year. So the year-on-year headwind will last into 2027, and then it will disappear as they transition solely onto our Odds Feed+ service. The gaming tax and other column includes the impact on commission rates of certain key partner renewals, as well as increases in gaming taxes, for example, in the Dutch, Brazilian, and Illinois markets, as well as other U.S. states, which we know about today. Additionally, there is the indirect impact of the remote gaming duty increase in the U.K., which will impact the level of marketing expected from certain U.K. operators we work with. On the cost side, firstly, cost of sales will increase this year as we see an increase in recharged data supplier and other supply costs, which are charged through to customers. Our operating expenses, on the other hand, will be broadly flat, with inflationary effects driving salary and supplier cost increases. But these will be offset by our ongoing efficiency programs as we look to rationalize costs across the business. And this year, we're targeting an annual cash impact of our savings of around EUR 9 million. Any one-off costs associated with these savings programs will be presented this year as in 2025, as items affecting comparability. So assuming no introduction of a new Colombia sports betting tax, this broadly flat cost outlook should enable us to reach the upper part of the EUR 20 million to EUR 25 million range you see on the screen. With that, I'm going to hand you back to Werner. Werner Becher: Thanks, David. As I mentioned earlier, we are in a strong period of new business wins, and you can see our latest turnkey additions on this slide. For Q4, I covered all but one in the last presentation, so I want to focus here on the most recent Pickwin. Pickwin is a Mexico-facing operator that switched to Kambi from another supplier, choosing us to support their growth in a highly competitive market. They're already live on our sportsbook, and I'm excited to see how this scale over the coming years, especially with the fantastic opportunity ahead as Mexico co-hosts the FIFA World Cup. In Q4, we also signed 4 partner extensions, including Paf and our retail partnership with PENN Entertainment. And in December, we launched with PENN into the recently regulated State of Missouri. Q1 has started already strong with 3 new partners added so far. In recent days, we signed an agreement with 4 Bears, a tribal-owned operator in North Dakota, which will become a new U.S. state for Kambi. We also partnered with SuomiVeto, a new operator founded by the same team behind BetCity, one of our most successful partners in the Netherlands, now owned by Entain. SuomiVeto will be aimed at the Finnish market, where the founders hope to replicate their success upon launch of the country's regulated market in '27. And in January, we completed the innovation process with Ontario Lottery and Gaming Corporation, formally bringing OLG from FDJ into full partnership with the Kambi contract. On 27th of January, we transitioned this full contract with OLG, taking on responsibility for the sportsbook operating through 2032. We launched with OLG and its PROLINE brand both online and across 10,000 retail locations, a major undertaking and a fantastic achievement by everyone involved. As part of this partnership, we are also providing the front-end client, giving OLG customers across the province a faster, cleaner, and more engaging user experience. This launch strengthens our position within the lottery sector and among other state-owned organizations looking to upgrade their sports betting offering. But now our focus is firmly on working hand-in-hand with OLG and supporting them as they grow their sportsbook business. Our Odds Feed+ product continues to gain meaningful traction in the market. Since our last report, where we announced Superbet and Coolbet, we've added FDJ UNITED, and more recently ComeOn, to the growing list of Odds Feed+ partners. This builds on earlier wins with LeoVegas and Hard Rock, and shows how the product is resonating with Tier 1 operators. I've said it before, and I say it again, we have a real edge here. Just like with our turnkey offering, our vast global liquidity is a powerful advantage, driving the accuracy and performance of our AI-powered pricing and trading. Yes, there are established incumbents in the Odds Feed space. But over time, I'm confident we can grow our share to become a material and meaningful contributor to our business. On this side, you can clearly see the impact of our commercial strategy. A key priority has been to reduce our reliance on a small number of large turnkey partners and to diversify our revenue base, lowering our overall risk, and this strategy is working. The share of revenue generated by our 3 largest partners has fallen again, now down to 36%, driven both by the addition of new partners and the continued growth of those outside the top 3. By year-end, we generated revenue from 53 turnkey partners, along with 7 Odds Feed partners, with this number rising this year again. These partners are all spread far and wide across the world, providing us with greater geographic diversification, which also supports more stable sports betting margin. On this slide, I want to show you just how quickly AI is transforming our business. This chart shows the surge in bets priced and traded by our automated AI-driven systems. Last year, 49% of all bets across the Kambi network were fully AI traded. And in January, we passed the 50% tipping point, meaning the majority of bets placed are on the bet offers priced through our AI models. Next year, I look forward to showing you the same chart, again, expanded to include even more sports, soccer, tennis, basketball, ice hockey and others, as AI continues to scale across our product. And the benefit isn't just automation and efficiency, even more important is the quality of the product, our premium product. Our proprietary neural network delivers sharper prices, faster decisions and a more constant trading performance. So as you can see, for us, AI isn't a buzzword. It's a capability already deeply embedded into our product, our workflows and increasingly also our results. We are now less than 4 months away from what will be the biggest sports betting event of the year and arguably the biggest of all time. The FIFA World Cup '26 kicks off June 11, and this addition will be larger than anything we've seen before. Not only will be there 60% more games and double the knockout matches, but thanks to our global footprint, we expect engagement across the Kambi network to reach unprecedented levels. Just looking at the 3 host nations, Canada, Mexico, and the United States, Kambi has partners in all of them where interest will naturally be sky high. And when we zoom out further, 8 of our top 10 betting volume markets have already qualified for the tournament with Sweden and Denmark still fighting for their place in the playoffs. This World Cup represents a huge opportunity for our partners to reactivate existing customers and to acquire new ones. And their success will depend heavily on an offering of a world-class product. And while we never rest on our laurels, we have a product that competes at the highest level. In recent months, our soccer product has improved further, driven by AI trading, including more player props, broader depth, and virtual limitless combinability. And as I mentioned earlier, we expect to push this even further. We look ahead to this World Cup with real confidence because for the first time, an entire World Cup will be completely traded on AI across our network. So to sum up, we finished the year in strong fashion, taking that momentum into '26 with further partner signings and the important launch of OLG. Today, we released our guidance for '26, which highlights a return to revenue growth and increased profitability despite various headwinds. And as we continue to build the foundations for long-term success through product, through operational excellence and through our partner network expansion, we believe we will accelerate growth in the years ahead. Thank you. Mattias Frithiof: Thank you, Werner. With that, I will hand over the word to the operator and see if we have any questions on the teleconference. Operator: [Operator Instructions] The first question comes from the line of Martin Arnell from DNB Carnegie. Martin Arnell: My first question is on the guidance for 2026. Can you elaborate a little bit on the moving parts here in addition to the intro of sports betting tax in Colombia or the potential intro, and the other sort of key factors when it comes to the organic growth item, for example? David Kenyon: Yes. I mean on organic growth specifically, I think the biggest -- I mean, across various operators, I won't get into them one by one. But I think I'd call out specifically the Odds Feed+ customers where we've had a -- we started in 2025, and it's -- yes, it's been a good start, but I think we've got much more potential. And I think that is particularly one revenue line that will grow materially in '26. So we're looking forward to seeing how that develops. Martin Arnell: In this bridge, what is the organic growth in percent on your business in this? What does the bar in organic growth represent in terms of organic growth? David Kenyon: Can you go to the slide? Werner Becher: Good, take the slide. David Kenyon: Yes. I mean, it's kind of mid-single-digit percentage, I would say. Martin Arnell: Mid-single-digit percent roughly. Yes, okay. David Kenyon: Roughly kind of 3% to 5%, I guess. Martin Arnell: Just a question on the cash flow also on your -- you had a negative change from working capital changes. Can you elaborate on that? Is it something that has reversed already in Q1? Or what is it? David Kenyon: Yes. No, I was pleased to say, we had some large customer receipts coming in just after year-end. So actually, the EUR 32 million -- EUR 32.9 million we talked about at year-end actually is kind of north of EUR 40 million as we stand here today. So yes, there were some receipts that came in just after year-end. So its -- yes. Martin Arnell: Okay. And this -- the effect from the Football World Cup going forward, how well prepared would you say that you are? How much of a bigger event will this be for you? I appreciate the guide that you gave of around EUR 5 million effect. And how does that compare to historic performance of these kind of events? Werner Becher: Yes. Martin, we are, of course, very excited about the FIFA World Cup coming up because -- especially comparing it to last year, where we had a very dry summer with not a lot of big sporting events. This year will be an exciting event for sports fans across the globe. As you mentioned, we expect to generate around EUR 5 million of revenues, so roughly 3% added revenue to our top line out of it. Looking back historically, of course, World Cups were even more important 10, 15 years ago, where sports fans had not the chance to bet on 700,000 live events per year, but only, I don't know, 20, 30, 50. This number was increasing heavily over the last few years. So it's still super important for the betting industry, especially with our global footprint in South America, in Europe, but also now with Mexico, Canada, and the U.S. hosting this event. So it will be a material and very important event. But of course, each and any single event, the importance of these events is decreasing as we add more and more events in general to our schedule. Martin Arnell: David, do you remember how much you had last time around in the World Cup in terms of contribution on adjusted EBITDA? David Kenyon: I don't, but I think we're forecasting a little higher than we had in the past really because it's an expanded event. So -- and yes, more matches this year. So yes, I think it's a little higher versus historically. Martin Arnell: My final question is on the AI effect on the business. And I appreciate that you're working hard with this. And -- but there's also a question on sort of what our competitors doing and how easy would it be to replicate? And then also the discussion around prediction markets, would be interesting to hear your latest views on it, if you have changed anything in terms of views. Werner Becher: Yes. Thanks for the question, Martin. I'll start with AI. So we don't see AI in general as a threat for us as a company. It's exactly the opposite. We're an early mover here. We started to invest already some years ago, and we are also already now seeing the results out of it. Some of our competitors are going in another direction than we are going. They are -- they have, I would say, given up on pricing and trading and they simply purchase Odds Feed from other suppliers. We see pricing trading as the core of our business, and we want to be excellent, and we want to offer a premium sportsbook. So I think it will not be easy to replicate our systems, the domain knowledge we have, but especially the big liquidity we have. We have a betting liquidity of around EUR 17 billion from our 60-plus customers on our neural network. It's about 1.6 billion bet tickets coming into our system on an annual base. And this is something you can't replicate. The data we have, the historical data, first of all, but also the real-time bet tickets coming in and this big liquidity is super important for neural networks and to train AI and to sharpen your prices, this is very difficult to replicate. Coming to your second question to prediction markets, we still haven't seen any impact on our business from prediction markets. Of course, we fully understand that in unregulated markets in the U.S. specifically, these guys have some first-mover advantage and they will take some market share there, which is some threat for, I think, the regulated industry of betting. But in the regulated states, their impact so far was not material at all as the product is very simple. We see it positive and negative. We see this very simple product prediction markets offer also as an opportunity to educate sport fans and to bring them to sports betting. So we don't only see this as a negative. But of course, the future will show how it turns out. Operator: We will take our next question. Your question comes from Nicolas Kalanoski from ABG Sundal Collier. Nicolas Kalanoski: Just a few questions from my end. So you've had a quite decent momentum in terms of signings, I think it's fair to say. I'm a little curious, has the feedback from prospective clients changed compared to, let's say, a year ago, if you look at the roster of prospects alone? Werner Becher: Yes, the market, of course, is in an evolving phase at the moment. I think we are still in a gold rush in South America, I would call it. So a lot of opportunities, a lot of regulation going there on country by country. We also still see big movements in the U.S. And of course, we have a lot of expectations, as Martin mentioned in his question before, specifically about prediction markets that this could even speed up the regulation in some U.S. states. In Europe, market is already very, very mature. So there is not a lot of business additionally we can gain. We can take some business away from other suppliers, but there's not a lot of growth in Europe anymore. On top of our turnkey business, of course, our new Odds Feed product is something which we're very focused on. And there, of course, the opinion about what Kambi is, I think, has changed in the market now. So we have a lot of, I would say, advanced discussions with big Tier 1 operators being very interested in this product. So this is a very exciting opportunity for us. Nicolas Kalanoski: Yes. Very cool. I appreciate that. And I also appreciate your prior commentary on the impact of AI and how you view the business as being insulated partly against it. Just a final one on the cost base. When I look at the guidance bridge, I take the building blocks of the guidance to mean you're relatively satisfied with your current cost base. Is there any chance that we can see changes in the OpEx base maybe turning into a tailwind for the profitability? David Kenyon: I wouldn't say we're satisfied. And I think I mentioned, I called out extensive savings programs. There are inflationary effects in the business for sure, and you see that in pay rises and supplier costs rising. So we need to battle against those. And I talked around the EUR 9 million annual cash savings programs. It's across all parts of the business. We're looking at office sizes, renegotiating suppliers, how we structure ourselves, leveraging AI across trading, across the whole business. So we're doing -- we're working really hard on the cost base. And it's hard against that inflationary backdrop, but we are -- yes, we're trying to keep it as flat as possible. Operator: There are no further phone questions. If you wish to take the written webcast questions... Mattias Frithiof: Thank you. So we had quite a few written questions. So we'll start with the Odds Feed one. You just signed ComeOn on Odds Feed+ and stated you are getting good traction with Tier 1s despite established incumbents. Can you just expand on the difference between the Kambi Odds Feed and those supplied by others as well as future prospects? Werner Becher: Yes. Happy to take this question. So we're clearly a challenger in the Odds Feed market. We have been known for many years as being a full turnkey supplier. So I think the industry received the message now that there is something interesting also on the Odds Feed side, they can buy from Kambi now, and we see some good tractions with first Tier 1 customers having signed up. The big difference and the edge we have on Odds Feed+ is clearly that most of the other Odds Feed, you can buy, they do pricing only on in-event data. So only on what's happening in the game. Our Odds Feed is traded, which means we fully leverage the 1.6 billion bet tickets we get into our system, and we trade the odds, meaning our odds are changing faster, more accurate, leading to a much better product for sports fans out there. We don't suspend markets that long than others. Our bet acceptance rate is higher. Our availability is higher. Our margin is higher. The experience for sports fans is so much better taking our sportsbook, and the margin is so much better for operators taking a much sharper pricing. Mattias Frithiof: Thank you. Next one, coming back a bit to the prediction markets. With the rapid rise of CFTC regulated prediction markets in the U.S., could there be an opportunity to license your Tzeract AI pricing technology, especially to financial market makers or trading firms operating in these markets? Werner Becher: If you ask the question, if we could, then the answer is yes. If we will do that, the answer is at least for the short-term, no, because we are licensed in many jurisdictions in the U.S. So we play on the white side of the business, and that's also something we will do in the future. There is a high risk, and we received a lot of very clear statements from regulators across the U.S. that if we would go into this space that the risk of losing some license and therefore, also customers relying fully on us would be very high. So we could be market maker. I don't think that Tzeract specifically would be the only edge we have here, but it's not on our agenda for the next few months. We will continuously monitor the space and especially the court cases and the decisions coming up here in the next few years. But for now, our strategy is clear: To stay fully focused on sports betting. Mattias Frithiof: Yes. And the question was a bit also on financial markets outside of sports betting, but I guess the answer there is no as well. We're not really looking at that. Werner Becher: No. We're laser-focused on our strategy to offer the best available premium sportsbook. And there are always opportunities you could go left and right. But for us, it's super important to stay fully focused on our strategy. Mattias Frithiof: Clear. Coming to Colombia. Colombia saw strong customer GGR growth in 2025, with VAT currently removed. How is Colombia reflected in your 2026 growth assumptions? David Kenyon: Yes. So I mean, there is a tailwind. If there's no tax introduced, there's around EUR 3.6 million tailwind versus last year. Of course, there may be a tax introduced, so that's why we say, we're aiming for the top end of the range given today, if there's no tax, but we're conscious that can change. We hope it's at a sensible level going forward. That's what we can really ask for at this stage. Mattias Frithiof: How much on the assumptions is incorporated in sort of organic growth or...? Werner Becher: Yes, I can answer this question. So of course, the introduction of this new tax at the end of the first quarter last year disrupted a little bit the market because on these high tax, it's simply not possible to run a profitable business. So our customers in this market try to offset the impact with a lot of more bonus money they gave to customers to keep their market share. Now the market changed only, I think, 3 weeks ago when this new tax was suspended. We see already now that customers in Colombia are changing their marketing strategy, their bonus and engagement strategy. I think it's too early to say how this will change also market growth for our customers. But of course, we expect some very nice tailwind from this market. Difficult to say how big the organic growth because of these changed marketing strategies will be. Mattias Frithiof: Then coming back to the 2026 launches. Does the contribution include any unsigned customers or only contracts already secured? David Kenyon: Both. It covers both. But I think that hopefully, the reassuring part, as I mentioned earlier, is that the Ontario Lottery and Gaming piece, which is obviously signed and launched is a massive part of that chart -- over half of that chart is from that one contract alone. And then we have some other signings recently announced, which are also in there. And then there is some expectation and hope of further signings contributing there. Mattias Frithiof: Yes. Okay. And coming back to the Odds Feed, what share of 2026 revenue do you expect to come from modular products? I guess it's Abios and Shape as well, but also the Odds Feed. David Kenyon: Yes. I mean it's growing. I'd say, it's probably hopefully, it should be north of 10% this year in the 10% to 15% range, I think. Mattias Frithiof: Yes. Okay. Following the Pickwin agreement, are you still equally positive on Latin America? Werner Becher: Yes, of course, we are. Many customers in the Brazilian market, of course, have signed up with suppliers when the market opened early 2025. So the next window of opportunity for us is coming right now where some of these contracts will come to an end eventually -- 2, 3 years contract. So we already have some inbound questions from operators in Brazil being not super happy with their existing suppliers, not only because of pricing and trading, but also mainly because of being not fully compliant with regulations. This is actually one of our big, big strengths: Being licensed in more than 60 jurisdictions around the globe that customers can be 100% sure that they are fully compliant and there is no risk to lose a license. So also for the next, I would say, 18, 24 months, Latin America will be a key focus for our sales ambitions, yes. Mattias Frithiof: Then moving to another area of growth. Could you provide an update on the Nevada licensing process for OMEGA and when we might expect customer launches there? Werner Becher: Yes. So we are fully licensed in Nevada. Next step is to go with our first customer in Nevada through what's called there the field test. We are in advanced discussion with several interested partners in the State of Nevada as we speak. And we are still very confident that we will be able to launch 1, 2 or 3 of them during the time of the year and go with one or more of them in this field test approach, which is already a production test then. So we would be already live then. Mattias Frithiof: Thank you. Operators are optimistic that Alberta could go live at the end of Q2. Is this reflected in guidance either from existing operators or potential contract wins? David Kenyon: Alberta, I don't know specifically. Werner Becher: Yes. So of course, we have modeled into our 2026 budget movements up and down. Alberta will come most probably now soon as a new state, but there are also a lot of other, I would say, downsides and taxes we don't know to be announced and introduced today. So we don't expect Alberta to have a very material impact on our budget for '26. Of course, we appreciate each and any new state in the U.S. to regulate sports betting and to make it legal and to close down the black markets. Mattias Frithiof: Okay. And then continuing on the taxes. The U.K. tax increase is for 2027. It feels a bit early to bring it up as a headwind for 2026. Are you that close to clients that they've already told you about the marketing budget for 2027? So maybe explain a little bit what is the... David Kenyon: Here, we're talking about -- I referenced earlier the remote gaming duty, and that's more on casino products, for example. Sports betting increase does come in '27, but there is a 2026 -- April '26 that remote gaming duty goes up from 21% to 40% and will severely impact U.K. operators. There's been a huge talk in the U.K. around this. So it's very clear that that will, I'm sure, limit what they can spend on marketing and their resources generally. So that's the indirect impact that we will -- that we have included this year on us, which is what we see. Mattias Frithiof: Yes. And then the 3% to 5% revenue growth, is that organic revenue growth, excluding FX? I guess, FX will be a negative given USD weakness. David Kenyon: Yes. There will be a small headwind on a full year basis. But yes, the 3% to 5% is excluding that. Mattias Frithiof: How have rising taxes across your key markets affected your full year 2025 EBITDA? David Kenyon: Negatively. Always taxes -- I hate just talking about taxes. I much prefer talking about bonus opportunities. But yes, there's a long list of taxes that have hurt us in '25. You've seen it. It's something we expect. We do, of course, forecast for all these budget taxes going up, but I mean, it does hurt us. I'm not going to call out individual impacts, a long list of them. Mattias Frithiof: Okay. And actually, the last question is on cash flow. Development cost of intangible assets decreased from EUR 28.2 million to EUR 26.3 million in 2025. What should we expect here for 2026? David Kenyon: Relatively flat, I would say. I mean, I've talked around some of the areas we are looking to rationalize our costs. But I think generally, it won't be in that area. So I wouldn't really especially see a massive change in the amount we're capitalizing going forward. Things can change. But as we stand here today, that's -- it seems a relatively stable number, I think, in our P&L and balance sheet. Mattias Frithiof: Okay. Thank you. Thank you, everyone, for listening in today, and we look forward to speaking to you soon or again after the Q1 presentation. That concludes the presentation for today. Thank you, David and Werner as well. Thank you. Werner Becher: Thank you, Mattias.
Operator: Ladies and gentlemen, welcome to the Mercialys presentation regarding its 2025 full year results. It will be structured in 2 parts. First, a presentation by Mercialys' management team represented by Mr. Vincent Ravat, Group CEO. Afterwards, there will be a Q&A session during which you can oral questions through your computer or by joining the conference call. I will now hand over to Mr. Vincent Ravat. Sir, please go ahead. Vincent Ravat: Good morning, everyone. Thank you for attending this presentation of our 2025 full year results. Our presentation today is built around 4 main messages. First of all, the momentum created by the repositioning of our portfolio. Secondly, the foundations we have put in place to gain the preference of retailers and consumers. Thirdly, the strength of our results and our financial structure. And finally, our distribution policy and our outlook for 2026. 2025 was special for us. In October, we celebrated Mercialys' 25th anniversary. 2025 also marked a change of momentum for the company. For several years now, we have been undergoing a profound transformation of our portfolio. 2025 showed that this strategic change is now well advanced and already bearing fruit. Slide 5, we note that there is a general positive consensus about commercial real estate sector. This is especially the case for the companies with portfolio of assets in the right locations and in the right format. Three factors will support future performance for those company. First, population is still growing in the suburban areas, while administrative constraints for new supply have increased. The second factor is a tighter consumer spending, which means that everyday low price policies are fundamental to create shoppers' preference. Thirdly, retail and commercial real estate are polarizing. So portfolio selectivity will be central to performance. In the past few years, we have shaped and we continue to shape our portfolio of assets around these conditions of success. This is why we believe we are among the companies that are well positioned for positive performance forward. Slide 6, you can see a summary of the journey we have undertaken to do so, where we come from, where we stand and where we are aiming soon to be. Our starting point was a dispersed portfolio of hypermarket-dependent assets. Today, we are no longer exposed to any hypermarket dependence. We used to have a portfolio spread across France, often including in areas with low economic dynamism. We have actively refocused our portfolio on the most dynamic regions and metropolitan cities. At the same time, we have strengthened the local dominance of our assets. Today, more than 85% of our assets have more than 50 shops, and this percentage increases every year. In this respect, today, 80% of our portfolio now exceeds 3 million visitors annually, and we have in sight a 95 percentage soon. Finally, within 3 years, our assets will have more than 90% of the consumers' preferred brands in their merchandising mix. Our portfolio is now made up of mostly dominant assets in their local area, no longer just convenience centers. The strategic repositioning is directly reflected in the very positive momentum of our 2025 figures, summed up on Slide 7. This is our best overall set of results since 2019. Our EBITDA margin is gaining 40 bps at 82.4%. Our rental revenues are on the rise despite perimeter effects related to disposals in 2024. Our recurring net income grew year-on-year by a solid plus 3.9% to EUR 117.5 million. This is the second highest level of NRE since 2011. At the same time, on a like-for-like basis, the value of our portfolio increased by nearly 4% in the second half of the year to exceed now EUR 3 billion. Our LTV ratio is improving consequently by 260 bps in 6 months to 39.5%. And finally, our EPRA NTA is up 8.5% since end of June. Slide 8, we ought to highlight that these financial performances are not temporary nor cyclical. They are here to stay. They are the results of our constructed, coherent and disciplined model. It is based on the 8 strategic pillars of our Shop Park roadmap. Let me recap them. A geographically refocused portfolio; two, assets of the right size dominant in their catchment area; three, selectivity in our assets and in their commercial offer; four, accessibility in terms of price positioning; five, industrial and rental diversification to limit rental risk; six, seven and eight, cost-efficient asset operation, full commitment to environment. As shown here, these are the pillars that will continue to support both the growth in our retailers' turnover and hence, our net rental income growth. This strategy translates into very concrete terms for our shareholders. On Slide 9, provided that our Board proposed EUR 1 dividend per share, is approved by our general meeting to be held on April 23, for 2025, Mercialys would have delivered double-digit return to its shareholders, a total shareholder return of 18.4% and a 10.2% return on equity. Our solid model offers investors a visible recurring and distributable cash flow generation. This value creation is accompanied by our commitment to sector-leading ISR ratings and demanding forward ESG trajectory as illustrated on Slide 10. 2025 marks 10 consecutive years of recognition at the highest ISR level for Mercialys. Operationally, we have reduced our greenhouse gas emissions by 57% since 2017, and we are now embarked on a new certified net zero trajectory covering all Scopes, 1, 2 and 3. We have equipped almost 85% of our centers with charging points. We have brought 86% of our main assets to an excellent or outstanding BREEAM In-Use rating. Last year, we have also obtained the leading score among French SBF 120 companies in terms of gender equality at 96%. As I mentioned earlier, we are repositioned. We have a solid model, and we have momentum. All these elements allow us to set our sights on an attractive medium-term trajectory detailed Slide 11. Over the period 2026-2028, we expect a trajectory of growth of our rental revenues between plus 5% and plus 7% on a compound annual basis, of which we consider that between 0% to 1% could come from indexation, of which we consider that 1.5% to 2% could come from our organic rental growth through more reversion, more variable rent, more casual leasing and less and even further less vacancy. The rest of the growth would be contributed by new acquisitions and by our pipeline based on current planning of deliveries. This growth in top line should offset the expected increase of our financial costs. All in all, by 2028, this would support an average net recurrent earnings growth of between plus 2% and plus 4% with a dividend policy targeting an annual payout around 80% of the NRE per share. In any circumstances, our capital allocation will continue to be extremely disciplined with a goal of a net debt over EBITDA ratio below 8x and an ICR ratio above 3.5x, both well above our bank covenants. We have seen how we have laid solid foundations to deliver a strong and steady financial performance. It is because these foundations drive retailer and consumer preferences locally that our assets can outperform. Let's see how we do it in details in the following slides. First of all, it is important to realize that there is a high level of polarization of regional sociodemographic trends across France. Consequently, retail performances have not been equal across all regions. In the past few years, we have followed this polarization to reshape our asset portfolio. As you can see on Slide 13, we have focused our portfolio on regional capitals and the French Sunbelt. That is a focus on the areas that capture most of the demographic and economic growth in France. In a country marked by a strong polarization of territories, being positioned in the right geographic areas is a decisive advantage in securing turnover growth. Beyond localization, we have also profoundly changed our marketing and digital approach. Our Shop Parks have become true omnichannel platforms capable of generating additional physical traffic from powerful digital levers. Our permanent active asset management is amplified by this industrialized marketing strategy. These are 3 drivers that we focus our attention on. Firstly, the retail brand's local visibility. We have reached 417 million views of our content in 2025 with a coverage of 100% of the population in our portfolio catchment areas. Second driver, enhancing click & collect and ship from store for our retailers. For 5 years now, we have been offering local logistics solution to our retailers. We will soon reach 1 million visits for packages, pickups and drop-offs, which themselves drive 25% incremental on-site purchases. Thirdly, we develop exclusive events, either thematic or eco-responsible, that contribute directly to increased on-site traffic and conversion. Preference from consumers also comes from supply. Today, 80% of French consumer favorite brands are present in our Shop Parks, as you can see on screen. It is an extremely strong marker of the quality and relevance of our current commercial mix. Our strategy is to further concentrate our portfolio offer on the top-of-mind brands while equally integrating e-commerce players when it reinforces the attractiveness of our sites. Slide 16. This attractiveness is accompanied by a strong discipline on diversification of our exposure to avoid any concentration of operational risks. In 2025, we have re-tenanted 100,000 square meters of our portfolio, that is to say 14% of our total portfolio surface area. At the same time, we are steadily reducing the share of the top 10 tenants in our rent roll from 32% 5 years ago to 25% today, and then we will reduce it further. Our objective remains unchanged. No individual rental exposure above 3% in the medium term, no excessive industrial exposure to any retailer either. Slide 17, we present another element driving our positive momentum. In a context where purchasing power remains under pressure, our everyday low-price proposition is a real economic shock absorber and a strong footfall and sales driver. It allows retailers to preserve their volumes and consumers to maintain their appetite and satisfy their appetite for acquisition of physical goods. This positioning is clearly an edge on inflation, which translates very concretely into our continuously improving collection rates, reaching 97.8% at the end of 2025. The attractivity of our refocused portfolio is reflected in our business activity on Slide 18. In 2025, we have signed nearly 200 leases, a lot of them with new brands on our portfolio. This is an increase of 10% compared to 2025, showing the strength of the demand for our assets. These signings mainly concern segments of daily consumption, home equipment, sport, beauty and accessible catering. Primark, Aroma-zone, Mango, Adidas, Lidl, Leclerc, Grand Frais, Volfoni, Tedi, Maxi Zoo, B&M, Biotech or Normal are all leading brands in their segments signed in our portfolio in the last 12 months, with a lot of them being international leaders. All of these levers I have just described resulted in a very clear operational outperformance of our assets in 2025. Slide 19, we can see that over 12 months, our portfolio footfall increased by plus 3.9%. This is 300 basis points above the national index. Meanwhile, retailer sales also increased by 2.6% over the same period, 280 basis points above the national index. It is worth noting as well that our outperformance in terms of sales versus the French national panel increased by a further 40 bps to 340 basis points for the month of December alone. These indicators confirm the relevance of our commercial offer and positioning. Since the beginning of 2026, the first indications are for a continuation of these positive trends. This dynamic is reflected in our other operating indicators, Page 20. Thanks to strong letting efforts, I just described, in 2025, our current financial vacancy has dropped to an all-time low of 2% at year-end. At the same time, our retailers' occupancy cost ratio remains among the lowest in the sector at 10.9% and even lower at 10% if we include the food stores OCR. This combination creates a healthy rental tension, which constitutes a natural lever for positive reversion. In 2025, renewals and relocation were done at a 2.2% reversion rate, up 190 basis points from their 2024 level. You will note that we do not include reletting of vacant units nor short-term contracts in the calculation of our reversion rate. Our future growth will be sustained via not only the organic drivers that we have just seen, but also by our project pipeline, which will further strengthen our dynamic. As illustrated on Slide 21, we have a large portfolio of projects that can be adjusted, activated or deferred according to the economic context. We will remain very disciplined in our capital allocation with a strict 10% IRR hurdle rate for deployment. Part of the short- and medium-term projects have already been activated to drive our growth in the coming few years. And we are currently deploying 3 categories of projects, strengthening, extension, new creation, which I will illustrate now individually. The first category, Page 22, are projects that reinforce existing assets to help them gain local leadership when they do not have it already. Two of these projects are underway in Brest and Niort. In Brest, the opening of the first MSUs, including Leclerc, has already generated an increase of plus 50% in footfall. We also expect positive reversion on leases for the rest of the assets as well as a revaluation to come upon completion in September 2026. This asset is becoming the leading asset in Brest metropolis. In Niort, we are following a similar logic, accelerated execution, commercial strengthening, all with very significant expected effect on traffic of at least plus 30%. This reinforcement should also lead to a revaluation of the asset. Secondly, in terms of the projects, beyond these reinforcement projects I just mentioned, we are also deploying extensions to create additional rent on sites that are already dominant as shown on Slide 23. Our approach is very simple. We capitalize on assets that are already leaders and we add additional attractiveness features. Two illustrations here. In Grenoble, we will create a deli-gourmet promenade and add MSUs by gaining on common areas. Our project is already 80% pre-let. Work will start soon, and we expect plus 20% additional net rent for the asset. In Angers, we have acquired 1.6 hectares of land immediately adjacent to our leading local Shop Park. We will be filling administrative authorization in 2026 for a 15,000 square meter potential retail development. Our target is to increase our total rent on this site by 15% upon completion. This sequenced CapEx-light developments with quick returns are best illustrated by the transformation example over time of our Toulouse Shop Park on Slide 24. This is a textbook Mercialys business case, a consistent step-by-step transformation strategy that gradually increases the retail offer, overall quality and attendance of the site. Around 10 years ago, we owned a convenience center with an hypermarket and 24 shops with 2 million footfall. It was already not bad at the time for this type of neighborhood asset. In 10 years, we have grown this asset retail offer to 130 shops and restaurants with more than 6.6 million visitors in 2025, and footfall continued to grow by another 3% in January. Our additional ongoing new project initiatives have a clear ambition for this asset to exceed 7.5 million visits within 3 years and become the #1 asset in terms of footfall in the Toulouse metropolis area. Finally, our third category of projects on Page 25 consists of new creation on selected geographies and secured land plots. In Saint-Andre, in the Reunion Island, we are developing a mixed-use business park on a land reserve we already own. In an area with low commercial density and favorable consumption dynamics, our project is fully authorized, already pre-let on more than 80% of its total retail GLA of 11,000 square meters. There is little complexity in the development scheme, and our approach is CapEx frugal with an expected yield on cost above 8.5%. In Ferney-Voltaire, on a plot of land bordering Geneva, we are targeting a 17,000 square meter mixed-use development in partnership. The yield on cost is expected above 8%. Given the attractiveness and wealthiness of this cross-border area, we have already received retailers marks of interest for over 80% of the total GLA. Together with our developments, our acquisitions are part of a very disciplined investment logic, improving quality, strengthening leadership and creating value quickly. Slide 26, we see that we invested EUR 176 million in 2025 for an average return of around 9%, with value creation already visible. NAV is up by more than 20% in the scope concern. We intend to pursue our investment campaign in 2026, which could reach up to EUR 100 million depending on our level of disposals. We already have specific acquisition targets in sight. We are giving here, on Page 26, the example of a retail park adjacent to our Toulouse asset that we are targeting in order to consolidate the local market share of the Shop Park as explained earlier. Our post-acquisition model is also industrialized. We act on 4 levels: improving merchandising, vacancy, expenses and ancillary revenues. As you can see on Slide 27, with the case of Saint-Genis Shop Park acquired last year, we have already signed new lease with Maxi Zoo, and we have active leads with new retailers like Mango, Decathlon or Aroma-Zone. Our goals in 2026 are to: one, reduce vacancy by 50%; two, increase rent by 5%; three, reduce charges by at least 10%; and four, develop specialty leasing income by plus 10%. Overall, in the medium term, our ambition is to create additional appraisal value of plus 30% to plus 40% of the acquisition price. Beyond our organic growth and project pipelines, we now fully hone another growth engine, the ImocomPartners asset management platform. As at beginning of 2026, the platform has 33 retail parks under management, approximately 400,000 square meters of GLA for EUR 40 million in annual net rental income. ImocomPartners provides us with a platform of expertise and asset-light growth with recurring revenues that could be comforted by operational strategies -- synergies. In the medium term, there is a strong potential of value creation with the launch of new funds and the ramp-up of assets under management, which would contribute positively to our EBITDA growth. Slide 30. I will now move on to financial results and funding metrics. Let's start with rental revenues. Our rental revenues reached EUR 180.6 million at end 2025. On a pro forma basis, taking into account the temporary IFRS accounting impacts related to already relet spaces of Brest and Niort detailed on the bottom right of this slide, our rental revenues grew by plus 1.7% compared to 2024. This growth includes the total negative scope effects of 2024, offset by 2025 acquisitions. This highlights our organic performance. Indeed, on a like-for-like basis, our gross rental revenues increased by plus 2.8%. It is important to note that we are talking here about gross rental revenues from indexation and leasing activity only. Our figure of plus 2.8% does not include doubtful debtors' effect nor JV marketing or other type of fees. Beyond the growth of the top line, we have embarked on a structured approach to optimize our cost base. Slide 31. In 2025, we launched the first operational deployment of artificial intelligence in our back office with 3 very concrete objectives: automating recurring functions with low added value, optimizing commercial and rental management processes and using our data to accelerate decision-making and pro rata temporary effects. Over time, we expect associated productivity gains could contribute to plus 0.25 to plus 0.5 points of additional EBITDA margin. If we move on to the analysis of the evolution of our net recurrent earnings on Slide 32, we see here that our EBITDA increased by EUR 1.7 million. This brings the EBITDA margin to 82.4%. Our financial expenses grew by EUR 6 million in the meantime. This change is mainly due to the increase in debt marginal cost and to our refinancing operations. The change of our other operating items amounting to, as I mentioned earlier, to plus EUR 5.1 million is mainly due to indemnities received for early lease termination. IFRS standards imposed an accounting treatment outside rental income. It is worth noting that more than 90% of the GLA concerned by these indemnities I just mentioned has already been relet. The new rents will take effect in 2026 and 2027 after store setup period, hence, our pro forma presentation 2 slides ago. Finally, change in equity associates and non-controlling interest have been mostly impacted by the change in the consolidation method of the ImocomPartners fund management company and the impacts of change of other minority interest due to acquisitions and disposals. On the basis of these elements, our net recurring earnings stood at EUR 117.5 million for 2025. Its increase is plus 3.9% over 12 months. This represents EUR 1.26 per share, also up plus 3.9%. This performance is at the top end of the range of the guidance we revised last year. Slide 33. Our operating performance, rent growth and net acquisitions are also reflected in the positive evolution of the valuation of our portfolio. In 2025, the value of our portfolio exceeded the EUR 3 billion mark, up 10.1% over 12 months. This increase was driven by a positive rent effect for plus 2% and a scope effect for plus 8%. Meanwhile, capitalization rates stayed stable. Our appraisal yield remained flat at 6.65%, maintaining a premium of more than 300 basis points over the risk-free rate. This leaves potential for further revaluation given the current operational strength of our asset base and the associated level of our key performance indicators. Slide 34. This portfolio revaluation is reflected in our NAV. EPRA net tangible assets came to EUR 16.96 per share, up plus 8.5% over 6 months and plus 4.1% over 12 months. The positive change over 12 months takes into account the following impacts: the payment of EUR 1 of dividends; the net recurrent earnings growth for plus EUR 1.26; the positive change in unrealized capital gains for EUR 1.41, including a negative effect linked to the change in valuation rates and positive effect linked to rents; and fourth, other items in relation to the accounting for minus EUR 0.99, mainly in relation to amortization and depreciation. I remind you that our accounting is on the historical cost method. Regarding our EPRA NDV, it is up plus 9.5% over 6 months and plus 5.1% over a year to reach EUR 17.29 per share. Slide 35, we highlight that our current performance and our future growth remains supported by a robust financial structure. At the end of 2025, our banking covenant LTV, excluding duties, stood at 40.4%. Note that the LTV on screen is not taking into account the financial lease associated with our Lyon acquisition. Including this financial lease, our LTV stood at 39.5%, including rights at end of December. It is down 260 basis points over 6 months. These levels are all much lower than the 55% banking covenant that applies to all our confirmed bank lines. Our ICR ratio stood at 4.9x as of December 31, well above the minimum level set by our covenants. Both our ICR ratio and net debt over EBITDA ratio were partially impacted at end of December by the pro rata temporary effect of the acquisition of Saint-Genis in Ain, which occurred in June. We had more debt, but half the EBITDA contribution. Note also that on October 17, Standard & Poor's reiterated Mercialys' BBB stable outlook rating. Slide 36. As you know, in June 2025, Mercialys issued a EUR 300 million bond oversubscribed 5x with a maturity of 7 years. This [ emission ] illustrated investors' confidence in the credit quality of the company. It is intended to allow the redemption of the EUR 300 million bond maturing this month and carrying a coupon of 1.8%. At the end of December 2025, the average maturity of our drawn debt was 3.5 years. We also maintained a high level of coverage of our fixed rate debt at 89%. Additionally, Mercialys also has EUR 390 million of undrawn financial resources. All of our undrawn bank resources include ESG criteria. I hope that with these results and through this presentation, we have shown that Mercialys combines portfolio strength, high recurrent profitability, balance sheet discipline and a high growth potential. Building on these strengths, we expect a solid 2026 performance. We are targeting an earnings per share of at least EUR 1.29 with a dividend of at least EUR 1 per share. Our underlying growth of earnings shall be supported by continued strong retail operating performance with continued footfall and retail sales growth. It will be supported by the positive impacts of our dynamic leasing, by the ramp-up of some of our projects and by positive impacts of 2025 and new 2026 acquisition and as well a continued focus -- with a continued focus on cost discipline. Our guidance also incorporates and reflects the increase I mentioned of our cost of debt and the effect of disposals associated with our permanent asset rotation policy. Well, that is all for me for today. Thank you for listening, and we can now follow up with the Q&A session. Operator: [Operator Instructions] The next question comes from Florent Laroche-Joubert from ODDO BHF. Florent Laroche-Joubert: I would ask maybe 1 or 2 questions. So my first question would be on your development and investment plan. So could you give us maybe more color on the CapEx you are able or you're willing to invest in the coming years or for a year? And maybe also what would be the targeted credit profile for the next year? So do you still target maybe LTV ratio below -- around 40%? And maybe also, would it be possible to have some more color on the deliveries for the pipeline that you expect? Vincent Ravat: Okay. I'll start with maybe your second question. In terms of pipeline delivery, basically, what you can expect for 2026 are the delivery of small projects that are CapEx light that we started in 2024 and 2025 and that will contribute to additional rents in our projects. I mentioned about Brest and Niort. We are talking there about building walls to separate the unit to transform it and then to create reversion on the former space. We have also other initiatives like in Grenoble that will be due a little bit later. But basically, at the moment, what we are focusing on in strengthening our portfolio, and that's the type of delivery you can expect for '26 and '27. In terms of acquisition, I mentioned a potential about EUR 100 million. As you know, and as I mentioned, it will also depend on the amount of disposal that we will realize during the year. We are always looking at liquidity and rotation of our portfolio because this is important to support our confidence in the level of valuation of our assets and then to contribute to general liquidity of the company. So depending on these disposals, we estimate that we have firepower of around EUR 100 million for 2026. The balance between investment, new acquisitions, disposal and CapEx is always in mind for us and adamant criteria of maintaining our BBB perspective, stable rating from S&P. There are sets of criteria that S&P shares with us that are required, and we stick by them in a very orthodox way. So don't think that we will put that in danger in any sort of way. And we feel confident that we can both invest and maintain those criteria and this balance sheet equilibrium. Florent Laroche-Joubert: Okay. So that means that you can target potential acquisition investment for EUR 100 million maybe in the next 12 months, and then we will see what you are able to do for the next years, 2027 and 2028. Vincent Ravat: Yes, plus some potential disposal if we deem them interesting at the time with, of course, the pro rata effects of any acquisitions when they occur and when we communicate on them. Florent Laroche-Joubert: Yes. But in your guidance -- there is no acquisition included in the guidance. And today, you have very advanced discussions, significant to be added maybe later in the guidance. Vincent Ravat: We always include all perimeter effects in our guidance, and these perimeter effects can be from acquisitions, from disposal, but also from variation in our P&L. And I mentioned about the financing cost increase. What we provide to the investor is something that is clear. The management of how we invest, how we sell assets, how much value we create is ours -- it's our job. What we give you is something that -- is visibility on what we will deliver in terms of net recurrent earnings per share for the year to come. Operator: The next question comes from Valerie Jacob from Bernstein. Valerie Jacob Guezi: Just maybe a follow-up question on the previous question about your investment strategy and capital allocation. You -- in terms of how you think about your pipeline, you said you have a criteria of 10% IRR. Currently in your pipeline, do you have projects that are above this hurdle rate? And if you do, why don't you launch them? I mean, I guess my question is how you think about development versus acquisition? And maybe to finish also, how you think about share buyback in this context? I've got another question, but I'll ask the question after. Vincent Ravat: This is an interesting question. This is part of what's thrilling in our jobs, to make the right choices of capital allocation. Our belief is that any investment should provide return within a short-term period. So when we see that we can either launch or start projects with low CapEx and high yield that can be compressed in time with short-term delivery, we do it, especially if they strengthen our assets. When we see that we have very relative acquisition potential, we will go for them because they are immediately contributive, especially if we think we can improve the KPIs of those assets. So what we have in mind is short-term delivery on capital allocation. That's the driver. Plus a level of yield that's highly relative. And it's the combination of the 2 that's important. So no investment below 8% yield on cost. But then the difference between something that's long term at 8% and something that's short term at a little bit lower yield makes a lot of difference in our choices. Valerie Jacob Guezi: Okay. And maybe -- so you didn't answer about share buyback, right? How do you think about that versus acquisition and development? Vincent Ravat: I said in many road shows in the past that I thought buying back share was less interesting than investing in our industrial know-how. Now seeing how our shares trade and have been trading over the past year, lagging with inadequation in my mind between the strength of our underlying performance and where our share stands relatively, it's true that I started to ask myself -- and this is a discussion we had with the Board of the possibility of buying back share. We have not decided to do so in this sequence of results, but this is a thinking that's clearly in our mind. Valerie Jacob Guezi: Okay. And I've got another question about your recent acquisition and Saint-Genis. You said during the presentation that the assets' valuation were up more than 20% since you bought it, over the past 6 months. So I just wanted to understand what happened? I mean, was it a lucky buy? Or did you do anything to improve the valuation of the asset over the past few months? If you could share some details. Vincent Ravat: In the last 5 years or more, we have been transforming assets that are disliked into powerhouse. The assets I'm talking about are assets somehow that have no name. They are not retail parks. They are not convenience centers. They are not hypermarket galleries. They are in between. They are dominant -- they are assets that can become dominant in their local areas. They are assets that have an amplitude of offer that's very wide. They are assets that are convenient, that are low cost. And this category that we have named Shopping Park because it bears no name really, embodied by our Shop Park brand, is a category that was overlooked and little looked by investors. When we went for the Saint-Genis acquisition, we faced little competition in those bids. Probably I should not say that too much publicly because that could attract investors in the future. But on these categories of assets where we see a huge potential and we deliver strong performance, there are little investors showing up. And so when you have a willing seller and you have a few counterparts as buyers, you make good deals and you make -- and the yields that we reach later on reflects the stability and the low risk on the cash flows. We have a lot of our assets that are not considered prime shopping malls only, where we had 0 vacancy in the last 10 years because they are in secondary cities in France and where the risk on the performance is limited, which should definitely be translated into the valuation yield. So yes, for the assets that we work on, there is a big discrepancy between the yield as a reflection of the transaction on the market and the yield as a reflection of the risk on operational performance and on recurrence of cash flows. Operator: The next question comes from Amal Aboulkhouatem from Degroof Petercam. Amal Aboulkhouatem: Congratulations for this result. I have 2 questions on my side. And the first one would be on the operational performance when it comes to retail sales, but also footfall. Is there any base effect to see behind the strong results as -- 2024 was impacted by the casino transition. Could that be an explanation for your strong outperformance? Vincent Ravat: It's interesting you're asking this question because this is something I failed to mention. Actually, our footfall performance in 2025 did not include the assets where the base effect could have been extremely positive because it would have wrapped our overall performance to a level that would not have been credible. So basically -- for instance, the Brest assets indeed has a huge base effect between 2024 and 2025, but it's not included in our report of footfall growth. The footfall growth comes from the other assets where we have a basis of comparison that's equal. So it's really -- and the performance that we are publishing are really the underlying performance of our model, not related to base effects. Amal Aboulkhouatem: Okay. Second question would be, again, on the investment policy and strategy. Just -- so we see you did a very great acquisition in 2025. How do you look at the market in 2026? Do you think this is replicable, meaning that do you see still potential targets that would, let's say, tick all the boxes at still attractive prices? You mentioned the retail park adjustments to your Toulouse portfolio -- your Toulouse asset, but have you identified more potential targets at this stage? Vincent Ravat: Yes, we are clear on the targets that we would like to acquire. We have a set list that we are looking at. We still see a few potential buyers. Probably it's because all those assets -- and this is true for commercial real estate in general -- are difficult to manage. We have a specific know-how that we know how to apply on those assets that a lot of investors, especially nonspecialists, cannot replicate easily. After -- and therefore, the yields on acquisition could reflect that, meaning being quite high. After -- the difficulty is more on the vendor side, where we see vendors hesitating because probably they see what we do and they think maybe there is a possibility. So that limits a little bit the number of assets on sales. But we are very confident that there will be -- there are opportunities currently. And also, the fact that because the yields are high, the bank having a little bit more confidence about commercial real estate tend to refinance those potential vendors who hold the assets, which flows a little bit the dynamic of rotation on the market. But there are enough products that we like on the market for us to deliver what I just presented. Amal Aboulkhouatem: And is there any like plan to look at acquisition outside of France? Vincent Ravat: We -- despite all the political and economic turmoil in France, we still like the country. It has a very stable consumption base. We think, as we mentioned, that when we are focused on the right geographies, there is still a lot of potential. So that's our main focus. We are strong in France. We know the market to -- and each millimeter square of it. And so that's where we believe we can deliver most. Now there is always this question of diversifying of our rental base, of the fact that our share drag or comparative share drag to our performance could also be related to some defiance from investors about any companies too exposed to France. And so this is also a question that the Board and I discuss and that we look at. Operator: The next question comes from Benjamin Legrand from Kepler. Benjamin Legrand: I have actually a few questions. You're mentioning disposals, but I was just wondering what kind of assets would you be disposing? Will it be smaller noncore assets? Or would you be looking at mature assets? And then on your acquisition plan, which would be financed through disposals, would you also be looking at new equity going forward? And related to that, your guidance for 2028, I mean, the midterm, is on earnings per share, right? It's not earnings only. I mean, if you do equity raise. That would be it for me. Vincent Ravat: In terms of the disposals, what we've always said and we continue to say and think is the fact that there is no trophy asset in our portfolio. Basically, the key for a REIT like us is to have full liquidity on the whole portfolio, not liquidity on a small part and then the rest overvalued. Then there's no ability to be sold. So anything could be sold. If it's at the right price, valued properly by the market, we could consider selling it. And we've shown in the last 6 years that basically we are ready to dispose of anything if the purchase circumstances are the right ones. So there are multiple options. We have demand on some assets. People see the job that we are doing, especially locally. We have an average asset value of around EUR 70 million, which provides us many options in terms of seller type. So anything is possible. And then obviously, depending on the amount of what we could sell, then we would look at reallocating in order to be able to deliver the guidance that you have on screen or you must have still on screen right now. In terms of equity raise, this is something that we mentioned in road shows. We saw that what some of our peers have done. We think this is clever. It's true that our stock trades at a huge discount, which creates a hurdle rate to -- for -- to have a relative acquisition a bit more complicated. But if we estimate that there are fantastic opportunities on the market that could be relative for our shareholders, great for the company overall portfolio strength, yes, we will consider looking at the option of equity raise. Operator: [Operator Instructions] The next question comes from Alex Kolsteren from Van Lanschot Kempen. Alex Kolsteren: I think my colleagues asked most questions, but I have one remaining. In that growth outlook, what do you assume will happen with the reletting of the hypermarket maturing next year summer? Vincent Ravat: Sorry, I could not hear precisely. What you're asking is the potential reversion on the hypermarket reletting? Alex Kolsteren: Yes. Is that sort of accounted for in that growth outlook, 5% to 7%? Vincent Ravat: Yes. Basically, the hypermarket transformation is part of our overall strategy. And when we cut the hypermarket size related to new units, this creates a reversion. So at the moment, it's not accounted for in the reversion that we have published or at least any of these -- none of these operations are accounted for in the numbers that -- of reversion that we have published for last year. Alex Kolsteren: That's understood. But I'm more talking about the outlook for '26 to '28. And then the organic growth figure is 1.5% to 2%. So my question is, is part of that 1.5% to 2% accounted for by the reletting of hypermarket space to non-hypermarket tenants? Vincent Ravat: Yes, of course. We count on this reletting to not only contribute to our organic growth but also contribute to the strength of our retail assets. This was part of our strategy. Remember back in 2015 and '16 when we said we are buying hypermarket walls in order to be able to transform them because we see that the hypermarket is changing and the operators will have to reduce their space to concentrate on food only, and so those spaces will have to be reconfigured? It's better to be in control of that reconfiguration, as we are, because we can do what is good for us instead of suffering the potential consequences of those reconfiguration as a weakness. Operator: [Operator Instructions] Vincent Ravat: I think there are no further questions. So I think we'll end this conference on that. Thank you all, and I wish you a very pleasant day and a very pleasant result season.
Operator: Greetings, and welcome to the Celanese Corporation Q4 2025 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the brief remarks. Please note this conference is being recorded. I will now turn the conference over to William Cunningham. Thank you, William. You may begin. Thanks, Daryl. Welcome to the Celanese Corporation fourth quarter 2025 Earnings Conference Call. William Cunningham: My name is William Cunningham, Vice President of Investor Relations. With me today on the call are Scott A. Richardson, President and Chief Executive Officer, and Chuck B. Kyrish, Chief Financial Officer. Celanese Corporation distributed its fourth quarter earnings release via Business Wire and posted prepared comments as well as a presentation on our Investor Relations website yesterday afternoon. As a reminder, we will discuss non-GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today’s presentation will also include forward-looking statements. Please review the cautionary language regarding forward-looking statements which can be found at the end of both the press release and the prepared comments. Form 8-K reports containing all of these materials have also been submitted to the SEC. With that, Daryl, let us please go ahead and open it up for questions. Operator: Thank you. We will now be conducting a question and answer session. The star keys. Our first questions are coming from the line of David Begleiter with Deutsche Bank. Please proceed with your questions. Thank you. Good morning. Scott, now that the business has been stabilized, you have done some improvements on the cost and balance sheet side, what are your updated thoughts on potentially selling some equity to get ahead of this balance sheet issue? Thank you. Scott A. Richardson: David, focus continues to be on the plan that we have been outlining. It is really about cash generation first. And I think the team has done an excellent job of prioritizing cash generation, and the strength of that Operator: in 2025 despite the earnings decline year over year, was evident. And the fact that I think we built, you know, the right elements Scott A. Richardson: that can keep that going, here in 2026 and beyond. And we are extremely well poised for recovery. So you know, our focus really continues to be on using know, you know, debt and, you know, we have been able to refinance, our bonds and and continue to to pay off what is right in front of us. So, you know, given, you know, the fact that our maturities now coming up over the next couple of years are significantly lower than they were. And, you know, the cash generation that we have from the business as well as what we have coming from divestitures, we believe Operator: is strong. We feel like we are in a really good position. Very clear. And just on tow, what are you seeing for pricing in your contracts for 2026? Scott A. Richardson: Very little change in contracts pricing, David. And I would say more of the spot part of the business, that is where we have seen more competition, with the additional capacity that came on in the market last year, which drove the actions that we are taking. And I think the team with the action we announced last quarter about Operator: the Lanakan plant closure, we are going to be able to drive enhanced cost benefit into the business of about $20,000,000 to $25,000,000 on a full year basis, of which Scott A. Richardson: we should see about $5,000,000 to $10,000,000 of that this year. And we are trying to bring as much of that forward as possible. Operator: Thank you. Thank you. Our next questions come from the line of Patrick David Cunningham with Citi. Please proceed with your questions. Scott A. Richardson: Hi, good morning. Thanks for taking my question. I guess Operator: first just on the sequential improvement in Engineered Materials both from a volume and mix perspective. Can you just parse out which end markets are starting to stabilize and unpack some of the broader macro assumptions for 2026? Scott A. Richardson: Yeah. What I would say is electronics is what I would say the bright spot right now, Patrick. I would say it is a net positive on a global basis. You know, we are seeing a global build out from, you know, AI, as well as as data centers, and that is positive in the electronic space. But it is a small part of the overall base Operator: of the business. So, you know, certainly, auto is a much Scott A. Richardson: larger piece of the base and the business is going to trend kind of where that goes at least at this point. And and I would say auto is more mixed. Operator: You have got, Scott A. Richardson: know, some uncertainty in China with some of the EV, credits and stimulus rolling off in China. To start the year. So we have seen some softness in auto in China. Europe has been relatively stable to start the year, and US with the fleet mix becoming a little more certain and a focus of the OEMs around ICE and hybrids, that could be a net Operator: good thing for us. But I would say to start the year, it is about as expected. Scott A. Richardson: Got it. That is very helpful. And then with Operator: halfway to your $1,000,000,000 divestiture target, just any ideas on timing, potential assets that you would look to explore to achieve that divestiture proceed target? Yeah. And just to kinda restate, you know, we called out a billion dollars by the 2027. And to your point, we are about halfway there. Scott A. Richardson: You know, we feel like, you know, we we feel good about getting a deal done this year. Another deal done this year, and and we feel very good about achieving or exceeding that target by the 2027. And you know, again, we are prioritizing you know, parts of the business that do not fit, you know, the core operating models of Engineered Materials or Acetyl Chain, and that does kind of lead you to a heavier focus on some of the joint ventures we have talked about in past quarters. So, you know, we have a what I would say is a pretty robust slate of things that are being worked, but it is hard to get deals done in this environment. But you know, I proud of the team for what we did on MicroMax, the speed at which Operator: you know, we started that process to when we got it closed was approximately nine months, which is which is pretty fast. Scott A. Richardson: In any M&A market. And so we are going to continue to work this with a sense of urgency. Operator: Thank you. Our next question is coming from the line of Jeffrey John Zekauskas with JPMorgan. Please proceed with your questions. When you take a step back and look Scott A. Richardson: at 2025, Operator: I think in the Acetyl Chain, your adjusted EBIT was down about $400,000,000 and your Engineered Materials was down about 120. How do you analyze those changes? That is, how how do you see the Scott A. Richardson: larger Operator: factors that were at work in those changes? Scott A. Richardson: Yes. Let me start with acetyls, Jeff. Operator: Of that, it was pretty much all driven by volume and price. Scott A. Richardson: And you have got a mix element that goes into that. So it is largely spread relatively evenly between those two of which Operator: a good chunk of that was driven by the acetate tow business. And so that was, I would say from a product line perspective, was Scott A. Richardson: the bigger chunk. We did see some margin compression from China as well that went into that. And then the balance was really driven by Western Hemisphere volume. We did not have as much Operator: margin compression in the non-tow part of the in the Western Hemisphere. So those are the biggest components in Acetyl Chain. In Engineered Materials, volume and price were, you know, the both I would say semi Scott A. Richardson: equal overall in terms of Operator: of how much they were down. And then it was offset by by cost. And we had some cost benefit in NAFTA deals as well. But those are the largest drivers, I would say overall in both Scott A. Richardson: business. It really comes down to above-the-line variable margin. Okay. And then for 2026, Operator: is your base case that you can get some EBIT growth out of Engineered Materials but the Acetyl Chain might be challenged to grow in 2026? Or do you have a different Scott A. Richardson: approach in? And what are the key markets that you really need to have improve in order for Celanese Corporation to excel in 2026? Operator: Yeah. Jeff, when we started 2025, we talked internally, in the organization, kind of a mantra around Act Now and Win Together. And I think it was really that action orientation was really important with a focus on cost reduction and free cash flow generation. This year, we are still going with Act Now Win Together. Scott A. Richardson: And grow. That growth piece that you highlight is important. And and I do believe Engineered Materials in the current demand backdrop has, you know, more controllable ways to grow through our pipeline model. Operator: You know, it does not mean we will not be able to drive growth in Acetyl Chain. I just think that the groundwork that we have been laying in Engineered Materials and our ability to drive innovation Scott A. Richardson: and partner with customers and designers and engineers around innovative solutions. Just we have more degrees of freedom to do that. In Engineered Materials. You know, it is likely to be in, you know, Operator: you know, the higher growth areas like electronics that I called out earlier. Elements of automotive continuing to penetrate in higher margin areas in China and then continuing Scott A. Richardson: partner with our customers on innovation into kind of the what is now the chosen fleet mix here in the Western world. So those are the big elements. You know, I do think we will have some Operator: growth in medical as well. But I would say electronics and elements of automotive, are going to be the key components. Okay. Thank you very much. Thank you. Our next questions come from the line of Vincent Stephen Andrews with Morgan Stanley. Please proceed with your questions. Hi, this is Turner Hendricks on for Vince. I am just wondering, could you provide more Scott A. Richardson: color around your expectations for Operator: higher than first half earnings and Chuck B. Kyrish: whether you still expect to see $1 to $2 of EPS uplift versus 2025. Yes. Thanks for the question, Turner. Scott A. Richardson: Our team is still focused on $1 to $2 of lift. As I talked about in Engineered Materials, it is Operator: going to be around driving growth there and getting volumetric growth continuing to push Chuck B. Kyrish: price where we can and the team continues to be focused on doing that in the pockets of the business where we can achieve it. Then then also continuing to drive our cost reduction programs. In Acetyl Chain, it is about looking for those opportunities where the supply-demand balance we can be opportunistic around to be able to drive volume and price, and start moving kind of that sequentially on a quarterly basis back in a more positive direction. Look. Since the last time we spoke, there have been some things that changed. You know, our interest expense is likely to be relatively flat on the P&L year over year. I think how we model out our inventory draw this year, it is likely to have some amount of P&L impact. And then the demand backdrop is certainly not at least right now, where we were in the middle part of last year. And if we return to that, then certainly that would be a really nice tailwind. So Chuck B. Kyrish: it is Chuck B. Kyrish: I do think that we are working a plan, know, to be able to drive growth here this year. And you know, certainly, if we get any help whatsoever from the macro, you know, we are leveraged to be able to move up, you know, very quickly from an EPS perspective. You know, I will just kinda remind you, that a 1% improvement in volume in the Acetyl Chain is about $15,000,000 to $20,000,000 a year and a 1% improvement in volume in EM is about $20,000,000 to $25,000,000 a year. So, yeah, these are small changes drive, you know, significant, you know, uplift for the business. Chuck B. Kyrish: Great. Great. That makes a lot of sense. Thanks for the color. Also when thinking about the difference between first quarter and second quarter earnings, I am wondering whether we need to reverse the $30,000,000 inventory tailwind that is benefiting Q1 as well as the size of the polyacetal turnaround and any other bridge items that you might call out? Chuck B. Kyrish: Yeah. I think you know, that is probably the right assumption, Turner, is that $30,000,000 benefit we are going to get is going to likely draw out there in the second quarter. And, you know, we are going to have some turnaround at higher turnaround expense certainly in Q2. So I think, you know, with the dividend coming back in the second quarter, you know, all of those things relatively even out. I mean, Q2 flattish to Q1 and certainly depending on where the demand environment is, you might get some sequential benefit. But until we have better line of sight to that, I do not know that flattish is the wrong way to think about Q2. As we called out in the prepared remarks, we do believe this year is going to be more second half weighted just because of that turnaround activity that we have got in the second quarter. Chuck B. Kyrish: Great. Thank you for the color. Operator: Thank you. Our next question has come from the line of Ghansham Panjabi with Baird. Please proceed with your questions. Thank you, operator. Good morning, everybody. Scott A. Richardson: Scott, just on the Acetyl Chain and just zooming out a little bit and Ghansham Panjabi: think about EBIT margins, which were sort of mid-teens last year versus the previous trend line in the mid-20s, Operator: how much of that differential do you think is cyclical versus Ghansham Panjabi: something having changed in terms of obviously, supply coming on and also some of the challenges that you are seeing on acetate on the spot market? Chuck B. Kyrish: Yes. Ghansham, how I view these things in our business, over the last twenty years, we have seen structural changes. We saw and these could be headwinds, they can be tailwinds. And shale gas revolution in the U.S. certainly was a structural change. The industry did not get the benefit of that overnight. It is actions that were taken to be able to take advantage of those structural changes. We saw overcapacity in China, for example, come into the market the first time, you know, 2009 through, you know, 2017. And it was actions and business model changes that we and others made to be able to, you know, drive a more sustainable and higher level of earnings. And certainly, even today where we sit now in the current market with overcapacity where it is in acetyls, you know, the underlying business today is better than it was during 2012 and 2013. So I think it really is about how we as a company respond to changes that we see in the market. I do believe that through those changes, you know, you will see things start to move back up. Now each cycle is different. Each cycle is shorter or longer, and, you know, nobody can really predict how long it will last. But it is about responding to those changes that we see. On the Engineered Materials side, we have seen changes as well. You know, the move from ICE to EV in China in particular is a big structural change. It is not likely to change. We have to adapt to that. We have to change. We have to respond to that from a market perspective, and we have to continue to drive efficiency in our own business so that when we see small incremental changes in volume that I talked about earlier, those underlying margins are higher in the future than they were in the past. Ghansham Panjabi: Okay. Got it. And maybe a question for Chuck on free cash flow. Obviously, 2025, working capital is big for the year in terms of driving the free cash flow outperformance there. What are you embedding for 2026 for working capital? And just, you know, more broadly, what is defining your confidence on free cash flow relative to what seems to be a pretty challenged operating environment at least for the first half of the Operator: Thanks. Scott A. Richardson: Yeah. No. Thanks, Ghansham. I think what is driving our confidence is our ability to pull levers to generate free cash flow in all demand environments. So you mentioned working capital, it was very strong in 2025 to $390. We are targeting another $100,000,000, Ghansham, primarily from further inventory reductions. Know, tax is going to be lower this year. Chuck B. Kyrish: $50,000,000 to $60,000,000, cash interest down about $50,000,000 and the cash that will outlay for cost reduction programs that are that is adjusted EBITDA, that will be lower by about $25,000,000 to $50,000,000. So as you know, we plan for a number of different scenarios, Ghansham, and we feel confident that we can drive free cash flow into our target range that we provided. Either through modest earnings growth or through these additional levers that we know how to pull. Ghansham Panjabi: Okay. Thank you so much. Operator: Thank you. Our next question has come from the line of Salvator Tiano with Bank of America. Please proceed with your questions. Yes, thank you very much. So firstly, I want to come back a little bit to the EPS growth this year. And you have in your prepared remarks all the free cash flow I guess outlook and the puts and takes on free cash items. And it seems to us if you do some rough math that Salvator Tiano: that points to probably net income or EPS change EPS this year of around mid to high fours. As a base case. Does that make sense? And are there any items we may be missing that would deviate, you know, that would make your EPS deviate from that as a base case? Chuck B. Kyrish: It is how I look at it is our prior right now is around free cash flow and continuing to drive, you know, sustainable changes into our business models. As we look at the year, we have run a number of different scenarios, on kinda where things could play out from a demand standpoint, and then what that translates into to EPS. And know, for us, we are confident in being able to, you know, generate that free cash flow between $650 and $750. So there is a number of different EPS scenarios that that gets you to that number just depend on the movements and timing and the fact that we are, you know, second half weighted also certainly plays a little bit of a role just in terms of, you know, how much AR is sitting on the balance sheet as we model it out. So all of those factors go into play, you know, in terms of how we model it. So, you know, we are not looking at, you know, a finite range right now. Our focus is on really driving and maximizing as much as we can. And working to grow on a year over year basis with an emphasis on ensuring that we are delivering the cash flow. Vincent Stephen Andrews: Okay. Perfect. Salvator Tiano: And I want to ask a little bit about capacity additions on the nylon and the POM chains, specifically because these are something you had to to face the past few years. Can you provide us with some information on what may be coming online particularly in Asia in these chains? And what is kind of your exposure given you moved away from some chains such as nylon polymerization, what would be your exposure if there is more capacity coming online in these chemistries? Chuck B. Kyrish: Yes, Sal. As we have talked about in the past, our focus really is to continue to build flexibility into our operating model, in our nylon business as well as some of our other polymers. And that means being balanced in, you know, what we make, but also what we buy. And so the additional capacity, you know, that may come on in Asia and, you know, to be very honest, it is already over-capacitized in China. And you know, we are taking advantage of that by, you know, buying as much polymer as possible because, you know, that is a more advantageous way for us to, you know, be able to supply, our business in that region of the world. It is about being opportunistic and about building flexibility, you know, into our model. And what I would tell you is we are gonna continue to evaluate options to be able to enhance and maximize profitability, in all our value chains, including not Salvator Tiano: Thank you very much. Operator: Thank you. Our next questions come from the line of Laurence Alexander with Jefferies. Please proceed with your questions. Salvator Tiano: Good morning. This is Kevin Estec on for Laurence. Scott A. Richardson: So just on working capital inventories again, Chuck B. Kyrish: obviously, you are targeting Kevin Estec: an additional reduction. And I guess I was wondering what guardrails are you sort of using to avoid any service issues? Are there any specific product families, I guess, where inventory is still elevated? And maybe I guess, what is the timeline to reach a steady-state inventory model? Chuck B. Kyrish: Yeah. So it is a very coordinated approach. Internally. Right? We are never going to take too much risk on service levels and delivering to our customers, right? There are many different ways you can use inventories, can use raw materials, you can change your offtake agreements and you can reduce finished goods, right. So in a multiyear journey, on that, so we do not ever like to think that we are done. Know, we think we do have a $100,000,000 this year, but we are not going to stop there. There is a lot of efficiency that EM is driving within the organization. You are just going to need less and less inventory as you go forward. Right? So it is a constant it is a constant activity of ours, and we feel good about continuing that progress. Kevin Estec: Got it. Okay. Thanks. And then just as a follow-up. So on acetate tow, I guess, obviously, it is one of the biggest headwinds I guess, what are I know you touched on some this already, but I guess curious what the specific levers that I guess you can do to stabilize or stabilize tow in, basically, like, you know, regional mix shifts? Capacity actions, customer inventory normalizations, contract resets? I mean, and I guess when should we expect measurable improvement? Chuck B. Kyrish: Look. We are working this with a level of aggressiveness as we look at every element of the business. And that includes cost structure. It also looks at how we go to market or, you know, future contracts in this business. You have to take both a short-term view and a long-term view of how, you know, things are rolling in and rolling off. And so it is really about stabilization. We did see a decline. I do think there has continued to be an element of destocking. I think there was a lot of inventory throughout the value chain, in this business. I think that will probably take another quarter or so, so think mid-year. Where that evens out is our current estimation. And then you should get to a little bit more steady state and I think get a little bit more balance here as we get into the middle part of the year. Chuck B. Kyrish: Okay. Thank you. Operator: Thank you. Our next question has come from the line of Aleksey V. Yefremov with KeyBanc Capital Markets. Please proceed with your question. Kevin Estec: Thanks. Good morning. There is a number of price increases that were announced in the polymers world. I wanted to ask you about your expectations for achieving those. And also, is the intent here to offset rising material costs or actually expand margins. Operator: Thank you. Chuck B. Kyrish: Yes. In some of these polymers, Alexei, margins have got to where they are at unsustainable levels. And I think you can look at challenges we have seen in the industry and you have seen some folks in the marketplace go into default and I think that has just shown that things are at an unsustainable level. I am proud of the way the team, you know, got ahead of this a few years ago by taking action in our footprint, in our highest cost locations. And so that has, you know, certainly helped us be able to weather that storm. But, you know, as we go forward, you know, the returns need to improve here. And so it really is about, you know, pushing to drive returns to just an acceptable level going forward and, you know, the team continues to push that. You know, I do think it is going to continue to be a, it is going to take some time. It is going to be a step-by-step process. I would not expect us to get all of it at once, but, you know, it is about continuing to work this as we are having dialogue with our customers. Kevin Estec: Thank you. And as a follow-up, acetyl spreads have been a little better in China lately. What are your expectations for anti-involution or any kind of rationalization in that country that just based on your knowledge of what what government might be thinking? Chuck B. Kyrish: Yes. As I mentioned before, I mean, we have gone through big overcapacity in the acetyl business in China in the past. When I was living there, in 2009, the first overcapacity came in and we were in that period for a long time. Know, I think, you know, the pattern of behavior that we have seen over the last year or so, you know, does kinda tend to trend with what we saw in the past, which is, you know, new capacity comes in. There was a lot of new capacity over the last couple of years. As those plants are starting up, you know, they run at high rates to prove out the technology. But, know, margins are unsustainable. And so rates come back down, and margins move up a little bit. And so we certainly have seen that trend continue and things have stabilized, I would say, at higher, albeit still relatively low levels on a margin basis over the last eight weeks or so. So you know, we are not Vincent Stephen Andrews: you know, Chuck B. Kyrish: forecasting, you know, huge lifts by any stretch of imagination and, you know, the team will continue to to kinda work, you know, near-term and instantaneous opportunities on both the price and volume basis. Operator: Thank you. Our next question is come from the line of Frank Joseph Mitsch with Fermium Research. Please proceed with your question. Vincent Stephen Andrews: Hi, guys. Good morning. It is Aziza on for Frank. Scott, I was curious if maybe you can provide some thoughts on Chinese acetyls pricing as we progress through 2026? Chuck B. Kyrish: Yes, Aziza. I mean, look, we are not going to forecast any huge uplifts. I think, you know, we would expect things to stay in the range they have been over the last several quarters, I mean, or minus kind of where they have been, as I just said, you know, we have kinda stabilized at these levels over the last eight weeks or so. You know, demand right now is extremely low, as we are in Chinese New Year. And, you know, this year’s Lunar New Year is a longer holiday than what we typically see by a few extra days. So be interesting to see how things come out. It is a later New Year, as well. But certainly, demand was relatively stable going into the New Year holiday, pricing held and that does not always happen. You know, sometimes as you are getting into that New Year period, pricing falls off. Stayed relatively stable as we went in. So, you know, we will see kind of where things come out, but we are not anticipating, you know, really big uplift coming from Asia. As we look at, you know, recovery scenarios in the acetyl business, you know, we tend to really look at Western Hemisphere only. And so those numbers I quoted earlier, about a 1% improvement in volume being $15 to $20,000,000, that is on Western Hemisphere only. That does not include, any of the business in China. Just because I think with where overcapacity capacity is, if we get upside in volume and price, we will take it. But we are not going to necessarily bake that into our numbers. Vincent Stephen Andrews: Got it. And also, regarding the second quarter POM turnaround, have you guys quantified the impact to the second quarter earnings? William Cunningham: No. I mean, what we said earlier Chuck B. Kyrish: think a number similar to the lift in, that we called out of $30,000,000. So that is the right range. I mean, these the, you know, typically, these turnarounds in the past were about every three or so years. We have worked really hard, on our reliability over the last several years to where, you know, we have been able to extend this to five years between these major turnarounds. So this is not something that certainly happens every year. In the asset. And, you know, so it is a little bit larger than we would typically see. It really is contained to the second quarter. Vincent Stephen Andrews: Got it. Thank you. Operator: Thank you. Our next questions come from the line of Hassan Ijaz Ahmed with Alembic Global. Please proceed with your questions. Salvator Tiano: Good morning, Scott and Chuck. Look, I wanted to revisit Hassan Ijaz Ahmed: the $650,000,000 to $750,000,000 free cash flow guidance you guys provided. Look, I mean, it is anyone’s guess what demand does, but you know, if we were to take a draconian view and say that demand really does not improve much from Q4 levels, what does that do to the guidance and all the other aspects baked into it? Meaning, you know, the $100,000,000 sort of working capital uplift, that you guys guided to and the Chuck B. Kyrish: Yeah. First of all, Hassan, I would never refer to you as draconian by any such thing as a nursing. So Vincent Stephen Andrews: look. I I Chuck B. Kyrish: not to be repetitive, but I am gonna kinda go back. You know, we model out a lot of different scenarios, kinda that low demand scenario, higher demand scenarios. I mean, we kind of look at different permutations. We also have you also have to plot timing. And so as we kinda look at that, you end up range finding for, you know, where you think you can, you move on cash flow given the other actions that you can take. And how, you know, AR and inventory can move and what you can do through the year. And so, know, as we kinda range find for that, you know, we do feel very confident, in that $650 to $750 range that we put out there. Hassan Ijaz Ahmed: Understood. Understood. And, just moving on, again, as it relates to sort of debt paydowns and the like, I mean, you guys seem pretty comfortable with the incremental $500,000,000 of sort of asset sales, you know. So a, what gives you that comfort to achieve that by 2027? And b, if need be, could that number actually be higher? Chuck B. Kyrish: Yeah. I mean, we are aggressively pursuing, you know, additional divestitures. And Scott mentioned we feel good about, you know, getting another one of those done. There is a lot of things that we can look at. You know, that is part of our cash generation. That is part of our debt paydown strategy. Know, that is a probability-weighted number. So, you know, theoretically, that could end up at a higher number. But we are targeting right now a billion dollars total by 2027 to help us deleverage the balance sheet. Hassan Ijaz Ahmed: Very helpful. Thank you so much. Operator: Thank you. Our next questions come from the line of Michael Joseph Sison with Wells Fargo. Please proceed with your questions. Chuck B. Kyrish: Hey, guys. Sorry about that. Vincent Stephen Andrews: You sort of noted that Kevin Estec: the Western Hemisphere acetyl margins are better or holding up better. Chuck B. Kyrish: How much of your business is Eastern and Kevin Estec: is there any reason to be there longer term? I mean, this trough in the Eastern Hemisphere has been pretty deep. Chuck B. Kyrish: Does it make sense to reduce some capacity Operator: for that area, longer term? Yeah. Mike, Chuck B. Kyrish: you have known us for a long time. You know that, you know, we look at every option on the table, and we continue to look at what the short-term needs of the business are and balance that with where we think we need to be long term. And, you know, we will look at what the footprint in both businesses, you know, needs to look like and what the right match is. So you know, I would say we are constantly, you know, evaluating, you know, where we need to be and how we need to be operating the assets. And, you know, the Acetyl team continues to pivot there. You know, we are block operating, you know, the Frankfurt BAM unit, operating the Singapore acetic acid unit as well. And, just for that very purpose, and finding ways at which to be more efficient and squeeze out cost. William Cunningham: Got it. And then Joshua David Spector: if take a look as we head into the second half and we sort of sat here last year, thinking things could not get worse, but if there are areas within EM or the Acetyl Chain that that could get worse, what do you think it could be? And it does sound like things are more stable. Sequentially at least. But, you know, one of the things we need to watch out for is things could potentially get worse on the macro side for you? Chuck B. Kyrish: Mike, we are not going to take anything for granted. And we are going to continue to evaluate, take bold actions, you know, across the portfolio. We knew, you know, as we started last year, that we needed to kinda reset the growth mindset in Engineered Materials. And I feel like Todd Elliott and the team have done a great job of building the pipeline and refocus commercially on those areas where we can really drive high-quality wins, and making sure our time is being spent there with a focus on quality over quantity. And I think that is really going to start to pay off for us as we work our way through 2026. And we are going to continue to evaluate the cost side of the equation in both businesses, as well as from a corporate perspective. Because I do think it is really about how we generate, you know, operating leverage going forward. And so those are our priorities. With cash as being kind of that keen focus and delivery of our cash target. Joshua David Spector: Great. Thank you. Operator: Thank you. Our next questions come from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your questions. William Cunningham: Yes. Thank you and good morning. So Scott, in explaining the volume decline of Operator: 6% in the quarter, I think you mentioned in the prepared remarks last night that the destocking and seasonality were kind of greater than expected. William Cunningham: And so I wonder if you could comment on the degree to which you have seen any rebound or Operator: you know, temporary restocking in January and early February ahead of the Lunar New Year or has it been mixed William Cunningham: or just not happening? Just looking for any additional color on kind of incremental volume stability or improvement as you see it? Chuck B. Kyrish: Yes, let me start with Acetyl Chain. I think we have seen some moderate seasonal improvement largely in the coatings space, and we will see kind of where things hunt out as we get into March and April, which tends to be when demand moves up higher. So I would say that it is moderate at this point. We have not seen substantial change positively in the acetate tow side of the equation there in acetyls. In Engineered Materials, what we called out last quarter was that we knew we were going to see, you know, some destocking from our channel partners here in the Americas. You know, we are starting to see that come back to the order book. And we have seen seasonal improvement, in spaces like automotive in the Western Hemisphere, you know, improve, you know, to start the quarter. So that is pretty much as expected, and as is typical, you know, as we see from Q4 to Q1. Operator: Okay. And then to follow-up on your divestiture efforts, it sounds like the focus or at least one of the focus areas would be your joint ventures. You have got quite a few of them, I think. Maybe can you provide any color as to where you are in that process? William Cunningham: And whether or not we might expect something this year or more likely next year? Are you looking at multiple JVs or Operator: focusing on a primary target? Any color there would be helpful. Chuck B. Kyrish: Yeah. What I would tell you, Kevin, is we are looking at a lot of different things, and we have a pretty robust portfolio of options. Of varying sizes. You know, some small, some, you know, getting a little closer to the size of MicroMax. And, you know, as Chuck mentioned earlier, we probability weight that. You know, we feel good about getting another deal done here in 2026. I do not know exactly, you know, where it will fall in the size spectrum. It might be a smaller one, but certainly would be attractive even if it is small. So, you know, we are kinda working all elements. It may be that, you know, it takes a few of these deals to get to the target and maybe, you know, it takes one deal. So it just it kinda depends upon how these things materialize here over the course of the next, you know, year and a half. William Cunningham: Thanks very much. Thank you. Our next Operator: question is coming from the line of Joshua David Spector with UBS. Please proceed with your questions. Joshua David Spector: Yes. Hi, good morning. I want to just ask on the earnings in Engineered Materials. If I kind of take your comments on first half, Chuck B. Kyrish: your EBIT is maybe around $200,000,000 a quarter on average. Looking at last year, Joshua David Spector: it is kind of similar levels to what we saw in Q2, Q3. I am obviously ignoring seasonality in the weaker Q1 a year ago. But I am just wondering that we are not seeing some of the cost initiatives really come through. You are talking about them more second half. You have been talking about the cost initiatives for six, nine months now. So why are not we seeing it as much in the first half and why does it take to the second half on the cadence of timing? Then when you talk about the new products and the higher margins, kind of the same thing. Like when do we start to really see more of this and why not now? Chuck B. Kyrish: Yeah. Josh, I am going to respectfully disagree with you. I think you are definitely seeing it roll through. We are in a much lower demand environment today in that business than where we were in the middle part of last year. And, you know, we are still performing at very similar levels. And that really is coming from the mix improvement we have seen as well as the cost reductions the business is taking, and we are going to continue to drive that forward. As I said, you know, there is such a leverage on volume in this business, you know, with a 1% change kind of being, you know, $5 plus million a quarter. Know, the amount of change that we have seen in that business is sizable on a year over year basis volumetrically. So it really is about, you know, continuing to improve the underlying fundamentals of this business and those small incremental changes in the demand are going to flow right back to the bottom line. Joshua David Spector: Thank you, Scott. Appreciate the thoughts. Operator: Thank you. Our next question has come from the line of John Roberts with Mizuho. Please proceed with your questions. William Cunningham: Have you actually guided Operator: for the China SIGTOE dividend expected for the final March 2026 in your in your free cash flow range? Chuck B. Kyrish: Yes, John. Think, pretty flat to last year. Is what to expect, that $40-ish million a quarter. Chuck B. Kyrish: Okay. And then William Cunningham: you once explored some consolidation opportunities in the SigTow. Does the contraction in the industry increase the chance of revisiting further consolidation maybe in a different form or different partner? Chuck B. Kyrish: Than what you earlier pursued? Chuck B. Kyrish: I do not know that the landscape has changed considerably, John, overall, in terms of the fundamentals. But, you know, look, we are always very open, to options in all of our businesses. And so, you know, we explore, you know, every opportunity, that might be out there. But I think on tow, I just do not know that the fundamentals have changed enough to change that outcome. William Cunningham: Thank you. We will make the next question our last one, please. Operator: Thank you. Our last questions will come from the line of Arun Shankar Viswanathan with RBC Capital Markets. Please proceed with your questions. William Cunningham: Hi, good morning. This is Adam on for Arun. Thanks for taking our question. If I could Salvator Tiano: ask maybe Chuck B. Kyrish: Hassan and Ghansham’s question in another way, Hassan Ijaz Ahmed: It seems like Kevin Estec: you know, the working capital management change for 2026 is almost a $300,000,000 headwind. And you talked about some benefits from lower cash, about 25, taxes lower by 40 to 50. Is the balance of that from earnings improvement William Cunningham: And if not, where is that coming from? And much earnings improvement are you really expecting to impact your free cash flow? Thanks. Chuck B. Kyrish: Yeah. Thanks, Adam. Yeah, you are right. I mean the working capital headwind year over year is sizable and then some other things that the loss set it as you mentioned. But again, I will say again, we feel good about driving free cash flow into that range either through modest earnings or through further levers if we see a lower demand scenario play out. It is very similar to what we did this year in 2025, so we are confident in that range. Adam: Okay. Great. Kevin Estec: And apologies if I have missed this, but have you guys outlined William Cunningham: in terms of a cost benefit from the Lanikan closure, you know, kind of market impacts aside, Chuck B. Kyrish: Yes. So Lanark enclosure for us going to be about a $20,000,000 to $25,000,000 cost benefit on a full year basis. And about $5,000,000 to $10,000,000 of that we expect to get this year. Adam: Thank you. William Cunningham: Well, thank you, everyone. We would like to thank everyone for listening in to today’s call. And as always, we are available after the call for any follow-up questions. Daryl, with that, let us please go ahead and close out the call. Operator: Thank you so much, ladies and gentlemen. This does conclude today’s conference call. You may disconnect your lines at this time. We appreciate your participation. Enjoy the rest of your day.
Operator: Good morning. Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter 2025 earnings conference call for Jones Lang LaSalle Incorporated. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I will now turn the call over to Sean Coghlan, Head of Investor Relations. Please go ahead. Thank you, and good morning. Sean Coghlan: Welcome to the fourth quarter 2025 earnings conference call for Jones Lang LaSalle Incorporated. Earlier this morning, we issued our earnings release along with a slide presentation and an Excel file intended to supplement our prepared remarks. These materials are available on the Investor Relations section of our website. Please visit ir.jll.com. During the call, as well as in our slide presentation and supplemental Excel file, we reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures to GAAP in our earnings release and slide presentation. We also reference resilient and transactional revenues, which we define in the footnotes of our earnings release. As a reminder, today’s call is being webcast live and recorded. A transcript and recording of this conference call will be posted to our website. Any statements made about future results and performance, plans, expectations, and objectives are forward-looking statements. Actual results and performance may differ from those forward-looking statements as a result of factors discussed in our Annual Report on Form 10-Ks and in other reports filed with the SEC. The company disclaims any undertaking to publicly update or revise any forward-looking statements. Finally, a reminder that percentage variances are against the prior-year period in local currency unless otherwise noted. I will now turn the call over to Christian Ulbrich, our President and Chief Executive Officer, for opening remarks. Thank you, Sean. Hello, and welcome to our fourth quarter 2025 earnings call. Christian Ulbrich: This morning, I am pleased to share our strong performance for the fourth quarter and full year of 2025. We reported our seventh consecutive quarter of double-digit revenue gain and ninth consecutive quarter of double-digit EPS growth. We have executed our strategy with discipline, building a resilient foundation for future growth. In 2025, Jones Lang LaSalle Incorporated achieved new highs across key top and bottom line consolidated financial metrics, notably revenue, adjusted EBITDA, and adjusted EPS, as well as free cash flow. In the full year, revenue increased 11% and adjusted EBITDA was $1,450,000,000, growing 22% and reaching the top end of our financial target for the year. We have consistently delivered disciplined operating rigor and strong margin expansion, largely through organic revenue growth and our focus on enhancing platform efficiency, in part due to tech-enabled productivity gains. We are proud to have achieved our midterm margin target in 2025 in line with expectations established at our last investor briefing in 2022 and despite the volatile macro environment since that time. Our fourth quarter revenue was up 10% driven by accelerated transactional revenue and the continued growth of our resilient business line. Our deep global expertise across capital solutions drove broad-based growth in investment sales, debt, and equity advisory, up 26% during the quarter. The investment markets demonstrated sustained momentum through 2025. Investor confidence is rising, more investors are deploying capital, and real estate debt markets remain robust, which we expect will lead to further growth in 2026. Momentum is similarly building in our leasing business, as office demand reached its highest level since 2019, and industrial demand is improving and diversifying across more industries. Fourth quarter leasing revenue increased 17% led by significant growth in the US, as well as notable contributions from India and the UK. Looking ahead to 2026, we expect ongoing growth in our leasing business based on an overall improved sentiment and a robust global economy, which supports increased leasing demand across asset classes and geographies. We remain focused on continuing our recent track record of revenue growth and margin expansion across our resilient business line. Revenue in real estate management services increased 9% in the quarter and 11% in the full year, and we are encouraged by a strong pipeline for continued momentum, especially in 2026. We maintain high conviction in the long-term growth trajectory of these resilient businesses. Before turning the call over to Kelly, I would like to address the market volatility which has impacted the real estate services industry over the past week. We have been acutely focused on both the opportunities and risk associated with technology and AI for nearly a decade. We have senior leaders with backgrounds in technology, data, and AI. Through JLL Spark, we have gained a deep understanding of the technology ecosystem in real estate across all stages of maturity and have directly invested into disruptive companies, including in AI. And we have been successfully embedding technology and building proprietary data across our core services throughout this time. Relative to our industry at large, we have a uniquely informed perspective on this topic. When we assess the past thirty plus years and look across industries, a consistent theme has been true. The services businesses with scale, proprietary data, unified platforms, and the best people outperform and win. We strongly believe this will continue to be true. For Jones Lang LaSalle Incorporated, we see significant runway for profitable growth and minimal risk of disintermediation. The complexity of the commercial real estate asset class, the criticality of real-time local market expertise, and the fiduciary responsibilities involved create structural barriers that favor scaled service providers with the proprietary data and technology acumen to drive client outcomes and results. Sean Coghlan: With that, Christian Ulbrich: I will now turn the call over to Kelly Howe, our Chief Financial Officer, who will provide more details on our results for the quarter. Thank you, Christian. Kelly Howe: Our strong top line and bottom line performance for the quarter and the year reflects the continuation of our momentum in driving client success through the strength of Jones Lang LaSalle Incorporated’s people and differentiated platform. The revenue growth, along with our ongoing focus on operating efficiency, produced meaningful margin expansion and earnings growth in the quarter and full year. The combination of our earnings growth and ongoing initiatives to improve working capital efficiency helped drive robust cash flow performance and cash flow conversion. We see significant opportunity to gain client mindshare and further penetrate the expansive and growing addressable market while also enhancing our operating leverage. Now a review of our operating performance by segment. Beginning with real estate management services, growth was led by workplace management and project management for the quarter and full year. Within workplace management, a reasonably balanced mix of new client wins and mandate expansions drove strong revenue growth, reflective of both the value we bring to clients and the significant market opportunity. In the quarter, an approximate $11,000,000 impact from higher US health care actuarial costs associated with a significant uptick in claims led to an increase in pass-through costs and consequently lower management fees. New and expanded contracts globally drove double-digit project management revenue growth, inclusive of high single-digit management fee growth. Property management revenue growth continues to be tempered by the anticipated elevated contract turnover we mentioned last quarter. The overall segment revenue growth drove the increase in adjusted EBITDA and margin in the quarter and for the full year. The higher US health care costs were a headwind to profitability in the quarter, though this was largely offset by discrete cost management actions. Looking ahead, we remain confident in the trajectory of the workplace management business. Our contract renewal rates are stable, and our pipeline is strong, albeit second-half weighted. Considering this and the time to onboard new business wins, revenue growth is likely to be modest in the near term and build in the second half. Within project management, client activity remains healthy, particularly in the US, positioning us for continued momentum. In property management, we anticipate the elevated contract turnover we are actioning to pressure revenue growth through midyear before gradually rebounding. For this segment overall, we continue to balance investing to drive long-term growth and profitability with near-term business performance. We remain focused on driving healthy annual margin expansion, inclusive of the transition of our direct revenue-generating technology businesses and higher health care costs. Moving next to leasing advisory. Revenue growth in the quarter and for the full year was led by continued momentum in leasing, notably in office. Globally, both office and industrial leasing revenue growth accelerated, with office up 26% and industrial up 11% in the quarter. The office revenue growth meaningfully outpaced the 1% increase in volume, according to Jones Lang LaSalle Incorporated Research. On a two-year stack basis, leasing revenue growth accelerated to 31%. The increase in leasing advisory adjusted EBITDA in the quarter and full year was primarily driven by leasing revenue growth as well as incremental platform leverage. The timing of incentive compensation accruals was a benefit to the fourth quarter, offsetting the correlating third quarter headwind. Absent this phasing impact, the fourth quarter incremental margin would have been much closer to our historical norm. The full year incremental margin was 35%. Looking ahead, our leasing pipeline remains healthy, as client demand for high-quality assets continues. In the face of a dynamic macro backdrop, the GDP growth outlook remains constructive and business confidence, as measured by the OECD, has been resilient, providing optimism for continued growth in the near term. We continue to invest in enhancing our talent and platform capabilities to drive long-term profitable growth. Shifting to our capital market services segment, the improvement in bidder dynamics and strength of the debt market continued in the fourth quarter, driving an acceleration in investment sales growth to 27% and a 20% increase in debt advisory revenue. On a two-year stack basis, growth meaningfully accelerated from the prior quarter, with investment sales up 63% and debt advisory revenue increasing 90%. Investment sales revenue notably outpaced the global market volume in the quarter and full year, a direct reflection of our differentiated data-driven global platform. The transactional revenue growth and improved platform leverage drove the increase in the adjusted EBITDA and margin expansion in the quarter and full year. Incremental margin for the quarter was impacted by business mix and higher commission tiers being met. Looking ahead, our global investment sales, debt, and equity advisory pipeline remains strong, and we are encouraged by the highly liquid capital markets fundraising activity and better momentum globally. We see meaningful runway for continued growth. Turning to investment management. The expected decline in incentive fees drove the lower revenue for the quarter and full year, with higher transaction fees from a pickup in acquisition activity providing a slight offset. Advisory fees were largely unchanged for the quarter and on a full-year basis, as growth from US core open-end funds was offset by declines in Asia Pacific. We raised $4,000,000,000 of private equity capital in 2025, compared with $2,700,000,000 in the prior year, reflecting continued strong demand for credit and core strategies. As it takes several quarters to deploy new capital, and as valuations have seemingly bottomed, we expect a gradual recovery in advisory fee growth in 2026. Moving to software and technology solutions, double-digit growth in software revenue within both the quarter and full year more than outpaced reduced discretionary technology solutions spend from certain large existing clients. The segment achieved profitability in the quarter in line with our expectations, and despite slower than anticipated top line growth. With the transition of our direct revenue-generating technology businesses into the real estate management services segment, effective at the start of the year, we remain focused on driving closer alignment as well as top and bottom line synergies between our technology products and core businesses. Shifting to free cash flow, balance sheet, and capital allocation, the higher free cash flow in the quarter was largely due to earnings growth and an increase in accrued commissions, partly offset by growth-related working capital headwinds. Full year free cash flow marked an all-time high and our cash conversion ratio was meaningfully above our long-term average, reflective of earnings growth, ongoing efforts to drive working capital efficiency, and discrete benefits like lower cash taxes paid in the year. Our cash generation contributed to a reduction in net debt, which along with higher adjusted EBITDA over the trailing twelve months led to the improvement in reported net leverage to 0.2 times at year-end. Our full year average leverage ratio was 0.9 times, generally where we anticipate managing the business over time. Capital deployment priorities remain focused first on driving organic growth and productivity across business lines. Organically, we are continuously and diligently enhancing our platform and service differentiation as well as investing in our people strategy. Our acquisition pursuits remain focused on augmenting organic that enrich our capabilities, as well as deepen our client relationships Christian Ulbrich: across multiple business lines Kelly Howe: and provide synergistic scale, particularly within our resilient businesses. Returning capital to shareholders remains a top priority. In the quarter, share repurchases totaled $80,000,000, bringing the year-to-date total to $212,000,000, notably above stock compensation dilution and full year 2024 repurchases of $80,000,000. We look to further increase share repurchases from fourth quarter levels, with the total annual amount depending on the broader operating environment, our leverage outlook and valuation, as well as relative returns to other investment opportunities inclusive of M&A. Regarding our 2026 full year financial outlook, the market backdrop overall remains constructive. Given our strong pipelines and underlying business trends, we are targeting an adjusted EBITDA range of $1,575,000,000 to $1,675,000,000, reflecting 12% growth at the midpoint. We continue to target healthy margin expansion, balancing investment and long-term profitable growth initiatives alongside further enhancing our operating rigor. Christian, back to you. Christian Ulbrich: Thank you, Kelly. Over the past year, our Global Executive Board and leaders from across Jones Lang LaSalle Incorporated have engaged in a focused, rigorous process to define the next evolution of our strategy. Since globalizing the business lines in 2022, we have made significant progress in developing the strategic foundation to drive continued top and bottom line growth. Reflecting on the volatile macro environment of the past few years, our results demonstrate our resilience, and we see significant runway ahead. In 2026, we are confident we have the people, platform, capabilities, and financial profile to drive our strategy forward with a strong balance sheet and a disciplined approach to capital allocation. As a result of our scale, exceptional people, differentiated offerings, and most importantly, the trust we have developed with our clients over more than 240 years, many of the world’s leading, most sophisticated investors and occupiers choose to work with Jones Lang LaSalle Incorporated. We are continuing to evolve our strategy to be the most intelligent, efficient, data-led service provider for our clients. We expect these strategic moves will directly benefit Jones Lang LaSalle Incorporated performance, and future innovations integrate in our business and industry, allowing us to gain market share and scale in underpenetrated markets in the years to come. We will be introducing our new strategy and longer-term financial targets at our upcoming investor briefing on March 12, and we hope you will join us in person or by livestream. As we look ahead to the coming quarters, we are optimistic. Clients are motivated to make decisions, transactional market growth is broadening across more industries, asset classes, and end markets, and pipelines indicate runway for growth and further share gains for Jones Lang LaSalle Incorporated across both our transactional and resilient business lines. I would like to once again thank all of our Jones Lang LaSalle Incorporated colleagues around the world for our achievements in 2025. We are excited by the opportunities ahead of us and look forward to building on our success in the years to come. Operator, please explain the Q&A process. 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. Sean Coghlan: We will now open for questions. Your first question comes from Anthony Paolone with JPMorgan. Christian Ulbrich: First question Sean Coghlan: maybe, Kelly, can you give us a little bit more detail on revenue growth expectations for 2026 for areas like capital markets, leasing, REMS? Kelly Howe: Sure. Hi, Tony. Just as a reminder, we do not generally provide top line guidance, but to give you a bit of a flavor of how we are thinking about our top line as we look into 2026, we expect continued growth from our REMS business, as I noted, in facility workplace management and property management a little bit more back half weighted than first half weighted, but with continued really strong growth in project management business, which has been boosted by market dynamics. Karen Brennan: Then in our transactional businesses, we are seeing continued momentum in both capital markets and in leasing. Pipelines look strong. The economic indicators are all very positive and strong, and we are building on momentum coming out of the fourth quarter. One thing I will note is that we are starting to face some tougher comps in those transactional businesses, which will probably mute growth rates themselves a little bit. But overall, we see continued momentum. Sean Coghlan: Okay. And then second question, you talked about the buyback a bit. How should we think about just free cash flow in 2026 and just your baseline assumption on what you do with your cash because your net debt is Anthony Paolone: pretty low at this point. It seems like even if you just bought back stock to match stock comp, you would still have a lot of cash left over. So what are the priorities there? Christian Ulbrich: Well, I take that one. First of all, as we spoke about over the previous years, we were focused on bringing down our debt levels to where we are now. We are very comfortable with those debt levels, and they are exactly in line with our range that the midpoint is around one. And so going forward, we will therefore have much more capital at hand to invest to the benefit of our shareholders, and even before the more recent decline in our stock price, we think that our own repurchases are a very attractive way of bringing back capital to our shareholders. So you can expect us to increase that over the course of 2026. Anthony Paolone: Okay. Thank you. Operator: Your next question comes from Stephen Sheldon with William Blair. Hey. Thanks. Maybe, Christian, Sean Coghlan: appreciate your thoughts on AI in the prepared remarks, and from my perspective, it seems like Jones Lang LaSalle Incorporated has been very front-footed on AI and data investments in recent years, even arguably more than peers, which I think Anthony Paolone: some continue to underappreciate. So just at a high level, I guess, when you think about the business, what are some of the factors that you think give Jones Lang LaSalle Incorporated a competitive moat versus some of the AI-focused startups in the space? How are you thinking about competitive moat over time? Christian Ulbrich: Well, overall, I think we are in a very good position around that whole topic of AI. As you alluded to, we started very early to invest heavily into our data platform and then also learned a lot about what is going on in the startup world, and we are trying to bring the best of those both worlds together Anthony Paolone: And and Christian Ulbrich: we have a lot of data which is very hard for other people to gather, which we call our proprietary data. And with that proprietary data, we can build Anthony Paolone: tools which just enable our people Christian Ulbrich: to drive better outcomes for clients, which then leads to higher revenues per head for our transactional people, also for the other areas of our business. And therefore, I mean, I do not want to come across kind of naive about the threat which AI may offer, but for the time being, we do not see any competitive pressure from outside of our industry coming to our industry. And within our industry, I think we are extremely well positioned to take benefit of AI. Anthony Paolone: Got it. That is helpful. And maybe as a follow-up, on the office leasing side, can you all maybe unpack just a little bit more what you are seeing under the hood there? And specifically, what are some of the factors driving the higher average deal size? Do you think about square footage, type of property you have seen leased, I think, a new shift to higher quality. Also, what you are seeing in terms of average lease durations. Karen Brennan: I can take that one. So as you have noted from our numbers, we had a very good quarter in leasing and a good 2025 in leasing as well. There are, as you know, a couple of things driving that. Office leasing has been very strong in the US but also in other parts of the world as well. We have definitely seen a recovery in large deals. In fact, when we look at deals at 100,000 square feet and often the US, those are up 15% year over year. That definitely plays to our strength. And we are seeing strength in core gateway markets as well, New York, San Francisco, etc. And so that also really plays to our strength. As we look forward, we see that momentum continuing. We are seeing continued flight to quality. We are seeing continued office mandates, return-to-work mandates. I think the average now for the private sector is at four days a week in office. Rents are up in the fourth quarter, 4% according to our data, and lease durations are at eight years, which has been continuously increasing since COVID. So, again, as we go into 2026, we are seeing continued momentum, particularly in the office space. And also, I would couple that with feeling good about our pipeline. Anthony Paolone: That is great to hear. Congrats on the strong end of 2025. Operator: Thank you. Your next question comes from Jade Rahmani with KBW. Christian Ulbrich: Thank you very much. Anthony Paolone: You highlighted proprietary data as one of the key defenders against AI Jade Rahmani: potential disruption. I would also add, you know, the heterogeneous and complex nature of commercial real estate. That said, would you agree that there is more disruption risk at the low to middle market part of the landscape because those assets would be simpler, less complex, more homogeneous in nature? And if so, can you give any breakdown of how much of Jones Lang LaSalle Incorporated’s business is truly institutional, maybe $40,000,000 in size and up or however you define it, versus at the low to middle market. Christian Ulbrich: Well, that is an interesting way of putting the question. I would start off with the more scaled you are in a business, the better protected you are because you have data. And your point about whether less sophisticated deals or sizes of transactions are more at risk to be disintermediated Jade Rahmani: Potentially, Christian Ulbrich: at the end of the day, somebody has to execute the deal. And so there will always be human interaction for pretty much everything you see within our space. Whether at some point you can completely cut out human interaction, I think we are very far away from that. So with regards to Jones Lang LaSalle Incorporated, I mean, we looked at it, and we looked at it again after last week’s stock price decline, whether we are missing a trick here. Jade Rahmani: And Christian Ulbrich: honestly, we cannot see anything on the horizon which will disrupt parts of our business in the next couple of years. And, you know, we cannot look further out there. The momentum is very fast on AI. But just at the end of the day, there will be human interaction, and then that human interaction will be executed by people who have the right data at hand and have the knowledge to deliver that service. And so I do not know who should disintermediate us. Thank you. And on a positive front, can you talk Jade Rahmani: to the areas in which Jones Lang LaSalle Incorporated is utilizing AI today, deploying it across the platform, which businesses you believe most clearly benefit, and if you could quantify, as one of your peers has, you know, the percentage of, say, revenue or earnings currently coming from data center management services and such businesses? Christian Ulbrich: Okay. These are two very different parts, but I will kick it off. On the AI front, we have, obviously, two major areas. We have those areas where AI is driving efficiency into our organization, and that goes across all business lines, but it also goes very much into the functions. And we see that momentum as being very strong, and it is part of the very strong margin performance we were able to deliver that we are becoming just more productive and more efficient through the use of AI. Specific to the business lines, we have tools in place across all service lines now. We have spoken about them before. We identify potential opportunities for our brokers which they then work on. And we help our project management business with tools to be really on the spot for what is the current pricing for certain works and how to do that in an optimal way for our clients. So it goes across the board, and it is very much in our workplace management business. So that was the first part of your question. The second part of your question was around data centers, which we had a very strong fourth quarter around data centers. You know, this is an asset class which touches pretty much all of our business lines. On the workplace management side, as you know, we manage those data centers, and that has doubled year over year, the amount of work we do there. But what was specific in the fourth quarter, we saw a lot of transactional business across leasing and capital markets in the data center business. So I want to stay away from—I know that our competitors are always giving a revenue number where I do not know what part of that revenue number includes development and what does not include development—but I want to stay away from giving you this precise revenue number. I can only say, overall, it doubled year over year over the last twelve months. Jade Rahmani: Thank you very much. Operator: Your next question comes from Seth Bergey with Citigroup. Sean Coghlan: Hi. Thanks for taking my question. I was just kind of wondering if you could comment on how you think AI will kind of impact office demand and, you know, appreciate that you do not want to put specific numbers around Anthony Paolone: how much of the data center is a piece of the business. But Sean Coghlan: you know, in your comments on kind of how you think about Anthony Paolone: the longer term Sean Coghlan: impact on the office demand, could you also kind of maybe Anthony Paolone: quantify in some way kind of how much office comprises the overall business? I start off with the demand, and then the team will look during the time I am Christian Ulbrich: speaking about the proportion of offices to our overall revenues. Listen, the demand side was very much impacted by COVID and people staying at home. Now we are on a trajectory that people are coming back to the office, and we have seen now the second largest take-up since 2019. So the office markets are actually very strong. And then within the office markets, as you know, you have that movement around that a lot of companies are trying to secure the best buildings for the best spaces for their people. So we have a shortage on the top end of the market. From there, it moves down. So if we were to see a significant decline in office work because of AI, what would happen is that you would see the worst buildings, back office spaces, and those type of buildings suffering first, and Jade Rahmani: and any kind of Christian Ulbrich: reduction in grade A buildings would be probably picked up relatively quickly by people who are currently sitting in a C or in a B building, Jade Rahmani: then they will Christian Ulbrich: move up the ladder. So overall, frankly, first of all, there is no sign. It is the opposite. When you look at markets like San Francisco, the market is boosted very much by AI-driven demand, and we also see that in New York. So for the time being, it is growing. But if it would go the other way, through AI, I do not think there will be a significant impact on the business we are focused on. As you know, we are very focused on the best buildings and the large transactions in the main gateway cities in every country. So there is absolutely nothing on the horizon that we see that shrinking over the next couple of years. Guys, can you provide the number? How much our exposure is to offices at the moment? Karen Brennan: Yeah. I can follow up on that. So if you look at our leasing business, about 60% of our leasing business globally is in the office space. For capital markets, it is closer to mid-teens. Our project management business, about half is office. And so when you look at our consolidated portfolio, it is about 40% is exposed to office. Jade Rahmani: Great. Thank you. And then maybe just a follow-up Sean Coghlan: You kind of mentioned that the way you are currently using AI is creating efficiencies in your processes. Anthony Paolone: You know, how do you think about just Sean Coghlan: that impacting the business from a headcount perspective? And do you think that any of those efficiencies kind of put pressures on Anthony Paolone: top line fees at all? Christian Ulbrich: Can you repeat that again? Top line what? Jade Rahmani: Just just Sean Coghlan: you know, does AI kind of put—you know, do some of the efficiencies that you are able to achieve with AI put pressure on advisory fees or any changes to the way you think about headcount needs for the business? Christian Ulbrich: Well, what you have seen, we have shown pretty robust top line growth in 2024 and 2025 Jade Rahmani: Without adding Christian Ulbrich: much headcount to the organization other than those people who are working client-side and are reimbursed by our clients. But if you put that to the side, we were able to drive that Sean Coghlan: that Christian Ulbrich: revenue growth without adding any more headcount to the company, and that is a clear outcome from us deploying AI in a successful way. I see that as a trend going forward. We will be able to drive more revenues through the company without any significant amounts of headcount. To your second question, the arrangement of fees with our clients are impacted by many aspects. Most of it is the competitive environment. So far, we have not seen any pressures which we could bring down to AI coming into our industry. Sean Coghlan: Great. Thank you. If I was Karen Brennan: if I was maybe just to add one more point on that, that is on the workplace management side. On the transactional side, we absolutely see continued productivity improvements around our producer productivity. And so we think that with a lot of the investments that we are making around data, AI, etc., we will be able to drive more productive top line growth on the transactional side. So that is just another view on the portfolio. Operator: Your next question comes from Brendan Lynch with Barclays. Sean Coghlan: Investment sales was up 24% in 2025. You kind of alluded to this, the market kind of overcoming the wide bid-ask spreads. What are some of the lingering impediments Anthony Paolone: to recapture the pace of transaction the industry was on in prior cycles? Christian Ulbrich: No. We believe that this will be an ongoing upward trend, but not a hockey stick. So what we have seen, we have seen a recovery chipping in into 2024. That has continued in 2025, and we expect that to continue in 2026, but nothing which will blow you completely away from a transaction volume globally. The US is doing pretty good already. We will see more recovery coming into Europe in 2026. Europe is still, especially on the continent, at a very, very low transaction level. So there is significant room to grow that again. But as I said, do not expect that to be a hockey stick uptick in those transaction volumes. Brendan Lynch: Okay. Thank you. That is helpful. And then maybe one on workplace management. You had a nice mix of expansion with existing clients and new client wins. Can you provide any details on the new wins component of that as it relates to either customer vertical or themes that they are trying to address? Christian Ulbrich: What we see there is almost a continuation of what we have seen in the past. You have, within each industry, companies who are doing extremely well, and they are growing much stronger than other parts of the industries, and that brings a lot of revenue for us going forward. And we have a very high market share in the technology sector and the financial sector, and those are two sectors which continue to do well. From a geographic lens, as you know, the outsourcing has been around for a long time and in a very sophisticated way in North America, and it is lagging quite significantly behind in Continental Europe for many reasons. We see that now accelerating. So a lot of new business wins are coming from a geographic lens now out of Europe. And we also see that moving stronger into the Middle East and into Asia. You may have seen that we have entered a joint venture in Saudi because the market is developing there at high speed. Brendan Lynch: Great. Thank you, Christian. Operator: Your next Operator: question comes from Julien Blouin with Goldman Sachs. Anthony Paolone: And congratulations on the strong quarter. Christian, I was wondering how you feel about tech and AI investments going forward. You know, you have historically been one of the most front-footed in making those investments. But those investments have often been criticized for the difficulty of parsing out the returns and the occasional write-downs that have been associated with them. I—but I wonder if these fears of disintermediation maybe make you even more aggressive in making those investments going forward to sort of protect and strengthen the moats around your business? Christian Ulbrich: Well, the irony is that I was much more fearful about disintermediation ten, fifteen years ago, and after I invested now for so long into that area of product startups, at least my personal fears about disintegration have significantly shrunken over time. It is not that easy Sean Coghlan: to Christian Ulbrich: overcome the benefits of the incumbents. And most notably, I want to go back to the amount of data which we are collecting. So we spent indeed a tremendous amount of money to get our data in order, which is not trivial in an organization which was built country by country over such a long period of time, but we turned the corner on that one, and that is really helping us in a meaningful way to provide our clients with insights which are not easy to get by Anthony Paolone: by people who do not have that data. Christian Ulbrich: And therefore, yes, we will continue to invest into our own platform, very much so, and we are investing heavily into developing new internal tools which we are providing to our colleagues so that they can be even better in servicing our clients. But we have, for the time being, no intention to increase our investment into third-party prop-tech startups. We will continue on that journey, which we have been doing over more recent history, but not more than you have seen already. Anthony Paolone: Okay. Thank you. No. That is very helpful. And, Kelly, I wanted to ask about how we should be thinking about cash flow conversion in 2026. Do you think you could reach that long-term 80% conversion level? And then, sort of related to that, I appreciate the comments around looking to increase share repurchases in 2026. But I was wondering if you are considering maybe a more aggressive stance on share repurchases as a signal of your conviction around the limited risk that AI poses to your business. Karen Brennan: Yeah. I can take the first part of that question, and then, Christian, I will turn it over to you on the repurchases. We had an extraordinary cash conversion year in 2025, as you all have seen. Truly extraordinary. As we look to 2026, we do not generally provide specific guidance on what we expect cash flow conversion to be. I will say our long-term history has been about 80%, a little bit higher than that. And we certainly, after this strong year, expect to return to something that looks more in line with our long-term average. Christian, maybe I turn it over to you for the repurchase question. Christian Ulbrich: Yeah. I mean, it depends how you define aggressive. So maybe I used too much of a muted language, but we have our debt levels where we want it to be. The current share price after last week is at a level which makes it very, very hard for any M&A opportunity to be more attractive to our shareholders than buying back our own shares. So you will see us allocate a significant amount of our free cash flow to share repurchases in 2026. Anthony Paolone: Okay. Great. Thank you very much. Operator: Your next question comes from Mitch Germain with Citizens. Thank you, and congrats on the year. Some of the noise that the disruption that you are experiencing within the property management segment—I mean, obviously, I think you are exiting certain contracts. You talked about being kind of low margin. Is that offsetting growth from other contracts? I am just kind of curious about how this segment is performing on a more normalized basis. Well, we were quite transparent around it. We globalized that business line as the last business line which we globalized, and we identified some contracts in especially in our China business, which did not meet our Christian Ulbrich: thresholds on margins, and we are now, in line with the interests of our clients there, exiting some of those contracts and moving them over to other providers if clients are not willing to pay us significantly higher fees, which would meet our margin expectations. And so, yes, that has clearly impacted the overall growth rate of that subsegment. If we were not doing that, you would see that subsegment growing pretty much in line with what you see in our workplace management business. So high single digit. But for the time being, we are still exiting more contracts, and we expect to get back onto a growth trajectory in the second half of 2026. And from then on, we will see normalized growth rates in that business again. Jade Rahmani: Great. That is helpful. And are you seeing an increase in global capital flows? I know that that was one of the themes that was impacting the capital markets industry. Are you seeing that global capital becoming a more meaningful aspect of the growth on a go-forward basis? Well, Christian Ulbrich: global capital flows have been very, very strong until the more recent crisis, and then it became a bit more muted. And now global capital is becoming more active again. And so that is a driver of transactions’ volumes growing. But, as I said earlier, it will not jump up to the levels where it was immediately. It is a more gradual increase in transaction volumes, and you see that also from global capital. And then one aspect which we should not underestimate: global capital is very reactive to any issues in the world which impact confidence levels. And so whenever there is a lot of noise in the world, then global capital gets more careful, where domestic capital will continue to invest. So the longer the period is where we do not have a lot of exciting things happening in the world of geopolitics, you will see more global capital being active in the US, in Europe, and elsewhere. And if we have a lot of noise coming, then it will be more driven by domestic capital in those countries. Jade Rahmani: Your next question is from Anthony Paolone with JPMorgan. Brendan Lynch: In health care costs in the quarter? And then it sounds like those were offset by these discrete Jade Rahmani: cost saves. The health care costs sound Anthony Paolone: more one-time, but are the cost saves—do those continue, or just any color there? The first part of your question, Tony, cut off, but I think you are asking about the health care deficit that we noted that Karen Brennan: hit our fourth quarter. Yeah. So we saw an uptick in claims in the fourth quarter. We did face a health care headwind in our fourth quarter. We did manage to offset most of that headwind with very discrete cost actions that we do not expect to repeat. And we are, on a go-forward basis as we look into 2026, managing, of course, our broader health care costs accordingly, and it worked into our plan with a broader set of actions that we were taking holistically around our cost structure to make sure that we are managing for that. Brendan Lynch: Okay. Got it. And then just second one. Back on capital markets. I think the GSEs upped their caps pretty substantially for 2026. And just does that help give you visibility in growth Anthony Paolone: debt originations, or just in general, can you talk about the visibility on debt originations side going into 2026? And growth there. Christian Ulbrich: Well, the debt business has been very, very strong in 2025, and we expect it to continue to be very strong in 2026. And that aspect you just mentioned is one driver of our expected growth. But it is not the only one. The sources of debt have widened significantly, and it was a trend in the US which has now moved over to Europe very strong, and we see a really significant uptick in our services, in our debt services in Europe, and now also starting to be active in Asia. And so we have a very optimistic outlook for our debt business going forward. And not only for 2026. That will be an ongoing trend for multiple years. Okay. Thank you. Operator: Your next question is from Jade Rahmani with KBW. Jade Rahmani: Thank you very much. On the AI disruption risk, I wanted to ask if you see another buffer being network effects. If you are a large money manager looking to deploy into real estate, you want to be part of, say, the Jones Lang LaSalle Incorporated ecosystem of transaction deal flow, and that also adds benefits on leasing as well as management services. Do you see that as a meaningful part of the business? Christian Ulbrich: Listen. Clients do reduce the numbers of service providers they use. This has been an ongoing trend now for multiple years. I always bring it down to the fact that the world has significantly increased in complexity, and so people are trying to reduce the complexity they have to deal with, and one way of reducing it is they are choosing their service providers which they really trust and where they get superior outcomes, and provide more assignments to them. And that is something where we and other very large players in our industry are benefiting from. And, yes, that will also help to protect us against potential disruption. But, again, one major aspect why it helps us is we are collecting more and more data. As we grow, we do more transactions, we manage more buildings, and every single building, every single transaction provides us with data. And that data, we turn around and we provide insights to our clients which other people who do not have that data cannot provide. So it is a bit of a self-fulfilling story here. But it is something which is not only unique to us; it is unique to all large players in our industry if they have their data in order. Thank you. Operator: Your next question comes from Patrick O'Shaughnessy with Raymond James. Hey. Good morning. So by my calculations, your workplace management revenue, net of the gross contract costs, the growth decelerated to flat year over year in the fourth quarter versus 6% in the third quarter. Can you speak to the cause of that deceleration? Christian Ulbrich: Yeah. As Kelly alluded to, we had to pick the health care costs and deduct it. That is the way the accounting works. If you Jade Rahmani: take that out, Christian Ulbrich: the revenue growth, net of gross contract cost, would have been roughly 4%. We had 5% in local currency in the third quarter, so somehow in line with the third quarter. You know, as a general comment there, our strategy is to be very focused on margin. And we do not accept any contracts which are margin diluted to us. And it is always between six to nine months you have to go back when you win those type of work before it turns into revenue, and so there will have been some potential assignments out in the market six to nine months before the fourth quarter which did not meet our margin requirements, and we do not pick them up. And you see that in our constant widening of our margin in that business. But as we said earlier, we are very confident that the average growth of that business over time is always in the high single digit, Anthony Paolone: we do not expect anything else for 2026. Patrick O'Shaughnessy: Got it. That is helpful. Thank you very much. And then secondly, Patrick O'Shaughnessy: what is your outlook for industrial leasing in 2026? Looks like it started to improve, but still off of relatively depressed levels. Karen Brennan: Yeah. When we look at industrial leasing, and if you look at our performance on a two-year stack basis, it is actually been quite strong relative to the market. We believe that industrial leasing has bottomed out and looks like it is building momentum again. As we look into 2026, we expect continued acceleration around that particular segment. And our pipelines look strong, look good, for industrial leasing as we head into 2026. Patrick O'Shaughnessy: Alright. Terrific. Thank you. Operator: There are no further questions at this time. I will now turn the call back over to Christian Ulbrich for any closing remarks. Christian Ulbrich: Thank you, operator. With no further questions, we will close today’s call, and I hope to see you all at our Investor Meeting on March 12. Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Welcome to HF Sinclair Corporation's fourth quarter 2025 conference call and webcast. Hosting the call today is Franklin Myers, who is acting as temporary Chief Executive Officer of HF Sinclair Corporation. He is joined by Atanas H. Atanasov, Chief Financial Officer; Steven C. Ledbetter, EVP of Commercial; Valerie Pompa, EVP of Operations; and Matt Joyce, EVP of Lubricants and Specialties. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing 1 again. If you should require operator assistance, please press 0. We ask that you please limit yourself to one question and one follow-up. Additionally, we ask that you pick up your handset to allow optimal sound quality. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may begin. Thank you, Julianne. Craig Biery: Good morning, everyone, and welcome to HF Sinclair Corporation's fourth quarter 2025 earnings call. This morning, we issued a press release announcing results for the quarter ending December 31, 2025. If you would like a copy of the earnings press release, you may find one on our website at hfsinclair.com. Before we proceed with remarks, please note the Safe Harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the Safe Harbor provisions of federal securities laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the earnings press release for reconciliations to GAAP financial measures. For any forward-looking non-GAAP measures, the company is unable to provide a reconciliation without unreasonable effort due to the unpredictability and uncertainty of certain items. Also, please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. I will now turn the call over to Franklin. Thank you, Craig, and thank you for being part of the fourth quarter earnings call. You have seen in the release this morning, Mr. Timothy Go, the company Chief Executive Officer and President and a member of the Board, requested a voluntary leave of absence from his duties. The Board has accepted Tim's request, electing me Chief Executive Officer and President of the company on a temporary basis. Also, the company released this morning, and announced that the Audit Committee of the Board is assessing certain matters relating to the company's disclosure processes. We are working to complete this review as soon as possible. I want to emphasize that our review relates to our disclosure process and not to the numbers we released this morning. We are comfortable with the financial statements and disclosures we released and have no expectation that they will change. At this point, our audit is not yet complete pending completion of this review. Once we have worked through these issues, we will move forward to filing our 10-K. At present, we fully expect to make a timely filing of the 10-K. With these preliminary remarks, I will turn it over to Steven and Atanas for their remarks on the results. After the presentation, we will be happy to take questions. I want to note, though, and emphasize that this is an earnings call, and our results for Q4 and the full year of 2025. We will not be in a position to address any questions relating to the disclosure process review or on the company's leadership. Let me turn it over to Steve. Thank you, Franklin. This morning, we reported solid full year 2025 adjusted EBITDA of $2,300,000,000 and fourth quarter adjusted EBITDA of $564,000,000. Our fourth quarter results reflect seasonal weakness in our refining business. Our fuel margins were strongest in the first half of the quarter when our throughput was the lowest, but the margins weakened significantly at the end of the quarter, especially in our core markets in the Rockies, Mid-Con, and the Southwest. This, along with the Puget Sound refinery turnaround and the unplanned Artesia refinery event, negatively impacted refining earnings for the fourth quarter. Despite the headwinds in refining, the positive contributions from our midstream, lubricants, and marketing segments highlight the strength of our diversified portfolio. In the fourth quarter, we returned $230,000,000 through dividends and share repurchases, demonstrating our commitment to returning excess cash to shareholders. During the quarter, we received small refinery RINs waivers from the EPA, which increased adjusted refining gross margin by $313,000,000. This includes $43,000,000 of small refinery RINs waivers granted by the EPA in the third quarter but recognized in the fourth quarter. I will now go through our full year highlights and provide an update of some of our strategic initiatives, and after that, I will turn it over to Atanas to go through our detailed fourth quarter results. For the full year 2025, I am pleased to report that our financial and operational results demonstrate significant progress we are making on our three key priorities: reliability, integration, and shareholder return. For example, in refining, in 2025, we successfully completed major turnarounds at our Tulsa, Parco, and Puget Sound refineries. We also made improvements on our operational performance, setting annual records for throughput of 652,000 barrels per day and operating expense per throughput barrel of $7.67. Our overall refining operating costs were down by $87,000,000 year over year, highlighting our improvements in both cost control and reliability. On the organic front, we are progressing a vacuum furnace project at our El Dorado refinery that will improve plant reliability, upgrade yield through gas oil recovery, and importantly, increase our heavy crude processing capability by approximately 10,000 barrels per day. The estimated capital cost of the project is approximately $55,000,000, of which $37,000,000 has already been spent in 2025, with an expected annual EBITDA uplift of between $25,000,000 and $30,000,000. The project is expected to be completed during the fourth quarter El Dorado turnaround of this year. Our marketing segment delivered record annual EBITDA of $103,000,000 in 2025, a 37% increase over the prior record. We also grew our supplied branded footprint by a net of 117 sites, demonstrating our commitment to grow the Sinclair brand and provide a long-term outlet with margin uplift for refining barrels. Looking forward, we expect to grow our number of branded sites by approximately 10% annually. And today, HF Sinclair is pleased to announce the formation of Green Trail Fuels LLC, a new joint venture with U-Pop Holdings for which we will hold a 50% nonoperating economic interest. This joint venture will include more than 30 retail sites across Colorado and New Mexico. As part of this partnership, HF Sinclair will supply fuel from its proximate regional refineries, strengthening the company's branded marketing footprint in the Rockies and the Southwest. This joint venture represents a strategic step forward for our marketing segment and allows us to accelerate growth of the Sinclair brand at an expedited pace and capture synergies across our integrated asset base. In lubricants and specialties, in 2025 we delivered annual EBITDA of $261,000,000, reflecting lower sales volumes and the turnaround at our Mississauga facility. Our finished and specialty business continued to deliver strong results, offset by weakness in Group II and Group III base oil margins. Looking ahead, we are well underway in integrating our recently acquired Industrial Oils Unlimited business, which provides strong regional manufacturing capabilities to further our lubricants and specialties reach into the United States markets. Its proximity to our Tulsa refinery also provides synergy opportunities from its base oil production. We continue to look for additional bolt-on opportunities that will allow us to grow our finished and specialties business. In our midstream business, we delivered record annual adjusted EBITDA of $459,000,000. In October, we announced the evaluation of a multiphase plan to expand our midstream refined products pipeline network to address growing supply needs in the Western U.S., and we believe our geographic reach and infrastructure provide an advantaged position to quickly and efficiently deliver refined products where market needs are most acute. We are targeting the final investment decision for phase one by the middle of this year. During 2025, we returned over $724,000,000 to shareholders through share repurchases and dividends. Since the Sinclair acquisition in March 2022, we have returned over $4,700,000,000 in cash to shareholders and have reduced our share count by over 64,000,000 shares, which represents all of the shares we issued for Sinclair and 79% of the shares we issued for both Sinclair and the HEP transaction. We remain committed to our long-term cash return strategy and long-term payout ratio while maintaining a strong balance sheet and investment-grade credit rating. Today, we announced that our Board of Directors declared a regular quarterly dividend of $0.50 per share, payable on 03/12/2026 to holders of record on 03/02/2026. Looking forward, we are bullish on margins in refining in 2026, and we remain focused on safe and reliable operations, continued growth in our midstream, lubricants, and marketing segments, and returning excess cash to shareholders. I will now ask Atanas to take it from here. Thank you, Steve, and good morning, everyone. Atanas H. Atanasov: Let us begin by reviewing HF Sinclair's financial highlights. Today, we reported fourth quarter net loss attributable to HF Sinclair shareholders of $28,000,000, or negative $0.16 per diluted share. These results reflect special items that collectively decreased net income by $249,000,000. Excluding these items, adjusted net income for the fourth quarter was $221,000,000, or $1.20 per diluted share, compared to adjusted net loss of $191,000,000, or negative $1.02 per diluted share for the same period in 2024. Adjusted EBITDA for the fourth quarter was $564,000,000 compared to $28,000,000 in 2024. In our refining segment, excluding the lower of cost or market inventory valuation adjustment charge of $313,000,000 and certain other adjustments, fourth quarter adjusted EBITDA was $403,000,000 compared to negative $169,000,000 in the fourth quarter 2024. This increase was principally driven by higher adjusted refinery gross margins in both the West and Mid-Con regions, partially offset by the Puget Sound refinery planned turnaround and the unplanned Artesia refinery event. As Steve mentioned, small refinery RINs waivers granted by the EPA in 2025 increased adjusted refinery gross margins by $313,000,000, which includes $43,000,000 of benefits related to the small refinery RINs waivers received in the third quarter but recognized in 2025. Crude oil charge averaged 556,000 barrels per day for the fourth quarter compared to 562,000 barrels per day for 2024. In our renewables segment, excluding the lower of cost or market inventory valuation adjustment charge of $7,000,000, we reported adjusted EBITDA of negative $6,000,000 for the fourth quarter compared to negative $9,000,000 for 2024. In 2025, we recognized incrementally more in value from the producer's tax credit. Total sales volumes were 57,000,000 gallons in 2025 as compared to 62,000,000 gallons for 2024. Our marketing segment reported EBITDA of $22,000,000 in the fourth quarter, compared to $21,000,000 in 2024. This increase was primarily driven by higher margins and high-grading our mix of stores throughout 2025. Total branded sales fuel volumes were 337,000,000 gallons for 2025, compared to 333,000,000 gallons for 2024. Our lubricants and specialty segment reported adjusted EBITDA of $43,000,000 for the fourth quarter compared to adjusted EBITDA of $70,000,000 for 2024. This decrease was primarily driven by lower finished and specialty product sales volumes, lower base oil margins, and higher operating costs. Our midstream segment reported adjusted EBITDA of $114,000,000 in the fourth quarter compared to $114,000,000 in the same period of last year. Net cash provided by operations totaled $8,000,000 in the fourth quarter, which included $122,000,000 of turnaround spend. HF Sinclair's capital expenditures totaled $131,000,000 in the fourth quarter. As of 12/31/2025, HF Sinclair's total liquidity stood at approximately $3,000,000,000, which includes a cash balance of $978,000,000 and our undrawn $2,000,000,000 unsecured credit facility. As of December 31, we have $2,800,000,000 of debt outstanding with a debt-to-capital ratio of 23% and net debt-to-capital ratio of 15%. Let us go through some guidance items. With respect to capital spending for full year 2026, we expect to spend approximately $650,000,000 in sustaining capital including turnarounds and catalyst. This is down $125,000,000 from 2025 due to the completion of the heavy maintenance cycle of our assets, and we expect our sustaining capital to continue to trend below the high catch-up maintenance levels of the past years. In addition, we expect to spend $125,000,000 in growth capital investments across our segments. For 2026, we expect to run between 585,000–615,000 barrels per day of crude oil in our refining segment, which reflects the planned turnarounds at our Puget Sound and Woods Cross refineries. We will now open for questions. Operator: The floor is now open for questions. At this time, if you have questions or comments, please press 1 on your touchtone phone. We ask that you please limit to one question and one follow-up. If you have additional questions, we welcome you to rejoin the queue. At any point your question has been answered, you may remove yourself from the queue by pressing 1 again. Our first question comes from Neil Singhvi Mehta from Goldman Sachs. Please go ahead. Your line is open. Craig Biery: Yes. Good morning, team. Franklin, I recognize you are limited in terms of what you can say here, but the stock is down a lot in the premarket. So I do think the story could benefit from some color. Anything you can share about the management change and the audit to provide a little bit more color? Because I think a number of folks are confused this morning, and is there any relationship between these two items? Neil, I appreciate the question, but you have to understand the circumstances that we are in. We have no further comment today. Personally, I view this as a buying opportunity. If and when we have additional information, we will give you updates as we are able to do so. Thank you for your questions. Thank you for letting us clear that up. Alright. My follow-up is just on small refinery exemptions. In the quarter, they were pretty significant. Just Steven C. Ledbetter: any color in terms of the path of converting that over to cash and perspectives on the 2026 outlook? Craig Biery: For SREs. Atanas H. Atanasov: Neil, thank you for the question. We intend to continue to participate in this program and appreciate the EPA is now following a formulaic approach. We cannot comment on any further benefit from SREs. However, we did benefit in this quarter and this year in a significant way, both in terms of EBITDA and cash. Operator: Our next question comes from Ryan M. Todd from Piper Sandler. Please go ahead. Your line is open. Atanas H. Atanasov: Good, thanks. Maybe Craig Biery: first one on the refining side. I mean, the headline refining results were strong, but if we exclude the SRE tailwind, I mean, you had strong throughput, you had good OpEx, but the gross margin contribution looked a little lower without the SRE. Atanas H. Atanasov: You maybe talk about Craig Biery: what some of the headwinds might have been on the quarter that would have led to lower capture across the regions? And maybe if you can disclose any, you know, on a regional breakdown, what the gross margins would have looked like without the SRE? Steven C. Ledbetter: Hey, Ryan. This is Steve. I will take that. Look, when you think about the quarter, the crack environment was very strong in the first half of the quarter, but then it took a precipitous fall beginning in the second half, really November, coming off around 15%, and then December dropped another 48% to 50%. So from a timing perspective, that was what the market looked like in our regions. And our planned and unplanned maintenance happened in the first half of the quarter when the margins were much stronger. So, finally, following our maintenance events, we needed to liquidate inventory positions, and that happened in a lower market environment. But I would also like to say that we are very bullish in refining outcomes, and we believe in the underlying business performance improvement plans that we have underway. I think that has been demonstrated by capture improvement year over year, the underlying reliability trends contributing to lower OpEx and increased full year throughput. Atanas H. Atanasov: Great. Thanks. And then maybe Craig Biery: separately on, you know, congratulations on the marketing JV that you announced. Can you provide some color on what you see as potentially the tangible benefits of the partnership, what the platform may allow you to do in terms of driving additional growth in the region or elsewhere? Steven C. Ledbetter: Yeah. We are very excited to be able to announce that. I think it is truly a new avenue to really accelerate the growth and unlock the full potential of Craig Biery: the Sinclair brand, which we think is still an untapped resource for our company. Steven C. Ledbetter: What this allows us to do is to accelerate the branded put. It gives us exposure to what we believe is attractive margins in the rack-to-retail and even the backcourt. And then finally, it allows us to capture synergies with our integrated asset base in both refining and midstream. This is a template that I think we can use in other places. We look to really accelerate the growth of the Dyno brand in our core markets, and this is the first one where we are signaling that we are serious about this, and we see this as a significant platform for growth. Thanks. Operator: Our next question comes from Paul Cheng from Scotiabank. Please go ahead. Your line is open. Steven C. Ledbetter: Hi, good morning. Franklin, can you maybe clarify that with the management change, is the company going to conduct a strategic review on the operation Paul Cheng: or to look at different assets, whether they fit into long-term portfolio, or is it business as usual and none of the strategy and anything will be changed? And because I know you are not going to comment on Timothy Go, the reason behind, but can you clarify that when you say it is a voluntary leave of absence, does that mean that he will come back at some point, or is this a permanent— in other words, that you guys will be looking for a permanent replacement of the CEO? That is the first question. Atanas H. Atanasov: Okay, Paul. I heard two questions there, and I will answer both of them. Craig Biery: The first question on strategic review: it is business as usual within the company, and we will keep going forward on the plans that we have. In terms of your question with respect to Tim and the other matters, we have no further comments today. I just want to turn your follow-up question back to the earnings call, please. If and as we have additional information, we will alert the public in the appropriate way. I think you may have a follow-up question. Paul Cheng: Okay. The follow-up question is on the SRE impact on the margin for the quarter. Is that just because it depends on where you receive? Do you have a breakdown by region, what the SRE impact is? Thank you. Hey, Paul. This is Steve. Why do we not take that one offline, and I Steven C. Ledbetter: would offer up Craig Biery on a follow-up call to show the breakdowns to you. Paul Cheng: Alright. Will do. Thank you. Operator: Next question comes from Theresa Chen from Barclays. Hey, Steve, follow-up on your comments about the bullishness on the outlook for the refining business. Curious how you see the path of economic recovery, how that will go for the Mid-Con region. Particularly in light of the weakness in Group III RIN-adjusted crack spreads and still elevated utilization rates across the region, how do you see the path to a more sustainable profitability environment from here? Steven C. Ledbetter: Yeah. It is a good question. Thanks, Theresa. Of course, we look at things on a longer-cycle basis. As we look across the cycle, we see that tightness will return and be constructive, including in the Mid-Con. We think what we see right now is directly associated with winter storm Fern really taking the demand Craig Biery: bubble and popping it. Steven C. Ledbetter: And high inventories and now converting into the RVP. But we think that is temporary and normalizes out over the year. On the back of that—and it is really on gas—we believe that diesel continues to remain very strong, and jet appears to be durable. It is a bit of a timing issue. Mid-Con will be a little softer early in the year, but we feel like that will normalize as we step into driving season. Operator: That is helpful. Thank you. And on the Green Trail Fuels JV, any color or details on the expected CapEx net to Dyno and the build multiples associated with the incremental retail sites? Do you have any quantitative color at all on how we should think about the contribution of this investment to earnings on a go-forward basis? Atanas H. Atanasov: Yeah. Thanks, Theresa. This is Atanas. We are not going to comment on the exact investment. However, I would say that we are funding this JV through a very efficient use of capital, which ultimately results in very attractive multiples to the corporation, to the point that it is competing with any of our other projects. What it also does—any of our other marketing projects—the incremental benefit there is not only the branded footprint that you have on the wholesale side, but also our access for very accretive rack-to-retail economics. So this is efficiently funded by the corporation and results in a relatively low multiple to us. Thank you. Steven C. Ledbetter: Of course. Operator: Our next question comes from Doug Leggate from Wolfe Research. Please go ahead. Your line is open. Atanas H. Atanasov: Hi. Good morning, everyone. I am going to avoid Doug Leggate: the main topic that seems we are going to have to wait on your review there, but I do have a couple of questions, Atanas. Small refinery exemptions and cash flow, if I may. It is part A and B, perhaps, but can you just confirm that the SRE benefit you took was cumulative, and if so, over what period? And how that leads through to how we should think about the ongoing benefit going forward. That is my first question. Then my second question is, can you offer any color on the underlying free cash flow excluding the SREs? I do not know what the cash flow impact was this quarter from the SREs, and we also do not know what the working capital move was. Can you give us a breakdown of what you see as the underlying cash flow and free cash flow excluding working capital and any contribution from SREs, please? Thank you. Atanas H. Atanasov: Yeah. Thank you for your question, Doug. So for the total year, the cash flow impact of the SREs was just under $300,000,000. It was over $280,000,000. Doug Leggate: So Atanas H. Atanasov: obviously, it represents a significant amount of our free cash flow in the fourth quarter. However, I remind you that we had a lot of capital outlays in the fourth quarter. You should focus on total free cash flow for the full year, which was very robust, just almost $900,000,000, just under $870,000,000. Now, when you look at an ongoing basis, we are not going to provide any guidance because that is really out of our hands, and we appreciate the EPA's formulaic approach, but we are going to limit our comments to our actuals. So $313,000,000 in total EBITDA impact for the fourth quarter, $485,000,000 for the full year, and significant cash flow contribution just under $300,000,000 for the fourth quarter. Doug Leggate: So for the full year—can you give the working—sorry. Can you just focus, please, after this, on the fourth quarter, the SRE after-tax contribution and the working capital move? I am just trying to get an underlying cash flow number excluding those two issues. Atanas H. Atanasov: When you look at our total working capital movement for the fourth quarter—and you will be able to analyze this later—the total working capital was a headwind. There are really two items when you exclude SREs. Number one, when you build inventory, that is a headwind. Number two is in a declining price environment, accounts payable is a headwind. Those are the two main drivers that you see that were impacting our net working capital for the quarter. But then for the full year, like I said, our total cash flow from operations and free cash flow was pretty robust, as evidenced by our return of capital to shareholders. Doug Leggate: I will take it offline. Thank you, guys. Operator: Our next question comes from Joseph Gregory Laetsch from Morgan Stanley. Please go ahead. Your line is open. Atanas H. Atanasov: Great. Thanks. Good morning. Thanks for taking my questions. So I wanted to ask on lubricants. It was a bit weaker than we had expected in fourth quarter. I know there was some seasonality to that business. But could you just unpack some of the drivers Steven C. Ledbetter: of the fourth quarter results? And as part of that, how do you see the segment progressing throughout the year? Thank you. Matt Joyce: Thanks, Joe. It is Matt Joyce here. You nailed it. The seasonality was, of course, a big driver for us. Fourth quarter always tends to be a time of the year where our customers are destocking and managing inventory. We saw a similar trend. This was no exception. But the other part of this was we also encountered some higher operational expenditures in the quarter. Energy costs and feedstock costs and feedstock quality in particular in our Mississauga facility impacted our overall performance of base oil production as well as the margins that we could achieve. We also got caught out with some pretty poor weather in the Mississauga area when we rely heavily on that Seaway for our supply chain, and so that also impacted some of our production and our costs throughout the quarter. From the finished and specialty side of it, I had alluded to it in earlier quarters on the specialty side where we had seen some slowdown in our process oils that go into the rubber and tire industry based on new cars being built at a slower rate. That is still the case. We saw a little bit of a slowdown that was tracking a little bit lower than what we would like to have seen, and that was a continuing trend at about 10% lower than what we would anticipate. But our finished business remained pretty healthy, and we have put on some new volumes and new business at very nice margins. In balance, when we look at it, quarter four was generally driven by base oil production costs and operational expenditures as well as the pricing we were able to achieve in the quarter. Looking forward, we see steady demand for our products. We will obviously be watching out for any impacts or continuing impacts on the slowdown in our specialty side, and base oils will be the one that we are working to solve in the future. And then on the midstream side, could you just give us an update on where we are with the westward expansion pipeline project? I know there are several phases under— I think phase one is targeted by midyear. Thank you. Valerie Pompa: Yeah. So, Steven C. Ledbetter: we are progressing both the midstream and refining aspects through our project delivery framework, and as we talked about earlier, we think that this project is really complementary to whatever other projects may come to fruition. We are working through not only the economic assessment, but also to make sure we can execute appropriately and with accurate cost assessments, which get us to the point of taking FID. We believe very strongly in this project, and we think that this will be very accretive to the entire value chain under HF Sinclair. So stay tuned. More to come likely midyear. Valerie Pompa: Great. Thank you. Operator: Our next question comes from Manav Gupta from UBS. Please go ahead. Your line is open. Valeria Pompa: Good morning. I wanted to go back. It seemed from your earlier comments that you were Manav Gupta: relatively bullish on refining margins. I am just trying to understand: are the cracks what you are bullish on, or do you see widening differentials? I think Brent–WTI is a little wider. WCS is a little wider. If you could talk about your relatively more bullish view on refining. Steven C. Ledbetter: Hey, Manav. This is Steve. I think we talk about our belief on a constructive margin environment and being bullish for a number of different areas. One, when you think about the global supply-demand balance, looking 2026 versus 2025, we see it to be short 100,000 to 200,000 barrels a day, demand net of additional capacity. When you look at the U.S., we think that there is still tightness in the market. We have seen the demand for diesel be very strong as well as jet. Some of the underlying things that you already mentioned—the Venezuelan announcement had a shock to the system in terms of the differentials, and we saw that immediately pop. We think that is probably another $1.00 to $1.50, which is very good for us. As you know, we can run up to 100,000 barrels a day of heavy crude, and that results in anywhere from $30,000,000 to $35,000,000. The other piece is what is happening to the pressure of WTS Doug Leggate: versus Steven C. Ledbetter: WTI, and we think that is structural as those barrels have to compete to get south. We are taking advantage of that now, and we see that strong in Q1 and onward. It is really a combination of everything. We do not see a lot of additional capacity. One other point is our exposure to PAD 5 is an enviable position with what is happening there. That market is getting tighter with two announced refinery closures, and we think we have regional efficiencies to get there and take advantage of that both in the Pacific Northwest as well as in the southern PAD 5. All in all, for Dyno, we think our refining structure looks pretty bullish through 2026. Manav Gupta: Perfect. My quick follow-up, and I understand the limit here. The number one question we are getting is the parallels are being drawn a little bit to ADM. Is this an internal inquiry, or at this point is there involvement of SEC or Department of Justice? Again, I am asking because a number of people have asked us, is this something similar to ADM, or is this something internal? We cannot comment on it right now. I can tell you that, and again, I will refer you back to the press release if that will give you information that is material. As it and when it becomes available. I will emphasize, though, the Audit Committee and the Board are fully comfortable with the disclosures that we have made today. Craig Biery: And the financial statements both with respect to the results of operation and condition of the company. If we were not comfortable, we would not be having this call. Doug Leggate: I want to provide you with that assurance. Operator: Thank you. Our next question comes from Phillip J. Jungwirth from BMO. Please go ahead. Your line is open. Steven C. Ledbetter: Yes. Thanks. Good morning. Coming back to SREs, can you level-set us just on where you sit now for Woods Cross, Parco, Casper, Tulsa, and Artesia? Not looking for guidance but just what has been submitted or resubmitted, and what are we still waiting on decisions from? Yeah. Phillip, this is Steve. We have submitted petitions for all of those and already submitted petitions for 2025, and we are waiting for the EPA to deliberate on granting the award. We have done everything that we can at this point to make sure that we are not the constraint or the bottleneck, and we anticipate hearing something in short order. Okay. Great. And then, the company has talked about being in the fifth inning of its refining reliability, integration, operating cost improvement journey. Just wondering if you still think that is the case today. How do you see the progression trending this year? And then is there the ambition or ability to do more on the commercial side too, just in order to improve capture rate? Operator: Yeah. This is Valerie Pompa. The strategies we have been talking about for the last few years continue to be reflected in our OpEx per barrel. We are continuing to, ahead of headwinds on natural gas, manage to improve the underlying base business and our controllable costs and still take $87,000,000 out this year. We anticipate and expect that we are going to continue those strategies towards our $7.25 goal that we put out there over the last few years. Steven C. Ledbetter: Yeah. Maybe from a commercial perspective, of course there is always opportunity to do more, which is why we are doing some of the things that we have already announced, including announcing the multiphase project, the joint venture that we just announced, and the optimization of our midstream assets, which really takes advantage of the integrated nature of our business. Doug Leggate: that also does Steven C. Ledbetter: the same thing of taking advantage of our integrated footprint. We talked about the El Dorado project, where we are making investments that we think are accretive. That one is an important one in terms of product yield as well as running more heavy and then taking advantage of our retail asphalt business, so that heavy oil value chain. We have made progress both in the jet value chain as well as the premium value chain in taking middle pieces out that do not add value to us or where we have efficiencies to make that work. The final piece is our light and crude structure. We have taken a very aggressive approach in making sure that we can qualify more and different crudes that allow us to take advantage of differentials or dislocations at different times, and we are starting to see that show up in our light and crude underlying numbers. I would just point back to our year-over-year capture improvement of 6% excess ROE and 9% excess RE in the RVO. Not done yet, not calling this victory, but what we are seeing in terms of the trajectory is encouraging, and we are going to continue to aggressively pursue that. Atanas H. Atanasov: Great. Thanks. Operator: Our next question comes from Matthew Blair from TPH. Please go ahead. Your line is open. Atanas H. Atanasov: Great. Thanks and good morning, everyone. Can you talk about how your RD business is trending so far in the first quarter? Just given this increase in D4 RIN prices, do you think that EBITDA margins above $0.25 a gallon Craig Biery: is realistic so far for Q1, and also, have you been increasing your operating rates of your RD facilities? Thanks. Steven C. Ledbetter: Maybe I will take that one just at a high level. We have worked extremely hard in our renewable diesel business to get to the point of it being at or around breakeven in terrible market conditions in preparation for what we expected to come, which is what we are seeing in the underlying market. You are seeing the BOHO spread work. You are seeing the RIN values jump, and we have a forward view that that business is more constructive than it was. Finalization of RVO is going to help. I think 45Z finalization was also a big help. We have done some meaningful improvements to our base business. We talk about it in feedstock strategy, and that is really getting closer to where the feedstock is produced and taking a middle part out of that value chain, and then high-grading our molecules, getting into different markets. We are now finding homes in attractive markets in Canada and the Pacific Northwest, differently than just California. I think we have made great strides in the underlying operational efficiency in terms of operating costs as well as catalyst change. We see the economic incentives to run Atanas H. Atanasov: higher, Steven C. Ledbetter: and we will do that and are doing that. Having said that, we did have an end-of-life catalyst change at Artesia that has been now completed. That was done in January. It is a long way of saying we are finally seeing some benefit for our current setup. The structure in the market is telling us that we are encouraged about the outcomes financially. Not going to comment on the $0.25 per gallon EBITDA at this point, but we do see this more constructive than we probably ever have since we stepped into this business. Doug Leggate: Sounds good. And then there is also a proposal in Utah to reduce taxes on retail gasoline, but then Atanas H. Atanasov: implement a new tax directly on refiners in the state. Could you talk about where you stand on this proposal and the implications if it passes? Thanks. Steven C. Ledbetter: Yep. We are actively working with the various legislatures up in that region. The issue is wanting to make sure that security of supply is there and bringing down overall fuel cost. I am not going to comment necessarily on that proposal, but we do not believe taxing is the way forward. We are in active conversations around that. In fact, part of our whole project to move more barrels west is potentially part of the solution. We are talking about how we can get support to accelerate getting that delivered and solve the need, which is underlying what this proposal is trying to accomplish. Operator: Our next question comes from Jason Gabelman from TD Cowen. Please go ahead. Your line is open. Craig Biery: Yeah. Hey, good morning. Thanks for taking my questions. Wanted to Doug Leggate: ask a question about the Craig Biery: RVO in the crack, and it is kind of a few dollars a barrel, Doug Leggate: approaching $9 a barrel, and Craig Biery: I think historically you have not really captured any of that, but I wonder Steven C. Ledbetter: following the Sinclair acquisition's expansion of the marketing business, Craig Biery: if that has changed at all, if your blending Atanas H. Atanasov: capabilities on the ethanol side Craig Biery: enable you to capture any of that Doug Leggate: RIN that is in the crack? Thanks. Steven C. Ledbetter: Hey, Jason. Yeah. We watch this pretty closely. I would tell you that in an oversupplied market, you are less able to pass that through to the customers in how you are getting rid of the product, and you eat more of that. As we have gone and moved more into an integrated view on our blending capabilities and our branded put, we do see some benefit from that. But it is a headline, and the RVO, as it climbs, continues to be something that we look at as a headwind. I think as we evolve here and things tighten up, we will begin to see more of this play out to where it does show up in the crack. For now, it is a wait and see. We are trying to make sure that we can pass as much of that along, but in an oversupplied market, that becomes more and more difficult to do. Doug Leggate: Okay. And my follow-up is just on Puget Sound because Steven C. Ledbetter: I was a bit surprised, I think, to see another turnaround announced Doug Leggate: in 1Q just given the turnaround you recently had. So can you just talk about if there is anything specifically going on with the asset? Did you find something during the work in 4Q that resulted in you accelerating work Craig Biery: into 1Q, or is it just kind of normal Doug Leggate: turnaround cycles and a bit of bunching up? Thanks. Operator: Yeah. This is Valerie. It is just our normal cycle. We split the turnaround units for capability and capacity of the site, historically, to ensure turnaround success and that we can execute well. We have right-sized the turnaround, which units we take together. This is just a normal cycle. The turnaround in the fall was executed successfully to a lot of our objectives. This small turnaround—a coker and a reformer—will close all of those north side units up this year. Atanas H. Atanasov: Thanks. Operator: We have no further questions. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Innospec Inc. Fourth Quarter 2025 Earnings Release Conference Call and Webcast. Speakers on the call today are David Jones, General Counsel and Chief Compliance Officer; Patrick Williams, President and CEO; and Ian Cleminson, Executive Vice President and Chief Financial Officer. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please note that today's conference is being recorded. I would now like to hand the conference over to your first speaker, David Jones, General Counsel and Chief Compliance Officer. Please go ahead. David Jones: Thank you. Welcome to Innospec Inc.'s fourth quarter and full year earnings call. This is David Jones. I am Innospec Inc.'s General Counsel and Chief Compliance Officer. The earnings release and this presentation are posted on the company's website. During this call, we will make forward-looking statements, which are projections about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainty that can cause actual results to differ materially from the anticipated results implied by such forward-looking statements. The risks and uncertainties are detailed in Innospec Inc.'s 10-Ks, 10-Qs, and other filings with the SEC. Please see the SEC site and innospec.com for these and related documents. In today's presentation, we have also included non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure is contained in the earnings release. The non-GAAP financial measures should not be considered as a substitute for or superior to those prepared in accordance with GAAP. They are included as additional items to aid investor understanding of the company's performance and adjust to the impact these items and events had on financial results. With me today from Innospec Inc. are Patrick Williams, President and Chief Executive Officer, and Ian Cleminson, Executive Vice President and Chief Financial Officer. I will now turn the call over to Patrick Williams. Patrick Williams: Thank you, David. Welcome everyone to Innospec Inc.'s fourth quarter 2025 conference call. This was a good quarter for Innospec Inc. with continued strong operating income growth and margin expansion in Fuel Specialties combined with improving results in Performance Chemicals and Oilfield Services. In Performance Chemicals, margin improvement actions and lower overheads drove strong sequential operating income growth. We continue to execute on price-cost management, manufacturing efficiencies, and new product commercialization actions over the short to medium term. New products include the continued expansion of our industry-leading sulfate- and 1,4-dioxane-free personal and home care portfolio. Additionally, we are accelerating our growth in new technologies for agriculture, mining, construction, and other diversified industrial markets. We expect these combined efforts to drive further growth in 2026. In Fuel Specialties, sales growth and margin expansion drove a 7% increase in operating income over the prior year. As expected, the business has continued to deliver consistently strong results and has a diverse pipeline of fuel additives. Oilfield Services operating income improved on a richer sales mix and lower overheads. Sales were down on reduced activity in U.S. completions and the Middle East. We remain focused on delivering operating income growth in 2026 as Middle East activity returns and our recent DRA expansion takes effect. In parallel, we will continue to focus on margin improvement. Our outlook does not assume any resumption of Mexico sales in 2026. Regarding our outlook for 2026, results in Performance Chemicals and Oilfield Services will be negatively impacted by the historic winter storm which occurred in late January. Despite this, we are optimistic that we will drive full-year improvements in both businesses in 2026. I will now turn the call over to Ian Cleminson, who will review our financial results in more detail. Then I will return with some concluding comments. After that, Ian and I will take your questions. Ian? Ian Cleminson: Thanks, Patrick. Turning to slide seven in the presentation. The company's total revenues for the fourth quarter were $455.6 million, a decrease of 2% from the $466.8 million reported a year ago. Overall gross margin decreased by 1.2 percentage points from last year to 28%. Adjusted EBITDA for the quarter was $55.7 million compared to $56.6 million last year. Net income for the quarter was $47.4 million compared to a net loss of $70.4 million recorded last year, which was driven by the buyout of the U.K. pension scheme. Our GAAP earnings per share were $1.91, including special items, the net effect of which increased our fourth quarter earnings by $0.41 per share. A year ago, we reported a GAAP loss per share of $2.80, which included a negative impact from special items of $4.22. Excluding special items in both years, our adjusted EPS for the quarter was $1.50 compared to $1.41 a year ago. For the full year, total revenues of $1.8 billion decreased 4% from 2024. Adjusted EBITDA for the year was $203 million compared to $225.2 million in 2024, and net income for 2025 was $116.6 million compared to the prior year net income of $35.6 million. Our full-year GAAP earnings per share were $4.67 including special items, which decreased our full-year earnings by $0.60 per share. In 2024, reported GAAP earnings of $1.42 per share included the negative impact from special items of $4.50. Excluding special items in both years, our adjusted EPS for 2025 was $5.27 compared to $5.92 a year ago. Turning to slide eight, revenues in Performance Chemicals of $168.4 million were flat with the fourth quarter of last year. Volumes reduced by 7%, offset by a positive price/mix of 3% and favorable currency impact of 4%. Gross margins of 18.1% decreased 4.6 percentage points compared to 22.7% in the same quarter in 2024 due to higher costs and a weaker product mix. Operating income of $17.7 million decreased 14% from $20.6 million last year. As expected, our fourth quarter results improved sequentially over the third quarter, as improvement actions took effect. Fourth quarter gross margins of 18.1% improved three percentage points compared to the third quarter and operating income of $17.7 million almost doubled from the $9.2 million recorded in the third quarter last year. For the full year, revenues of $681.4 million were up 4% from last year's $653.7 million and operating income decreased by 26% to $61 million. Moving on to slide nine, revenues in Fuel Specialties for the fourth quarter were $194.1 million, up 1% from the $191.8 million reported a year ago. Volumes were up 8% with an adverse price/mix of 10% and a positive currency impact of 3%. Fuel Specialties gross margins of 34.7% were 0.3 percentage points above the same quarter last year, benefiting from a stronger sales mix and disciplined pricing. Operating income of $37.2 million was up 7% from $34.9 million a year ago. For the full year, revenues were unchanged at $701.5 million and operating income increased 12% to $144.8 million. Moving on to slide 10. Revenues in Oilfield Services for the quarter were $93.1 million, down 12% from $105.8 million in the fourth quarter last year. Gross margins of 31.9% increased 1.8 percentage points from last year's 30.1%. Operating income of $8.2 million increased 9% from $7.5 million one year ago. For the full year, revenues of $395.1 million were down 19% from last year's $490.6 million and operating income decreased 40% to $23.3 million. Turn to slide 11. Corporate costs for the quarter of $16 million decreased by $4.6 million from a year ago, driven by lower personnel-related costs. The full-year adjusted effective tax rate for the quarter was 24.1% compared to 26.4% in the same period last year due to the geographical mix of taxable profits. For 2026, we expect the full-year effective tax rate to be around 26%. Moving on to slide 12. Cash flow from operating activities was $61.4 million before capital expenditures of $20.5 million. In the quarter, we paid the previously announced semiannual dividend of $0.87 per share. This brought the total dividend for the full year to $1.71 per share, a 10% increase over 2024. There were no share repurchases in the quarter, and for the full year, we have repurchased a total of 247,000 shares at a cost of $22.2 million. For the full year, cash from operations after capital expenditures was $63.9 million compared to $122.7 million in 2024. As of December 31, Innospec Inc. had $292.5 million in cash and cash equivalents and no debt. I will now turn it back over to Patrick for some final comments. Patrick? Patrick Williams: Thanks, Ian. Entering 2026, our focus is unchanged. We will continue to deliver exceptional innovation, value, and service to our global customers across all our end markets. We will also continue to prioritize margin and operating income improvements in Performance Chemicals and Oilfield Services. In addition, we expect Fuel Specialties to continue to deliver consistent results. Operating cash generation was excellent in the quarter, and our net cash position closed at over $292 million after making our semiannual dividend payment of $21.6 million. We continue to have significant balance sheet flexibility for dividend growth, buybacks, organic investment, and M&A. I will now turn the call over to the operator, and Ian and I will take your questions. Operator: Thank you. Once again, please press 1-1 and wait for your name to be announced. We will now open for questions. We are now going to proceed with our first question. The questions come from the line of Jonathan E. Tanwanteng from CJS Securities. Jonathan E. Tanwanteng: Hi, guys. Good morning, and thank you for taking my questions. Really nice job on the mix and margin there. I was wondering if you could go a little bit into the oilfield business and how you see the mix evolving there, especially in the coming quarters as you continue to diversify that business? Patrick Williams: Yes, Jonathan, let me start with that one. We are really pleased with the progress that we have seen in the oilfield business in Q4. We were with the team yesterday, and I have to say we are really encouraged by the activity levels that are going on, the creativity, the focus on technology. As we head into 2026, we are going to take a little tap on the brakes because of the weather impacts in Q1. But beyond that, our DRA expansion is coming online, and we are starting to ramp up volumes there. Spreading the customer base and improving the profitability and the gross margins in that business is critical for us. Also, the Middle East remains a real hotspot for us. We can see lots of opportunities there advancing technologies and a real opportunity for us to grow the business above-average rates in the region. Outside of that, we have had a tough time in the U.S., but we have lots of opportunities with new technologies and new ways of going to market starting to happen. So when we wrap all that together, we do feel confident that we will be able to outpace what we did in 2025. The mix will be a little bit more towards the Middle East and DRA, and we feel that we can improve the profitability of the core businesses in production and stimulation as well. Jonathan E. Tanwanteng: Okay. Great. You mentioned the impact of weather a couple times. I would guess that less people driving, maybe there are some snarls with production, but I would also expect that there is probably an offsetting impact from cold flow. Could you just quantify what you think the impact is going to be this quarter from cold weather and winter storms? Patrick Williams: Yes. I will let Ian take the financial portion of the negative effects, but in Oilfield Services, it was production activity. People could not get to the well sites, could not deliver product. There was a multitude of issues. If you look at North Carolina, it was an extreme snow and ice event where our plants are located. Probably the biggest ice event in a century in that area. So we did have a lot of planned downtime, could not get raw materials in. Then, obviously, Jonathan, when you start the plant back up, you are going to have a lot of issues, and that is what we have done. In conjunction with that, being that we have had these issues with cold weather that hit us, we have also decided at the same time to really work on the plant inefficiencies to make the plant more efficient, get better yields, better product quality, work on some of the manufacturing processes that we probably would have done at some point in time. So we are going to go ahead and do it all since we had plant issues and had the cold weather issue. Just knock it all out at once. Patrick Williams: So I would not say it is a blessing in disguise by any means because I think we would have had a really strong first quarter. We would have backed up the fourth quarter with another strong quarter. But it is something that has to be done. It is an event that was unexpected. We will get it fixed. It will not happen again because we will prepare for it. But we will also make that plant in much better condition and move forward for growth. Ian Cleminson: Yes. Just to add to that, Jonathan, you roll that into our expectations for Q1. Within the Oilfield Services business, we are probably going to be posting operating income round about $5 million to $6 million. That is probably a couple of million below where we would like to have been, and that is for the reasons Patrick explained. In Performance Chemicals, it is a bigger impact because we have obviously got quite a large manufacturing footprint down there, which was closed for an extended period, and there has been some damage to the site as well. So it is going to take a little time for us to build that back up. So we are expecting the Performance Chemicals Q1 operating income to be close to $10 million to $11 million. Again, that is probably $5 million to $6 million below where we would have liked to have been. So it is quite a significant impact from the weather in Q1 in both of those businesses. Jonathan E. Tanwanteng: Got it. And just to follow up on that, do you expect to make that up in the following quarters for the whole year, or is that something that gets lost as you look at all of 2026? Ian Cleminson: It is slightly different in both businesses. The Oilfield Services business potentially could make up some of that, Jonathan, but it is going to be a tough ask for them because their customers have closed down. If they come back strong, we may make up some of it. Performance Chemicals, because it is production based, we have lost that production time. We will not be able to make that back up, and it is going to take us a quarter or two for the reasons Patrick was explaining—some of the additional efficiencies that we are going to be looking for on that site. We will not be able to make up that volume of production. Those sales and those costs will be lost to us. What we do expect is as we exit Q2, the Q3 numbers will be showing much stronger benefits of the changes that we are making and a much stronger benefit from the direction and the discipline the business is driving into customer contracts, pricing, and general efficiencies. Patrick Williams: It is just unfortunate timing, Jonathan. Our expectations were rolling into a nice Q4 to roll into a really strong 2026, and we are just going to take advantage of it now that it did happen. We are going to make it even better coming out of Q2. Jonathan E. Tanwanteng: Got it. Thank you. I will jump back in queue. Patrick Williams: Thanks, Jonathan. Operator: We are now going to proceed with our next question. The next questions come from the line of Michael Joseph Harrison from Seaport Research Partners. Please ask your question. Patrick Williams: Hi. Good morning, Mike. Good morning, Mike. I had just a couple of questions on Performance Chemicals business. Can you talk a little bit about what drove the volume decline that you saw in Q4? I assume that was not weather related. Was that the customers taking inventory down or what else is going on there? And then, in terms of the pricing actions you need to take in order to cover the higher cost of oleochemicals and maybe other raw material inputs, are those prices in place where you need them to be, or are there going to be some additional actions that may contribute to better price versus raw material cost margin contribution as we get into 2026? Patrick Williams: We will hit your questions by both of us. To start with Q4 volumes, Mike, a lot of it was just uncertainty in the marketplace. Tariffs in general have put a down tone on any kind of inventory build. I think that was part of it. Typically, Q4 is a little slower in the business by nature. But overall, if you look at the quality of business that we have moving into the year, we felt very strong. We have done a lot of price action around margins and around raw materials. A lot of our national contracts, international contracts, multinationals have price mechanisms built into the contract. So we had to go back and make sure we are following those guidelines that are set forth in the contracts. In other areas where we saw price spikes around oleos, etc., we have finally gotten out in front of those. Therefore, you saw the margin increase. I do think over time, probably more towards the middle of this year, you will start to see us even get ahead of that. But because of the weather event that we had, I think first quarter is going to affect us a little bit and a little bit into Q2. Overall, we are heading in the right direction with margins. The volume is there. The sales are there. The revenue is there. The business is there. We are increasing our output on new products in the portfolio, which is going to build upon throughout the year as well. Those are higher-margin products too. Patrick Williams: If you look at the overall business, I would say it is not a negative. It is a positive. I think it is the weather event that is going to affect us upfront. But we are starting to really manage these processes the way they should have been. Additionally to that, the pipeline is full of new products, which will benefit us moving forward. Patrick Williams: I think that probably covered all of it. Yeah. Michael Joseph Harrison: Alright. Thanks for that. And then a couple on Oilfield Services. I am just curious. 2025 was a year when you saw some further declines in revenue. Obviously, you did not see any recovery from the Latin American customer, but as you are starting to think about what top-line growth could look like next year, it sounds like you are really encouraged by what you are seeing in the Middle East. Some contribution from DRAs. Is it your view that, as we think about the entire year, we could see maybe mid- to high-single-digit type of top-line growth? And then the second piece of that question is, as we are talking about Latin America, is it possible that we see any business opportunities start to show up in Venezuela? Patrick Williams: Yes. Good questions. I do think you are going to start seeing that probably between 5% to 7% revenue growth in Oilfield Services. Oilfield Services needs consolidation in the marketplace, at least in North America. There is also a need for technology. As Ian alluded to earlier in the conversation, there has been a big emphasis and a big push to bring new technologies to the marketplace that really this market has not seen in quite some time. I do think that we are on the edge of that happening. As you said, I think the Middle East will start to really pull its weight in Q2, Q3, Q4. It is not just with Saudi Aramco. It is in the general market area, the regional area of the Middle East. In regards to Latin America, I do think we are going to start seeing sales in Mexico again. It is a function of how we are going to get paid. We are not going to sell products for free, but we do know they need the technology. We know our technology works. It is proven. So I do think Mexico, at some point in time, we will see something, not to the magnitude we have had in the past. In regards to Venezuela, it is a very heavy crude. We know that crude up there very well. Chevron has operated in that region for quite some time. As soon as you start getting some political stability in that area, and you start seeing international investment primarily from the U.S., that is definitely an open market for Oilfield Services where I think we can make a big difference. There are a lot of positives there. We have to extract those, and the market has to come our way. It is up to our team to really push the envelope and make it happen. Michael Joseph Harrison: One of the special items that you called out in the quarter referred to the tax impact from an internal reorganization. I was wondering if you could explain what that reorganization entails and what impacts that could have on the P&L going forward. Ian Cleminson: Yes. I will take that one, Mike. It was a reorganization we did over a year ago at the top end of the organization just to simplify the structure and allow us to move cash overseas into the U.S. in a much more tax-efficient way. There was a deferred tax impact to that reorganization that has a 15-year benefit to tax. It will be about $600,000 a year for the next 15 years in cash taxes, Mike. So it is all below operating income. There is no business benefit. But it does simplify our operations, the way we are able to move cash around, the way we are able to file tax returns in the U.S., and it gives us a little bit of benefit to the tax line as well. Michael Joseph Harrison: Alright. Last one for me is just on corporate cost. They were quite a bit lower in Q4. I was just curious. Was that some incentive comps that were lower or what drove that? And if you can give any kind of an outlook or guidance for corporate costs in the first quarter and for 2026, that would be very helpful. Thank you. Ian Cleminson: Yes. You are spot on, Mike, with personnel-related costs. As we look forward into 2026, that sort of $20 million per quarter, $80 million for the full year, that is the level that we are expecting for 2026. Patrick Williams: Thanks, Mike. Thank you. Operator: We are now going to proceed with our next question. The questions come from the line of David Silver from Freedom Capital Markets. Please ask your question. Patrick Williams: Yes. Hi. Good morning. David Silver: Morning, David. Patrick Williams: Morning. David Silver: I would like to start with a question or two on Fuel Specialties. Firstly, on the quarter, if I am not mistaken, my model goes back about 10 years or so. I believe the revenues in the quarter were your highest ever, and your operating profit, $37 million, was, I think, your second highest ever. The business is functioning pretty well, and I know that your view is that it is a very stable business, low single-digit grower from year to year. But it does seem like you are operating the business a little bit differently. What led to the record revenue and near-record operating profit this quarter? Did you have some incremental success with new products or just a richer mix overall? Maybe some thoughts about that and why that strength on an annual basis could not continue into 2026. Patrick Williams: Yes, David. They have really done a good job in that business. I think you are spot on. It was a record revenue. It was very close to a record operating income. A lot of it was product mix, but a lot of it is outside of even fuels. They have done a good job expanding their portfolio, getting out there with new technologies, making sure that we have the right costing in place, making sure that we are staying up on innovation. It was a good overall effort globally by all parts. It is a business that is typically a 2% to 3% growth business. Occasionally, we see those spikes like when you went to ULSD. We had the big spike. You are starting to see some regulatory movement. You are starting to see GDI take effect in some aftermarkets in Europe with our marine business. All the businesses that we have been talking about for quite some time are starting to come along as expected. The group who manages that division have really stepped it up, and you have to give them credit. It has always been our stable business. It is light on CapEx. It has great free cash flow. We will continue to push it there. It is also an area we would love to acquire into if we found something that was worth purchasing. The team deserves it. They have built it. They are ready for it. We just have to find the right thing to buy. Patrick Williams: Overall, great job. I do expect them to have another strong, consistent year. David Silver: You poached, with that M&A comment, one of my questions for the follow-up. Next question. I wanted to switch over to Performance Chemicals and come at it a little bit different. Revenue-wise, I think it was a record or near-record year. There are a number of issues involving the lower operating profit year over year. In general, there is a lot of chatter about the strained middle-income consumer. I noted it is two or three quarters in a row where you cited a weaker mix within Performance Chemicals. Is trading down an issue that you are seeing? Are your customers indicating that is a bigger part of their business with you? More to the point, this business has been a mid- to high-single-digit grower over the longer term. Is that still your thinking for next year, or whether it is due to mix or other factors, the growth potential might be a little slower over the medium term? Patrick Williams: If you look at consumer trends right now, they are trading down to lower-price commoditized type products. We have definitely seen that. That ebbs and flows. Once you take market uncertainty out and people see more spending capabilities in their pockets, they will go out and start spending more on high-end products. We have seen that push down to more commoditized products. That is typical in markets like this where there is uncertainty or coming out of inflationary markets. For us, it is the continuance on innovation and to get better manufacturing processes and efficiencies so that we can better prepare for that commoditized market where we are making better margins than we have today. That is something we are doing at some of our plants right now, which will benefit us towards the latter part of the year. Consumer trends have sent us that way. The way I look at growth in that area is flat this year. Then you will start seeing it spike back up probably towards the latter part of this year, but I would probably hold it flat. David Silver: Okay. Last one for me. I did want to go to your concluding remarks in your earnings release, and in particular, you cited in Performance Chemicals and Oilfield, you said new technology commercialization and other opportunities for 2026. On the new technology commercialization, you have focused on some of your functional surfactant products for mining and agrochemical and whatnot. Are those the recent commercialization products you are talking about, maybe expanding the rollout there? Or is there another new crop of product introductions we should be thinking about? Qualitatively, could you point us to where those might be? Patrick Williams: These are a series of products—let us talk Performance Chemicals specifically. They are a series of products that go in multiple applications. They are not mass markets where you are going into a multibillion-dollar industry and capturing $200 to $300 million of this. They are more specialized. We will typically launch two, three, or four of these throughout the year, which is a nice build upon our business and, over time, will start increasing that margin. As I said earlier, you will start seeing the impact of those probably more in the Q3, Q4 range. There is a nice pipeline of products that will be hitting the market throughout the year, but it is a buildup over time where you start seeing the big changes in margin profile and in revenue. It is the same in Oilfield Services. We have a lot of creativity in the group. They are coming together and bringing new ideas and creativity to market. Sometimes it is not necessarily just products. It could be market approach. There is a lot of different reality going on. We have to be different than other people, whether it is technology or service or any kind of innovation that is attached to both. That is where we are pushing our group. That is why we feel confident that we will overcome the barriers that we have in Q1 and Q2—manufacturing barriers. We will overcome those in Q3, Q4 by all the things that we have going on internally with the organization. David Silver: Okay. Great. Thank you very much. Operator: Thank you. We have no further questions at this time, so I will hand back to the President and CEO, Patrick Williams, for closing remarks. Patrick Williams: Thank you for joining us today, and thanks to all our shareholders and Innospec Inc. employees for your interest and support. If you have any further questions about Innospec Inc. or matters discussed today, please give us a call. We look forward to meeting with you again to discuss our first quarter 2026 results in May. Have a great day. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you and have a great day.
Operator: Good morning, and welcome to Dana Incorporated Fourth Quarter and Full Year 2025 Financial Webcast and Conference Call. My name is Regina, and I will be your conference facilitator. Please be advised that our meeting today, for those participants who would like to access the call from the webcast, please reference the URL on our website and sign in as a guest. There will be a question-and-answer period after the speakers’ remarks, and we will take questions from the telephone only. To ensure that everyone has an opportunity to participate in today’s Q&A, we ask that callers limit themselves to one question at a time. If you would like to ask an additional question, please return to the queue. At this time, I would like to begin the presentation by turning the call over to Dana Incorporated’s Senior Director of Investor Relations and Corporate Communications, Craig Barber. Please go ahead, Mr. Barber. Craig Barber: Thank you, Regina. Good morning, and welcome, everyone. Today’s presentation includes forward-looking statements about our expectations for Dana Incorporated’s future performance. Actual results could differ from what we discuss today. For more details about the factors that may affect future results, please refer to our safe harbor statement found in our public filings and other reports with the SEC. I encourage you to visit our investor website where you will find this morning’s press release and presentation. As stated, today’s call is being recorded and the supporting materials are the property of Dana Incorporated. They may not be recorded, copied, or rebroadcast without our written consent. With us this morning is Bruce McDonald, Dana’s Chairman and Chief Executive Officer; Byron Foster, Senior Vice President, President of Light Vehicle Systems Group; and Timothy Kraus, Senior Vice President and Chief Financial Officer. I will now turn the call over to Bruce McDonald. Bruce McDonald: Thanks, Craig. Good morning, everyone, and thanks for joining us on our Q4 earnings call. With us today, in addition to the usual cast of characters, we have Byron Foster, our incoming CEO, with us. I have known Byron and worked with him for many years. He and the rest of the management team here at Dana Incorporated have been instrumental in our cost reduction activities and our transformation plans as well as the development of our Dana 2030 strategy. I think the Board and I have the utmost confidence in the team under Byron’s leadership, and I am very confident in the team’s ability to deliver on the financial objectives that we are going to share with you today. Turning to the business overview. Excuse me. Our final results for the fourth quarter came in higher than our preliminary estimates. You can see here for the fourth quarter, our margin is at 11.1%, which is 40 basis points higher, $10 million higher than the preannouncement numbers. In terms of full-year cash flow, we came in at $331 million, which is $16 million higher. I would point out that that cash flow is the highest the company has delivered since 2013. We completed the sale of the Off-Highway business on January 1 and used most of the proceeds to repay down debt, and Tim will take you through what our new debt profile looks like later on in the pack. In terms of cost reduction, great job by the team. We had originally committed to a $200 million run rate. We upped that to $300 million, and we delivered $248 million in the year and a run rate of $325 million going into 2026. We have talked before about our stranded costs post the sale of Off-Highway being about $40 million. We are very confident in our guidance. We are assuming that we are going to be able to substantially eliminate those next year. In terms of new business, we shared our backlog a couple of weeks ago at $750 million. Despite the turmoil in the EV side of our business, the team secured a higher backlog than we had last year, of which $200 million is going to flow through in 2026. If you look at our capital return, we returned just over $700 million to our shareholders last year, and we have grown our dividend. Where Dana Incorporated sits exiting 2025, we are extremely well positioned, have strong momentum, and we have a strong plan going forward. Just a little bit more on the capital return plan, which we upped to $2 billion of share repurchase through 2030, and that reflects our confidence in the delivery of the longer-term financial targets that we are going to share on the call later today. For 2025, we bought back just a shade over 34 million shares at an average cost of $18.96 and paid $54 million in dividends. In the first quarter, we have already bought back $100 million worth of shares at a little bit over $27 a share. In the balance of the year, we forecast buying back another couple hundred million, which, at current prices, is $56 million, something like that. Lastly, on the dividend, we upped our dividend by 20%, to $0.12 a quarter. The way we are thinking about this is we are going to grow our dividend as our share count declines. We have a lot of confidence in the value that we are creating. If you look at the company right now, while we are able to accelerate growth investments and margin enhancement investments in our business, we are also deleveraging, growing our dividend, and comfortably buying back a significant amount of stock every year. Byron, I will turn it over to you. Byron Foster: Okay. Thanks, Bruce, and good morning, everybody. On page six, a little bit on the market outlook as we look at the 2026 plan. On the light truck side, we continue to see the light truck market holding steady, and our plan is built around flat volume year over year from 2025 levels. We are seeing a consistent operating environment and volume from our customers, which is allowing us to run at a good steady clip. On the commercial vehicle side, we have built the plan around flat volumes to 2025 levels. However, there is some optimism that towards the back half of the year, perhaps we will see improved volumes on the commercial vehicle side. As Bruce mentioned, on the right-hand side of this page, our three-year net backlog is $750 million, of which $200 million is built into our 2026 plan, and you can see how that matures through 2028. If we go to page seven, it might be interesting to give you a view of how our new business pursuit activities have evolved over the last seven or eight years. You can see a dramatic increase in business pursuit activity in the early 2020s, dominated by increasing EV activity. More recently, that trend has pivoted and reversed itself from roughly 80% EV-level activity to a heavy mix toward our more traditional ICE powertrain types of vehicles. We expect that trend to continue as our customers revisit their product plans to adjust to consumer demand for more traditional ICE-type vehicles as well as hybrids, and some full BEVs will still exist, but at a lower rate than we saw a few years back. We are encouraged by that, and as we talked about growth going forward, we expect that to play into our ability to capitalize on that opportunity. With that, I will hand it over to Tim, and he will take us through the numbers. Timothy R. Kraus: Thanks, Byron, and good morning to everyone. Please turn with me now to slide nine for a review of our fourth quarter and full-year results for 2025. All results discussed this morning reflect continuing operations, except for adjusted free cash flow. Starting on the left side with the fourth quarter, sales were $1,867 million, an increase of $93 million compared with last year. Improvement was driven primarily by customer recoveries and currency translation. Adjusted EBITDA for the quarter was $208 million, resulting in an 11.1% margin. That is a 640 basis points improvement over the prior year’s fourth quarter, reflecting better mix and continued benefit of the company-wide cost improvement actions. EBIT from continuing operations was $61 million compared with a loss of $117 million in last year’s fourth quarter. Interest expense was $49 million, an increase of about $12 million from last year due to higher average borrowing costs tied to our accelerated capital return initiatives that we did last year. Operating cash flow was $406 million for the quarter, an increase of $104 million, driven by higher earnings and disciplined working capital management. Turning now to the full-year results on the right side of the slide. Sales for 2025 were $7,500 million, down $234 million from 2024. As we noted earlier, this reflects weakening demand across both light vehicle and commercial vehicle sectors, partially offset by customer recoveries. Full-year adjusted EBITDA was $610 million, an improvement of $215 million from the prior year, resulting in an 8.1% margin, up 300 basis points. The year-over-year improvement was driven by accelerated cost savings, higher production efficiency, and improved execution across the entire Dana Incorporated organization. EBIT from continuing operations was $138 million compared with a loss of $176 million last year. Interest expense was $171 million, up $26 million from last year. Note that we closed the Off-Highway divestiture on January 1 and began our delevering program in 2026, so this is not yet reflected in our 2025 results. Finally, operating cash flow was $512 million, a $62 million increase compared with last year, supported by improved earnings and continued working capital discipline. Overall, 2025 delivered meaningful margin expansion and stronger free cash flow generation despite a challenging demand environment, underscoring the effectiveness of our cost action programs and operational execution. Please turn with me now to slide 10 for the drivers of the sales and profit change for 2025. As a reminder, results are presented excluding the Off-Highway business, which is classified as discontinued operations. The removal of $561 million in sales and $102 million of profit from 2024 provides a comparable baseline for our continuing operations. Starting with sales, our fourth-quarter 2024 continuing operations for the quarter were $1,774 million. Year-over-year volume and mix increased sales modestly by $2 million, with light vehicle growth largely offset by weaker demand in certain commercial vehicle markets. Performance action contributed an additional $17 million, driven by commercial recoveries and pricing initiatives implemented earlier in the year. Tariff recoveries were $27 million, and currency translation added $31 million, largely due to the benefit of the euro against the U.S. dollar. Commodities provided a further $16 million benefit for the quarter. Altogether, these items resulted in Q4 2025 sales of $1,867 million. Moving to adjusted EBITDA, starting from $84 million in 2024, representing a 4.7% margin, volume and mix contributed $33 million of incremental profit in the quarter. This was driven primarily by a richer mix in Light Vehicle Systems. Performance added $6 million, reflecting pricing and commercial actions mostly offset by higher conversion costs. Cost savings contributed $74 million. Tariffs provided an $8 million benefit, while currency added $3 million. Commodity impacts were neutral year over year. Bringing these together, adjusted EBITDA for our continuing operations was $208 million, representing an 11.1% margin, a significant expansion from last year. This improvement reflects strong performance execution and the structural benefits realized from our cost action programs. Next, I will turn to slide 11 for the drivers of sales and profit change for the full year 2025. This slide shows full-year sales and profit changes for 2025 on the same basis as the previous quarterly slide. Starting with sales, our 2024 continuing operations baseline is $7,734 million. For 2025, year-over-year volume and mix reduced sales by $464 million, primarily due to lower demand across both our end markets, with commercial vehicle and light vehicle largely equal contributors to the lower sales. Performance, which includes pricing and commercial action, adds $81 million of sales. Tariff recoveries were $102 million, representing the majority of our tariffs for the year. Currency translation provided a $28 million benefit, largely driven by strengthening euro against the U.S. dollar. Commodities added an additional $19 million, supported by market stability in our structured recovery mechanisms with our customers. Taken together, these drivers result in 2025 sales of $7,500 million for our continuing operations. Moving to adjusted EBITDA, starting from $395 million in 2024 and a 5.1% margin, volume and mix reduces profit by $112 million, consistent with the reduced sales level and some unfavorable mix early in the year. Performance action added $90 million, reflecting both pricing and ongoing efficiency improvements across our manufacturing footprint. Cost savings remain a meaningful contributor, adding $248 million in 2025. These benefits more than offset the margin pressure created by lower volumes and continue to demonstrate the momentum behind our cost-saving programs as we enter 2026. Tariffs represented a $14 million headwind due to timing of recoveries. Together, adjusted EBITDA for our continuing operations was $610 million, representing an 8.1% margin, a 300 basis points improvement over last year. This improvement is driven primarily by operational efficiencies and our accelerated cost action program, which more than offset both the volume declines and the modest tariff impacts for the year. Next, I will turn to slide 12 for the detail of our full-year cash flows. Accounting for cash flow includes both continued and discontinued operations to align with the transaction structure. For 2025, we delivered adjusted free cash flow of $331 million, which represents a $250 million improvement over 2024. This significant step up reflects higher profitability, disciplined working capital management, and a meaningful reduction in capital spending. Starting at the top of the walk, adjusted EBITDA from continuing operations drove $215 million of improvement, stemming from stronger operational performance and structural cost actions executed over the past two years. This was partially offset by lower profit of $86 million from discontinued operations. One-time costs, largely related to restructuring and ongoing strategic initiatives, were $30 million higher year over year. Net interest expense increased by $16 million, driven primarily by higher borrowing costs associated with funding our capital return initiatives ahead of the planned deleveraging in early 2026. Taxes were a modest headwind of $3 million, with no material changes to our underlying tax structure. Working capital and other items contributed $57 million of improvement, reflecting disciplined inventory management and favorable timing across payables and receivables. Finally, capital spending decreased $113 million, supported by lower program launch requirements as significant investments made over the last several years begin to taper. Please turn with me now to slide 13 for an update on our full-year guidance. As we look ahead to this year, our outlook remains unchanged from our January call, with continued operational execution, accretive new business, and ongoing benefit of our cost reduction initiatives. Overall, we expect results to be broadly consistent with 2025 on the top line, with meaningful profit expansion driven by improved mix and sustained cost management. Starting with sales, we expect 2026 revenue to be approximately $7,500 million, consistent with this year. Increased backlog and the benefit of higher-margin new business are expected to largely offset a modestly softer market environment and changes in product mix. Adjusted EBITDA is expected to be around $800 million, an increase of roughly $200 million compared with 2025. This improvement is driven by the full-year run rate of our cost savings program, continued operational improvements, and incremental margin from business that carries higher profitability. At the midpoint of the range, this represents an adjusted EBITDA margin of roughly 10% to 11%, an expansion of approximately 250 basis points year over year. We are reinstating our diluted adjusted EPS guidance for 2026. We expect diluted adjusted EPS this year to be $2.50 a share at the midpoint of the range. For this calculation, we are using a share count of about 109 million shares and are not including future share repurchases in this target estimate. Adjustments for EPS are similar in nature to those made for adjusted EBITDA. Adjusted free cash flow is expected to be around $300 million, in line with our 2025 performance. Adjusted free cash flow stability reflects disciplined working capital management, improved earnings, and the normalization of capital spending as major investments over the past years begin to taper. Our 2026 outlook demonstrates continued profit improvement driven by new business, operational efficiencies, and the structural benefit of cost actions, all while maintaining a consistent cash flow profile, positioning us well as we launch New Dana. Please turn with me now to slide 14 for the drivers of sales and profit for our full-year guidance. Beginning with sales, volume and mix are expected to reduce revenue by approximately $95 million as lower demand in traditional commercial vehicle markets, as well as ongoing softness in electric-vehicle light-vehicle platforms, impacts our battery and electronics cooling business. Performance is expected to be modestly lower, reducing sales by about $30 million, reflecting a more normalized pricing environment as we lap last year’s commercial actions. Tariffs are expected to improve sales by roughly $50 million, largely due to the timing of recoveries and the impact of a full year’s worth of the tariff environment. Foreign currency translation adds approximately $60 million, primarily driven by the strengthening euro compared to the U.S. dollar. Commodities are expected to add about $15 million in sales due to the continuing effectiveness of our recovery mechanisms, with which we recover approximately 75% of our commodity price changes. Together, these drivers result in 2026 sales of approximately $7,500 million, in line with 2025 levels. Let’s turn now to adjusted EBITDA. Starting from the $610 million we generated in 2025, representing an 8.1% margin, volume and mix is expected to add approximately $20 million. Favorable mix will drive higher profit on slightly lower sales. Performance is expected to increase EBITDA by roughly $100 million, largely from continued operational efficiency. Please note that we are expecting to eliminate about $40 million of post–divestiture stranded costs, which is included in the performance line of our walk. Cost savings, in addition to the stranded cost reduction, will be a meaningful contributor, adding $65 million of profit for the year. Tariffs are expected to be a $10 million tailwind due to the timing of recoveries. Commodity cost recovery is expected to represent a $15 million headwind, driven by timing of recoveries and expected material cost changes. All combined, adjusted EBITDA for 2026 is expected to be approximately $800 million at the midpoint of our range, or a 10.6% margin, representing an improvement of roughly 250 basis points over 2025. This step change in profitability is driven by our ongoing performance improvements and cost savings initiatives. Next, I will turn to slide 15 for details of the adjusted free cash flow outlook for 2026. You will note on this slide that 2025 includes profit and free cash flow from discontinued operations that will not be included in 2026. Even without the discontinued operations contribution, we expect full-year 2026 adjusted free cash flow Timothy R. Kraus: to be about $300 million at the midpoint of the guidance range. One-time costs will be about $30 million lower than last year, due to lower expected levels of restructuring as our cost-saving programs wind down. Net interest would be about $70 million in 2026, about $95 million lower than last year due to our aggressive debt reduction that we executed earlier this year. Taxes will be about $100 million, about $75 million lower than 2025, due to lower taxable income and jurisdictional distribution of profits for New Dana. Working capital will be a source of about $25 million in 2026, a $40 million improvement over last year. Finally, net capital spending is expected to be about $325 million this year, about $70 million higher than last year as we invest in efficiency improvements at our operations and support the new business backlog. Please turn to slide 16 for a review of our balance sheet and debt reduction actions that we executed earlier this year. Craig Barber: As a reminder, Timothy R. Kraus: the Off-Highway divestiture closed on January 1, and we will be reporting at year end without the benefit of the sale and subsequent deleveraging. I thought it would be helpful to show our balance sheet post divestiture and after the debt reduction. If you look on the left side of the page, we ended January 2026 with $659 million of cash and a total liquidity of about $1.8 billion, including the revolver capacity of just over $1.1 billion. As we progress through the year, we expect our average cash balance to be approximately $400 million, consistent with our operating needs and lower liquidity requirements. We are continuing to evaluate opportunities to optimize the balance sheet, including rightsizing of our revolver capacity and the examination of our real estate lease portfolio, while we also pursue additional divestitures of noncore operations where appropriate. We also continue to receive positive response from our delevering actions from the rating agencies, with upgrades from both Fitch and Standard & Poor’s. This reflects the strength of our improved balance sheet and expanded margin and free cash flow profile. Now turning to the right side of the page, you can see the impact of the meaningful deleveraging associated with the Off-Highway sale. Relative to our starting position, we have reduced total debt by approximately $1.9 billion, highlighted by the red boxes shown across the maturity ladder. This leaves us in an extremely strong capital structure position. Importantly, we now have no near-term maturities. Our first maturity is in 2029 at just over $200 million. The remaining debt on our balance sheet carries an average interest rate of around 6%, providing both predictability and flexibility as we continue to strengthen the business. On the bottom right side, you can see that the deleveraging results in less than one-times net leverage through 2026. This enhanced financial strength positions us well to navigate a dynamic market environment while we continue to invest in growth and deliver value for our shareholders. Operator: Overall, Timothy R. Kraus: our balance sheet is now significantly stronger with ample liquidity, reduced debt, and a long-dated maturity profile that supports our strategic priorities moving forward. I will now turn the call over to Byron for a sneak peek at our targets for Dana 2030 on page 17. Byron Foster: Okay. Great. Thank you, Tim. And Craig Barber: hey, before I get into the Timothy R. Kraus: targets here, I do want to take the opportunity to thank Bruce for his leadership through Dana Incorporated’s Craig Barber: transformation over the last year and a half or so. Timothy R. Kraus: As he mentioned, we will have a very seamless transition Craig Barber: here through the ’26. Timothy R. Kraus: Myself and the management team, we could not be more excited for the opportunities ahead for Dana Incorporated. Let’s take a look at our long-term targets and our plans to continue to drive performance of the company to new levels. If you look at the 2030 financial targets, starting with revenue, we are targeting close to $10 billion of sales, which would be 33% higher than the midpoint of the 2026 guide that Tim just took us through. Timothy R. Kraus: We expect margins Craig Barber: to increase by close to 400 basis points to 14% to 15% at the EBITDA line. Timothy R. Kraus: And adjusted free cash flow at 6%, which would be about a 200 basis point improvement from our 2026 guide. Craig Barber: In terms of returning capital to our shareholders, you can see that Timothy R. Kraus: we plan to return $2 billion via stock buybacks, Craig Barber: of which $650 million has been completed in 2025, with the remaining planned for 2026 through 2030, and specifically in 2026, we are targeting $300 million of buybacks. That is on top of the 20% dividend increase that was previously announced. In terms of our roadmap of how we plan to deliver that level of performance, it is under our strategy called Dana 2030. You can see the five pillars of that plan: three related to growth in our aftermarket business, Timothy R. Kraus: our traditional light vehicle and commercial vehicle business, Craig Barber: as well as our EV and applied technologies, Timothy R. Kraus: which basically takes Craig Barber: Dana Incorporated’s know-how and technology and explores opportunities for growth in new and adjacent markets. Timothy R. Kraus: In addition to those growth pillars, Craig Barber: there are two pillars around efficiency and execution in everything we do, Timothy R. Kraus: both at the manufacturing level as well as our structural cost and support of the business. We look forward to sharing more Craig Barber: of our 2030 plan Timothy R. Kraus: with you Craig Barber: during our Capital Markets Day, which is planned for March 25 in New York at 9 a.m., and we are hoping to see you all there so we can talk more about the future ahead for Dana Incorporated. With that, I will hand it back to Regina for Q&A. Thank you. Operator: We will now begin the question-and-answer session. Please press star then the number one on your telephone keypad. We kindly ask that you please limit yourself to one question at a time. Our first question comes from the line of Colin Langan with Wells Fargo. Please go ahead. Colin M. Langan: Great. Thanks for taking my question. Craig Barber: I just want to follow up on the target for sales of $10 billion by 2030. That is faster than we have seen growth historically from Dana Incorporated. Particularly, you just gave a backlog. I think there is $550 million from 2027–2028 coming. So where is the other almost $2 billion? Is that market factors? Is there M&A assumed in there? I should have something about that. I will take that. I will take that, Colin. So here is Bruce McDonald: kind of the way you should think about it. Of the $2.5 billion that we are committing to grow over the next five years, our backlog, as you said, for 2027–2028 is $550 million. We anticipate that a normalization in the North America CV market is worth another $2.3 billion. So that is kind of a third of it. Then we have five growth strategies. One is the slide that Byron covered off around our quoting activity, really around ICE is going to be here for longer. Our customers are changing their product plans to reflect more SUVs and CUVs. We do expect to continue to win new business on new programs that our customers are introducing. Secondly, in CV, Operator: we Bruce McDonald: are very North American-centric. We have a very strong position in the market right now. We have a brand-new world low-cost manufacturing facility, greenfield site that we opened up in Mexico. That plant is performing for us at a very high level, and as a result of our delivery performance, our quality, and our cost base, I think we are well positioned to gain share of wallet at our main North American customers. Third, aftermarket. It is an area that we have not really focused on in the past. We have several growth strategies within aftermarket, but the one I would point to as being front and center here is our North America sealing and gasket opportunity. This is a market where we have 30%–35% share in Europe, and we are just looking to enter North America. We see that as being a $250 million opportunity that we are just starting to get our foot in the door this year. Lot four, I would point to EV. We have adopted more rigid and commercially sensible quoting disciplines, and there are still opportunities there, particularly as we are seeing on the range-extended products from our customers. Lastly, Byron touched on applied technologies where we are looking to get into adjacent markets or areas that we have historically underinvested. We have four or five of those opportunities, but a couple of examples: powersport, the off-roading quad vehicles. Those vehicles are becoming larger and larger. The supply chain in terms of our products for those is largely Chinese and old technology. We think we have a big opportunity to enter that market. We have several hundred million dollars of RFQs as we have put some resources into that business. That is a good example of an adjacent opportunity. If I thought about something that I will say we have kind of neglected, I would point to Craig Barber: defense. Bruce McDonald: We have a very highly profitable business; we just have not put sales and technical resources into capturing growth in that market. Those applied technologies, as a bucket, we think are another $400 million–$500 million. That is the path to the $2.5 billion. Kind of a long answer. I apologize for that. Colin M. Langan: No. I appreciate all the color. Craig Barber: And just as a second question, any help from that we have seen Timothy R. Kraus: all pretty much all the Detroit Three have these big recovery programs for EV cancellations. Craig Barber: Was any of that helping 2025? Is any of that baked into the guidance? Any help actually in cash flow as well? Timothy R. Kraus: Hey, Colin. This is Tim. As we mentioned in Q3, we took some charges due to some of this. We did get a little bit of recovery in the fourth quarter. In terms of the recoveries, a lot of what we are seeing is really adjustments to ongoing sales prices because many of our programs have not completely canceled. Many of them are just volume down. In terms of the other recoveries, it is really a net coverage of the costs that we have incurred and what we owe in terms of suppliers and other development costs. It is largely not a big tailwind in terms of profit drivers for us in the short term, but it obviously avoids our necessity to continue to write amounts off like we had to do in the third quarter. Colin M. Langan: Got it. Alright. Thanks for taking my question. Bruce McDonald: Yep. I would just add, if you look at the volume/mix slide and how it is a little bit strange that top line is negative and bottom line is positive, some of the benefit of repricing EV programs is within that bar. Craig Barber: Got it. Okay. Thank you. That is helpful color. Operator: Our next question will come from the line of Tom Narayan with RBC Capital Markets. Bruce McDonald: Hi. This is Craig Barber: Tom Acito on for Tom. Thanks for taking the question. You are guiding to 14% to 15% EBITDA margins by 2030, which is about 400 basis points higher than your 2026 guide. This might have to wait for the Capital Markets Day, but can you give us any rough breakdown of the contributions you are expecting from those items listed to the right of slide 17? Robert Aaron Saltzman: No. We do not really want to get into a lot of Bruce McDonald: detail. What I would tell you is, if you think about margin enhancement, how do we get that 400 basis points, it is in two places. One, structural cost reduction. We cut $325 million out of our cost base this year. If we look at the opportunities that we have that are longer term, Timothy R. Kraus: or require Bruce McDonald: systems investments, we think there is $100 million there. A couple of examples of that would be expanding our shared service center and a lot of ERP and other system standardization. I think the thing we encourage you to do is come see us in New York. We are going to lay out the walk and how we get there and why we are so confident. Come to the Capital Markets Day. We will lay it all out for you, but we are highly, highly confident. What you have seen from Bruce and the management team here over the last 14–15 months is we are very bullish on what we can deliver and what we tell you we are going to deliver, we do. We have that same confidence as we start looking forward to the strategy to deliver the $10 billion and the 15% to 16% margins in 2030. So encourage you to come down and we will take you all through it in March. Craig Barber: Okay. Got it. Thank you. As a quick follow-up, it looks like your Bruce McDonald: commercial vehicle margins expanded pretty significantly in Q4, even though sales are down year over year. Craig Barber: It sounds like this is mostly a mix and a cost reduction story, but I was wondering if you think that margin level is sustainable going into 2026, or Dan Meir Levy: whether there were any one-offs in the Q4 results? Timothy R. Kraus: Not a lot of one-offs. This has been a part of the business over the last few years that we have focused on improving our operating efficiency, and you are starting to see some of that. Bruce mentioned we built a new, state-of-the-art plant over the last years, and as we continue to ramp that plant up and have more production in there, we are getting the benefits of that in the efficiency and the margins in that product. We are not done yet. We think we have more opportunity to continue to improve margins in the CV business because they are not where we think they should be. Stay tuned. There is more good to come in our CV segment. Bruce McDonald: I would just add that the team in CV has done a great job this year. Great job. But we have been fighting volumes falling against us all year long. As we get into this year, we are going to start to see that flip around and have volume as a tailwind instead of chasing the year-over-year declines. Dan Meir Levy: Okay. Great. Thank you. Operator: Our next question comes from the line of Edison Yu with Deutsche Bank. Please go ahead. Dan Meir Levy: Good morning. This is James Mulholland on for Edison. A quick question on our part. If we do a bit of math, even with the share buyback and increased dividend that you have outlined with your longer-term free cash flow guide, it looks like you are looking at a materially higher cash position than what you have historically maintained or even guided to. Do you have any thoughts on where you are going to put that to work? Would you consider further inorganic investments, shareholder returns? Any thoughts you might have there? Timothy R. Kraus: I think we have laid out a significant increase in the amount of capital that we would return to shareholders. As we move out—and we will talk a bit about this in March—as we move out beyond 2026 and think about our growth strategy, there could be opportunities for acquisitions or other investments that are inorganic in order to fill in parts of the portfolio that can help accelerate growth. We are really focused right now on continuing to execute on the plan. We do think that the business we own and the management team we have will continue to drive the business forward and deliver superior returns for the shareholder. Dan Meir Levy: Got it. That is helpful. On the flip side of my prior question, in the presentation it sounds like you are thinking about other noncore operations that could either be sold or perhaps shuttered. Are there other parts of your business that can be as cleanly separated as the Off-Highway business? Is there something specifically you are thinking about that you can share with us now? Timothy R. Kraus: Nothing we can share now. We are talking about some smaller things. We have a number of different smaller businesses, but nothing on the scale or size of Off-Highway. To answer your question, yes, we believe that those are imminently separable. We did a few of them last year where we sold a couple of interests we had in some joint ventures. We will continue to look at the portfolio, whether that be individual JVs, plants, or just product lines in some of the businesses. As we continue to think through the portfolio, there are a number of opportunities where maybe we are not the best owner or they are not the most profitable product lines or part numbers, and we will continue to cull through that and make those adjustments. We think there are opportunities on the portfolio side. Again, these are smaller-type things. Dan Meir Levy: Great. Thank you, guys. Operator: Our next question comes from the line of James Picariello with BNP Paribas. Please go ahead. Craig Barber: Hey. Sorry. Just to clarify, what was the last answer regarding—is there a possibility for M&A within this revenue target, or would that be in excess of the $10 billion target? There is no M&A in the $10 billion. Dan Meir Levy: Alright. That is what I thought. When I think about the capital deployment up to 2030, if there is no M&A embedded in the target, which I think is a great thing, free cash flow Craig Barber: is slated to double. Dan Meir Levy: Over 2026 to 2030, if I assume a linear annualized step up off the $300 million this year to the $600 million targeted for 2030, that cumulative free cash flow generation looks like $2.2 to $2.3 billion in that zip code. We are looking at $250 million in dividends—$50 million a year over five years—and you have $1.35 billion in buybacks, which leaves about Dan Meir Levy: $650 million left over Craig Barber: in excess capital. How are you thinking about that? Where do you disagree or agree on how I laid that out, and what are we doing with that additional Dan Meir Levy: $650 million or so? Timothy R. Kraus: We will not get into specifics. It leaves us some flexibility in what we use the cash flow for. We have maturities coming due. We can use it to reduce leverage on the business if we want, and depending on where we are in the cycle, that may be something we do. Otherwise, we have more opportunities to return capital to shareholders if that seems to be the best use of that capital. Two, three, four, five years from now is a long time and a lot of things can happen. We are planning for an exceedingly strong operating performance through the business cycle with a capital structure that allows us to continue to be exceedingly nimble in our ability to continue to invest in the business regardless of where the markets are. That is really important to think about given where we were and the high two turns leverage. Look at what we are going to be able to do through the business cycle regardless of where the end markets are going forward. We are leaving ourselves some flexibility. We have said we are going to continue to drive really high shareholder returns, and that is our intention. Craig Barber: Okay. That makes a lot of sense. My follow-up is a quick one. What is the assumed effective tax rate for this year to inform the adjusted EPS range of $2 to $3? It is somewhere—it is Timothy R. Kraus: we have had some pretty strange ones. It is somewhere between 20%–30%. It really depends on the jurisdictional mix, but that is where we are targeting. That is a wide range, but given the balances that we have and how the income mix can change, it happens to be a pretty reasonable rate this year based on the jurisdictional mix and where the valuation allowance balances are. Robert Aaron Saltzman: Understood. Thank you. Operator: Our next question comes from the line of Joseph Spak with UBS. Please go ahead. Dan Meir Levy: Thanks. Good morning, everyone. Hey, Joe. Timothy R. Kraus: Maybe just a question on Craig Barber: CapEx, with two flavors of fuel. It looks like you were in the low $300 million in 2025. Guidance calls for low $400 million this year. I am assuming that is a step up to support some of these growth initiatives, but maybe you could add some color there. How should we think—I know you gave the free cash flow margin target for the 2030 plan, but Timothy R. Kraus: should we think about any material change in CapEx to sales Craig Barber: to support that growth opportunity? Is 4% the new go-forward rate we should be thinking about? Timothy R. Kraus: I think 4% is probably a good number to pencil in as you go forward. We will have to spend both on growth initiatives and on the initiatives to drive margin expansion. Bruce mentioned our plant-level operational efficiency. We have taken a lot of costs out at a relatively modest investment. The next step is we will have to have a higher level of investment, which is largely CapEx, to drive that next lockstep change in our margin profile, especially at the plant level. That is built into our targets, both the 2030 target and the target we have for CapEx in 2026. We have committed significant amounts of CapEx to help drive both growth and efficiencies in the business. Bruce McDonald: Okay. Thank you. You alluded to this Craig Barber: a little bit earlier, but I was wondering if you could Timothy R. Kraus: get a little bit more color. You are guiding 250 basis points of margin expansion this year. It sounds like we should be maybe above that level in CV given some of your comments, so maybe slightly below that in light vehicle to get to the number. Can you help us understand some of the Timothy R. Kraus: profit drivers or margin drivers by segment for 2026? Timothy R. Kraus: I think you have it right. We will have continued flow-through on the cost savings, and we will continue to get performance improvements, which is fairly consistent on a relative basis in the segments. Probably a little bit more in CV because we have a little more opportunity there, but generally pretty balanced between the segments. The important thing to note is that we continue to focus on our ability to expand margins through actions that are completely within our control and that are low risk and have high returns. Think about some of the things we are doing with automation and efficiencies within the plants. Largely, those are in plants that are on ICE programs. We know what the volumes are going to be, and we know what the investment and the returns look like. We are highly confident in our ability to both make those investments and deliver the expanded margins that they will deliver. So Dan Meir Levy: okay. Great. I should go along with this, but Timothy R. Kraus: congrats to both Byron and Bruce, and looking forward to learning more at the upcoming investor event. Thanks, everyone. Bruce McDonald: We plan to put Byron out there so you can go right after him in March. Okay? Dan Meir Levy: Look forward to it. Byron Foster: Yeah. Thank you. Timothy R. Kraus: Thank you. Operator: Our final question comes from the line of Emmanuel Rosner with Wolfe Research. Please go ahead. Dan Meir Levy: Great. Thank you so much. Emmanuel Rosner: First question is on the—I appreciate the sneak peek on the 2030 financial targets. I wanted to ask you about the high-level drivers of the 400 bps in margin expansion. How much of it is growth driven versus cost savings? I think, Bruce, you mentioned maybe a $100 million opportunity from the systems enhancement. Is there anything else you would call out on the cost side? What implication does it have in terms of potential cadence? Four hundred bps obviously averages to about 100 bps a year, but I would assume that the cost savings are maybe more front-end loaded, whereas some of the growth initiatives may take a little bit longer. Anything you could share on that? Timothy R. Kraus: Come see us in March, I think, is the line of the day. Some of what you said makes sense. Given where we are today, we are going to be able to invest in both the growth and the margin expansion initiatives and deliver them over time. We will lay it out in detail in a few weeks. Come down and see us. Bruce McDonald: I would say that getting to the 15% is not because we are relying on growth. We will expand our margin based on investments that we are making and cost actions. The growth will help out, but the main driver is the investment we are making in our manufacturing operations and automation. Timothy R. Kraus: I would not say the growth is coming through at a super high rate. We still operate in the mobility business, for goodness’ sake. A lot of what we are thinking about is things that are completely within our control and tied to programs that are tried and true. High-return, low-risk type things to drive margin improvement. Emmanuel Rosner: I appreciate the color. If I could just follow up based on what you disclosed in today’s slides. Revenue target of $10 billion, up from $7.5 billion this year. What is the right incremental margin on that kind of revenue increase? If you just apply that to $2.5 billion of revenue, you would already have probably $500 million of uplift in EBITDA. How do you think about that piece based on the numbers that you already shared with us? Timothy R. Kraus: You also have to realize there are costs associated with some of that growth. It is not like we just go out and sell it and put it in the same plant. It is not that simple. Again, we will Craig Barber: give you a front-row seat, Timothy R. Kraus: Emmanuel, in March, and we will take you through it and answer all your questions. Emmanuel Rosner: I look forward to that. On 2026, on slide 14, the walk to the 2026 EBITDA by factor. Can you remind us what goes inside the performance and the cost savings bucket? Timothy R. Kraus: Think of cost savings as our $325 million that is all above the plants. That is what is in that number, and that is the last piece of that $325 million. If you think about performance, that is all the improvements that are going on at the plant level. This is material cost savings, engineering cost savings that is coming through as a result of design and updates, conversion cost savings, and we have also included about $40 million of the stranded cost avoidance that we are taking out this year. That is one of the reasons why that number looks pretty large. Forty million dollars is related to the structural cost takeout related to stranded costs from the deal. Robert Aaron Saltzman: Understood. Emmanuel Rosner: Alright. Thank you. Robert Aaron Saltzman: Yep. Bruce McDonald: Okay. That is the last of the questions. Thanks, everybody, for joining us this morning. I want to have a big shout out to the Dana Incorporated team. I know a lot of them are listening in on the call. An incredible 2025, and I thank each and every one of our team members for helping make this happen. Coming into 2025, we made some very bold commitments, and the teams delivered on all fronts. I am very proud of them. Looking ahead, the team is laser-focused on performance and delivering on our financial commitments. Dan Meir Levy: You know, as I said earlier, Bruce McDonald: right now, Dana Incorporated is exceptionally well positioned. We have a strong balance sheet—I would say best-in-sector balance sheet. We have a strong top-line growth story. We have a very clear plan and actions to deliver significant margin expansion. Our free cash flow is accelerating to the point where we can first grow our investment in our business, second, return a significant amount of capital to our shareholders via dividends, and third, grow our buyback. Right now, we can comfortably buy 8% to 9% of our shares per year, all while deleveraging. I love how Dana Incorporated is positioned right now in the auto space. I would not change places with anybody else. Thanks for joining us this morning. Operator: This will conclude our call today. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the Travel + Leisure Co. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, Andrew Burns, Vice President, Investor Relations. Thank you. You may begin. Thank you, Shimali. Andrew Burns: Good morning, everyone. Before we begin, I would like to remind you that our discussion today will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements and the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. The factors that could cause actual results to differ are discussed in our SEC filings and our press release accompanying this earnings call. You can find a reconciliation of the non-GAAP financial measures discussed in today’s call in the earnings press release available on our Investor Relations website. Please note that all references to EBITDA, diluted earnings per share, free cash flow, and return on invested capital made during this call are on an adjusted basis as disclosed in our earnings press release. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our results and longer-term growth strategy. And then Erik Hoag, our Chief Financial Officer, will provide greater detail on our results, capital allocation strategy, and outlook for 2026. Following our prepared remarks, we will open the call up for questions. Finally, all comparisons today are to the same period of the prior year unless specifically stated. With that, I will turn the call over to Michael Brown. Good morning, and thank you for joining us. 2025 was an outstanding year for Travel + Leisure Co. Michael Brown: Our results reflect sustained momentum in our core vacation ownership business and repeatable execution across the enterprise. Our fourth quarter adjusted EBITDA exceeded the full year outlook which we raised in Q3. 2025 was an excellent year, and we are off to a strong start in 2026. So I want to thank our associates across Travel + Leisure Co. for their hard work and dedication, which drives our success. In addition to strong financial performance during the year, we advanced our brand expansion strategy, activated new partnerships, and continued to invest in our digital roadmap. These initiatives strengthen the foundation of the business and position us for long-term profitable growth. At the center of our strategy is a clear focus on delivering exceptional vacation experiences for our owners and members. What differentiates Travel + Leisure Co. is that we convert owner engagement into recurring demand, predictable cash flow, and consistent capital return. We manage the model end to end to deliver shareholder value that compounds over time. Since the 2018 spin, we have returned over $2.9 billion to shareholders, reduced our share count by roughly one-third, and grown the dividend by more than 35%. As we enter 2026, leisure demand remains strong. We have momentum in our vacation ownership business and clear line of sight to another year of growth and shareholder value creation. At the same time, we are advancing our brand expansion strategy and strategically optimizing our resort portfolio, building the foundation for sustainable, profitable growth that extends far beyond this year. In 2025, we generated 4% revenue growth and 7% EBITDA growth. Revenue growth combined with EBITDA margin improvement and our shareholder-friendly capital allocation approach fueled compounding growth across the P&L. We returned $449 million to shareholders through dividends and share repurchases, reflecting our ongoing commitment to disciplined capital allocation. These results underscore the strength and resilience of our operating model. 2025 financial performance was led by our vacation ownership business, which is built around a large, loyal owner base with highly recurring demand. Performance is driven less by short-term travel trends and more by these long-term owner relationships and our intentional approach to operating the business. For the year, strong sales and marketing execution drove 8% gross vacation ownership sales growth. VPG was up 6%, above the high end of our guidance range, and tour flow growth steadily improved throughout the year, including 5% growth in the fourth quarter. Q4 represented our fastest year-over-year tour growth in 2025. In our Travel and Membership segment, we delivered $228 million of EBITDA for the year, demonstrating the profitability and cash-generating strengths of the business. We remain focused on very tight cost management as we actively mitigate the impact of exchange headwinds. Travel and Membership continues to be an important part of the portfolio, and we are evaluating every opportunity to enhance its performance and create value for shareholders. In 2025, we made meaningful progress advancing our multi-brand strategy, announcing four new resorts across our emerging brands. Margaritaville and Accor continued to deliver solid growth, and we began sales at both Eddie Bauer Adventure Club and Sports Illustrated Resorts. Early consumer response has been very encouraging; we are focused on scaling these brands in 2026. For consumers, leisure travel has increasingly become an expression of their lifestyle. Our diversified brand portfolio allows us to reach new, distinct travel segments. This multi-brand strategy broadens our addressable market and enhances our long-term growth potential. When combined with Club Wyndham and WorldMark, we have a powerful engine to sustain vacation ownership growth, balancing existing owner upgrades and new owner sales. Another area of focus for us is enhancing the owner experience. We know that delivering outstanding vacations directly drives owner retention and greater lifetime customer value. The more frequently our owners vacation with us, the more likely they are to upgrade. On average, owners purchase 2.6 times their initial purchase over the first ten years. That dynamic is central to our model, driving predictable revenue and cash flow. To support this, we are investing in technology that makes the experience more seamless end to end, from discovering a vacation to booking travel and on-site activities. In 2025, we made progress on our digital roadmap with the launches of the Club Wyndham and WorldMark apps and launch of our new AI Concierge service. Beyond digital investments, we are focused on deepening owner engagement through special events and experiential offerings. Our partnerships with Live Nation and Authentic Brands expand our ability to deliver highly differentiated, memorable experiences for our owners. Looking ahead to 2026, we are focused on continuing to advance these initiatives, further enhancing our digital capabilities and scaling new partnerships. In our vacation ownership business, we have consistently been an innovator of the product and in running our timeshare business for the good of our owners and the enterprise. This includes everything from being among the first to adopt a points-based product in the 1990s to recently launching new and innovative brand resorts and experiences. We are constantly modernizing our owner offerings while seeking better and more efficient ways to grow the business. Last year, we embarked on our latest initiative which we refer to as the Resort Optimization Initiative. A handful of our resorts have aged and are consistently at the lower end of our demand scale. As such, we will be removing those resorts from our system, similar to what hotel brands do year after year, and replace them with higher demand, less seasonal, and newer resorts and resort locations. In fact, once we net these reductions against our additions, we will have grown our resort portfolio by over 30 resorts in the last three years. We believe this will be a win for our owners as they have demonstrated their resounding support through the individual HOA votes. As noted in our release, this has resulted in a 2025 balance sheet impact and related one-time charges. Going forward, it will drive a full year 2026 positive EBITDA benefit. Erik will walk through the mechanics and how it impacts our financial performance and outlook. Ultimately, this is an innovative way to strengthen our resort system for our owner base while improving the financial health of Travel + Leisure Co. and our club HOAs. Turning to the outlook, while the first quarter is still in progress, early trends are consistent with our expectations, and we are seeing momentum carry forward across demand, tour flow, and execution. We have started 2026 with strong visibility into the key drivers of our results, and we are well positioned to deliver another year of revenue growth, EBITDA margin expansion, and robust free cash flow. All in, we expect EBITDA in the range of $1.03 billion to $1.055 billion, reflecting 4% to 7% year-over-year growth. I will now turn the call over to Erik to further elaborate on our results, capital allocation framework, and outlook. Erik? Erik Hoag: I will frame my comments in three parts. Erik Hoag: How the business performed, how we ran it, and how that performance translates into capital allocation as we look ahead. Erik Hoag: Starting with performance, the fourth quarter marked a strong close to 2025 with revenue of $1,026,000,000, EBITDA of $272,000,000, and EPS of $1.83. EBITDA grew 8% year over year with margin expansion reflecting operating leverage that built over the course of the year and became more evident in the fourth quarter. These results reflect deliberate and proactive choices we made across pricing, mix, underwriting, and capital. Turning to the Vacation Ownership segment. Erik Hoag: The core engine of the business continued to perform at a high level. For the quarter, gross VOI sales rose 8% year over year driven by accelerating tour flow growth of 5%, the strongest level of the year, reflecting sustained consumer demand and strong marketing performance. Volume per guest finished above the high end of our expectations at $3,359, reflecting consistent sales execution and disciplined yield management across channels. Segment EBITDA was $252,000,000 with margins expanding year over year as operating leverage and inventory efficiency improved. Credit performance remained stable with delinquencies and defaults holding within a tight range consistent with our expectations. Our provision rate was 19.3% in the quarter, with a full year provision rate of 20.7%, slightly better than our 21% guidance. New originations remained high quality, with weighted average FICO scores above 740 and average down payments trending above 20%. Those originations, combined with actions we are taking around early owner engagement and collections efficiency, give us confidence the loan loss provision will be lower in 2026 than in 2025. Turning to the Travel and Membership segment. Fourth quarter revenue was $148,000,000, down 6% year over year, while EBITDA was $47,000,000, down 10%, reflecting ongoing exchange headwinds. We continue to take targeted cost actions to align the expense base with the current revenue profile and maximize profitability. Stepping back and looking at the full year, we delivered revenue of $4,020,000,000, EBITDA of $990,000,000, EPS of $6.34, and free cash flow of $516,000,000. These results are compounded: revenue up 4%, EBITDA up 7%, EPS up 10%, and free cash flow up 16%. That progression reflects operating leverage in the model and return-based capital allocation with buybacks amplifying per-share growth. Relative to the initial full-year guidance we provided at the start of 2025, we finished at the high end of our gross VOI sales range, above the high end of our VPG range, and above the high end of our EBITDA range. For the full year, we converted 52% of EBITDA into free cash flow, right in line with how this business is designed to perform over time. On a GAAP basis, cash flow from operating activities grew year over year, reinforcing that the earnings growth we delivered in 2025 translated into real cash generation. Our return on invested capital remains above 20%, reflecting both the quality of the business and the discipline with which we deploy capital. That is the model at work. Operational execution drives cash, cash funds capital return, and capital return compounds value. We exited the year with leverage under 3.1 times, reinforcing the balance sheet strength that supports consistent capital return while preserving flexibility. During the year, we returned $449,000,000 to shareholders through a combination of dividends and share repurchases. We repurchased $300,000,000 of stock, reducing our share count by approximately 6%, and we paid $149,000,000 in dividends. Together, these actions increased per-share value while maintaining balance sheet flexibility. Reflecting that confidence, our Board approved a new $750,000,000 share repurchase authorization, which we view as one of the highest return uses of capital at current valuations. We also intend to recommend to our Board a first quarter 2026 dividend of $0.60 per share. Looking ahead to 2026, our capital allocation priorities remain unchanged. Our top priority is investing in the core business to drive organic growth while returning meaningful capital to shareholders through dividends and share repurchases. We also pursue opportunistic M&A when returns are compelling and clearly expected to be superior to buying back our own shares. Given the strength of our balance sheet and consistency of free cash flow, we expect share repurchases to remain the primary use of excess capital alongside a growing dividend. This approach preserves flexibility across cycles. As Michael referenced earlier, we have identified a select group of resorts to close. This resulted in a non-cash inventory write down and impairment of $216,000,000 in 2025. From a P&L perspective, there are three main components to keep in mind as you model the impact of these actions in 2026. I will run through some of the high-level estimates to help you better understand the mechanics. First, the impact of sales office closures will reduce VOI sales by approximately $100,000,000, and, assuming a 35% flow-through, this creates a $35,000,000 EBITDA headwind. Second, fewer resorts in the system will reduce management fees by approximately $20,000,000. Assuming a 75% flow-through, this creates a $15,000,000 headwind to EBITDA. Taken together, this creates a $120,000,000 revenue headwind and a $50,000,000 drag to EBITDA. The third component is lower inventory carry costs, which results in roughly $70,000,000 of expense savings. All in, lower expenses more than offset the impact of lower revenue, resulting in a $20,000,000 net EBITDA benefit. I used specific numbers for this example to illustrate the mechanics, but there are several variables and a range of outcomes to consider. Based on our best estimates as of today, we expect this initiative to provide a net EBITDA benefit in the range of $15,000,000 to $25,000,000, which is included in our outlook. Importantly, this is not a demand story. It is a deliberate portfolio action that improves the cost and capital intensity of the system while leaving the core engine intact. This is how we actively manage the portfolio, exiting lower-return assets, redeploying capital to higher-return opportunities, and improving returns and cash flow over time. Turning to the outlook for 2026. We expect gross VOI sales to increase 1% to 5% year over year to a range of $2,500,000,000 to $2,600,000,000. Absent the impact of sales office closures, underlying VOI growth would have been 5% to 9%, reflecting continued strength in tour flow, pricing, and close rates. For the full year, we expect volume per guest to be in the range of $3,175 to $3,275, modestly lower year over year, reflecting a deliberate mix shift towards new owners over the course of the year. EBITDA is expected to be in the range of $1,030,000,000 to $1,055,000,000, representing mid-single-digit growth year over year. The midpoint of this range reflects our base execution plan for the year and the positive net impact of the resort optimization initiative. We expect year-over-year EPS growth to be in the teens, supported by EBITDA growth, lower interest expense, and share repurchases. As you update your models, a few guardrails may be helpful. We expect depreciation and amortization to be modestly higher in 2026, reflecting our ongoing investments in technology and digital platforms. We expect our adjusted tax rate to be broadly consistent with 2025, and we expect to convert roughly half of our EBITDA into free cash flow. Erik Hoag: Stepping back, the guide reflects a profile where we believe downside is well contained while upside is asymmetric and driven by execution. It also reflects our conviction that we can deliver mid-single-digit EBITDA growth and teens EPS growth while investing in our brand expansion strategy and navigating Travel and Membership headwinds. For the first quarter, we expect gross VOI sales to be in the range of $520,000,000 to $540,000,000 and EBITDA in the range of $210,000,000 to $220,000,000. We expect volume per guest in the first quarter to be in the range of $3,200 to $3,250. Erik Hoag: To close, the business is performing the way it is designed to perform. The results we are delivering are the outcomes of clear priorities, intentional trade-offs, and a capital allocation approach designed to compound value over time. Emily, we can now open the line for questions. Thank you. We will now open for questions. Operator: You may press star 2 to remove yourself from the queue. It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Stephen Grambling with Morgan Stanley. Please proceed with your question. Michael Brown: Hey, thank you. Just wanted to start off on the Stephen Grambling: optimization initiative and just maybe help us think longer term about maybe the moving parts around the EBITDA or free cash flow contribution from effectively the club management business as we think about maybe clubs coming out, new clubs coming in, and price within that? Michael Brown: So, good morning, Stephen. I would first of all consider 2025 as the effort we put into the resort as a catch-up year. If you think about our strategy, coming out of COVID, it was all about creating efficiency in our models, starting with marketing and now moving over to the resort portfolio system that we have. We use the three-year comparative because that is when we really started to come out of COVID and prepare our P&L and our overall operation to be highly efficient. So as we go forward, I would expect the following years to return to your normal cadence of VOI growth, resort management growth. Overall, resort system on a net basis is going to continue to grow as we add new brands to our overall portfolio system, and maybe going forward we are talking one to two resorts, just normal maintenance, as opposed to a catch-up year, which we had in 2025. Stephen Grambling: That is helpful. And then one other follow-up. There are a bunch of balls in the air between the initiative and then some of the new brand launches. As we think about the trajectory of owners, do you think that we will get to a point where net owner growth could actually kind of flatline and maybe even grow as we look into 2026 or 2027? Michael Brown: Yes. That is our full intention. Part of creating a more efficient resort system, a more efficient sales and marketing organization, and supporting the type of growth and launching these initiatives allows us to start to bend that curve back north. I do not think it is going to be too long before we start seeing a northern trajectory on our owner count for two reasons. Number one is all the initiatives we have in our core brands, Club Wyndham and WorldMark, related to our partnerships. But additional to that is as we launch these new brands, you are going to see a higher mix, especially in the Sports Illustrated Resorts, on the new owner component versus a Club Wyndham where we have been in the business for four decades, where you have got long-tenured owners, a huge owner base, and therefore the relative new owner to owner growth is a lot tougher. It is one of the benefits that we are going to see as we get these new brands going. But it is our full intention. I do not think it is going to be over the long term, but over the midterm, where that owner count begins growing again in the northern trajectory on a consistent basis. Stephen Grambling: Great. Thank you. Operator: Thank you. Our next question comes from the line of Patrick Scholes with Scholes Security. Proceed with your question. Erik Hoag: Hi. Good morning. Erik Hoag: Everyone. Morning, Patrick. Good morning. Just from a high level, Erik Hoag: talk about Patrick Scholes: just how you see your consumer doing right now? Certainly, a very bifurcated world out there between the highs and the lower-end financial demographics, but give us your latest thoughts on specifically your consumer. Thank you. Michael Brown: The short answer, Patrick, is really no change to what we saw in 2025: continued strong demand both for their vacations and for their purchases. The why, I think, is a little more important. The continued performance is partly due to the changes we made that I referenced in Stephen’s, really focusing on the continued quality of our consumer from a demographic standpoint. Our household income has moved up well above $100,000. Our average FICOs has moved from the 720s to over the 740s over the last few years. But I also think it is reinforced by the quality and value and consistency that people see in the vacations. You know, the macro conversation is all about affordability in a K-shaped economy. But when 80% of your owner base made their purchase and are vacationing for pre-inflationary prices, it is very easy to see the value combined with the fact that you are inside of a condominium that is, you know, 800 square feet, 1,200 square feet. And that value really plays out. You know, someone said to me recently that there is something very special about a vacation when you are not in a hotel room and you do not have to go to bed at the same time as your kid. You know, it just really elevates the vacation experience. And when you do that, when you have paid 2020 dollars or 2018 or 2015 dollars, which is 80% of our owners, people see the value in the quality and the experience at a much more elevated level. And that has played through our performance. And I would add maybe one final forward-looking statistic that reinforces that our Q1 arrivals are above what they were in 2025, and we are getting early indications that Q2 is on a really good path as well. Erik Hoag: Okay. Thank you. And then just a follow-up question for Patrick Scholes: Erik, I believe, and this is related to consumer performance. I think in the prepared remarks, you said you expected loan loss provision for this year to be down, if I got that correctly. When you are thinking down, is that like 100 basis points from the 21% that you did in 2025? And then related to that, you did drop 100 basis points year over year in the fourth quarter. Talk a little bit about what the dynamics for that 4Q were. Thank you. Michael Brown: Yeah. Thanks, Connor. Erik Hoag: Yep. Thanks, Patrick. Couple of things. So we ended the fourth quarter with a loan loss provision of 19.3%, yes, down roughly 110 basis points year over year. It was the only quarter that we were down year over year during 2025 and we finished the full year at 20.7%, which is better than what Michael and I have been talking about for the last several quarters at roughly 21%. So as I think about 2026, Patrick, I would guide you towards 20%, down year over year roughly. You know, we saw larger down payments in the fourth quarter, which is the predominant driver for the more favorable loan loss provision, and I think that we have got real comfort and conviction that we will be down year over year. Erik Hoag: Okay, thank you. Erik Hoag: Will hop back in the queue. Thank you. Erik Hoag: Thank you. Operator: Our next question comes from the line of Ben Chaiken with Mizuho. Proceed with your question. Ben Chaiken: Hey, good morning. Thanks for taking my question. Would love to touch on the strategic review. Of the 17 assets, what were the occupancies of these? Clearly, they were below average, but maybe how sold or unsold were they in broad strokes, to the extent you can share? And then maybe what is the swing factor between the $15 million and the $25 million? Simply how well you can reallocate those sales to other sales centers? And then one follow-up. Thanks. Michael Brown: So, Ben, let me hit the—it is 17 in 12 locations. Significant amount of unsold inventory at those resorts, and occupancies well below 50%. And if you think about the resorts that we focused on, average age 40 years, primarily in the Northeast, and if you could think about those assets, highly seasonal, lots of wear and tear, lots of pressure that starts to get put on HOAs that the entire club has to bear. So when we talk about this as a positive for the overall club HOAs, it reduces a lot of burden on what could occur as assets age to 45 and 50 years. Additionally, let me use this as an anecdote. In Branson, we have over 600 units. So is the demand for unit 600, 650 as valuable to our owner base as the first 50 units, or 60 units we will put in a place like Chicago where we have no assets today? And as we evaluated, we looked at the age, we looked at that lower demand, the lower sales level, many with fixed weeks, and then started to think where would our owners prefer to go, and the decision became obvious that let us get them to newer builds, higher-demand destinations, and less seasonal. And, you know, the HOAs were very much a part of it and had obviously a clear vote because they run the individual HOAs, our owners. So that was our thinking about it. And just your second question, Ben, I apologize. I think you just explained your question on the Michael Brown: between the Michael Brown: what did you mean, the delta between fifteen and twenty-five? Ben Chaiken: I believe you said that the EBITDA contribution, if I caught you correctly originally, I think you said EBITDA contribution for the year was going to be some tailwind of $15,000,000 to $25,000,000. And so I am asking about the swing factor, which is sales that you kind of— Michael Brown: Let me let Erik run through the mechanics there. Erik Hoag: Yes. So, Ben, good to hear you. So I think we have been able to isolate the revenue components pretty clearly. We have got a point of view associated with the EBITDA contribution associated with the revenue bit. We do still have some open switches associated with gaining all of the Homeowners’ Association approvals. We do have a couple that will bleed here into the first quarter. I think that the $20,000,000 at the midpoint is a good place for you to model what the benefit of this program will drive. Ben Chaiken: Got it. Appreciate it. And then just one quick one on Sports Illustrated. I believe you opened up sales of Nashville in December. Maybe you could share any relevant data points to the extent you are willing? And then, obviously, recognizing it is very early in the system, have you considered any type of upgrade program for legacy TNL customers where you buy SI and your legacy TNL is fungible at an exchange rate? So I believe it is a separate platform at the moment. Thanks. Michael Brown: Let me take the opportunity to give you two updates. First on Sports Illustrated, we started our event-based marketing there as we renovate both Nashville and Chicago. We do not have our physical sales gallery open, so we are doing more events. We have done several. We have a good amount of sales with our first Sports Illustrated owners. Those will begin in earnest in our more traditional approach late in Q1 and early in Q2. So I would expect more meaningful results to come at that point, but early reception was very positive, very excited about the concept. We were very pleased with the feedback we got from our first event programs. Equally to that, we transitioned in Q1 from virtual sales to physical sales centers for Eddie Bauer Collection, and we saw tremendous reception in that approach. Our WorldMark owner base, which is nearly 250,000, was looking for more destinations with a slightly different feel. We are giving them that through the Eddie Bauer to different club, but the reception to that product has been really, really impressive. We are very pleased with what we saw in the first 45 days of 2026. So, pleased with both of those starts, both for Sports Illustrated and Eddie Bauer. Operator: Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed with your question. Michael Brown: Thanks for taking our questions. Chris Woronka: I was hoping we could maybe spend a minute talking about the kind of the marketing approach this year, and there has been a lot of talk obviously about tax refunds, larger refunds, other stimulus. And I am curious as to whether you guys have adjusted any of your marketing campaigns either in terms of timing or messaging to kind of coincide with what are expected to be those larger refunds and whether it is about, from a P&L aspect, maybe in terms of marketing expense being more weighted towards one quarter or one half. Thanks. Michael Brown: Good morning, Chris. I would not say that we have a different approach as it relates to the singular event around taxes. I think as you look through 2026, we are being more intentional in a few areas. Number one is continued focus on owner arrivals, which indirectly is going to be a benefit if there is an economic win for consumers in the April timeframe. That means it is likely that encourages summer travel, and given that the vast majority of our tours are booked when people are at location, that is going to be a big win for us. But owner arrivals is always our number one priority for a number of reasons. Number one, outside of sales, is because that is why we are in business. The other components are, I mentioned it in the prepared remarks, Live Nation, Authentic Brands, really working in closer partnership. We have been working with both those companies for over a year, and we are finding new ways to link up to their organizations and provide some really cool both new owner and owner events there. And then, lastly, as we continue to mine our data, we have got an incredible population of data that we think we have underutilized over the past five years and that we think, with the launch of our apps, more engagement through AI, that we can start moving more of our data through the marketing funnel to the point that we can get them into market and ultimately have a sales opportunity. I think that is more of a mid- to long-term opportunity, but we have made tremendous strides in the last 12 months of prepping that platform to really start leveraging it at the end of this year and into the next three to five years. Chris Woronka: Oh, okay. That is great color. Thanks, Michael. And then a follow-up for you. You just mentioned kind of Live Nation and Authentic Brands. I am curious as to how you view the cruise industry. It is not exactly a secret they have been doing pretty well lately, and I think you guys have historically done some level of sales opportunities on ships, and I know that people can also use their points on cruises, although it is not necessarily the most economic use of those points. So is there any thought, any evolution, you are thinking of how you interact with that industry to maybe capture some of the same tailwinds that they are seeing? Michael Brown: A little bit tongue in cheek, I think we have had some pretty good tailwinds in 2025. I thought we had a great year, and I think we would sort of ride alongside of cruise as enjoying the high leisure demand, but I think the nature of your question is absolutely on point. Our consumer loves not only to visit our resorts, but to cruise. We began to leverage one of our existing partnerships with Margaritaville in 2025 on the Margaritaville cruises, which, you know, that lifestyle between vacation club, hotel, cruising, and retirement communities is an entire ecosystem unto itself, and our partnership with Margaritaville continues to grow. And cruise is just one of those components. And I think it will grow from simply cross-marketing opportunities to something bigger as time goes by. You know, success in that brand will yield more dots on the map, and if they happen to float, then even better. That does not mean that it is only Margaritaville. I think we have really stepped up through partnerships, tying into other cruise lines in 2025. We have made some changes there, and we have recently seen an uptick in the cruise side. And, yeah, we like to take things methodically. If we see a partnership, we will start working with the company, and if it grows, then we will invest more heavily. Margaritaville, the first example, but we have others in the works as well. Chris Woronka: Okay. Very good. Thanks, guys. Michael Brown: Thanks, Chris. Operator: Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question. Michael Brown: Hi, good morning, everybody. Congrats on the quarter and thanks for taking my question. David Katz: And I think I may have asked this maybe last quarter or some prior quarter. When we look at SI, we look at Eddie Bauer, you know, Accor, do you have a notional sales amount with each of those that you have sort of laid out for some untimed future, you know, opportunity for you to, you know, chew into that we can sort of paint the long-term vision of? Michael Brown: Let me come at it the other way, David, which is on a high level. We want to see the four brands—Margaritaville, Accor, Sports Illustrated, and Eddie Bauer—as a growing percentage of our overall mix as we progress year over year, simply to take pressure off in the law of big numbers. You know, Club Wyndham and WorldMark are $2.3 billion. You know, 6% to 8% growth gets harder and harder as you progress through that. So the addition of these new brands allow us to either augment to maintain that 6% to 8% or give us potentially upside. So I am looking at it more top down. Three years ago, that number represented about $50,000,000 of sales. Two years ago. In 2026, we think that number gets to $200,000,000 or north. And if you think about our overall guidance, you are starting to approach a 10% number. So as we move to 2027, 2028, that number should be moving to double digits and then to the teens and up to 20. So we just want it to be a growing percentage of the overall mix. I still would say, and that is an absolute direction that we have. What I would say on the individual brands is they should be obviously outsized growth compared to our core 6% to 8%. And then how we divide that growth into 2027, we just want to see how both of these brands are received and how we change the offering as we get consumer feedback. But the macro answer to your question is it is going to be high single digits this year as a percentage of total sales, moving into double digits and then to teens after that. Operator: Excellent. And as my Michael Brown: follow-up, Chris Woronka: wanted to spend a second on the blue thread, which, you know, we have not talked about much in a while. What is the aspiration or the vision for, you know, Blue Thread? I am not sure if you gave us a sales number breakout. You have in the past. And how does that sort of fit into, you know, launching your app? Right? Does your app connect with their app? And, you know, should we sort of see this as heading down opposite paths? Michael Brown: So Wyndham Hotels and the blue thread remain a critical and important and a very strong partnership for us. We have continued to see success with the affinities between Wyndham Hotels and our Club Wyndham brand, and it will remain a core part of all of our growth as we move forward. So no new news there. I think the reality of the sales contribution from the Wyndham Rewards member has reached a point where there are mechanics way beyond the timeshare realm that has changed the way people book hotel reservations. We work very collaboratively with the hotel group to find new ways to reach those customers. We found a few avenues, but we have really seen that sales level stabilize at about 3% of our total sales, and it will remain an extremely important part of who we are here at Travel + Leisure Co. Michael Brown: Okey doke. Thanks. Michael Brown: Oh, and sorry, the app. We are focused on our app of the Club Wyndham and WorldMark. We will get apps for all of our brands, and then we will absolutely look for connectivity across to anyone we are working with. So, you know, the technicalities of that, I could not say, but we are trying to establish our platform first, but in all respects where we can link across to work collaboratively with Wyndham Hotels, we will absolutely do it. Michael Brown: Thank you. Operator: Thank you. Our next question comes from the line of Lizzie Dove with Goldman Sachs. Please proceed with your question. Lizzie Dove: Hi, good morning. I just wanted to ask about VPG. You had a really good year. And then for this year, there are some moving pieces. You called out the deliberate mix shift, but your guidance does factor in quite a deceleration in trends throughout the year. Could you maybe just give us some more color on how to think about that and the impact of the mix shift? Erik Hoag: Hey, good morning, Lizzie. We finished the year with our fourth quarter VPG right under $3,400. VPG was up percent year over year and VPG was at a three-year high. So we feel great about the momentum that we have associated with demand. You are right, the midpoint of our guide has got VPG down, I think it is between 1%–2% year over year. Full-year new owner transactions in 2025 was 30%–31%. We are trying to move from low thirties to mid thirties. And the flattish VPG is 100% attributable to our desire to nudge new owner transactions from low thirties to mid thirties. Lizzie Dove: Got it. That makes sense. And just to follow up on that, I apologize if I missed this in the opening, but anything you can share in terms of specifically around new owner close rates or just kind of new owner demand and how that has been versus existing in the fourth quarter? Thanks. Michael Brown: Well, 2025, and in the fourth quarter, our new owner performance was very consistent throughout the year. So no meaningful change. What you saw in 2025 was just extremely strong owner performance. So if we hold what we did in Q4 and 2026 on our new owner performance, we will be very pleased. We will have an acceleration on tour growth year over year. And our teams have been able to very much handle that acceleration, and they did in the quarter, and we were very pleased with that. Lizzie Dove: Got it. Thank you. Erik Hoag: Thanks, Erik Hoag: Thank you. Operator: Our next question comes from the line of Trey Bowers with Wells Fargo. Please proceed with your question. Patrick Scholes: Hey guys, just a follow-up to I think it was Patrick’s question on the provisions. Brandt Montour: As we look forward a little longer term, where do you see that number heading? Is there something about kind of optimized level of recycling that a provision level of 20 and an associated write-off level is kind of the right place to be? Or on the flip side, as you have improved your FICO scores and you have a higher income bracket for most of the owners now, should that number kind of continue to migrate down? Thanks so much. Erik Hoag: Hey, Trey. Good morning. You know, as I mentioned, we finished the fourth quarter with a provision of 19.3% and a full year 20.7%. And we expect it to go down in 2026, so super pleased with the direction of travel and the trajectory with the loan loss provision. I have said over the last couple of quarters that we expect, over time, that the provision settles back into the high teens. Do I think we can do that? I do. Do I think that the business needs for us to settle back into the high teens? I do not. You look at 2025, full-year provision was 20.7%. We wound up beating our budget. We were above the top end of our guide in EBITDA. We feel good about the programs and the initiatives that we have in place to drive the provision down. And we do think it settles into the high teens over time. And I think 2026 is a step in that direction, moving from 20.7% to something lower and then, aspirationally, into the teens after that. Brandt Montour: And unrelated, but just a follow-up. Could you guys just talk about the Travel and Membership business going forward, just expectations for when that kind of bases out? Or do you expect that one to continue to just have some top-line pressure for the foreseeable future? Thanks. Erik Hoag: Yeah. So the Travel and Membership business, you know, we are modeling 2026 very consistent with the 2025 trend line. No heroic assumptions, just disciplined cost management. We are trying to be very pragmatic and opportunistic associated with leveraging partners. We had announced a partnership during the fourth quarter. So we are trying to be very pragmatic associated with the roughly 3.5 million members that we have there. The business continues to be a very important contributor to our EBITDA growth as well as a very important contributor to cash flow generation. But right now we are modeling our base case in 2026 off of the 2025 trend line. Erik Hoag: Thanks guys. Thanks for the questions. Thanks, Troy. Thank you. Operator: Our next question comes from the line of Brandt Montour with Barclays. Please proceed with your question. Hey, good morning, everybody. Thanks for taking Brandt Montour: question. On the sales optimization announcement, was there any benefit from that to the bottom line in the fourth quarter? Michael Brown: There was no Q4 benefit. We will start to see some benefit in Q1. The impact was balance sheet related. Ben Chaiken: Okay. Thanks for that. Brandt Montour: And then just a follow-up because I do not think we have really ever talked about this—sort of what happens to the older resorts when you guys eventually move on, which makes total sense. I guess that is really not your problem. What happens to it is up to the HOA, the residual HOA, and what they decide to do with the property because it is their property. But, you know, and maybe it is negligible, but 17 resorts, it might sort of add up. Is there sort of a contingent of folks that have owned for a long time there that are not part of your points program that then you kind of do outreach to try and, you know, get them to sort of, you know, maybe convert so that they are not quote, unquote, like, left behind? And maybe it is just such a small amount of people at that point it does not matter. But just curious on how that sort of plays out. Michael Brown: Well, for us, it does matter. We will go through a sale process of the resorts. And it was not a one option for the owners. And keep in mind, we are a big owner here. We have worked with the owner base. We have worked with the HOAs to really provide two options for them. Number one is to receive proceeds from the eventual sale of the properties, which has been well received. Or to move their ownership back right back with us, and we are in the middle of a pretty intensive outreach to the owner base of all these resorts to make sure that they understand fully the two options. And what we have learned as we have moved along, even though I do not know we are a third or halfway through, is that once people understand their options, we are seeing a good number want to stay in their ownership and move across to a Club Wyndham or another type of product. So it is an intensive outreach program, and we have learned that there is a lot of surprise at the options that have been given and that there is some excitement about—some people, you know, it is just at their point in time said, I never thought that I would see proceeds from this, or, you know, I see great value in it and I want to keep my ownership. And that is what we are in the process of doing, and that is how we have moved along. So did I answer fully your question, or was there anything trailing there? No. That was great. It does not sound like there is a cost Brandt Montour: component with trying to make, you know, trying to sort of help those folks out— Ben Chaiken: So artist. Michael Brown: No. In some cases, it is going to be the opposite where there are proceeds. But I think ultimately, just to come back to the bigger point here, is we took that three-year example of netting 30 resorts positive, but if you go back even further, it is net growth of more than that. And hindsight 20/20, would have liked to have started this earlier, sort of onesies and twosies along the way. But at some point, you just have to catch up, and we have spoken at all our conferences about having four to five years of inventory. We want to get it down to two and a half, three. And this helps along that path. And additionally, you know, one of the value equations for owners is I do not want special assessments. I do not want maintenance fees going up beyond a reasonable level. And when you are looking at older resorts that have a lot of wear and tear, this really helps to reduce the likelihood that those elements occur and really help to preserve value and trade it out for higher-demand destinations. Operator: Just so clear. Thanks, Michael. Thanks, everyone. Michael Brown: Thanks, Brian. Operator: Thank you. Our next question comes from the line of Ian Zaffino with Oppenheimer & Co. Please proceed with your question. Ben Chaiken: Hey, good morning. This is Isaac Selhausen on for Ian. Thanks very much for taking the questions. I just had a follow-up on Travel and Membership from the previous questions that were asked. Maybe if you can touch on the profitability of the segment, with the exchange revenue headwinds, and if the mid-30s EBITDA margin is sustainable with the cost actions that were previously taken. Just any puts and takes on the margin would be great. Michael Brown: Yeah. So I would start with Erik Hoag: some of my prior comments around the 2025 trend line, sort of extrapolating into 2026 as sort of the baseline starting point for modeling. We do see a dynamic, right? So we have got exchange headwinds, we have got our Travel Clubs business that is continuing to grow very nicely. It was up mid-teens in the fourth quarter. There is a structural contribution margin difference between the two things, between those two businesses, that over the longer term, if the trend continues, we will see some broad-based erosion in segment margins for Travel and Membership. Ben Chaiken: Okay. That is clear. Thanks very much. Operator: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to CEO Michael Brown for closing remarks. Michael Brown: Well, thanks once again for joining us today. I am proud of what our global team of more than 19,000 was able to achieve in 2025. They drove our results which exceeded the expectations on nearly every metric, but we are not content with just having a strong 2025. We are focused on delivering outstanding results again in 2026. We are entering the year with confidence, momentum, and a clear path for growth and value creation. Erik and I look forward to seeing you at upcoming conferences and eventually on the Q1 call. Have a great day, everyone. Operator: And this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the PROG Holdings, Inc. Q4 Earnings 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 that your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, John Baugh, Vice President of Investor Relations. Please go ahead, John Baugh: Thank you, and good morning, everyone. Welcome to the PROG Holdings, Inc. Fourth Quarter 2025 Earnings Call. Joining me this morning are Steve Michaels, PROG Holdings, Inc. President and Chief Executive Officer and Brian Garner, our Chief Financial Officer. Many of you have already seen a copy of our earnings release issued this morning, which is available on our Investor Relations website investors.progholdings.com. During this call, certain statements we make will be forward looking, including comments regarding our 2026 full year outlook, and our outlook for the 2026. Listeners are cautioned not to place undue emphasis on forward looking statements we make today, all of which are subject to risks and uncertainties which could cause actual results to differ materially from those contained in the forward looking statements. We undertake no obligation to update any such statements. On today's call, we will be referring to certain non-GAAP financial measures, including adjusted EBITDA, and non-GAAP EPS, which have been adjusted for certain items which may affect the comparability of our performance with other companies. These non-GAAP measures are detailed in the reconciliation tables included with our earnings release. The company believes that these non-GAAP financial measures provide meaningful insight into the company's operational performance and cash flows, and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding the company's ongoing operational performance. In addition, I encourage you to participate in our Investor Day meeting being held at the New York Stock Exchange and webcast live on Tuesday morning, March 10, at 8:30 AM Eastern Time. Please reach out to me at John.Baugh@PROGHoldings.com for details on how to participate. With that, I would like to turn the call over to Steve Michaels, PROG Holdings, Inc. President and Chief Executive Officer. Steve? Thanks, John. Good morning, everyone, and thank you for joining us as we review our fourth quarter and full year 2025 results, which met or exceeded the outlook we provided in late October. I'll start with a high level view of the year, provide some context around the environment we operated in, and then talk about how our strategy and execution position us as we move into 2026. 2025 was a year that required balance, discipline, and focus. The retail and consumer environment remain challenging, particularly in the categories we serve, and we navigated meaningful disruption following the bankruptcy of a large retail partner. At the same time, we took deliberate action to tighten decisioning in our Progressive Leasing business to protect portfolio performance. Those dynamics weighed on leasing GMV, which was down 8.6% year over year. Adjusting for the Big Lots bankruptcy and the intentional tightening, underlying GMV in 2025 grew in the mid single digits, reflecting operational execution and healthy demand across other areas of the business. We gained balance of share with key partners, ramped new partner activity, expanded ecommerce penetration, and built momentum at Prog Marketplace, our direct to consumer motion. While leasing faced some headwinds, we saw important tailwinds at our buy now, pay later platform For Technology. For delivered triple digit GMV and revenue growth throughout the year. For continues to scale organically, with strong consumer engagement, and improving unit economics, and is playing an increasingly important role in our ecosystem. We also made meaningful progress in cross selling our products, Money App, our direct to consumer mobile cash advance business, and For, drove approximately $45,000,000 of incremental leasing GMV in 2025 up from $23,000,000 in 2024, as customers who engage with these products increasingly opted into leasing when it was the right fit. This cross product engagement is a central element of our long term strategy and an important offset to macro pressure in any single product. Alongside this execution, during 2025, we took a strategic step to sharpen our focus by selling our Vibe portfolio. A decision that aligns with our long term priorities around capital efficiency. Vibe is reflected in in discontinued operations at year end, and this transaction allows us to redeploy capital toward opportunities with stronger strategic alignment and return potential. In January 2026, we completed the acquisition of Purchasing Power, expanding our offerings into a differentiated channel and adding a complementary growth platform aligns with our long term strategy. So while 2025 presented real challenges, it was also a year where our diversified platform mattered, we leaned into the areas of the business with momentum, strengthened portfolio health and leasing, accelerated our strategy, and took deliberate actions to position PROG Holdings, Inc. for sustainable profitable growth. Before I address consolidated full year results, I wanna take a step back introduce how we are increasingly thinking about growth through the lens of consolidated GMV, rather than viewing GMV solely through the Progressive Leasing segment. As our ecosystem expands, GMV is being generated across multiple products, most notably leasing and For today, with Purchasing Power becoming part of that picture as we move into 2026. Looking at GMV on a consolidated basis provides a more complete view of customer engagement, transaction volume, and the overall scale of commerce flowing through the product platform. Importantly, as leasing For and Purchasing Power each represent distinct reportable segments for external reporting, we will continue to provide GMV results at the segment level to maintain transparency, and comparability over time. We believe this broader view of GMV will become increasingly relevant in understanding how customers engage with PROG Holdings, Inc., across multiple entry points and how that engagement ultimately drives long term value creation. For the full year 2025, consolidated GMV, which includes Progressive Leasing and For, grew 12.1%, supported by For's triple digit growth at approximately 144%. Turning back to Progressive Leasing for a moment, the intentional tightening to protect portfolio performance achieved the intended benefit. Full year write offs remained within our annual targeted range of 6% to 8%, and gross margin expanded year over year as portfolio yield improved. This reflects the effectiveness of our dynamic decisioning models, and our willingness to make proactive, data driven trade offs. At a consolidated level, adjusted EBITDA from continuing operations for 2025 was $269,000,000 which beat the high end of the outlook we provided in October was essentially flat to last year, and importantly landed within the original adjusted EBITDA range we guided to back in February 2025 despite the volatility and disruption we navigated during the year. Non-GAAP diluted EPS from continuing operations at $3.51 beat both the October outlook and the original guidance we provided in February. Together, these results reflect the year where we balanced near term pressure with long term value creation and generate strong free cash flow to reinvest in the business and return capital to shareholders. Moving to strategy, as our business has evolved, so is the way we think about our three strategic pillars: Grow, Enhance, and Expand. While the pillars themselves remain the foundation of our strategy, way we execute against them is increasingly shaped by our multiproduct platform. Rather than viewing leasing For Money App and Purchasing Power as stand alone products, we operate the business as a connected platform, where growth, customer experience, product innovation reinforce one another. This ecosystem first mindset is becoming a meaningful accelerant across all three pillars. Under our Grow pillar, our focus is on expanding the company by strengthening our industry leading partnerships and scaling our direct to consumer channels, with growth accelerated by customer engagement across our products. In 2025, at Progressive Leasing, we grew balance of share with some existing retail partners by deepening integrations, and executing joint initiatives across marketing, digital, and in store workflows. Even in a soft retail environment, these efforts allowed us to capture incremental GMV within existing doors by improving application flow, waterfall execution, and conversion across channels. Direct to consumer was another key growth driver. Prog Marketplace expanded meaningfully in 2025, delivering approximately $82,000,000 in GMV, nearly doubling year over year and exceeding our previously communicated target. Additionally, our ecommerce channel scaled, with ecommerce GMV reaching an all time high of approximately 30% of total Progressive Leasing GMV the 2025, and 23% for the full year compared to 17% in 2024, reflecting the shift towards digital engagement and the strength of our omnichannel strategy. Marketing is central to this pillar, our approach has evolved. In 2025, we expanded partner marketing programs with retailers, while also scaling cross product marketing using shared customer data and insights to engage customers more intelligently. A clear example of this is the previously mentioned $45,000,000 of leasing GMV generated through marketing to For and Money App customers during the year, which on a stand alone basis would rank as a top 10 retailer within the product leasing platform, underscoring the power of a connected approach. Under the Enhance pillar, our priority is delivering an industry leading consumer experience, one that is simple, efficient, and intuitive across every interaction. In 2025, we made meaningful progress improving how customers interact with PROG Holdings, Inc. through digital channels. We expanded self-service capabilities within our mobile app, allowing customers to manage accounts, make payments, and engage with our products more seamlessly. A critical enabler of these improvements has been our work to eliminate and consolidate technical debt. In 2025, we continued modernizing core platforms. This work is not always visible externally, but it is foundational. For example, we have improved the scalability of our back end systems through an ERP implement implementation, optimize our usage of cloud based resources, and enable faster product generation delivering more consistent experiences and better use of customer and decisioning data. Additionally, our innovation team at Prog Labs is at the forefront of customer experience through the use of AI. As we look back on 2025, I wanna highlight how AI has moved from an area of experimentation to one of real impact across the business. This was a year where AI became embedded into several aspects of how PROG Holdings, Inc. operates, not as a separate initiative, but as a set of capabilities directly supporting growth efficiency, and execution. The focus was simple. Apply AI where it improves speed, decision quality, and outcomes for customers, retailers, and our teams. In 2025, we embedded AI across operations and customer engagement. Piper Plus, our internal AI assistant, resolved over 18,000 inquiries with more than half handled on first interaction, improving efficiency and reducing friction. Our AI enabled flexible lease engine improved decision speed by approximately 75% and lifted marketplace conversion, while AI driven marketing delivered stronger returns and lower acquisition costs, all supported by robust governance and human oversight. Equally important, 2026, we are focused on enabling our people. More than 600 knowledge workers have access to secure AI tools for everyday use the development of digital agent employees. We're not building AI for specialists. We're making it accessible across the organization. Our focus is on scaling these capabilities, including the deployment of more autonomous digital agents to drive productivity quality, and function level efficiency. We view this as a continuation of the same strategy, disciplined execution, practical application, long term value creation, using AI as a lever to make PROG Holdings, Inc. faster, smarter, and more scalable. Enhancing the experience is not just about usability. It's about trust, repeat engagement, and creating late relationships that extend beyond a single transaction. Under our Expand pillar, we are focused on growing our offerings through new product innovation and added capabilities. In 2025, refinement of our decisioning posture was a clear example of this approach. We tightened approvals where necessary to protect portfolio health, while simultaneously progressing on capabilities with improved data and analytics to match customers with the right product, whether that was leasing For or Money App. This allows us to preserve access responsibly by improving overall outcomes. For scaled rapidly, delivering approximately 132% revenue growth in Q4 and 170% for the year. Q4 was the ninth consecutive quarter of triple digit GMV and revenue growth, and engagement trends remained strong throughout the year, with average purchase frequency of approximately five transactions per quarter and more than 164% growth in active shoppers year over year. New shoppers grew approximately a 168% year over year, representing a healthy leading indicator of platform expansion. Additionally, our For Plus subscription model is a key driver, staying consistent with over 80% of GMV coming from active subscribers. For’s take rate of approximately 10% defined as revenue generated as percentage of GMV over the trailing twelve month period, is an indicator of monetization efficiency. From a profitability standpoint, For generated adjusted EBITDA of $9,900,000 in 2025, representing a 13.5% margin on revenue. Money App approached breakeven adjusted EBITDA as it exited the year, reflecting improving stand alone economics, while also driving incremental leasing volume through cross sell. With profitability improving, we can increasingly focus on scaling the product responsibly to drive greater customer engagement, and generate incremental value for PROG Holdings, Inc. Finally, the sale of the Vibe portfolio in early Q4 2025 was a strategic realignment of capital and not an exit from serving our customers. We freed up resources to reinvest in products with better strategic fit and return potential. Looking ahead, Purchasing Power, further extends this pillar, expanding reach into a differentiated channel and customer base. The business aligns with our long term vision of delivering flexible, inclusive financial solutions while improving customer lifetime value across the platform. As Purchasing Power integrates into the PROG ecosystem, we see opportunities to drive cross product engagement, leverage shared data and decisioning capabilities, and enhance partner value. What ties Grow, Enhance, and Expand together is the ecosystem. Growth is enhanced because products feed one another. Experience is better because systems and data are being unified. Innovation is more impactful because access is is deliberate and connected. Is how we are building a more resilient, scalable PROG Holdings, Inc. One that we believe can perform across cycles to create long term value for customers, partners, and shareholders. While Brian will provide more detail on our 2026 outlook, I'd like to share our perspective on the macroeconomic backdrop as we enter the year. As we look ahead to 2026, we plan for an operating environment that remains challenging, particularly for the consumer segments that our products serve. While the rate of inflation has moderated, elevated prices for essential goods and services continue to pressure discretionary income. Big ticket retail categories such as furniture and appliances remain under pressure. And in our leasing segment, we begin the year with a smaller lease portfolio, down 9.4% year over year which creates revenue headwinds. That said, we also see offsets. Higher expected tax refunds in 2026 should provide incremental liquidity and near term support for demand and repayment behavior. Our pipeline with large retail brands and employers remains active. Broad Marketplace and our direct to consumer channels, including For, continue to scale, expanding customer reach and long term strategic optionality. Importantly, we begin 2026 with a leaner cost structure following S&A reductions in the leasing business, preserving our ability to invest in high ROI initiatives while improving downside protection and operating leverage. The realities of this operating environment are reflected in our 2026 planning assumptions. However, our strategy is clear. We'll reinvest in the business following our three pillared strategy to Grow, Enhance, and Expand with an emphasis on our multiproduct offering. We believe this approach spanning leasing For Money App and Purchasing Power positions PROG Holdings, Inc. to serve customers more holistically improve lifetime value, and deliver sustainable, profitable growth over time. From a capital allocation perspective, our priorities remain consistent with what we've previously outlined, which is investing in the business, pursuing targeted M&A opportunities, and returning capital to shareholders through share repurchases and dividends. In the near term, we will focus on prioritizing debt reduction as we work toward our long term net leverage ratio of 1.5 to two times. Before I close, I'd like to welcome Lee Wright, to the PROG Holdings, Inc. leadership team as President of Purchasing Power. Lee brings more than three decades of leadership experience across retail and consumer finance including his most recent position as CEO of The Vitamin Shoppe. He has deep expertise in credit, collections, and capital markets. Lee's operating discipline and experience scaling consumer finance platforms make him well suited to lead Purchasing Power's next phase of growth for PROG Holdings, Inc. We're excited to have him on the team as we integrate the business and unlock its long term potential. In summary, 2025 was a year of discipline and progress. We navigated disruption, made deliberate trade offs to protect portfolio health, delivered strong margin performance, executed a strategic divestiture, announced an acquisition and delivered exceptional growth in For. We entered 2026 with a resilient foundation, clear focus, and growing momentum across our ecosystem. I'm proud of our team's execution as we strive to create long term value for our customers, partners and shareholders. With that, I'll turn the call over to Brian for more detail on the Q4 financial results and 2026 outlook. Brian? Thanks, Steve, and good morning, everyone. Before I get into the financial details, I want to echo Steve's comments and acknowledge the team's execution in 2025. Delivering essentially flat adjusted EBITDA for the year and within the original outlook range of $260,000,000 to $280,000,000 provided in February, reflects disciplined management of the factors within our control alongside ongoing investment in the long term earnings power of the business. I'll start with a summary of the fourth quarter results, then cover consolidated performance for the year, discuss the balance sheet and capital allocation and finish with a few comments on our 2026 outlook. As a reminder, Vibe, which we sold in October, is reflected as operations of both the fourth quarter and full year results. We are pleased to highlight that for continuing operations, Q4 consolidated revenues were within our outlook range provided in October, our adjusted EBITDA of $61,500,000 along with a non-GAAP EPS of $0.74 exceeded the high end of this outlook. Our fourth quarter results were consistent with the trends we saw throughout 2025, disciplined portfolio management leasing and execution across our diversified platform, with triple digit growth of For Technologies. Despite GMV and revenue headwinds in our leasing segment, we delivered margin expansion through healthy portfolio performance, partially offset by investment in growth in strategic growth initiatives. Beginning with the Progressive Leasing segment, fourth quarter GMV declined 10.6% year over year, driven primarily by two factors. The impact of the Big Lots bankruptcy and our intentional tightening actions. Excluding approximately $40,000,000 associated with Big Lots, and $30,000,000 related to decisioning, underlying GMV grew 1% year over year, despite ongoing pressure on our consumer. Digital channels continue to be a bright spot, with Prod Marketplace GMV increasing 187% year over year reinforcing the value of our investments in direct to consumer and omnichannel capabilities. Progressive Lations Q4 revenue of $545,000,000 declined 8% year over year, reflecting the smaller portfolio throughout the quarter. Despite this headwind, gross margin expanded approximately 90 basis points driven by higher portfolio yield, and a greater proportion of customers remaining in their leases longer. Provision for lease merchandise write offs was 7.6% of revenue in the fourth quarter, an improvement from last year and within our targeted annual range of 6% to 8%. For the full year, write offs were 7.5%, reflecting our visibility and expertise that informed our tightening actions and disciplined portfolio management. For Resolutions, SG&A was $91,400,000 or 16.8% of revenue in the quarter. The year over year increase was primarily driven by approximately $5,000,000 of onetime costs related to a partner bankruptcy and incremental investments in technology and infrastructure to support future growth. Adjusted EBITDA for the Progressive Leases segment at $63,900,000 declined modestly reflecting the impact of a smaller portfolio partially offset by margin expansion of 90 basis points driven by higher portfolio yield and the sale of aged receivables. Q4 adjusted EBITDA margin for Progressive Lacing came in at 11.7%, and 11.4% for the year, which is within our 11% to 13% annual margin target. Turning to our other businesses. For delivered another quarter of triple digit GMV and revenue growth. While For reported an expected adjusted EBITDA loss of $1,200,000 in the quarter due to seasonal dynamics and upfront provisioning, for holiday originations. Performance for the full year was strong. In 2025, For generated approximately $730,000,000 of GMV, representing a 144% growth year over year, and delivered approximately $10,000,000 of adjusted EBITDA a meaningful improvement from a loss in 2024. These results reflect improved unit economics, disciplined underwriting, and increased sale scale across the platform. Money App also performed in line with expectations, reaching approximately EBITDA neutral performance for the quarter and playing an increasingly important role as an engagement and cross sell engine. Money App drove significant incremental lease in GMV in 2025 reinforcing the value of our ecosystem approach. At the consolidated level, fourth quarter revenues from continuing operations declined 5.2% year over year to $574,600,000 reflecting the smaller leasing portfolio partially offset by triple digit growth at For. Consolidated gross margins improved 284 basis points to 36.3%, driven by margin expansion of Progressive Leasing, and a shift towards higher margin For revenue. Consolidated SG&A from continuing operations for the quarter increased 19% of revenue, reflecting investments in technology, and the previously mentioned onetime partner related costs. Consolidated adjusted EBITDA declined 4% year over year to $61,500,000 or 10.7% of revenue as lower leasing profitability weighed on consolidated results. For the full year, consolidated adjusted EBITDA from continuing operations totaled approximately $269,000,000 or 11.2% of revenue and non-GAAP diluted EPS was $3.51. Both exceeding the high end of our outlook we provided in October. Turning to the balance sheet. We ended 2025 with $308,800,000 of cash and total available liquidity of approximately $659,000,000 including our revolving credit facility. Net leverage at 12/31/2025 was 1.1 times trailing twelve months adjusted EBITDA. As previously disclosed, following the acquisition of Purchasing Power on 01/02/2026, net leverage increased to approximately 2.5 times. Importantly, these leverage metrics exclude the nonrecourse ABS debt, used to fund Purchasing Power's operations. Brian Garner: In 2025, we generated healthy operating cash flow and returned capital to shareholders through dividends and share repurchases. We repurchased approximately 1,800,000 shares at an average price of $28.20 and pay dividends totaling $0.52 per share for the year. We did not repurchase shares in the 2025 due to advanced discussions related to the divestiture of the Vibe portfolio and Purchasing Power acquisition. Our capital allocation priorities remain unchanged. Investing in a high return growth initiatives pursuing strategic M&A opportunities and returning excess capital to shareholders. Near term, our focus is on integration and execution following the Purchasing Power acquisition, alongside meaningful progress towards bringing net leverage back into our long term target range of 1.5 to two times. This target excludes nonrecourse ABS that used to fund Purchasing Power Let me now touch on some key aspects of our 2026 outlook as outlined in this morning's earnings press release. For Progressive Leasing, both first quarter and full year 2020 results will be influenced by the 9.4% lower gross leased asset balance entering the year which will pressure revenue particularly in the 2026. As the year progresses, we expect revenue trends to improve as portfolio growth resumes and the benefits of our strategic initiatives compound. The Resolution's portfolio performance is expected to remain within targeted yields as we actively manage decisioning dynamics. We anticipate modest growth gross margin expansion driven by higher yield trends exiting the 2025. And we expect lease merchandise write offs to deliver another year of consistent performance within our targeted annual range of 6% to 8%. We expect Progressive Leasing SG&A to remain flat to 2025 as a percentage of revenue and EBITDA margins to expand, reflecting our deliberate effort to align expenses with the revenue trajectory while continuing to prioritize high return initiatives. Our approach remains disciplined, eliminating unnecessary cost, and managing spend through a portfolio lens to optimize return on investment. Turning to our other segments, Purchasing Power is expected to contribute $680,000,000 to $730,000,000 of revenue and $50,000,000 to $60,000,000 of adjusted EBITDA for the full year. While we typically do not provide quarterly outlook for our operating segments, Purchasing Power is new to our portfolio, and we think it's important to highlight the seasonal dynamics of this ecommerce business. Historically, Q1 is the lowest revenue earnings quarter of the year. And as such, we expect Pershing Power's first quarter to be roughly breakeven on an adjusted EBITDA basis. For the balance of the year, it follows similar trends as holiday centric retailers with fourth quarter contributing the most revenue and earnings. We expect FORWARD Technologies to deliver another year of significant revenue growth alongside expanding adjusted EBITDA margin as the platform continues to scale. Turning to 2026 consolidated outlook for continuing operations. We expect revenues to be in the range of $3,000,000,000 to $3,100,000,000 adjusted EBITDA in the range of $320,000,000 to $350,000,000 and non-GAAP EPS in the range of $4.00 and $4.45. This outlook assumes a difficult operating environment with soft demand for consumer durable goods, no material changes in the company's decisioning posture, an effective tax rate for non-GAAP EPS of approximately 26%, no material increases in the unemployment rate for our consumer, and no impact from additional share repurchases. In closing, 2025 demonstrated the resilience of our model and the benefits of disciplined execution. Despite meaningful headwinds, we protected portfolio performance, invested for the future, strengthened our ecosystem, and improved the long term earnings power of the company. As we enter 2026, we remain confident in our ability to navigate challenging environment while continuing to build long term shareholder value. I'll now turn the call back over to the operator for questions. Operator? Operator: Certainly. Star one one on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question will be coming from Kyle Joseph of Stephens. Your line is open. Kyle Joseph: Hey, good morning, guys. Thanks for taking my questions. A lot of positive things going on. And yes, welcome back or welcome, Lee. Brian Garner: But, yeah, I wanted to Kyle Joseph: dig in on Purchasing Power a little bit. Obviously, Steve Michaels: that's one of the businesses we're we're least familiar with, but just give us a sense for how you expect that segment to perform maybe versus 25%? Appreciate the color you gave on seasonality, but kinda how you're thinking about that business in terms of growth versus 25 and then, you know, what sort of levels synergies you expect in '26? And if there's any incremental juice to squeeze beyond that. Thanks. Brian Garner: Yeah. Good morning, Kyle. Thank you. Yeah. We're excited about Purchasing Power. Obviously, we closed it here forty five days or so ago. The outlook that we provided this morning was consistent with what we gave when we did the announcement back on December 1, I think. It that that was the date. That that revenue outlook implies a low double digit revenue growth for the for the business. Steve Michaels: And so we'll continue to push on that and hope that Brian Garner: combination in in in the PROG Holdings, Inc. ecosystem can can help to to drive growth that growth and and hopefully beyond. On the on the earnings front, on the adjusted EBITDA front, you know, we're we're looking at a kinda seven ish, seven and half seven to 8% adjusted EBITDA margin. Just a reminder that adjusted EBITDA is burdened by the the interest expense from the from the ABS transactions. Or the ABS facilities And, you know, we we we look for opportunities to expand that EBITDA margin over time. We believe that we can get it into kind of the low double digit range similar to leasing, but that's not a 26 commentary Probably not even a 27. It depends on how how successful we are at the growing the business because scale is is really the way that we're gonna drive the the EBITDA margin. There's also some efficiencies and some opportunities from a synergy standpoint. That by being part of PROG Holdings, Inc. from from a data and and and tech and and other shared services type stuff. But we we really are looking to grow the business and take advantage of the revenue synergies, which we didn't really include in 2026's outlook because, you know, they're you you have to capture them first. And so but there's, we believe, tons of of opportunity across the the retail partners that we serve, the employer clients that happen to be retailers that Purchasing Power serves as well as cross marketing different products. Within the the Purchasing Power system. So we're excited about the opportunity. The we're hitting the ground running. And moving as fast as we can. It's not gonna be straight up into the right as it as it never is with with integrating an acquisition, but we're excited about what we can accomplish there. Kyle Joseph: Great. Really helpful. And then shifting to the credit for the outlook. I know you guys talked talked about at least on leasing remaining within your kind of your goalpost in terms of loss expectations. But, you know, just walk us through some of the puts and takes. Obviously, macro isn't perfect by any means. You know, you guys tightened underwriting there. Lot of headlines about, you know, elevated tax refunds. And and I think, you know, historically, we focused on lease I think if you could give us kinda your sense for credit outlook by product given some of the contra the other contributions part particularly for and and Purchasing Power, I think that'd be be helpful. Thank you. Brian Garner: Yeah. I could I can I can start and Steve, anything you wanna you wanna add? Good morning, Kyle. I think just starting with Progressive Leasing and what's what's baked into our our view for '26 from a from a a credit perspective, So we're we're we're encouraged by what we're seeing thus far in terms of the the the outcome of our tightening efforts. A year ago. And we have not had the need or or seen the data reason to to tighten substantially or or or make a make you know, more more significant moves. So I so I like where we're sitting. I like what what we saw here in in Q4 with a with a 7.6% write off for for leasing, you know, that's improved a year over year perspective about 30 basis points And I think as we as we're watching these these early indicators, you know, whether it's you know, news on the on on the student loan, front or pressure on the subprime consumer more broadly, We're watching, you know, as you see in auto delinquencies and elsewhere. Those are all data inputs that were actively managing and we're we're feeling comfortable about our current decisioning posture and and and but we will continue to watch it. I think just kinda stepping through to to to four, You know, the the you have you have observed kinda you know, I just wanna draw your draw your attention to and maybe everyone's attention to some additional details on four that are provided here as we've reported out as a a separate lease, a segment for four for all of 2025. And you can you know, there's additional details in the K that will be forthcoming here this morning. But here in the in the the the earnings release as well, you're able to see kind of the the provision that is attributed directly to Ford, and you can see their performance there. Know, the biggest the biggest driver for for four under under CECL accounting and the and the short term duration of their of their instruments, really what's gonna be, you know, driving that is is growth to to a large degree, particularly in Q4 as they they accelerate. And that's what you see in in the tables that we've provided. There's kind of a Q4 buildup of the other provision. I think what what is implied in our guidance, and this is this is very directly tied to the credit picture. Is we're expecting improvement in overall EBITDA margins for the midpoint of of our guidance is right just over 15% for four. And that's up from about 13 and a half percent in in 2025. And so that that's gonna come with scale. Scale is gonna drive that Efficiency is gonna drive that. But the credit performance side is as we get smarter with the CSNI, smarter with with underwriting. So I don't wanna I don't wanna commit to, you know, you know, a a specific number with four. We haven't given guidance on that. I would just say that that team has been finding ways to drive margin expansion and and we'll maintain credit discipline along the way with Ford in order to in order to hit our targets here. And so we're we're we're moving EBITDA margin the right way for and the credit picture is obviously part of that formula. And then Purchasing Power, there there is not you know, we have not provided any details on on the low mass provision around Purchasing Power. I I that's that's kind of a short term situation here next middle middle of next month, you're gonna see some required disclosures that we need to make around the historical financials of of Purchasing Power. And you'll you'll see kinda 2024 out of the financials, pro pro form a year to date as of 09/30, you're gonna see some some information. So you'll be able to get a a better picture of kinda, how their their P and L is is built up, but obviously, we're reported on Q4, so we don't have any of their financials rolled up to here. But I would just say that that's that's a controllable dynamic for us We and we are from at a starting point, we feel there is a tremendous amount of opportunity for us to overlay our expertise. We we we feel that we've developed over the years. To that business and and leverage leverage our knowledge around this consumer and and how best to serve them. And so I'm I think there's plenty upside on on that front is is what I would say. Steve Michaels: I don't know if you have any excuse. Kyle Joseph: Thanks, Brian. Real really helpful. Last one for me. And I can get back in the queue. I was gonna you know, given where we are in the air, gonna ask the obligatory, pipeline question. And I'm still curious to hear your perspective there. But I also wanna ask about kind of the evolution of the the sales process now that you guys have so many different products available. Brian Garner: Yeah. Kyle, maybe I'll I'll I'll let somebody else ask the pipeline question. But I mean, you mean you're talking about the you're talking about the biz dev the pipeline with the different products? Yeah. I mean, we're we're incorporating Steve Michaels: four and and Brian Garner: and Money App into our discussions as it relates to our existing, relationships. And we expect as we move forward, Purchasing Power will will have additional products on its voluntary benefits platform that will help with with landing new employer clients as well. So that it's it it continues to evolve as our overall ecosystem strategy and we'll certainly talk more about that at the Investor Day. Kyle Joseph: Great. Thanks for taking all my questions. And our next question will Operator: be from Harold Groch of B. Riley Securities. Harold, your line is open. Steve Michaels: Hey, guys. Thanks for the all the information and and detail. Wanted to ask about you know, Purchasing Power and the ABS transactions they do that are embedded in the cost of sales. How long is Purchasing Power by the ABS issuer and what kind of interest rates are are they charged I mean, are they basic what's their cost of capital? Brian Garner: And you know, for those transactions historically, Ben, and what do think you can do embedded in you in a large a larger company. Steve Michaels: They've been they've been in the market for I'll say, many years. I don't know the exact number of years, but they're a seasoned issuer. Brian Garner: Okay. We are actually in the market right now to replace an an expiring facility. The 2024 A facility, And you know, we expect that Steve Michaels: we can improve on those economics, but we can't commit to Brian Garner: anything until until the deal's closed. Oh, okay. And and then and then the the b BNPL segment, the growth is just best in class. Maybe you could just give us qualitatively, you know, what you know, you're basically growing two x even the next type the next closest Steve Michaels: peer, maybe from a smaller base. But Brian Garner: maybe you could share with us your thoughts on qualitatively, quantitatively how this growth has has been so outstanding and Steve Michaels: and any commentary on on losses and merchants that you're having success with. Brian Garner: Thanks. Steve Michaels: Yeah. And Brian Garner: kudos to the team. They're they're doing an awesome job. And I don't wanna take anything away from the team, but I would I would point to what you said, which is kind of it's from a smaller base. But but we do Yeah. We're very, very, very excited about the about the ability to acquire customers both organically and then through a paid Steve Michaels: a paid marketing motion Brian Garner: And we saw very strong acceptance, if you will, of of the product in the back half and and expect that to continue in 2026. Our For Plus subscription service is is why is getting wide acceptance and actually exceeding our expectations as it relates to active subscribers. You know, the it does have churn like all subs all subscription providers do, but we're we're but it's below our you know, below what we had forecast. And we basically executed through the the holiday season with a higher base which helped for us to Steve Michaels: outperform our internal forecast for the quarter. Brian Garner: We're having it's a direct to consumer model, right? So it's not really based on merchant traffic at their in their checkout card. It's it's flowing through the For app, which has great user reviews, you know, star ratings, The it's it's highly ranked in the App Store depending on, you know, where we are in the market. From a paid marketing standpoint. And we're really seeing a nice a nice balance of customer acquisition repeat usage, and broadening that platform. So know, when the law of big numbers kicks in, I do expect that the growth rate will decelerate, but it'll decelerate from a very high level to your point. And we put out some guidance this year that implies a growth rate, and it's Steve Michaels: that team is Brian Garner: highly motivated to even beat those growth rates and we'll do it in a disciplined way. We we are continuing to tweak and optimize the the underwriting And but there's some seasonal dynamics to that where you where you do take on some more risk in four quarter, but that is a is still a high ROI action because you you turn many of those new customers into derisked repeat customers, and it helps to drive GMV as the rest of the year goes on. So we look forward to continuing to update you on on the on the progress. We expect the progress to be impressive throughout twenty six and and beyond. Steve Michaels: Excellent. Thank you. Operator: And our next question will be coming from Brad Thomas of KeyBanc Capital Markets. Your line is open, Brad. Steve Michaels: Good morning. Thanks for taking the question. A lot of Brian Garner: exciting things happening over there. Steve Michaels: To ask about. But I maybe wanted to start with GMV, if I could. And I think if I've tracked the numbers right, you said the underlying business ex the tightening and big lots was up about 1%. That was a little softer than where you had been tracking Brian Garner: recent quarters. Just curious if there was any color on how things were trending by category or with partners or anything else that you've seen here in the quarter? Steve Michaels: Yeah, Brad. Thanks. And, yeah, Brian Garner: it relates to leasing GMV for the quarter, would say that we Steve Michaels: it was a little softer than our internal expectations. And, you know, it's always difficult to to forecast GMV on the October before the holiday season kicks in. But Brian Garner: but what what we saw is really Steve Michaels: weakness in in kind of late October, and and the first three weeks of November. And it's difficult to pinpoint it exactly, but the the one kind of data point that was out there was this government shutdown, and it just seemed like there was maybe a little bit of hesitation on behalf of the consumers to to enter into the new deals and and take on new originations. And that's not a commentary on on us having much exposure in the leasing business to government employees because we don't. And the extent we do, it's mostly military, and we're not even aware that they were impacted from a pay standpoint. It just seemed to have kind of, like, a a negative headline effect on on trading. Because what we saw is the Black Friday to Cyber Monday period was actually okay. And we and we had a decent actually, a nice rebound in December. And had, you know, had the best performance of Brian Garner: of the quarter. And actually, Steve Michaels: best performance for a month in in quite a while for 2025. So there was the the quarter came in a little bit below where we expected. And that was the cadence of it. It was a a week October a a week ish October, a week ish first three weeks in November, and then a slight a rebound in the the the holidays and in the through Christmas. That's really helpful, Steve. Brian Garner: And as we think about GMV for 2026, a bright spot will be that big LUTs headwinds start to get out of the system as we go through the first half. Brad Thomas: But I know you've had Brian Garner: at least one of their retail partner that's gone bankrupt. Can you help us maybe size how much of a headwind that will be Steve Michaels: Yeah. Thanks. Yeah. We Brian Garner: so as we sit here, you know, in this first quarter, Steve Michaels: we're we expect by the February, we'll we will have kind of lapped both the Big Lots GMV headwind as well as the the decisioning tightening that we kinda reported on all last year. And so it's our expectation that as as we get into a clean quarter, kind of in Q2, we'll see improving GMV trends We're not we're not gonna be talking about the other we're not gonna have a repeat of '25 where we're or every quarter we're talking about the headwind related to the bankruptcy of that other partner because we're just gonna execute against it and and and cut and and cover it up with with, hopefully, growth elsewhere. So you know, we're we look forward to getting into some calm waters lapping those two discrete items that we talked about all of '25, and and and delivering some improving results certainly in the first half. And then you know, better than that in the second half. I I appreciate that color. Brian Garner: Maybe moving on to cash flow. I apologize if I missed it. I know you guys are usually very capital light business. Steven Michaels: But any color on where CapEx may be now that you own Purchasing Power? And particularly as we consider the impact of the one big beautiful bill, how are you thinking about free cash flow for this year, considering the EBITDA guidance? Brian Garner: Yeah. I I'll I can start. Yeah. I think we're feeling I think we're feeling good about the cash flow dynamic. You mentioned the one big beautiful bill. That's the impact of that that bill had about, call it, $25,000,000 impact in terms of incremental cash impact in 'twenty five, and we expect you know, we talked about $9.09 figures. So so right around, call it, $100,100,000,000 dollars, in in '26. And so the the cash generation there is is certainly positive. As I as I just kinda think about the you know, what I expect in in '26, just kinda work down the cash flow statement. I I think Progressive Leasing segment is gonna do what what it's really always done, which is generate a lot of cash that gives a lot of optionality. And growth rates will will impact that, but I think as you kinda you know, look at what historical cash flow from operations has been, largely that's generated by the Progressive Leasing segment. And I think you know, those are those are you know, we'll stay within reasonable range of what we've we've generated historically, kinda at these projected growth levels. And I think you know? So so the questions are what what do you do with that cash flow? Like Steve mentioned, we're we're gonna emphasize delevering our balance sheet. So we came out of the purchase power acquisition with about 2.5x excluding nonrecourse debt. We've got a we we've got an emphasis on on paying down that debt. And I think, you know, it's it's not a stretch to say we'll be kind of approaching that two times turn pretty pretty quickly. So here this year. So I think there's there's an emphasis on on that. And then you you look at, you know, what we're doing with cash flow from from from investing, you see the you see the channel of cash flow into new loans at four And, you know, that's we we we are pleased to send as much their way as as we're able to originate with discipline. And so you know, if we were to use up a meaningful portion of cash flow from Progressive Leasing, two and and channel it to four. I think that means we're doing we're we're doing the right things over there. And so there could be some cash usage there at four. And that Purchasing Power, is is largely going to to you know, they have they have optionality around their ABS facilities. And I think we'll we'll kinda you know, reassess and and look to optimize where it makes sense, how we're utilizing cash versus leaning on leaning on the the ABS. But the ABS picture will be will continue to be a a meaningful part of how they're how they're financing their business. And they they they have a you know, a strong cash flow profile as well. So that's that's why I'd say it's kinda you're thinking through the gives and takes in cash. But the net net is we're gonna have more than than we need here this year to to run the business invest in new businesses and also make Steve Michaels: make other decisions. Operator: And our next question will be coming from Bobby Griffin of Raymond James. Your line is open, Bobby. Good morning. This is Alessandra Jimenez on for Bobby. Thank you for taking our questions. I first wanted to follow-up on Kyle's earlier question. What do you think is the largest synergy opportunity within the Purchasing Power segment? Alessandra Jimenez: And what do you expect to benefit the P and L over kind of the early integration period versus a multiyear opportunity? Steve Michaels: Yeah. I mean, the the largest opportunity is to accelerate the growth rate of the business. We've got a great even before we before we bought them, they have a great installed base of client partners. But we believe we can help get better penetration into the existing eligibles which are, you know, basically, they are the employer partners employees. As well as add new new partners to the to the platform. And and also help with the direct to consumer channel, the what they call the PPC Select or or the PPC Direct. So there's lots of scale opportunities. That's the largest opportunity, and that's what we're gonna be driving. At the same time, just like we always do, we're gonna look for opportunities on the on the cost side and improvements in the data side and on the collection side. And you know, we certainly underwrote some of that in our in our diligence process. But the the the growth side is where the most exciting synergies are. Alessandra Jimenez: Okay. That's helpful. And I understand it's still early in kind of the tax return season, but are there any reads on how the tax returns are progressing so far this year? Steve Michaels: No. It's it's really early. I mean, there was one report from the IRS last week that many people warned to just kind of ignore, but we expect next week and potentially that March to be when all the all the action happens. So we're we're standing by as well. Alessandra Jimenez: Okay. Perfect. Thank you so much, and best of luck here in 2026. Thank you. Operator: And our next question will be coming from Anthony Chukumba of Loop Capital Markets. Your line is open. Anthony Chukumba: Good morning. Thanks for taking my question. So my first question, Brian Garner: this $5,000,000,000 write off of assets due to retail bankruptcy, what exactly did that consist of? Is that, like, like, money that they owed you, or is that, like, yeah. If you can just give a little color on that. Steve Michaels: Yeah. I mean, sometimes, Brian Garner: in every case, but in some cases, when you when you initiate a new retail partnership that is a multiyear exclusivity. There's either an upfront payment or a prepayment of some type of rebate or something, and then obviously, if that chain goes into liquidation, then you're not gonna be able to generate any any business from that chain anymore, and you have to you have to take the unamortized portion of that those economics through the P and L. Anthony Chukumba: Got it. Okay. And and then just in terms of the, you know, higher income tax refunds, my assumption would be that that you know, or your expectation would be that would lead to a higher degree of early lease buyouts, ninety day buyouts. Is that a reasonable assumption terms of what your expectation is? Steve Michaels: Yeah. I mean, history would say that that is what what could happen and has happened in previous tax seasons. Steven Michaels: So Steve Michaels: early but also outside of early buyouts, it also helps with just regular repayment behavior and kind of some healing of the portfolio and some demand signals, hopefully, But increased liquidity in the customer's hands generally turn into into some some payoffs. Is healthy for the portfolio also. We have observed in previous years when when the the payments were delayed that actually had a behavioral impact on the consumer, and there weren't quite as many buyouts as we might have expected. But we'll have to see what happens over the next three weeks or so. Operator: And our next question will be coming from Hong Dwyn. Of TD Cowen. Your line is open. Hoang Nguyen: Thank you, and good morning. Thanks for taking my questions. Anthony Chukumba: So I want to ask about the EPS guide like it's very, very strong. So you're guiding almost to almost 20% growth in EPS. But I understand that the prop leasing business is kind of shrinking in '26. So can you talk about that mix of improvement in profitability between, you know, Purchasing Power coming in and maybe, you know, the improvement that you are seeing in '4 So I guess that's where the the improvement in profitability comes from. Thank you. Steve Michaels: I think, I mean, you could look at the segment the segment outlook that we gave. And the the leasing business. Is pretty flat on on an adjusted EBITDA basis. I mean, depending on what point you pick in the guide, And then four is up. And a a smaller adjusted EBITDA loss and and other And then Purchasing Power, we've said we believe it's a double digit accretive acquisition for 2026. So think those are kind of the the building blocks to the to the EPS guide. Got it. And maybe I want to ask again on the tax refund season because I think over over the past Anthony Chukumba: maybe three or four years, there were years when, you know, you guys kinda saw the Goldilocks environment, right, where people have the money, but they kind of stay in the lease for longer. And when they are very flushed with cash and then, you know, they kind of pay down, then that kind of crush the gross margin. So, I mean, I guess I mean, how how should we think about it this year? Because we're seeing average refinancing up 10%. Based on the earliest data. So how should we think about which direction it's it's going? Steven Michaels: Thank you. Steve Michaels: Yeah. I mean, that's you know, Steven Michaels: we have Steve Michaels: don't know. Right? We're we'll see how the how the customer behaves. Like I mentioned earlier, we have observed in the past that when when refunds are delayed several weeks, that we see less ninety day buyout activity. We're not predicting, you know, 2023 maybe where people stayed in the leases longer. We are seeing people stay in leases longer, but we don't think tax refunds are necessarily gonna be a driver of that. And it really depends on how the there's a lot of reports on what the average size or or the size of the average refund is. And how that slices and dices between kind of someone making 40 to 100,000 versus someone over a 100,000 which generally isn't our customer, not always, but generally isn't. So we'll see if that 10% if it's if it stays at 10% higher, I don't think it'll change behavior all that much. If it comes in at 30% higher, then I think it could potentially Anthony Chukumba: cause Brian Garner: some more Steve Michaels: ninety day buyouts, which would have an impact on gross margin. And our next question Brad Thomas: will be coming from Eunice Sun of Jefferies. Your line is open. Alessandra Jimenez: Hello. Thank you for taking my questions. You mentioned a switch to or switch in how you view the business to consolidate a GMV in addition to colors around the segment GMV. Could you expand a little more on that And how would that change how you or we should think about the drivers at the business, seasonality, momentum, segment contribution, anything will be helpful. Steve Michaels: Yeah. I mean, I think the the statement that we believe that with with four and leasing and now Purchasing Power, kind of all having the equivalent of GMV we believe that a consolidated GMV is a more holistic way to measure the the amount of commerce going through the PROG platform. It doesn't change the fact that we're gonna be tracking leasing GMV and tracking For GMV. Because all GMV is not created equal. And they and they have different paths They have different conversion into revenue and different paths through the P and L. And so it it while we think it's a a a useful metric that we will be talking about, You shouldn't and we will not get away from tracking the individual segment GMV results. And I think that you know, the the fact when we give revenue guide for each individual, segment, implied in that is an expectation around GMV. So it's not a it's it's not a departure. It's just a click up on the on the kind of global view, and we think it's helpful. Alessandra Jimenez: Thank you. And my next question is on expense cadence throughout 2026. Is there any cadence or investment throughout the year that we should think about? And how would that impact segment margin dynamics? Especially for for where it is where the margin is right now versus where the guide is. Thank you. Brian Garner: Yeah. So if I just go go segment by segment, on the Progressive Leasing side, I think we indicated that our expense cadence or our expense overall will be will be consistent with last year in terms of percentage of revenue. There's not there's not much in the way of, lumpiness along those lines, and there's there's variable cost tied to revenue. And so as as revenue is you know, seasonal, so will those some of those some of those costs. But but there's not, you know, a significant bullet at any point in time to to put on your radar. Think the the same case with with four. There's there's always always continued investment, but nothing that that jumps out as as significant. I think the biggest margin drivers there, again, are gonna be obviously, optimization and and growing growing EBITDA margin over the course of the year just as they get more efficient and and better able to manage the portfolio. And then nothing nothing really to to point out at Purchasing Power. Obviously, there's you know, anytime you you you acquire private company and you're you're going through getting them ready to to be public, there might be some some front end costs That's so maybe there's a little bit more of front weighted slightly, but nothing that I would I would say materially you should factor in. Operator: And our next question will be coming from Vincent Caintic of BTIG. Your line is open, Vincent. Vincent Caintic: Hey, good morning. Thanks for taking my question. I wanted to follow-up Brian Garner: sort of on the seasonality discussion again in terms of the guidance. Strong full year 2026 guidance Steven Michaels: first quarter guidance is a little bit more mixed. Anthony Chukumba: So I'm sort of wondering, so you just gave the expenses, that's really helpful. Brian Garner: How should we think about the revenue side and the inflection through the year? Steve Michaels: I think you've already provided Purchasing Power has that seasonality, which you discussed in terms of revenues. Brian Garner: For four, should we kind of be expecting this continued acceleration as you've been experiencing? Anthony Chukumba: And then for the leasing business, Brian Garner: so you talked about you're lapping both the loss of the partner as well as tightening underwriting in February Is there sort of any way to Steve Michaels: kind of get a sense of what underlying GMV would have been without that? I know you said without Big Lots, it would have been 1% higher. I'm sort of thinking, like, how does the cadence look like them? Brian Garner: Second quarter onwards? Steve Michaels: Thank you. Yes. I mean, I'll try and help you there. I mean, you you talked about Purchasing Power. It being new to the platform, we wanna give that quarterly color. And and so it it's it's roughly kinda breakeven in in Q1. And then obviously, we're we're guiding to 50 to 60. So in Q4, we'll it's a holiday retailer. So Q4 will be the the strongest quarter from a revenue and earnings standpoint. '4 has seasonal dynamics as well. Q1 will be a strong profitability quarter because of the revenue and fees generated off of the really high GMV from December got provisioned in December and hasn't had a chance to to generate the revenue as much yet. We'll continue to at our growth rates that we're projecting, you know, we'll we'll have another big fourth quarter next year or this year, sorry, And we'll see if if it like, last year, it caused us to swing to a loss, although a small loss, but a loss in Q4 from an adjusted EBITDA standpoint, We'll see what happens this year based on scale and other factors. But Q1 is a strong earnings quarter for that business. Mean, leasing is starting, I would I would say, more so from versus the the GMV front. It's starting at a 9.4% smaller portfolio than it had at the beginning of the year due to the GMV from 2025. So from a revenue standpoint and a earnings standpoint, there's a kind of an uphill climb there that you know, in the first half that hopefully gets better in the second half. From a GMV perspective, we you know, we are lapping those two discrete items, and, hopefully, those are behind us. Well, those will be behind us here. At the February. Brian Garner: And so we'll see some improvements in in GMV performance as we get out of the first quarter, into the second quarter, into the back half. But so that's Steve Michaels: guess, that's the color we can provide on the quarterly Brian Garner: version of the annual guides. Okay. That's helpful. Thank you. And last one for me. So we talked tax refunds a little bit already, but maybe if you could talk about just broadly what your expectations are for tax and what's built into Anthony Chukumba: guidance? Thank you. Brian Garner: Yes. Similar to what I said, I mean, Steve Michaels: you know, there's lots of reports that they're gonna be 30% higher this year. Not positive that that that our customer base is going to see that type of a percentage increase. Because of some of the things that are available in that tax bill are not available to our customer at their income level. However, I we do expect it to be higher. Anthony Chukumba: And so Steve Michaels: somewhere between probably 10 30%. And if that's the case, we'll see an inflow of cash, which is always good. Hopefully, we'll see some some demand signals on the GMV front. And it remains to be seen just what the GMV I'm sorry. The ninety day buyout activity will be So we have some you know, we have some estimates that it's a you know, a little more active tax season than the past, which I think is reasonable based on the fact that we think the liquidity position will be higher Operator: And I would now like to turn the conference back to Steve for closing remarks. Steve Michaels: Thank you, everyone. I appreciate you bearing with us here as we went a little long, but know, we're proud of the year, the 2025 that we delivered and excited about our plans for '26. Want to take an opportunity to, again, welcome the Purchasing Power team to PROG Holdings, Inc. We're excited to be working with you and to to unlock the potential of that great business. But also to thank all of our team members for their continued hard work and commitment to serving our customers and and retail and employer partners. I'd like to reiterate John's invitation for you to participate in our upcoming Investor Day on March 10. We have a great presentation lined up and look forward to laying out the PROG Holdings, Inc. story in more detail. And I look forward to y'all hearing from a broader part of the leadership team as opposed to just Brian and I. So please reach out to John on how to participate. In that Investor Day. We appreciate your time, and we look forward to updating you on our progress at the Investor Day and after Q1 in April. Thank you. Operator: And this concludes today's program. Thank you for participating. You may now disconnect. John Baugh: Goodbye.
Operator: Greetings, and welcome to the EnPro Industries, Inc. Q4 2025 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, James Gentile, Vice President, Investor Relations for EnPro Industries, Inc. Please go ahead, James. Thanks, Kevin, and good morning, everyone. James Gentile: Thank you for joining us today as we review EnPro Industries, Inc.'s fourth quarter and full year 2025 earnings results and introduce our outlook for 2026. I will remind you that this conference call is being webcast at enproindustries.com where you can find the presentation that accompanies this call. With me today is Eric A. Vaillancourt, our President and Chief Executive Officer, and Joseph F. Bruderek, Executive Vice President and Chief Financial Officer. During this morning's call, we will reference a number of non-GAAP financial measures. Tables reconciling these historical non-GAAP measures to the comparable GAAP measures are included in the appendix to the presentation materials. Also, a friendly reminder that we will be making statements on this call, including our current perspectives for full year 2026 guidance, that are not historical facts, that are considered forward looking in nature. These statements involve a number of risks and uncertainties, including those described in our filings with the SEC. We do not undertake any obligation to update these forward-looking statements. It is now my pleasure to turn the call over to Eric A. Vaillancourt, our President and Chief Executive Officer. Eric? Good morning. Since launching this next phase of our value-creating strategy last year, Eric A. Vaillancourt: there's been tremendous pride, motivation, and focus throughout EnPro Industries, Inc. The inherent balance and quality of our portfolio shined once again in 2025. James Gentile: Our Eric A. Vaillancourt: teams have made considerable progress aligning the organization to our long-term strategic goals by leveraging our core capabilities, engineering expertise to expand new commercial opportunities while steadily finding ways to optimize our foundation. We advanced our strategic goals in the first year of EnPro three point zero by growing organically at 7.6%, holding or expanding margins despite increases in operating expenses supporting growth initiatives, deploying two-thirds of our capital expenditures towards growth and efficiency projects, allocating $280,000,000 toward value-creating M&A with acquisitions of Alpha and Overlook, delivering total shareholder returns above premium peers, achieving and maintaining premium valuation reflective of a differentiated industrial technology franchise. As a learning organization, each of our colleagues completed a minimum 16 hours of training and personal development this year. We have clear line of sight in areas of the business where we can accelerate the growth and profit performance, and are excited to work on these value-creating levers again in 2026. Our growth priorities underpinning the EnPro three point zero strategy remain unchanged and will guide our performance through 2030. Over the long term, we are positioned to generate mid to high single-digit organic top-line growth with strong profitability and return levels. We are targeting mid single-digit organic growth in Sealing Technologies, while at AST we are targeting at least high single-digit organic growth, with both segments capable of generating 30% adjusted segment EBITDA margins plus or minus 250 basis points. Now on to our full year 2025 performance. EnPro Industries, Inc. performed well in 2025 with sales up 9% to $1,140,000,000. Strength in aerospace, food and biopharma, firm domestic general industrial performance, as well as improving performance in semiconductor markets were the primary drivers of the 7.6% increase in organic sales. Complementing our strong organic results were the partial quarter contributions from the acquisitions of Alpha Measurement Solutions and Overlook Industries completed in 2025, in addition to the AMI acquisition completed in late 2024. The Alpha and Overlook teams are energized and are hitting the ground running, and we are delighted with their performance since they joined our EnPro Industries, Inc. family. We continue to be pleased with best-in-class performance for our Sealing Technologies segment. As well, I am encouraged by AST's steady performance during the choppiness we experienced in semi capital equipment spending over the last few years. In all, we have been able to maintain premium profitability, free cash flow, and solid returns on invested capital despite the persistent weakness experienced in areas of semiconductor and commercial vehicle OEM demand through 2025, while continuing to invest to support growth programs at AST and throughout the organization. In Sealing Technologies, disciplined execution and efficient operations drove an adjusted segment EBITDA margin of over 32% for the second year in a row. Our teams are positioning the businesses to drive above-market growth by leveraging our applied engineering capabilities, durable aftermarket characteristics, and specification positions to deliver important solutions to our customers in areas where we have clear technology and process advantages. In addition, our pipeline of strategic acquisitions that can expand our capabilities in key growth areas throughout the segment remains robust, possessing premium characteristics that can enhance the growth profile of the segment over time. We will be continuing to be disciplined in pursuing these opportunities at the right time and at the right value for our business. Operator: At AST, revenue increased nearly 14% with strength in Eric A. Vaillancourt: solutions serving leading-edge applications and pockets of recovery in semiconductor capital equipment demand. We continue to proactively invest capital and operating resources throughout 2025 in preparation for new platforms in anticipation of a recovery in semiconductor capital equipment spending. We are encouraged by the recent improved order flow in AST that will begin to be realized in 2026. We remain well positioned to participate in a stronger semiconductor market in coming periods while also seeking 80/20 improvements and cost realignment opportunities to drive incremental improvement in segment profitability over time. Thanks to the inherent balance and quality of the EnPro Industries, Inc. portfolio, and the resilience of our business model, 2025 marked another year of robust free cash flow generation. Our cash flow allows us to maintain our strong balance sheet with a net leverage ratio of 2 times after taking into account the recently completed acquisitions of Alpha and Overlook purchased for $280,000,000 in aggregate. Looking ahead to 2026 and beyond, we have ample financial flexibility to execute on our growth and optimization objectives and deliver premium results for all stakeholders. Under our EnPro three point zero strategy, we are positioned to accelerate profitable growth through 2030. We are making considerable progress on our key growth priorities, will continue to pursue select strategic acquisitions that fit our strategic characteristics of an EnPro Industries, Inc. business, drive incremental long-term growth, and add complementary talent, technology, and process expertise that expands EnPro Industries, Inc.'s ability to answer critical needs of our customers. The foundation of this strategy is designed to extend our track record of strong shareholder returns and enterprise value growth while creating opportunities for our colleagues to develop and thrive. We have the right positioning and discipline to deliver on these targets, especially as we reinvest in growth nodes across the portfolio and drive continuous improvement to maintain and opportunistically improve profitability. At the same time, with our dual bottom line culture as a cornerstone, we encourage each of our nearly 4,000 colleagues to accelerate their personal and professional growth again in 2026. Our colleagues have made commitments to themselves and their teams to work on leadership and communication skills, financial acumen, psychological safety, and awareness. Our team will continue down this path of value creation as we empower technology with purpose. Joe? Thank you, Eric, and good morning, everyone. Turning to our results for the quarter. EnPro Industries, Inc. performed well in the fourth quarter, reflecting momentum across the portfolio and continued progress executing our EnPro three point zero strategy. In the fourth quarter, sales increased 14.3% to $295,400,000. We saw strong sales performance in aerospace and food and biopharma within Sealing Technologies. James Gentile: As well as improvement in overall AST sales led by continued strength in precision cleaning solutions supporting leading-edge semiconductor production. In addition, strategic pricing initiatives, Eric A. Vaillancourt: the partial quarter contributions from Alpha and Overlook, and firm domestic general industrial performance helped offset slow commercial vehicle OEM sales and slow industrial sales internationally. James Gentile: Organic sales increased approximately 10%. Fourth quarter adjusted EBITDA of $69,400,000 was up 19.2% and adjusted EBITDA margin of 23.5% was up 100 basis points. Continued robust performance in the Sealing Technologies segment, Eric A. Vaillancourt: and the partial quarter contribution from the acquisitions completed during the quarter, James Gentile: were partially offset by increased operating expenses ahead of growth programs largely in AST. Corporate expenses of $14,200,000 were up $800,000 from a year ago primarily due to increased medical costs. Eric A. Vaillancourt: Adjusted diluted earnings per share of $1.99 increased nearly 27% compared to the prior year period. James Gentile: Largely driven by the factors increasing adjusted EBITDA and lower interest expense tied to lower net borrowings. Moving to a discussion of segment performance. Sealing Technologies sales of $187,100,000 in the fourth quarter increased almost 15% versus last year. Healthy demand in aerospace and food and biopharma markets, strategic pricing actions, firm domestic general industrial sales, Eric A. Vaillancourt: and the partial quarter contribution from acquisitions completed during the fourth quarter, James Gentile: offset continued weakness in commercial vehicle OEM demand Eric A. Vaillancourt: and slow industrial markets internationally. Nuclear sales remained temporarily choppy during the quarter in Europe as well. James Gentile: Organic sales were up nearly 8% year over year. Eric A. Vaillancourt: For the fourth quarter, adjusted segment EBITDA increased more than 21% with adjusted James Gentile: segment EBITDA margin expanding 180 basis points to 32.8%. Strategic pricing, improved volume and the additions of Alpha and Overlook, Eric A. Vaillancourt: as well as firm aftermarket demand in the commercial vehicle market also contributed James Gentile: to the consistent year-over-year profit performance. Eric A. Vaillancourt: We expect best-in-class performance in Sealing Technologies to continue. James Gentile: 65% of the segment sales are tied to critical positions in the aftermarket, offering the segment stability during periods of uncertainty. Eric A. Vaillancourt: In addition, we continue to earn new business by leveraging the segment's technological expertise, James Gentile: process know-how, and applied engineering capabilities to drive above-market organic revenue growth and to help our customers safeguard their critical environments. Eric A. Vaillancourt: Overall, Sealing Technologies is well positioned to drive mid single-digit top-line growth organically, James Gentile: with strong profitability during EnPro three point zero. Turning to Advanced Surface Technologies. Eric A. Vaillancourt: In the fourth quarter, sales increased 13.4% to $108,400,000. We saw continued strength in precision cleaning solutions tied to leading-edge applications, James Gentile: along with pockets of strength in precision components Eric A. Vaillancourt: supporting semiconductor capital equipment and growth in optical coatings. Adjusted segment EBITDA increased approximately 3% versus last year. Adjusted segment EBITDA margin remained above 20%. James Gentile: We continue to invest in certain areas of the segment to support strength we are seeing in the leading edge. Eric A. Vaillancourt: Increased expenses supporting growth programs, which totaled approximately $2,000,000 in the fourth quarter and more than $8,000,000 for the full year, James Gentile: continued ahead of revenue. Eric A. Vaillancourt: Last quarter, we discussed a number of factors that will drive our near-term James Gentile: performance in AST. We expect lower sales growth year over year in the first half followed by improved performance in the second half as Eric noted, evidenced by current order Eric A. Vaillancourt: patterns. James Gentile: Also, as a reminder, we shipped $12,000,000 of safety stock inventory in 2025 to support customer supply chain transitions, which we do not expect to recur in 2026. On the cost side, we continue to make progress on optimization plans in AST and remain committed to expanding AST margins through appropriate operating leverage on sales growth, Eric A. Vaillancourt: especially as we begin to realize the benefits of investments in operational resources supporting growth programs in coming quarters. We are well positioned to support our customers during the upcoming ramp. James Gentile: And remain focused on delivering AST profitability towards 30% of sales plus or minus 250 basis points on high single-digit to low double-digit revenue growth within the EnPro three point zero planning horizon. Eric A. Vaillancourt: Turning to the balance sheet and cash flow. James Gentile: Our balance sheet remains strong, and we exited 2025 with a net leverage ratio of 2 times, inclusive of the $280,000,000 in cash used to acquire Alpha Measurement Solutions and Overlook Industries during the fourth quarter. We continue to generate ample free cash flow to invest the necessary capital and operating expenses into our strategic organic growth opportunities. In 2025, we generated more than $150,000,000 in free cash flow net of $48,000,000 of property, plant and equipment and capitalized software expenditures in 2025. This was up 18% from the $130,000,000 in 2024 net of $33,000,000 of capital expenditures. During the fourth quarter, we substantially completed and settled the termination of EnPro Industries, Inc.'s U.S. defined benefit pension plan. As a result of this transaction, EnPro Industries, Inc. incurred a non-cash settlement loss of $67,200,000 which was recorded to other non-operating expense, Eric A. Vaillancourt: primarily associated with recognition of life-to-date actuarial losses attributed to the plan previously deferred in accumulated other comprehensive income. During this plan settlement process, James Gentile: existing plan assets more than fully satisfied the cash settlement obligations. Overall, we maintain ample financial flexibility to execute our strategic initiatives, both organically and through strategic acquisitions that broaden our capabilities. Earlier last year, we expanded our revolving credit facility to $800,000,000 from $400,000,000 previously and currently have more than $580,000,000 of available capacity. We are also maintaining our commitment to return capital to shareholders, and during 2025, we paid a $0.31 per share quarterly dividend totaling $26,200,000 for the year. Eric A. Vaillancourt: On February 13, our Board of Directors approved another increase to the quarterly dividend to $0.32 per share, James Gentile: representing the eleventh consecutive annual increase since we initiated a quarterly dividend in 2015. Eric A. Vaillancourt: Moving now to our 2026 guidance. James Gentile: Taking into consideration all the factors that we know currently, we expect total EnPro Industries, Inc. sales growth to be in the range of 8% to 12% in 2026, including the contribution of approximately $60,000,000 from the acquisitions of Alpha and Overlook completed in 2025. We expect adjusted EBITDA to be in the range of $350,000,000 to $320,000,000 including $16,000,000 to $17,000,000 contributed from the recent acquisitions. Adjusted diluted earnings per share is expected to be in the range of $8.50 to $9.20. The normalized tax rate used to calculate adjusted diluted earnings per share remains at 25%, and fully diluted shares outstanding are approximately 21,300,000. Capital expenditures in 2026 are expected to be approximately $50,000,000, or around 4% of sales, as we continue to invest in growth opportunities across the company at accretive margin and return thresholds. In the Sealing Technologies segment, we expect revenue growth, Eric A. Vaillancourt: including the contributions from the fourth quarter acquisitions of Alpha and Overlook, to approach 15% in 2026. James Gentile: With mid single-digit organic growth for the year. We see continued strength in aerospace and food and biopharma markets and steady domestic general industrial demand drivers. Eric A. Vaillancourt: We expect our commercial excellence programs, new growth programs leveraging differentiated capabilities, and focus on solving critical problems for our customers to drive above-market growth this year. James Gentile: While we do not expect a significant recovery in commercial vehicle OEM demand to occur in 2026, aftermarket drivers in that market remain firm. We expect strong operational performance to continue in Sealing Technologies, with adjusted segment EBITDA margin to again exceed 30% this year. In the Advanced Surface Technologies segment, we are seeing clear signs of a robust recovery in semiconductor capital equipment spending as capacity for leading-edge applications gains momentum. Today, we expect AST sales to grow high single digits inclusive of the previously mentioned $12,000,000 of equipment sales that we do not expect to recur this year, with the second half of 2026 being stronger than the first half. Precision Cleaning Solutions is expected to perform well throughout the year as fab utilization and expansion of capacity for leading-edge applications accelerates. On the equipment side, we expect growth to accelerate as we move through the year, predominantly driven by a second half improvement multiple industry sources are predicting will occur, Eric A. Vaillancourt: and supported by our recent order patterns. James Gentile: We also expect demand for optical coatings to grow as demand signals improve in semiconductor and communications infrastructure markets. We expect to see adjusted segment EBITDA margin expansion in AST in 2026, with margins increasing throughout the year. We expect AST's second half profitability to be materially better than current run rates as demand improves and we begin to leverage our recent growth investments. Eric A. Vaillancourt: Thank you for your time today, and I will now turn the call back to Eric for closing comments. Thanks, Joe. We got so excited to talk about our results and future, we jumped right over our world-class safety performance. So I want to take a minute to recognize our teams across the company for their excellent safety performance in 2025. Safety is our first core value at EnPro Industries, Inc., and we begin every meeting with our safety pledge, striving to achieve an injury-free and psychologically safe workplace. Every day, we look after each other. We make sure we return home safely to our loved ones. In 2025, we recorded our best safety statistics ever with a total recordable incident rate of 0.64 and lost time case rate of 0.09. Our world-class safety results reflect the day-to-day commitment of our engaged environmental, health and safety communities of practice to steadfast leadership and development of strong repeatable processes that enable us to achieve these terrific outcomes. I would like to celebrate these milestones as we continue to strive towards an injury-free workplace. Our value-creating strategy remains unchanged and we are energized to deliver another year of strong performance and execution for our customers and shareholders in 2026. We will continue to invest in areas where we are strongest while pursuing strategic acquisitions that build upon our leading-edge capabilities at attractive growth and margin levels. I want to again recognize our dedicated colleagues across the company who are the driving force behind our success. Thanks to their contributions, we have a clear path to achieve our vision for EnPro three point zero. Thank you for joining us today. Life is good at EnPro Industries, Inc., and our best days are ahead. We now welcome your questions. Operator: Thank you. We will now open for questions. Our first question today is coming from Jeffrey David Hammond from KeyBanc. Your line is now live. Hey, good morning, guys. James Gentile: Good morning, Jeff. Good morning, Jeff. Operator: You hit a lot of bull's-eyes in that EnPro three point zero. Just starting on AST, a little more color on how you are thinking about first half, second half kind of margins. I think you mentioned being substantially higher in the second half. So just flush that out a little bit more. And then just expand on the order activity you talked about and where you are seeing it and how broad-based? Joseph F. Bruderek: Sure, Jeff. I will talk about the cadence first half, second half, and a little bit about our margin James Gentile: expectations and then turn it over to Eric to talk about current order demand and patterns and what we are seeing with our customers. So as we have been talking about, there are clear signs that the second half is going to be considerably stronger than the first half. I think you have seen that in a lot of expectations for market conditions across the semiconductor capital equipment guys. We are no exception. We are going to see moderate growth in the first half, I would think low to mid single digits. Joseph F. Bruderek: Something like $100,000,000-ish sales for the first quarter and margins similar to what we have experienced over the last couple quarters. Things will accelerate through the year, and we expect some recovery starting in the second quarter, James Gentile: and then materially into the Joseph F. Bruderek: third and fourth quarter. James Gentile: So there is no doubt we are going to be on significant Joseph F. Bruderek: significantly higher growth rates as we move through the year, and we expect the second half to be stronger. At the same time, some of our key growth programs that we have been investing behind Eric A. Vaillancourt: are set to start to materially contribute in the second half as well. So that is why we talked about margins in the second half being considerably stronger than the current run rate. Eric A. Vaillancourt: Yes, Jeff. We are seeing customer order patterns continue to accelerate. So our order booking is getting stronger and stronger as the year goes on. In addition, we are having some customers that are starting to get more, let us say, get more excited at placing orders, and their order pattern is increasing differently than it has been in the past. And so we are seeing the return to kind of what used to be in some cases. So we are more excited about the second half of this year. We also have two new platforms coming online, some of our growth investments that will start to get some legs probably in the late second half of this year. Operator: Okay. Great. And then, on seeing a lot of discussion about short-cycle trends, PMI kind of bumping above 50. Just wondering what you are hearing from customers around that inflection domestically and just maybe a little more on how long you think this nuclear choppiness lasts? Eric A. Vaillancourt: Nuclear choppiness, I think, is going to continue for a little bit, although we did have a little better order rate right now. But I expect that second half will still be choppy. But in general, our industrial business throughout EnPro Industries, Inc. is very, very strong. There has not been any let up. We are not seeing any reduction in orders or anything that would indicate that it is slowing at this point. Still very strong, and still our book-to-bill is higher than 100%. So still strong right now. Joseph F. Bruderek: And I would say overall, we are seeing clear continued strength in space and aerospace, food and biopharma being strong, industrial being just firm, as Eric mentioned. Good order demand, customers feeling relatively confident and stable as we move into 2026. The areas where we are clearly seeing some offset to that is commercial vehicle OEM, which is expected to be flat to slightly down. And on top of that, we continue to win between different applications. We are seeing strong earned growth across new platforms in space, aerospace, food and biopharma, even in some of our traditional general industrial markets. So if you blend all that together from a market perspective, the market is probably low single to low mid single-digit growth. And we expect our Sealing Technologies segment to outperform that and grow at least in mid single digits this year. Eric A. Vaillancourt: Even with the commercial vehicle segment being down, it was down so much before, 25%, 26%, whatever it was, being projected to be down another 9%, still not that many units. I expect that business to recover as the year goes on. Okay. Appreciate the color. Operator: Thank you. Next question is coming from Stephen Michael Ferazani from Sidoti & Company. Your line is now live. Morning, everyone. Appreciate all the detail on the call. Just wanted to walk through how things played out the last couple of months of the year versus your November guide. Looks like revenue ended up running a little ahead of the guide, particularly on Stephen Michael Ferazani: Sealing, on organic growth. But margins may be a little bit softer. Can you walk through what you saw both on top line and on margins? Looks like either AST costs are continuing to make those adds in the last couple months or perhaps it was on slightly higher corporate expense. Could you just walk through the revenue versus the margins the last couple of the couple of months of the year? Eric A. Vaillancourt: Yes. Thanks, Steve. Joseph F. Bruderek: Yes, I think things finished up pretty much as we expected through the end of the year. The sales were at the higher end of our range, but relatively in line. Margin was clearly right in the bull's-eye of what we expected from an EBITDA perspective. We did, as you mentioned, see a little bit higher corporate expenses as we moved through the year. Really two drivers: medical costs continue to increase, and we saw a spike in just claims and overall medical expenses. And again, with our strong performance this year, we did have a little bit of higher short-term incentive cost associated with that outperformance, especially on our ECFRI metric, which is really driven by really good working capital management and strong free cash flow as we ended the year. So in general, I think fourth quarter pretty strong and as expected. Operator: Yeah. Stephen Michael Ferazani: As far as the 2026 guide and how that will turn into cash conversion, given the higher CapEx expected, second straight year it is going to go up a bit. But when I look at 2026, your free cash flow basically around 100% of adjusted EPS. Do you expect even with the higher CapEx next year, but still in line given the top line growth, do you expect cash conversion to remain somewhat around 100%? And then how you would use that cash given your balance sheet remains in great shape even after the couple of M&A activity in April. Yes. The short answer, Steve, is yes. Joseph F. Bruderek: We expect strong free cash flow conversion as a percent of adjusted net income. The one thing, we will see a little bit higher interest expense in 2026, as we included in our EPS guidance, because we had periods of 2025 where we really had no draw on our revolver. And with the late-year acquisitions, we expect to be materially drawn on the revolver for most of this year. So that will require a little bit higher interest expense. But our balance sheet is in really good shape. At two times, strong free cash flow expected again this year. We are well positioned to continue to allocate $250,000,000 to $300,000,000 or more if needed for strategic M&A. Our pipeline continues to be strong. We have multiple targets that we have been working for a number of periods that meet our financial and strategic criteria, and it is just an element of the timing and availability of those assets. We are getting a lot of early looks, which is a good sign. We are having discussions with a number of assets that have not even gone to market yet, cultivating those relationships and being ready for when they are actionable. We feel really good about our balance sheet. As you mentioned, we are stepping up, for the last couple years, into our CapEx investments. The majority of that, two-thirds or more, going to growth investments both in AST and in Sealing. And that is probably the right appropriate level for us to continue compounding growth as we move forward. Stephen Michael Ferazani: If I could just add one on in response to your answer. M&A focus, has that shifted at all of what you are looking at? James Gentile: No. Eric A. Vaillancourt: No. We continue to look very aggressively. We probably look at an asset once or twice a week. But we are very, very disciplined about what we approach, and it will be both strategic and appropriate in terms of value we pay. Joseph F. Bruderek: And again, Steve, feel really good about the pipeline. We have a number of growth nodes where we have good strong organic positions, and we are looking to add additional capabilities and technology in some of those spaces, continue to round out the portfolio, have good growth characteristics, and strategically allow us to continue to grow in those markets like compositional analysis that we talked about on the last call, and food and biopharma, right in the wheelhouse of what we did with Overlook and Alpha. And more assets like that in AMI, where we are focused. Operator: Great. Stephen Michael Ferazani: Thanks, everyone. Operator: Thank you. Our next question is coming from Ian Zaffino from Oppenheimer. Your line is now live. Joseph F. Bruderek: Hey, good morning. This is Isaac Sellhausen for Ian. I just had one on kind of the margin Operator: expectations and ramp through the year. Joseph F. Bruderek: Should we expect any higher Isaac Sellhausen: OpEx associated with the qualification work in 2025? And should that continue this year? Or any additional color you can provide on the ramp through the year? Thanks. Joseph F. Bruderek: Yes. Good morning, Isaac. I think materially, we are at the run rate for those additional operating expenses. We have been at that for a number of quarters where we have a number of additional growth opportunities kind of layering on top of each other. We talked about that last call. And we are at the run rate of about $2,000,000 a quarter right now of operating expenses ahead of demand. And with all of those, we are kind of at the point now where we are progressing well, and we will start to see revenue come in and leverage against those costs really throughout 2026. We always have growth programs going on. We always have investments ahead of revenue. We just have a lot of them going on at the same time in multiple places, for additional growth opportunities, geographically, customer expansions, platform expansions. So we do not expect any incremental spending on those programs in the near term. We are just kind of at that similar run rate. And then as those programs deliver revenue as we move through 2026, they will leverage against that. And that is why we said we are confident that the second half, not just because of demand improving from general capital equipment spending increase, but also from those growth programs delivering revenue and leveraging against those expenses, we will see some margin expansion as we move through the year and more predominantly in the second half. Isaac Sellhausen: Okay. Understood. And then just as a quick follow-up on Sealing, with the addition of Alpha and Overlook this year, if you could just touch on how you anticipate those businesses perform, maybe compared to the mid single-digit growth rate that you gave for the segment? Thanks. Eric A. Vaillancourt: No, the businesses both have very good backlogs and very good order rates. And so right now, they are exceeding our expectations, and it is really full speed ahead. No concerns. The integration has been very seamless at this point. Joseph F. Bruderek: Yes. In both of those businesses, the inherent market drivers and strong secular growth characteristics should grow at least high single digits combined as we move forward. So we expect them to be accretive from a growth rate perspective over time and in the short term to the Sealing Technologies segment. Operator: Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over to James for any further or closing comments. James Gentile: Thank you for your interest today. We look forward to updating you in May when we report Q1, and we are available to answer any questions that you may have as you review our results. Thank you again for your Isaac Sellhausen: interest. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: The Charles River Laboratories International, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. This call is being recorded. After the speakers' presentation, there will be a question and answer session. To ask a question during this period, you will need to press star 1 on your telephone keypad. If you want to remove yourself from the queue, please press star 2. Lastly, if you require operator assistance, please press 0. I would now like to turn the conference over to your host, Todd Spencer, Vice President of Investor Relations. Please go ahead. Todd Spencer: Good morning, and welcome to Charles River Laboratories International, Inc. Fourth Quarter and Full Year 2025 Earnings and 2026 Guidance Conference Call and Webcast. This morning, I am joined by James C. Foster, Chair, President and Chief Executive Officer; Birgit H. Gershick, Executive Vice President and Chief Operating Officer; and Michael “Mike” Nau, Senior Vice President, Interim Chief Financial Officer, and Chief Accounting Officer. They will comment on our results for 2025, as well as our financial guidance for 2026. Following the presentation, they will respond to questions. There is a slide presentation associated with today's remarks we posted on the Investor Relations section of our website at ir.criver.com. A webcast replay of this call will be available beginning approximately two hours after the call today and can also be accessed on our Investor Relations website. The replay will be available through next quarter's conference call. I would like to remind you of our safe harbor. All remarks that we make about future expectations, plans, and prospects for the company constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated. During the call, we will primarily discuss non-GAAP financial measures which we believe help investors gain a meaningful understanding of our core operating results and guidance. The non-GAAP financial measures are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. In accordance with Regulation G, you can find the comparable GAAP measures and reconciliations on our Investor Relations section of our website. I will now turn the call over to James C. Foster. Thank you, and good morning. As Todd mentioned, I am pleased to be joined today by Birgit H. Gershick, who will become our next CEO when I retire in May, as well as our Interim CFO, Mike Nau. Birgit will provide an overview of our 2026 guidance and the key drivers behind our outlook. But before I hand the call over to her, I will provide details on fourth quarter and full year 2025 financial results, as well as an update on our latest developments and market trends. James C. Foster: We were pleased that our 2025 financial results were at the upper ends of the revenue and non-GAAP earnings per share ranges that we provided in November. Beyond our financial results, the fourth quarter capped a year that was marked by the stabilization of the biopharma demand environment, including substantial improvements in DSA net bookings, particularly during the first and fourth quarters. We also advanced several strategic initiatives that will enable the company to better capitalize on future growth opportunities and renewed our focus on scientific innovation that will reinforce our position as the leader in preclinical drug development. At different points during 2025, demand from both global biopharmaceutical clients and small and mid-sized biotechnology clients showed signs of improvement. Many of our global biopharma clients progressed through their pipeline reprioritization activities and, after holding back spending in 2024, moved their programs forward with more urgency when new budgets were released in early 2025, which led to strong DSA bookings at the start of last year. The biotech funding environment slowed in 2025, and we subsequently experienced softer demand trends from our small and mid-sized biotech clients during the summer months. However, with a reinvigorated funding environment in the second half of the year, including a record level of $28,000,000,000 in the fourth quarter, biotech clients were the primary driver behind a steady sequential increase in the DSA net book-to-bill in each month during the second half of the year. As we disclosed at an investor conference last month, the DSA net book-to-bill improved to 1.1 times in the fourth quarter. Taking these factors into account, we are cautiously optimistic that the favorable DSA demand trends will continue in 2026, resulting in a return to organic revenue growth in the second half of the year for both the DSA segment and the overall company. We have also made substantial progress on the strategic actions that we outlined in November to unlock long-term shareholder value, including strengthening and refining our portfolio, driving greater efficiency, and maintaining a balanced yet disciplined approach to capital deployment. Strengthening our portfolio, in January, we announced the planned acquisitions of the assets of KF Cambodia and PathoQuest. Both of these acquisitions are squarely aligned with our core competencies and are the result of lengthy, successful partnerships. KF, the acquisition of which has already closed, has been a long-time NHP supplier in Cambodia and will further strengthen and secure our DSA supply chain. We expect it will generate meaningful operating margin improvement starting later this year through significant cost savings on NHP sourcing. Between KF and NovoPrim, we expect to own and internally source most of our future annual NHP supply requirements for the DSA segment. We continued to advance our NAMS capabilities with the planned acquisition of PathoQuest, which is expected to close within the next month. The company has been a partner of our biologics testing business since 2016 and provides an in vitro approach to manufacturing quality control testing for biologics. The KF and PathoQuest acquisitions are excellent examples of capital deployment in core areas that will enhance our financial profile and advance our scientific capabilities as we endeavor to capture greater share of wallet from our clients. We will continue to evaluate additional M&A, including in the areas of bioanalysis and geographic expansion, in order to support our clients as they seek to drive greater efficiency and success in their drug development programs. We are also focused on continuing to build our NAMS portfolio, or new approach methodologies, in areas that are most relevant to clients and scientific needs. We believe we have already established a solid foundation of NAMS capabilities, including our Retrogenix cell microarray platform for off-target screening and toxicity, our development of virtual control groups for safety assessment studies that utilize machine learning and other techniques, and most recently, PathoQuest’s innovative next-gen sequencing platform. We are excited about current and future applications for NAMS and related innovations, including AI, and we view these as enabling technologies to support the work that we do and as complementary to it. NAMS, including AI, has promise, but it still has challenges with data availability and proof of concept. So it will be a gradual longer-term evolution led by science and the validation of new capabilities over time, particularly in a regulated safety assessment environment where patient safety is paramount. Since we began to discuss NAMS in more detail last spring, there have not been any significant technological changes in drug development, and we have not experienced any notable changes in client behavior, other than more frequent conversations about NAMS. We also continue to make progress on our plan to divest businesses totaling approximately 7% of 2025 annual revenue. These processes and negotiations with potential buyers are ongoing, and we continue to expect the planned divestitures will be completed by 2026. Assuming all transactions are completed, the expected non-GAAP earnings per share accretion of $0.30 on an annualized basis from the planned divestitures will be less for the partial year 2026, or closer to $0.10 per share, because of expected improvements in the operating performance of these businesses throughout the year. Now I will recap our fourth quarter and full year consolidated performance. We reported revenue of $994,200,000 in the fourth quarter of 2025, a 2.6% decline on an organic basis from the previous year, with revenue declines in all three business segments. For the full year, we reported revenue of $4,020,000,000 with an organic revenue decrease of 1.6% driven primarily by lower revenue in the DSA and Manufacturing segment. By client segments, sales to both the global biopharma and small and mid-sized biotech client segments declined modestly for the full year. In the fourth quarter, sales to global biopharma clients rebounded meaningfully versus the prior year, as these clients got back to work after pulling back on spending in 2024. Sales to small and mid-sized biotech clients decreased modestly in the fourth quarter, largely reflecting softer DSA bookings during the summer months. As a reminder, there is a natural lag between when DSA studies are booked and when they start and begin to generate revenue. Therefore, it will take one to two quarters to see the benefit of the stronger fourth quarter bookings. The operating margin decreased 180 basis points year over year to 18.1% in the fourth quarter, principally driven by three anticipated factors: lower revenue; higher staffing and NHP sourcing costs in the DSA segment; and the timing of NHP shipments in the RMS segment. For the full year, the operating margin declined by just 10 basis points to 19.8%, as the cost savings from restructuring and efficiency initiatives helped to protect the operating margin, which has been our stated goal. Earnings per share were $2.39 in the fourth quarter, a decrease of 10.2% from $2.66 in the fourth quarter of 2024. In addition to the lower operating margin, the tax rate was also a meaningful year-over-year headwind in the fourth quarter. For 2025, earnings per share were nearly flat at $10.28 compared to $10.32 in 2024, as lower revenue was largely offset by the benefit of the cost-saving initiatives. Below-the-line items largely netted out, with the higher tax rate in 2025 primarily offset by lower interest expense and a lower share count from stock repurchases earlier in the year. I will now provide additional details on the segment performance. DSA revenue in the fourth quarter was $591,600,000, a decrease of 3.3% on an organic basis. The decline reflected lower study volume, particularly for discovery services, while DSA pricing and mix were relatively stable. For the year, DSA revenue decreased 2.6% on an organic basis. As a result of client demand, we experienced a meaningful increase in revenue from NHP studies, resulting in an increase in the number of NHPs used in these studies in 2025, for which additional information can be found in the appendix of our slide presentation. These trends reflect our clients' continued reliance on traditional in vivo methods to help ensure drug safety, even as we and our broader industry continue to evaluate uses for NAMS and further expand our capabilities. We experienced a higher number of NHP study starts in the fourth quarter, and this trend is expected to continue into the first quarter. As we mentioned in November, the higher-than-expected NHP study demand led to increased NHP sourcing costs in the fourth quarter and will again in the first quarter. However, due in part to the acquisition of KF, we expect NHP sourcing costs will normalize over the course of the year. As we previously disclosed, DSA demand KPIs improved in the fourth quarter, led by net book-to-bill of 1.12x on net bookings of $665,000,000, representing a meaningful increase from 0.82x in the third quarter. The sequential improvement was principally driven by small and mid-sized biotech clients, while global biopharma clients also contributed with both sequential and year-over-year bookings increases. Proposal value continued to be stable to improved in the fourth quarter as it was for most of the year, and cancellations remained at lower levels consistent with the third quarter. At year end, the DSA backlog modestly improved to $1,860,000,000 from $1,800,000,000 at the end of the third quarter. Collectively, these trends lead us to believe that the favorable DSA demand environment will continue in 2026. However, it is important to note that this improvement may not be linear, as demonstrated in 2025, and also that fourth quarter and more recent bookings activity will not more fully benefit DSA revenue growth until the second quarter, due to the normal lag between booking and study start. The DSA operating margin was 20.1% in the fourth quarter, a 460 basis point decrease from 2024, and was 24.2% for the full year, representing a 150 basis point decline year over year. Both the fourth quarter and full year declines were driven by lower revenue and higher costs related to increased NHP sourcing costs and study starts in the fourth quarter, as well as higher staffing costs as we had previously anticipated. RMS revenue in the fourth quarter was $206,300,000, a decrease of 0.9% on an organic basis. For the year, RMS revenue increased 1.2% on an organic basis. The fourth quarter decline was primarily driven by two factors: lower NHP revenue and lower sales volume from small models in North America. NHP revenue was impacted by the timing of certain shipments which, as previously noted, had been accelerated to earlier in the year. In the small research models business, lower sales volume in North America reflected that in-house research activity by large pharma and mid-sized biotech clients has not fully recovered. Revenue from academic and government accounts remained very stable, but the growth rate has slowed compared to prior year due in part to the uncertainty with NIH budgets. Small model pricing in North America and Europe continued to be a positive contributor to RMS revenue and in Europe is offsetting the expected volume declines. In China, small model unit volume continued to grow nicely. Revenue from research model services increased in the fourth quarter, but occupancy for our CRADL sites remained impacted by the early-stage biotech market environment. The RMS operating margin decreased by 90 basis points year over year to 21.9% in the fourth quarter, but increased by 110 basis points to 24.8% for the full year. The fourth quarter margin was primarily impacted by lower revenue for small models in North America and an unfavorable revenue mix due to the timing of NHP shipments. For the year, the operating margin improvement was primarily due to a favorable mix related to higher NHP revenue as well as cost savings related to our restructuring initiatives. Manufacturing Solutions revenue was $196,400,000 for the fourth quarter, a decrease of 2.1% on an organic basis, and full year revenue declined 1.6% organically. The lower fourth quarter and full year growth rates were primarily driven by lower CDMO revenue, principally the result of the loss of one commercial cell therapy client whose revenue declined by nearly $25,000,000 in 2025. Microbial Solutions had a strong year, with growth across all three testing platforms, EndoSafe, Celsis, and Accugenix. However, year-end client ordering patterns were not quite as robust as last year, which caused the fourth quarter growth rate to slow. We were pleased to see the performance of the biologics testing business modestly improve and return to growth in the fourth quarter after a year that was impacted by lower sample volumes from several large clients due to project delays or regulatory challenges. The Manufacturing segment's operating margin increased by 340 basis points to 32.1% in the fourth quarter and by 140 basis points to 28.8% for the full year. We were pleased that the segment's operating margin continued to improve and move closer to the 30% level in 2025, driven principally by a solid performance from the Microbial Solutions business as well as restructuring actions to generate incremental cost savings including in the CDMO business. Before I hand the call over to Birgit to discuss our 2026 guidance, I would like to take a moment to reflect on my long and fulfilling career at Charles River Laboratories International, Inc. As many of you know, in January, I announced my planned retirement effective at the conclusion of our annual meeting of shareholders on May 5, but I am pleased to remain on our Board. Leading the extraordinary team at Charles River Laboratories International, Inc. as CEO for more than thirty years has been a profound experience and one of the greatest privileges of my life. Together, we built an industry leader with a culture shaped by our remarkable people, a strong and supportive workplace, and world-class science, all of which has enabled us to deliver meaningful outcomes for our clients and patients who rely on us. While I am proud of our accomplishments from taking the company public on the New York Stock Exchange to transforming Charles River Laboratories International, Inc. into a global leader in preclinical drug development, then becoming a respected member of the S&P 500, I am most proud and appreciative of the relationships that I have built over the last five decades with my colleagues, our clients, and all of you, our shareholders and analysts. I sincerely thank you. We have made tremendous progress over the last twelve months, ranging from NAMS and NHP supply to the biopharma demand environment and our strategic review, making this the right time to transition the company into its next chapter. I am delighted that Birgit H. Gershick will become our next CEO, and it will be in her capable hands to drive forward Charles River Laboratories International, Inc.’s strategic direction, future growth, and operational excellence for many years to come. Birgit has played an instrumental role as COO for nearly five years, leading our global businesses, guiding our digital evolution, and most recently, driving our strategic vision. I have worked closely with Birgit for many years and have the utmost confidence in her leadership abilities. I will continue to work closely with her in the coming months to ensure a seamless transition. As I sign off on my final earnings call, I would like to thank our employees profoundly for their exceptional work and commitment. It is their dedication to exquisite science and exceptional client service that has distinguished us as the preeminent provider of preclinical services. And always, I thank our clients and shareholders for their support over the years. Now I will introduce our next CEO, Birgit H. Gershick, who will provide details on our 2026 financial guidance. Operator: Good morning, everyone. First, I want to sincerely thank you, Jim, Birgit H. Gershick: for the tremendous mentorship and close partnership you have provided over the years to prepare me for this incredible opportunity and also for your significant contributions to build the company into the industry leader that we are today. I also want to thank and acknowledge our Board of Directors for the trust that they have placed in me. I am deeply honored to become Charles River Laboratories International, Inc.’s next CEO and am committed to building upon the solid foundation that Jim has established. With a talented team at Charles River Laboratories International, Inc., we will continue to work tirelessly to lead the industry, to accelerate the progress we have made in scientific innovation, to advance drug development through our best-in-class science and client service, and by continuing to focus on ensuring the company remains leading edge with world-class processes, a client-centric service offering, and technology enablement. I am very excited to be leading Charles River Laboratories International, Inc.’s next phase of growth. I will now provide details on our 2026 financial guidance and the improving trends that we expect. Organic revenue in 2026 is expected to range from down 1% to at least flat, compared to a 1.6% decline in 2025. We expect the operating margin will improve by 20 to 50 basis points from 19.8% in 2025, driven principally by the benefit from the acquisition of the assets of KF Cambodia. This is expected to translate into non-GAAP earnings per share in a range from $10.70 to $11.20, representing growth of approximately 4% to 9%. We continue to expect that the acquisition will add approximately $0.25 to earnings per share this year, which has been embedded in this guidance. By segment, we expect RMS revenue to decline at a low- to mid-single-digit rate on an organic basis in 2026. There are two primary factors driving the decline. First, NHP revenue is expected to be below 2025 levels and represents an approximate 200 basis point headwind to the RMS growth rate. This is primarily due to the timing of shipments, which favored 2025 and will have a particularly significant impact on the year-over-year comparison in 2026. A reduction in NHP volume commitments to certain third-party clients will also affect the growth rate. The other meaningful RMS headwind in 2026 will be CRADL occupancy levels, which are expected to continue to be constrained as demand from early-stage biotech clients remains subdued. Global revenue for small research models is expected to be flat to slightly higher in 2026, as unit volume declines, particularly in North America, will continue to be offset by favorable pricing. We expect DSA revenue will be in a range between slightly positive and a low single-digit decrease on an organic basis in 2026. As Jim discussed, we are cautiously optimistic that the favorable DSA demand trends will continue in 2026, supported by the recent improvement in biotech funding. We believe the strong bookings performance at the end of 2025 and a continuation of favorable trends this year will result in a return to DSA organic revenue growth in 2026. In order to achieve the top end of our DSA revenue outlook for the year, it would require continued momentum in the bookings environment, resulting in the net book-to-bill averaging above one times for the year. This does not mean that every quarter will be above one times, as our business is not linear, and factors like backlog conversion and the timing of bookings or study starts also heavily influence the DSA growth potential. For the Manufacturing segment, we expect the organic revenue growth rate will rebound to a low single-digit increase this year. This favorable outlook compared to a 1.6% organic decline last year principally reflects the anniversary of the loss of a commercial cell therapy client whose program generated about $20,000,000 in CDMO revenue during 2025. Microbial Solutions is expected to report a growth rate in the mid-single digits similar to its 2025 levels, and we expect that some of the client-specific challenges that impacted the biologics testing growth rate last year will be alleviated, resulting in a slightly better performance in 2026. Moving on to operating margin. We expect that the DSA segment will be the primary driver of the 20 to 50 basis points consolidated margin improvement in 2026. As previously mentioned, the margin expansion will largely be driven by the acquisition of KF, as lower sourcing costs to procure NHPs to support DSA studies will generate meaningful margin improvement in the second half of the year once the models sourced post-acquisition begin to be placed on studies. For the year, we expect KF acquisition will benefit the operating margin by more than 50 basis points on a consolidated basis and by more than 100 basis points in the DSA segment. We expect the RMS and Manufacturing operating margins will be stable in 2026. From an earnings perspective, we expect most of the earnings per share improvement in 2026 will be generated from operations, driven by margin expansion. We expect to generate at least $100,000,000 in incremental cost savings above the 2025 level to help protect the operating margin because revenue growth will not offset the level of annual cost inflation this year. As we discussed in November, the incremental savings will be primarily driven by initiatives designed to drive greater operating efficiencies through process improvement, procurement synergies, and implementation of an integrated global business services approach. As a reminder, we now expect to generate a cumulative total of over $300,000,000 in cost savings on an annualized basis based on actions that we implemented over the last three years. I have personally led many of the company's efforts to reduce costs through restructuring and efficiency initiatives designed to keep our cost structure aligned with the pace of demand and to drive process improvement. I will continue to focus on streamlining our processes and ensuring we operate a nimble, responsive, and technology-enabled organization going forward. In addition to significant cost savings and the $0.25 per share benefit from the KF acquisition this year, below-the-line items are expected to contribute more than a $0.30 benefit at midpoint to 2026 earnings per share, principally driven by a lower tax rate. We expect the first quarter operating margin will be in the mid-teens pressured by a few discrete factors, including an unfavorable mix from the timing of NHP shipments in the RMS segment, the acceleration of stock compensation expense due to the CEO transition, and higher DSA costs primarily related to NHP sourcing and staffing. These factors are not expected to be a meaningful headwind beyond the first quarter, and we expect the operating margin will improve Operator: significantly thereafter. Birgit H. Gershick: Mike will provide additional details on our first quarter outlook as well as the below-the-line items shortly. Before I conclude, I am pleased to announce that we will be adding two experienced senior leaders to our team this spring. Glenn Coleman will join us on April 6 as Executive Vice President and Chief Financial Officer. Glenn is a seasoned financial leader and operationally oriented CFO with over a decade of experience in the healthcare industry. Glenn has over thirty years of strong financial and operational management experience and has been CFO for multiple public companies as well as a Chief Operating Officer with experience managing clinical, R&D, and manufacturing teams. I also would like to thank Mike Nau for his leadership of our finance organization during the CFO search. Mike will continue in his current position as Senior Vice President and Chief Accounting Officer and will play an instrumental role in the success of our organization. I am grateful for his dedication and commitment to Charles River Laboratories International, Inc. We are also pleased to have Carrie Daley join us on March 30 as Senior Vice President and Chief Legal Officer. Carrie brings twenty-five years of sophisticated legal experience to Charles River Laboratories International, Inc., and is an experienced leader that has been focused on advising multinational life science companies across complex regulatory environments. We are pleased that she will enable us to proactively manage our highly regulated, science-led organization by combining our legal, compliance, communications, government relations, security, and ESG initiatives under one leader. I look forward to welcoming and partnering with both Glenn and Carrie in the coming months. I would also like to reiterate my appreciation for being named Charles River Laboratories International, Inc.’s next CEO. It is an honor that I am proud to accept. I am firm in my commitment to drive forward the company's strategic direction and growth imperatives, including the actions that we outlined in November to enhance long-term shareholder value. Over the past five years and more, I have had the pleasure of meeting many of you at various investor conferences and related events. These interactions have provided valuable opportunities to exchange ideas and insights, which I look forward to continuing. I am eager to reconnect with those of you I have met previously, and for those whom I have not yet had the chance to meet, I look forward to doing so in the coming months. I am committed to maintaining open and transparent communication with our investor community and welcome the opportunity to introduce myself and discuss our vision for the future of Charles River Laboratories International, Inc. Now I will turn the call over to our Interim CFO, Mike Nau. Thank you. James C. Foster: Good morning, and thank you, Birgit. Michael “Mike” Nau: It has been an honor to lead our talented finance team for the last several months. I look forward to continuing to work closely with them and our new CFO to drive our future success. I would also like to thank you, Jim, and the Board for the opportunity to be Interim CFO. Before I begin, may I remind you that I will be speaking primarily to non-GAAP results, which exclude amortization and other acquisition-related adjustments, impairments, costs related primarily to restructuring initiatives, gains or losses from certain venture capital and other strategic investments, and certain other items. Many of my comments will also refer to organic revenue growth, which excludes the impact of acquisitions, divestitures, and foreign currency translation. Let me start by providing some additional details on our 2026 guidance. Birgit highlighted our organic revenue growth and non-GAAP earnings per share outlook. On a reported basis, we expect revenue will be between at least flat and 1.5% growth. FX is expected to be a tailwind as the US dollar has continued to weaken and is expected to benefit reported revenue by 1% to 1.5%. We also expect a small revenue benefit from PathoQuest once the acquisition closes later this quarter. We have provided additional information on FX rates and our current exposure in the appendix of our slide presentation. On slide 31, we have also provided the segment outlook for 2026, which includes reported and organic revenue expectations. As Birgit mentioned, we expect several headwinds to impact the first quarter operating margin and earnings per share. Our outlook for 2026 assumes revenue will be essentially flat to slightly negative on a reported basis and will decline at a low single-digit rate on an organic basis. By segment, the RMS growth rate will be negatively impacted by lower NHP revenue due primarily to the timing of shipments, which will have a nearly $10,000,000 impact on first quarter RMS revenue. The Manufacturing segment's growth rate will reflect the difficult year-over-year comparison with regard to commercial revenue in the CDMO business, which also has an approximately $10,000,000 impact on first quarter Manufacturing revenue. We expect the DSA rate of decline will improve slightly from second half 2025 levels, but as a reminder, the benefit from strong bookings activity in the fourth quarter will not yet be evident in DSA revenue in the first quarter. From a first quarter earnings perspective, we expect non-GAAP earnings per share will decline at a high-teens rate year over year. As Birgit mentioned, there are several discrete factors that will impact the operating margin in the first quarter, resulting in an operating margin in the mid-teens. The two primary factors are the timing of NHP shipments and higher stock compensation costs, due largely to an acceleration of the expense related to the CEO transition. Stock compensation is expected to approximate a $0.15 headwind to EPS in the first quarter. In addition, the DSA margin will continue to be pressured in the first quarter, as it was in the fourth quarter, by higher NHP sourcing costs due to higher-than-anticipated demand for these studies, as well as increased staffing costs. But these DSA headwinds are expected to dissipate after the first quarter. Normalizing NHP study-related costs due in part to the KF acquisition, improving demand trends, and the strong year-end bookings are expected to benefit revenue and generate sequential improvement in the DSA operating margin as the year progresses. I will now provide details on nonoperating items. Unallocated corporate costs in 2026 are expected to be similar to the 5.5% of total revenue reported in 2025. We expect unallocated corporate costs in the first quarter to be elevated due to the timing of stock compensation expense related to the CEO transition, but this does not have a meaningful impact on the full year. For the remainder of the year, we expect unallocated corporate costs to trend favorably because of the benefit from prior cost-saving initiatives, and performance-based bonus accruals are expected to be lower as targets are reset for the new year. The non-GAAP tax rate for 2026 is expected to be in the range of 22% to 23%, a decrease from 24.6% in 2025. The anticipated decrease in the tax rate is primarily driven by the 2026 tax rate benefits related to the enactment of the One Big Beautiful Bill Act, or OB3, and a favorable geographic mix. In 2025, we lowered our net interest expense by shifting debt to lower interest rate geographies and by repaying debt borrowed for stock repurchases earlier in the year. At the end of the fourth quarter, we had outstanding debt of $2,100,000,000 with approximately 70% at a fixed interest rate, compared to $2,200,000,000 at the end of 2024. This equated to a gross leverage ratio of 2.1 times and a net leverage ratio of 2.0 times at the end of the fourth quarter. We expect gross and net leverage ratios will remain below three times after funding the KF and PathoQuest acquisitions. Total adjusted net interest expense in 2026 is expected to be in a range of $95,000,000 to $100,000,000, compared to $102,100,000 last year. We expect higher average debt balances in 2026 as a result of the KF and PathoQuest acquisitions, but the decrease in net interest expense reflects the full-year benefit of 2025 interest rate reductions and the favorable geographic interest rate mix. As we discussed in November, we will continue to take a disciplined approach to capital deployment and plan to regularly evaluate the optimal balance between acquisitions, debt repayment, stock repurchases, and other uses of cash. For 2026, with the deployment of over $500,000,000 in capital for the KF and PathoQuest acquisitions, we currently intend to focus more on debt repayment and maintaining dry powder as we continue to evaluate potential M&A opportunities. We will also continue to regularly evaluate all uses of capital throughout the year, including stock repurchases. However, we currently expect the average diluted share count will be slightly higher in 2026. For 2026, we expect free cash flow will be in a range of $375,000,000 to $400,000,000, representing a decrease from $518,500,000 in 2025. The decrease primarily reflects two main drivers: higher performance-based cash bonus payments due to the 2025 outperformance, which are paid in the first quarter 2026, and deferred compensation payments related to the planned CEO retirement. Capital expenditures for 2026 are expected to be approximately $200,000,000, or approximately 5% of total revenue, and a slight reduction from the 2025 level of $219,200,000. This outlook reflects our disciplined approach to managing capital investments while continuing to invest strategically in areas to support client demand. A summary of our 2026 financial guidance can be found on slide 39. In conclusion, we remain encouraged by the recent demand trends and by the potential to return to organic revenue growth in the second half of the year. We are laser focused on driving our strategy forward, including through selective and strategic M&A that aligns with our core competencies, taking decisive actions to deliver continued benefits to drive efficiency and process improvements that will strengthen our organization and enhance our flexibility as demand rebounds, and through maintaining a disciplined capital allocation approach. These actions position us well to drive long-term shareholder value creation. Finally, I want to thank Jim for his tremendous leadership and many contributions during my time at Charles River Laboratories International, Inc. and throughout his career. We look forward to continuing to execute on our strategy under Birgit’s leadership. Thank you. Todd Spencer: That concludes our comments. We will now take your questions. Operator: Thank you. If you would like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. We do ask that you please limit yourself to one question. Once again, that is 1 to ask a question. And we will go first to Eric White Coldwell with Baird. Your line is open. Please go ahead. Eric White Coldwell: Thanks very much. I wanted to dig into the broader topic of NHPs. Birgit H. Gershick: Seem to be some, I do not know, dichotomy in the outlook and results here between RMS and DSA. Hoping you can just walk us through this and help clear it up. So RMS is facing a material headwind from lower NHP volume. We have also heard lower sales from one of your competitors, but at the same time, DSA is facing a material headwind from higher NHP sourcing costs and strong demand for NHP studies. So I am just hoping you can walk us through some of these dynamics, the nuances between what is happening in RMS and what is happening in DSA, and then talk about some of the drivers of the higher sourcing costs that are impacting you in the near term. Thanks very much. James C. Foster: You guys want to take that? Birgit H. Gershick: Yeah. Happy to take it. Hi, Eric. Eric White Coldwell: So Birgit H. Gershick: let me start with the RMS volume. So the RMS volumes and the impact in Q4 is primarily timing. So looking for the full year, the shipments have shifted, and with that, Q4 was lighter than the year before. Looking forward, we talked about RMS volumes being a driver of less revenue in Q1. That is both timing as well as a little bit lower volumes. For our DSA business, we talked about higher sourcing cost, particularly in Q4, having some impact in Q1. We had more NHP studies coming in than we had expected in 2025 and early 2026. With that, we had to go to the open market and buy some NHPs at a higher price, which will have an impact on ROI. Part of the disconnect that you are seeing here is also the fact that we have always had two sources, so an Asian source as well as a Mauritian source. And they do not always connect perfectly with what we have available and internally our own farms versus what we have to buy on the open market. So it is really mostly timing as well as timing between the RMS business shipments when they are coming in, but also what kind of source we are needing, how quickly we are needing them, and that we had to source from the open market. If that makes sense. Eric White Coldwell: It does. And if I could just ask a follow-up. What is the, you provide in your appendix the NHP utilization for 2024, and you gave an update for 2025 which was a pretty notable growth. Is it too early, or would you care to share your thoughts on the full year for internal demand compared to that point provided in 2025. Birgit H. Gershick: For 2026? Yeah, it is a little bit too early. We are really just starting the year. But for 2025 compared to 2024, what you are seeing here is a higher number of NHP studies coming through. It is a little bit of mix, but also substantiates the need for this very important research model and that this research model is here to stay for a long time, which also required us to ascertain our supply chain and therefore the KF Cambodia acquisition. Eric White Coldwell: Very much. James C. Foster: Thanks, Eric. Operator: Thank you. We will go next to Luke Sergott with Barclays. Your line is open. Please go ahead. Luke Sergott: Great. Thanks for the question, guys. So I just kind of wanted to talk about the backlog here, and the DSA bookings are starting to ramp, continued strength there. But you guys also hired ahead of what was expected to be that demand. So as bookings environment baked within your guide continue to improve, can you talk about your hiring needs as you continue to ramp whatever you are going to do on the DSA to exit the year? Do you guys have enough, or should we expect some type of pickup there? Just trying to right-size with cost outs plus the capacity utilization and your hiring needs of what is going forward. James C. Foster: We, from a capacity point of view, we have sort of two issues. We have physical capacity, which is in pretty good shape right now. So we are not optimally using our facilities, which obviously that is a goal of ours, but still as the, hopefully, the demand increases, we will be able to utilize space that is already built and be able to fill that. We have been really careful for years actually, but really careful the last two or three years to get our headcount in sync with demand and with our revenue. Obviously, this is a people business, and it is more than half of our costs. And last year, in 2025, we added some incremental people in our lab sciences building business and to fill vacant spots. So I think we are in good shape. Senior scientific staff and study directors and people like that are in particularly good shape. And principally, we are looking at direct labor. We need to bring direct labor on probably a quarter before we actually need them because there is some training associated with that. But we are quite confident we will be able to do that in a measured fashion to both accommodate the work and not be a drag on our operating margin. Luke Sergott: Got it. And kind of related to that, and this kind of the overall with the AI fears based within the market and particularly within your business. Eric White Coldwell: You kind of gave the number there from a FTE Luke Sergott: perspective of percentage of cost, but, you know, as you guys continue to restructure, get more efficient, talk about James C. Foster: you know, I do not think that there is AI risk, but clearly, the market does not agree with me. So kind of walk us through the bull case on why you are not going to be impacted by any AI coming through considering how much wet lab work you guys need to do? James C. Foster: Yeah. So thanks for that. So we were frankly surprised at the sort of violent share price reaction to the AI conversation that has been going on across multiple industries actually for the last couple of weeks. So it is what it is. We got caught up in that. And so, you know, there are several things that we would like to say about that. AI is a NAMS, and we are focused on NAMS to the extent that the science is beneficial. The science is additive. And we view AI as an enabling technology to support our work over a long term and to complement it, but we do not see it as a disruptor. AI in discovery has been around for a while by many of our large clients, so that is not new. The conversations really have not changed at all. And so, you know, for us, AI and NAMS is sort of a broader, longer-term evolution rather than something that is immediate. We continue to see ourselves as an essential and logical partner to help validate NAMS, including AI, if and when they become beneficial and additive as I said. And we hope to be able to run interference in a positive way for both our clients and the regulatory agencies to validate these technologies, if beneficial. So the NAMS are basically crude right now. AI is really early. But, you know, it is a promise of AI that we see could be beneficial to discovery, and we do not quite see it in safety. We have had some investments in AI into virtual control groups, which we talked about in our prepared remarks, some of our scientific report writing, our sales effectiveness. We have data scientists that are on this. So we are embracing, I guess the bottom line for us is we are embracing alternative technologies sort of strategically, but the science will prevail. So to the extent to which these technologies are beneficial, great. We will use them. We think we will use them more, we, the whole industry, in discovery, to help our clients get to a lead compound faster. Hopefully that will have more molecules moving through preclinical tox, and molecules moving into the clinic, and, hopefully, more molecules being approved. So we acknowledge it. We embrace it. We are participating in it. We actually do not see this as a threat to the company. And if these technologies are better in any way, besides just being augmentative, they will be embraced by the whole industry. Definitely nothing is imminent. Operator: Great. Thanks. Thank you. We will go next to Maxwell Andrew Smock with William Blair. Please go ahead. Hi. It is Christine Raines on for Max. Congratulations to both Jim and Birgit on what lies ahead. Christine Raines: And for our questions, just hoping you can give some context on DSA cancellations in the quarter. I think you said they were consistent with last quarter levels, but curious if they were within your normal range, and if you could remind us what your normal range of cancellations is and also if the distribution of cancellations due to client funding versus clinical and other competitive reasons were in line with expectations in the quarter? Thanks. James C. Foster: So cancellations and slippage, as we call it, are elements of our business. Slippage is when studies do not start when we anticipated they would start or when the clients initially anticipate, and things just cancel because, I do not know, priorities change, therapeutic area focus changes, or the drug just is not performing well. Before we even get ahold of it, the client just cannot get it to a dosage that will not be harmful to patients. So we have cancellations all the time and always will. We have penalties for cancellations with insufficient notice, which tends to cover whatever cost we have been impacted by up to that point. And with a decent backlog, we manage this really well. There is very little variability with either slippage or cancellation. So we have never given the percentage or dollar amount or whatever, nor will we, but we are definitely back to normal expected, anticipated cancellations, and we can manage that really well again, without the volatility in our business model and to be able to accommodate clients across the board, both large pharma and biotech. And just to go back to the sort of nine months backlog, we like that. It gives us a really great line of sight. If a study cancels or slips, we can almost always, not always, but almost always, be able to slot something in the queue into real-time revenue-generating work to replace whatever has slipped and canceled. So, as you know because you asked the question, cancellations had gotten, a couple of years ago, much higher than we would have liked to historically, improved last year, and is now back to normal levels. Impossible to predict, but we would not anticipate, given the sort of market dynamics—cash coming into biotech, pharma companies finishing sort of skimming down their portfolios—that it would increase again in any significant way. Great. Thank you. Yeah. Thank you. We will go next to David Howard Windley with Jefferies. Please go ahead. David Howard Windley: Hi, good morning. Thanks for taking my questions. Congrats, Jim. It has been a nice ride. I looked back at my initiation. I think this is 100 conference calls with you. So thanks for the ride. James C. Foster: It has been a pleasure. It has been a pleasure, Dave. David Howard Windley: My question for you is basically a Todd Spencer: temperature check on David Howard Windley: demand or urgency of clients. Last year you entered into 2025 with some clients kind of booking some fast-burn, wanted-to-start-quickly type studies. Your demand book-to-bill in the fourth quarter certainly was strong. It sounds like month to month continued to improve. Just interested in any color you can provide about how that has continued into the early part of 2026, knowing that you often remind us that it is not linear, and January sometimes gets off to a slow start. But just kind of comparisons to maybe this time last year and continuation out of the fourth quarter would be great. Thank you. James C. Foster: So I will, maybe Birgit would want to elaborate. Demand is improving from a whole host of factors. So significant inflows of cash into biotech coffers, pharma companies sort of finishing some of their bloodletting and shrinking down their infrastructures, and just tariff stuff being sort of over, and whatever pricing situation is going on between Washington and the pharma companies. So we think that that is sort of past them. So demand seems to be improving. We, as I said a moment ago, like the backlog situation. You will recall, Dave, two or three years ago, the backlog got to about eighteen months, and we loved it until we hated it. It was just way too long. And clients got to the point of canceling studies because they just booked slots without a study. So last couple of years, we have seen a lot of post-IND work. We will always have both, both pre and post. We are seeing more sort of general tox now, earlier than the post-IND. So that is good. We are moving towards a greater balance. So that would indicate clients are anxious to start their studies and would want to do that earlier, which obviously is a good thing for us. And while we do get some late-stage work, sometimes we do not do the early-stage work, that is typically, we like both and get both. So if we get the early work and the drug is progressing nicely, we will typically get post-IND work as well. So sort of a balanced demand quotient right now. Maybe Birgit wants to add to that. Birgit H. Gershick: Yep. Happy to. Hi, Dave. So maybe just to add that the environment feels a lot more stable than last year. So discussions with global biopharma is all about how they can increase the number of candidates for the upcoming year and upcoming years. So they are ready. They are definitely ready, back to work. They have their programs lined up. From a small and mid-sized biotech, a lot more positivity in the marketplace that we are hearing about. Certainly, there is still some uncertainty in pockets. Certainly, we are happy about our net book-to-bill of above one in Q4. And so we are hoping that the demand trends will continue to get us back to growth in the second half of the year. So David Howard Windley: Great. If I could follow up real quickly. Relative to that better environment, continuing improvement, the book-to-bill that you just posted in the fourth quarter, your comments about achieving the higher end of your revenue guidance, caveat that things are not linear, requires a 1.0 book-to-bill, again, with, but that strikes me as a relatively conservative bar compared to what you just did. Perhaps add some perspective to that, please? Birgit H. Gershick: Yeah. I am happy to start, and then Jim, certainly come in. Yeah. So as you outlined, we need a book-to-bill of one, and it is not going to be linear. So the quarters are not all going to be above one most likely. And the reason for our outlook and looking at H2 for growth on the top end is really that there are other factors in there. Start times, so bookings are still one to two quarters out before they can actually start. Conversion of the backlog, the timing for that, and just then overall, the study starts from the booking, when we are getting the booking to when we actually can start starting and get it done in there. So just a lot of different factors that are playing into it. But certainly very positive of those trends continuing. James C. Foster: Okay. Thank you. Operator: Thank you. We will go next to Charles Rhyee with TD Cowen. Please go ahead. Charles Rhyee: Yeah. Thanks for taking the question. Operator: Hey. Maybe, first off, you know, Jim and Birgit, congratulations David Howard Windley: to the both of you, and Jim, good luck for the future. Charles Rhyee: And, Birgit, looking forward to meeting you soon. Maybe if I could just ask about the guide for coming up here, understanding the headwinds that you kind of laid out, particularly for the first quarter. And when you talk about this material improvement in margins going forward, it sounds like you are saying that, obviously, these kind of reverse as we exit the quarter. Can you kind of lay out which ones fully exit or which ones might carry through? Or should we really kind of assume sort of a big step function in margins into the second quarter and then it kind of flattens out there? Or should we be modeling more of a gradual ramp back in margins as we think through the course of the year. James C. Foster: Mike, why do you take that? Michael “Mike” Nau: Yeah. Hey, Charles. Thank you. So when I think about the sequential improvement in the operating margin, there are really three main drivers of that. The first one, we are going to get continued benefit from the cost savings and our efficiency initiatives as we go throughout the year. And then second one is the lower sourcing related to the KF acquisition. So we are going to, you know, we solidified that supply chain, David Howard Windley: and I think James C. Foster: the Michael “Mike” Nau: headwind that we are seeing in Q1 of having more bookings and having to go out to the open market to purchase those is really dissipated by the fact that we have such a majority-owned portion of that supply chain. So that will go away. And then our cautious optimism that the demand is going to continue to improve over the course of the year. So that strong book-to-bill that you saw in Q4, that is going to materialize into revenue as we progress into 2026. Charles Rhyee: And just maybe to follow up then, the extra sourcing cost where you kind of had because of the greater-than-normal number of study starts, so you had to kind of go outside. Is it more demand than the supplies you had? Is it that you expect that kind of level of sourcing required and that KF then offsets that? Or is it that you expect sort of that kind of bolus of study starts to abate and so you do not need to tap the market outside of your existing supply. James C. Foster: Thanks. Michael “Mike” Nau: Yeah. It is, like, it is a little bit of both. Right? You are going to get the impact of the KF in the second half of the year. We have had, obviously, more time to plan for the increased demand in the second quarter. The other pieces of Q1, right, are the NHP timing. So that is just a function of when the models are ready to be used and shipped and when the demand is, and that is simply timing in Q1. And then, of course, in Q1, you have the stock comp. Right? That is just the accounting rules of how you have to accelerate the expense over the service period. So with the retirement and the succession, we are going to get a James C. Foster: you know, a pretty heavy headwind in Q1 on the stock comp. That is Michael “Mike” Nau: improved throughout the year too. It is not a headwind on the year. Charles Rhyee: Alright. Great. I really appreciate the comments. Thank you, guys. James C. Foster: Yeah. You Operator: Thank you. We will go next to Elizabeth Hammell Anderson with Evercore. Your line is open. Please go ahead. Hi, guys. Good morning, and thanks for the question. Congrats Jim and Birgit on your new roles. I think that will be a good transition. Maybe just digging into the outlook here. Can you talk about the demand environment in Elizabeth Hammell Anderson: China right now, particularly in regards to RMS, but anything else you are seeing there? And then anything you would chalk up the improvement in biologics to that you mentioned for the fourth quarter? Thank you. James C. Foster: So our China business continues to perform well. You know, it is all RMS, as you know. And it is an important market for us, and, you know, we feel that we have elevated the craft of producing really high-quality pristine animals and sort of taught the industry the benefit of utilizing those in terms of the quality of the work that they do. And China is becoming a more sophisticated, innovative locale for sure. A lot of investment by the government. And you did not specifically ask this, but I am just going to throw this in there that, you know, we are looking closely at China with regard to what additionally we can do there besides RMS, given that it is obviously a big patient population. Drugs developed in China have to be tested in China. And so, except for the research model part, which we are thrilled with, you know, we are not accessing any of the service revenue associated with that. So China may become a bigger part of our own portfolio going forward. Biologics has been a really good business for us for a long time. It had a sort of complicated 2025 due to some lower sample volumes from a couple of large clients due principally to project delays and regulatory challenges. But this has returned to growth in the fourth quarter, due to higher demand principally from Europe, and we would expect some of those client-specific challenges—those are behind us as we move into 2026. So an important business obviously, testing large molecules. At least half of the drugs that are approved are large molecules going forward. A business that we think we have a strong position in. It has had years of very nice growth and escalating operating margins. So it is beginning to sort of come back. That was a business that was very much benefited by COVID, and things sort of slowed down, and now we are beginning to see them ramp up again. Operator: Thank you. We will take our next question from Michael Leonidovich Ryskin with Bank of America. Please go ahead. Todd Spencer: Great. Thanks for taking the question. Michael Leonidovich Ryskin: I will just do one, given time. Just following up on your earlier comments on DSA demand environment, what you saw in 4Q, expectations for the coming year. I kind of want to go back to 2025. You had a pretty strong start to the year, then a little bit of a lull over summer months in terms of demand, and then a pickup again in the recent months. Just wondering, that volatility, that uncertainty, those fluctuations, would you attribute that more to the macro environment, the geopolitical environment, rates environment? What I am getting at is what gives you confidence that we would not see something similar this year, or the 4Q, the strength you saw in 4Q 2025, is a little bit of a red herring if we take a step back? Just what makes you think that last year was an outlier in that regard? Todd Spencer: Thanks. James C. Foster: I mean, the big impact for us was overall soft demand from our client base, both large and small companies, both new and old companies, who were really concerned about access to capital, whether they had enough funding to work on a whole range of drugs. So it is quite clear to us that they paused some drugs before they got filed their INDs, so we think we are going to get back to that. And big pharma is facing another patent cliff, which, you know, we saw this, I do not know, twelve, thirteen, fourteen years ago. They begin to pull back on their cost structure. By the way, one of the things we do is help them alleviate or reduce some of their internal costs because the work that we do in safety assessment is as fast, if not faster, lower price point, and probably in most cases, better science. So we are being cautious. We said that. We are trying not to overcall it because it is not linear, and one quarter does not necessarily portend the next. But what is beginning to change is the mass amount of funding that went into biotech companies—$28,000,000,000 in the fourth quarter—was quite significant. And so if that continues—January was a good month as well—but if that continues, that should generate incremental demand going forward. There is usually a lag time between cash coming in and then booking studies. So, you know, we are going to see that in the second quarter, but more pronounced in the back half of the year. The fact that book-to-bill was above one times and much higher than that in Todd Spencer: December. James C. Foster: is obviously a very important point, and that is also going to benefit the second quarter and the second half of the year. So we are trying not to overcall it, but what we have been looking for and what we have been hearing from our clients just in terms of funding and access to continued funding is beginning to happen. And since the preponderance of our revenue—we have really big market shares in big pharma—but the preponderance of our revenue and the growth rate for the last decade has been principally from hundreds and hundreds and hundreds of biotech companies, none of whom have the internal capacity to do anything that we do for them. So they must outsource, do not have to outsource to Charles River Laboratories International, Inc., but most of them do. So they must outsource. And so just given the number and diversity of new modalities to treat or cure diseases, these folks have to get back to work, and that should generate additional volume for us. We are obviously comfortable with the guidance we have just given today. Michael “Mike” Nau: And, again, we are being, I think, our James C. Foster: cautiously optimistic is really a good way to put it. Michael Leonidovich Ryskin: Appreciate all that, Jim. Thank you. Well, congrats on Operator: Sure. Thank you. We will go next to Casey Rene Woodring with JPMorgan. Please go ahead. Casey Rene Woodring: Great. Thank you for taking my questions. And, yeah, Jim, again, Michael “Mike” Nau: on retirement, and Birgit, looking forward to working with you in the new role. Yeah. Maybe just sticking to one. On the capital deployment comments, so Casey Rene Woodring: you talked about maintaining dry powder for M&A. How should we think about that in relation to some of the comments you made about the opportunity in China? James C. Foster: And then how do we balance that versus repos this year? You know, you mentioned the violent share price move of late. And then also curious if you are looking at other deals like KF that could potentially alleviate some NHP sourcing costs, you know, some of the headwinds that you have seen in DSA to start the year? Thank you. Todd Spencer: Yes. So our NHP James C. Foster: sourcing volume is in really good shape now given that NovoPrim and the deal that we just did with KF. So it is highly unlikely that we will need to source anything further or buy anything further. We already had plans to increase the operation. And if the demand continues, we can increase both of them. So we feel that just in terms of quality of the NHPs, price point, just the quality of the farms that they are bred on, we are really, really comfortable in that. Capital deployment for us is pretty straightforward. We like to keep our leverage below three turns, and we have been able to buy many, many businesses over the years. And, you know, we lever up to high twos, occasionally over three, and we usually delever within twelve months. So we feel really good about that. Our balance sheet is in really strong shape pre these deals. And even after these deals, our leverage is just in the high twos, and we will continue to work it down. We have a committee of the Board that I sit on, and we objectively look at uses of capital every single quarter, in tandem with our Board meetings. And paying down debt, share buybacks, M&A is always on the table. So we are certainly continuing to look at M&A in some of the areas that we have talked about—bioanalysis is probably top of our list—and as I said, we are beginning to look closely at China, way too early to predict that. Buying back stock is totally dependent on what else do we have a better use, what does the share price look like. And we continue to pay down our debt. So I think we have a lot of flexibility right now. We just had a Board meeting last week where we talked about all of these things, have another one in May, and we will continue to stay on it. But there are definitely some areas that we would like to add. And every once in a while, we may continue to fill in the portfolio from M&A and come across one of our businesses where we do not think it has long-term value for us. And so we would take a look at divesting those as well. Birgit H. Gershick: Great. Thank you. James C. Foster: Sure. Christine Raines: Our next question Operator: comes from Justin Bowers with Deutsche Bank. Please go ahead. James C. Foster: Hi, good morning everyone and congratulations Jim and Birgit. So I want to sort of follow up on Luke’s earlier question, and hopefully, you can educate us a little bit more on NAMS. Michael “Mike” Nau: If I recall, it is about 20% of DSA revenue. Can you provide us with a sense of how the client base is using these methods? And the gist of the question is, are these technologies being platformed by a high-end full of clients or more concentrated? Or is adoption and uptake fairly diverse across a large number of clients that are using these technologies, perhaps to validate existing in vivo methods. Eric White Coldwell: So we are seeing, you know, we are James C. Foster: seeing NAMS across a big swath of our client base. We would say that, you know, big pharma has been looking at utilizing in vitro or non-animal technologies sort of forever. Lots of that is proprietary to each company, and some of it is just sort of standard stuff. It is definitely more pronounced in discovery as we have been saying now, as we have been talking about this multiple last year. And everybody hopes that some of these technologies, albeit somewhat anecdotal, help the process of accelerating our clients getting to a lead compound and spending less time on drugs with a low probability of getting into the clinic and more time on drugs that have a higher probability. Of course, we get paid either way, the drug advances to the clinic or not, so we are there to help them, and if the technology helps us make a determination with and for the client, we are happy to do that. As we have said before, PathoQuest that we just talked about on this call is a non-animal technology—next generation sequencing—that literally is replacing some of the animal-based work that we do in our biologics business. And that serves our clients. That is a really good NAMS that we are happy to provide that our clients are demanding, and it gives better answers faster. We also have another business we talked about on the call, Retrogenix. We are looking at off-target effects of drugs; it is really, really important. So there are some NAMS now that are beneficial and utilizable. There are some that are, sort of, hopeful but still early days, and we believe we are only going to see it in safety in a sort of narrow monoclonal antibody swath that the FDA has talked about, and too much of a safety risk to be focusing on these as replacements, but likely to be augmentative to some of the wet lab work, particularly in the early phase. Michael Leonidovich Ryskin: So James C. Foster: we will continue to license in technologies and periodically buy something that we think is really beneficial for our clients, and we generate decent revenue and margin. We will work with our clients in validation. But this is a long-term marathon and not something that is going to be done quickly or overnight. Since this is so Christine Raines: Thank you. And if I may, with just a quick follow-up. Michael “Mike” Nau: Topical, I was speaking with a top 10 pharma last week, and we were talking about AI and how that would potentially impact early stage. And they said, well, maybe we could see a scenario where we start with, you know, 20,000 targets instead of 10 at the top of the funnel. Can you help us understand how that would sort of flow through James C. Foster: your business? Michael “Mike” Nau: And if that would be accretive, dilutive, neutral, James C. Foster: Yeah. If you can screen through more targets at the same pace or faster, that is obviously really beneficial for our clients and should be beneficial for us as well. As I said, if they can go—just using your numbers—if they can screen through 20,000 potential drugs that hit the target, and then they can focus on the ones that have the highest probability of actually working and being tolerated by patients who get into the clinic, that should generate incremental work for us, and it should also have a higher hit rate for the drug companies. It is sort of shocking, I would say, that all of the US pharmaceutical and biotech companies in the aggregate, we only have between 40 and 50 new drugs a year, right? If that could be 100 or 200 or 500, obviously it would be better for society, that obviously would be better for human health, but definitely would be better for Charles River Laboratories International, Inc., and would be better for our clients. So to the extent to which AI can get its arms—you know, speaking to it as if it is a person—get its arms around more data earlier, and have a bigger funnel, I think that would be beneficial for all of us. Operator: Thank you. Thank you. We will go next to Patrick Bernard Donnelly with Citi. Your line is open. Please go ahead. Patrick Bernard Donnelly: Hey, guys. Thanks for the questions. This one, I think, covered a lot of ground here. Maybe the divestiture process, Jim, can you just update us where we are there? It sounds like negotiations are still going with the buyers. What hurdles are left? And it sounds like it will be done by midyear. That capital comes in the door. Is that deployed relatively quickly? Just a quick update on that process would be helpful. James C. Foster: I mean, the process is ongoing. You know, we have sophisticated investment banks working on these divestitures. We have interested parties. The comment that we made on our last quarter call still seems reasonable, and we hope to close these divestitures sometime in the first half of this year. And perhaps, hopefully, we can sign something sooner, but it is difficult to tell. I mean, these deals are not signed until they are signed, and they are not closed until they are done. So we are very committed to finalizing the process. We think we have some interested folks and it should be a good result. In terms of what we do with the proceeds, again, it is sort of what we do with any of our proceeds, what we do with any of our cash, as we look at M&A, debt repayment, share repurchases, all of the above or just one of the above. And it is always contextual and depends on what is going on with market demand, what the rest of our M&A portfolio looks like, what the share price looks like, and we do that, I think, very well, very objectively, very thoughtfully. Every quarter, we do not have any sort of preordained Michael “Mike” Nau: feelings about that. So James C. Foster: when we bring these deals to closure, we will see what the world looks like at that time in terms of what we do with the assets. Patrick Bernard Donnelly: Okay. And then maybe one last quick one on the NHPs. You know, obviously, KF is a nice impact this year. You look out, you know, beyond this year, is it almost a compounding effect on the NHP side where, you know, you benefit more on the savings as you insource more from, in 2027, from NovoPrim and KF both being onboard there? James C. Foster: You want to take that, Mike? Michael “Mike” Nau: Yeah. Absolutely. So, yeah, we said that there would be a $0.25 benefit this year. And then even next year would be even further. You know, we think that there is approximately $0.60 accretion from KF as we go into 2027. Casey Rene Woodring: Thank you. Operator: We have no further questions in queue. I will now turn the conference back to Todd Spencer for closing remarks. Todd Spencer: Great. Thank you for joining us on the conference call this morning. We look forward to seeing you at upcoming investor conferences in March. This concludes the call. Thanks again. Operator: Thank you. That does conclude today's Charles River Laboratories International, Inc. fourth quarter and full year 2025 earnings call. Thank you for your participation, and you may now disconnect.
Chanda E. Brashears: Thank you. You may begin. Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2025 results. Our earnings release, executive commentary, as well as our Form 10-Ks were issued earlier this morning and are available on our website at ir.cinemark.com. Today's call is being webcast with a replay and transcript available on the website after the call. Before I begin, I would like to remind everyone that during this conference call, we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations, or intentions. Forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to materially differ from those expressed or implied. The factors that could cause results to differ materially are detailed in our most recent annual report on Form 10-Ks as filed with the SEC and available on our website. Also, today's call will include non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the website's most recently filed earnings release, 10-Ks, and on the company's website at ir.cinemark.com. Joining me this morning are Sean Gamble, President and CEO, and Melissa Thomas, CFO. Beginning with today's call, we are shifting our earnings format to provide adequate time for your questions. Following brief introductory remarks from Sean, we will open up the lines for Q&A. With that, I will turn the call over to Sean. Sean Gamble: Thank you, Chanda, and good morning, everyone. Before we dive into Q&A, I would like to briefly reflect on our 2025 results as well as the advancements we have made over the past few years. Driven by further market share expansion and a series of all-time record achievements in 2025, we delivered a post-pandemic high in worldwide revenue of $3,100,000,000. This strong top-line result, combined with effective cost management and incremental productivity gains, resulted in $578,000,000 of adjusted EBITDA with a healthy 18.6% adjusted EBITDA margin. Through a relentless focus on initiatives that are aimed at expanding our audiences, activating new sources of revenue growth, optimizing our circuit, and continuously improving our processes and capabilities, we have taken the experiences we create for our guests and our operating agility to new levels. Furthermore, we have developed a distinctive set of competitive advantages, including a differentiated position of strength. Over the past three years, we generated nearly $1,800,000,000 of adjusted EBITDA with over $1,300,000,000 of operating cash flow. We increased customer loyalty to Cinemark, meaningfully expanded our market share, and grew our concession revenues and per caps to all-time highs. We fortified our balance sheet, extinguishing over $700,000,000 of COVID-related debt while at the same time reinvesting over $5,000,000,000 in capital expenditures to advance our company for the future and returning $315,000,000 to shareholders through dividends and share buybacks. Achieving these results has required extraordinary dedication, ingenuity, and perseverance throughout our entire company, and I would like to commend our sensational global team for the significant impact they have made setting up Cinemark Holdings, Inc. for ongoing success in the current environment and beyond. As we look ahead, we remain focused on effectively navigating an evolving media and entertainment landscape, continuing to diligently operate our business and delight our guests week after week, and effectuating a multitude of strategic initiatives to further strengthen our company and market position. 2026 appears set to benefit from a robust lineup of compelling films and a volume of wide releases that looks poised to reach pre-pandemic levels. We are excited about the prospects of this year's slate, and we remain highly encouraged by the sustained consumer enthusiasm we continue to see for the types of larger-than-life cinematic entertainment we provide at Cinemark Holdings, Inc., as well as the multitude of opportunities before us that are fully within our control to create incremental value for our customers, partners, and shareholders. Operator, we would now like to open up the line for questions. Operator: Thank you. The floor is now open for questions. Operator: Our first question is coming from Eric Owen Handler of ROTH MKM. Please go ahead. Sean Gamble: Yes. Good morning. Thank you for the question. Sean, given how well premium has been performing for you guys, I am curious Eric Owen Handler: how many of your theaters have two XD screens? Are there plans to add more theaters with multiple XD screens? And what do you think ultimately that could be? Sean Gamble: Sure. Thanks for the question, Eric. Definitely premium amenities, we are seeing a growing interest from a section of our audiences who really enjoy the added enhancement that they provide. Specific to your question, we have got about 10% of our domestic circuit that has two XDs. There are others that have a combination of an IMAX and XD, a ScreenX and an XD, but that is where the overlap. Part of the governor on that is just having enough significant screens to add an extra XD to. We are very particular about making sure that if we are selling an enhanced experience that it fully delivers on that, and that is beyond just the sound, the environment, it goes to the scale of the screen. So if it is an existing theater, it needs to be a second auditorium that can do that. We are in the process of rolling out additional screens over the next few years. So we are going to be continuing to do that. We have still a nice runway of opportunity, but I am just flagging that there are some limits to it. We also are just focused on how many of those we have in a theater. Premium enhanced formats still only represent about 15% of overall box office. So while there is a group of moviegoers who do like to pay for that additional enhanced experience, the bulk of moviegoing still is on all the other screens, and our focus is to continue to make sure all of our screens are a premier experience regardless of whether you choose XD or something else. Eric Owen Handler: That is helpful. And then I wonder if you have any type of updates on new build activity, be it in the U.S. or Latin America? Sean Gamble: Sure. Our new build pipeline was slowed during the pandemic, obviously, and then we have reactivated our real estate efforts in exploring opportunities out there. We have a number of things that are in motion, but these projects can take two to three years to get off the ground. So we opened a new site in El Paso in 2025. We have plans to open an additional site in Greenville, Texas in 2026. We have broken ground in Omaha, Nebraska on another site for 2027, and then we have a range of other projects, as I mentioned, that are in motion. So we reactivated that. It just takes a little bit of time to fully get up to speed because you have to make sure you get the right site and you go through all the exercises of finding the locations, negotiating the deals, working through all the regulatory processes. It can just take a little bit. Melissa Thomas: And, Eric, you do see that increase in our pipeline coming through as well in the step-up in capital expenditures that we are expecting from 2025 to 2026. So that is reflected there, as well as to your point on XDs and how many opportunities there are for expansion in XDs, ScreenX, and D-BOX as well. Sean Gamble: Thank you very much. Thanks, Eric. Operator: Thank you. Our next question is coming from David Karnovsky of JPMorgan. Please go ahead. David Karnovsky: Hey, thanks. Sean, in your executive commentary, you noted a softer-than-anticipated slate last year. So I wanted to see, with some hindsight, if you could walk through the factors that you think drove this. Is this primarily about quality and film mix? Or are there any kind of structural Benjamin Daniel Swinburne: impacts to consider like windows? Thanks. Sean Gamble: Sure. Thanks for the question, David. At a high level, I would say we view it more as just the normal ebb and flow of the industry. I think perhaps some of the expectations for 2025 got a little bit overinflated coming in. We had some pretty lofty targets for select films. When we look at the aggregate of the slate, there was a bit more of a mixed bag of the ones that overperformed and some of those that did not fully resonate. The year lacked a mega blockbuster that exceeded half $1,000,000,000, and there really was no major summer animated film. So I think if we had had one $300,000,000 animated film this summer, which we traditionally do, I think everybody would be viewing 2025 much differently. So I do not view that as a real structural issue. I think it is just more the way sometimes the strength and quality of films play out and how well they resonate with audiences. Windows is something we do continue to evaluate. It is a big topic for the industry. There are indications that awareness of highly shortened windows is having some effect on smaller movies and more casual moviegoers, which could be providing some headwinds to overall recovery in the industry. There is a factor, but I do not look at the softness versus expectations in 2025 necessarily because of that. It is just more based on some of the really high expectations we had. David Karnovsky: And Benjamin Daniel Swinburne: okay. And then, just with margins, when we look at 2025, obviously, attendance was a headwind, but assuming a recovery this year, how should investors think about room for operating leverage? And Melissa, any help in thinking about kind of cost of goods, staffing, or G&A? Thank you. Melissa Thomas: Sure. From a margin standpoint, we would expect, given we do expect a stronger box office and higher attendance year over year, that would support leverage in our operating model as well as margin expansion. As you know, our EBITDA margins are most heavily influenced by those two factors of box office and attendance. That said, there are a number of variables beyond that that influence our margin: market share, average ticket prices, and food and beverage per cap, and then, in addition to that, incremental value that we expect to capture from our strategic initiatives and our ability to manage cost pressures. And then for international segments, our performance will depend on, we are talking about film slate, so how film slate resonates with their audiences as well as inflationary and FX dynamics. And then to your question on expenses, particularly on a go-forward basis, from a G&A perspective, we do expect our G&A to continue to reflect merit increases and rising benefits costs. We are making targeted strategic investments in talent and capabilities, including cloud-based software, to continue to advance our strategic priorities and position the company for long-term success. But we remain disciplined in our approach to expense management, ensuring that our spend is closely aligned with long-term objectives. And then broadly, as you think about our variable costs, those are going to flex with attendance, albeit not at the same rate. David Karnovsky: Thank you. Sean Gamble: Thanks, David. Thank you. The next Operator: question is coming from Eric Wold of Texas Capital Securities. Please go ahead. Eric Wold: I guess, a question on kind of moviegoer monetization. Can you talk about, with the strength you had in concessions in Q4 and then broadly throughout last year, what strategies have been driving the most success that you have put into place with the various ones that you have used? Any way to parse out how much of the increase was film mix influenced versus just basket and incidence? And then lastly, do you think the opportunity is going to push ticket price and the concessions higher this year given the environment that we are in economically? Thanks. Melissa Thomas: I will take that one from a per cap standpoint. Our per caps domestically were up 5% year over year, and there are three primary drivers to that. First, our strategic pricing actions; second, higher incidence rates; and then third, a shift in product mix given the growth in merchandise sales as well as enhanced foods. As you think about the breakout, I would call it probably around three points strategic pricing, a point incidence, and a point driven by shift in product mix. In terms of the key catalysts, as we have said before, food and beverage is a game of singles and doubles. We have a variety of initiatives that we have been executing upon and others that we will be executing on to really drive growth on an ongoing basis, and that includes increasing the throughput of our concession stands, leveraging planograms to improve the monetization of our space, we continue to introduce new concepts, new flavors, expanding our enhanced food offerings—we still think there is runway there—as well as growth in movie-themed merchandise, and that is just to name a few. As we think about the go-forward looking ahead to 2026, we do remain optimistic about our ability to deliver another year of moderate year-over-year growth in concession per cap, supported by the broad range of initiatives that I just mentioned. And we do think that growth can come from both incidence as well as further opportunities to optimize our pricing. Bear in mind, from quarter to quarter, our per caps will fluctuate with film mix. And then in our international markets, we do expect concession per cap to be impacted by inflationary as well as FX dynamics in the region, while shifts in country mix also can play a factor. Overarchingly, our focus is on delivering sustainable per cap growth and ensuring that our strategies are supporting both profitability and long-term value creation. Eric Wold: Perfect. Thanks, Melissa. Sean Gamble: Mhmm. Thanks, Eric. Operator: Thank you. The next question is coming from Chad C. Beynon of Macquarie Asset Management. Please go ahead. Chad C. Beynon: Hi, good morning, Sean and Melissa. Thanks for taking my question. Andrew Edward Crum: Wanted to ask about international attendance. It fell in 2025, and I believe a lot of that decline was really just kind of a product of what was out there in terms of Robert S. Fishman: the movie slate. But as you look at 2026, Sean, I know you talked about your optimism, maybe domestically or globally. But what about internationally? Do you think this could be an inflection point and maybe we could see attendance even exceed what we are expecting in the U.S. in 2026? Thanks. Sean Gamble: Sure. Thanks for the question, Chad. Yes, I mean, I think you are right. When we look at overall 2025 for Latin America in particular, the profile of the slate in terms of what worked and what did not work, it skewed a little bit lower for that region relative to the U.S. When we look at it, that is just nothing more than the product, and we see how that fluctuates year to year. 2026, specific to that region, we are optimistic about a better balance relative to the U.S. We think that the overall slate looks set to resonate stronger with Latin audiences than 2025 did. So you have got titles like Michael, The Super Mario Galaxy, Spider-Man: Brand New Day, Minions, Avengers: Doomsday. These are all movies that really will resonate. There is another Insidious title in that particular type of genre of horror, and that franchise in particular has done really well there. Certain films like The Odyssey, Star Wars, Supergirl, Cat and Hell—some of those sci-fi oriented—Dune—those do tend to skew down. But on the whole, we definitely are more optimistic about 2026 in LatAm. And in general, attendance throughout that region has recovered, in certain pockets more so than in the U.S. And with everything, I mean, a great example we always like to point to is Argentina. With all the hyperinflation and the economic and political turmoil that has happened within that country over recent years, attendance is neck and neck with pre-pandemic levels. So they have recovered exceptionally well. So when the content is there and it connects, that region in particular can really show some upside. Andrew Edward Crum: Okay. Great. Thank you. Robert S. Fishman: Then as we think more broadly just in terms of the loyalty product, I think you said 60% domestically, 30% internationally. Are there any changes that we should expect in the near term that could either help that loyalty, increase moviegoing? Just anything on the product side that could be different in the near term for consumers. Andrew Edward Crum: Thank you. Sean Gamble: I would say, I do not know if there is anything materially different. I think that the core value and the core benefits that are inherent to these programs continue to resonate with existing members and continue to attract growth in our overall membership. We have continued to see growth year after year in these programs. Movie Club, in particular in the U.S., is up over 50% from where we were in 2019. We do expect that that will start to level off a bit more as the program continues to mature. But thus far we have continued to see terrific growth. So what we are doing is, in addition to those core benefits, we do keep adding additional elements to it just to keep it fresh and enrich it. There are all kinds of surprise-and-delight events we do for our loyalty members throughout the year where they get invited to special programming and things of that sort. I mentioned that we just added a new premium tier to Movie Club, which we are hopeful will attract those audiences who are more inclined to upgrade on a regular basis. We have introduced badges. So there is a whole slew of things like that that we continue to add to the program to make it attractive from a retention standpoint as well as attracting new guests. So I think that is really it. We do other promotional events sometimes tied to films, sometimes tied to just engaging types of incentives also to stimulate growth. But those are the things that we are continuing to lean into to sustain growth and sustain our existing membership. Robert S. Fishman: Okay. Thank you very much. Sean Gamble: Thanks, Jeff. Operator: Thank you. Our next question is coming from Andrew Edward Crum of B. Riley Securities. Please go ahead. Andrew Edward Crum: Hey, thanks. Hey, guys. Good morning. So, solid ATP growth has accelerated over the last few years. How do you foresee the rate of change for ATP trending going forward? Given the ongoing shift towards and success with PLF across your circuit amongst other factors, is the mid-single-digit increase the business delivered in 2025 a new normal? Or was last year more of a one-off and not sustainable? Melissa Thomas: Thanks for the question, Drew. We were pleased we have delivered a 4% CAGR in our domestic average ticket price over the past three years. As we look ahead to 2026, we expect average ticket prices will increase modestly year over year in the full year, and that is really twofold. One, we do believe that there are further strategic pricing opportunities, as well as opportunities related to our continued expansion of premium offerings—so as we mentioned, XD, D-BOX, IMAX, and ScreenX. So we do think it is twofold, but not to the same extent that we saw in 2025, given some of the outsized mixed benefits. But keep in mind, average ticket prices will fluctuate quarter to quarter depending upon the film mix. And then on the international side, inflationary and FX dynamics in the region could play a factor as well as country mix. We do continue to approach our pricing decisions thoughtfully and are leveraging data to identify those optimal price points that maximize attendance as well as box office performance. Benjamin Daniel Swinburne: Got it. Okay. Thanks. And then maybe one follow-up. Can you address Andrew Edward Crum: the planned splits between U.S. and international in terms of CapEx spend? And is the $50,000,000 number you are planning for this year a good annual run rate for the business? Or is 2026 a peak? Thanks. Melissa Thomas: Yeah. So in terms of splits between international and the U.S., typically, around $50 to $60,000,000 of our CapEx is dedicated on the international side. The remainder is towards the U.S. And then in terms of our capital expenditures in 2026, those are ramping up to $250,000,000, and that is based on not only our expectations for cash flow generation but also the ROI-generating opportunities in front of us that we are looking to pursue. As we look forward beyond 2026, the extent of our spending and whether we stay at that $250,000,000 level will again be predicated on the ROI-generating opportunities we see in front of us. And then the other point I would call out is, as the new build pipeline ramps, that can cause variability from year to year with temporary upticks and then coming back down, just depending upon where we are at within that new build pipeline timeline. So there could be some fluctuations, but by and large, I would say it is too early to tell at this stage. Andrew Edward Crum: Okay. Thank you. Sean Gamble: Mhmm. Thanks, Drew. Operator: Thank you. The next question is coming from Patrick William Sholl of Barrington Research. Please go ahead. Patrick William Sholl: Hi, good morning. I just had a quick Sean Gamble: follow-up on some of your CapEx comments. Just on the new builds, are these expanding into additional markets? Or are they more replacing older theaters within those markets? And I guess similarly, is that the path that you are taking to increase the recliner penetration, or are you still finding opportunities within existing theaters to renovate those and increase the competitiveness and attractiveness of those amenities? Melissa Thomas: So in terms of the new build pipeline, most of the locations that we are looking at are new locations. So that would be in new markets where we see that there is underpenetration and there is opportunity for us to go in and have a high-confidence return. So that is really the genesis of what we are doing on the new build side. Sean Gamble: And I would add on the recliners, we do still see recliner opportunities. With 72% of our circuit reclined in the U.S., those are fewer than they once were, but we are still finding opportunities beyond our new builds to have attractive returns with some of our theaters that strengthen the overall competitiveness as well as provide a good lift in performance. Patrick William Sholl: Okay. And then on just the film slate for 2026 and Sean Gamble: maybe even 2027 as well. I guess, how are you seeing the cadence of releases? And Benjamin Daniel Swinburne: are you seeing it kind of create Patrick William Sholl: more stability in box office in the coming years? Yes, this is how we Sean Gamble: It is a great question. The good news is volume continues to grow. We saw that 2025 got to within 5% or so of pre-pandemic levels. 2026 looks to at least match that, potentially go beyond that. And the benefit of that is, obviously, our industry tends to be a bit of a momentum type of business where people come to the theater, they see what is coming up, they get excited, they have a good experience, and they come back because of that. And when you get these kinds of lulls in terms of things being released, you are winding up having to reboot the engine over and over again, and that is the type of cycle that we have been in. So I think the good news is with further recovery in volume coming forward, there should be fewer of those instances of having to reboot. I will say what we have still yet to see—and these are conversations we continue to have with our studio partners—is for a long while prior to the pandemic, we would see more of the films getting bunched in the summer and at year end. And then in time, everybody learned it is a twelve-month calendar. Movies can do huge business any time of the year: first quarter, late summer, not just in those peak when-kids-are-off-from-school months. I would say the industry has gravitated a little bit back to this old norm, and we see a bit of a more crowded summer in 2026 and a crowded year end. So that is one of the things that we are still looking for to fully resolve itself so we can truly have a fluid cadence of movies every month throughout the year and just sustain that momentum. So that is something that still is being sorted out, but the good news is it is moving in the right direction. Patrick William Sholl: Okay. Thank you. Melissa Thomas: Thanks, Patrick. Operator: Thank you. The next question is coming from Robert S. Fishman of MoffettNathanson. Please go ahead. Robert S. Fishman: Good morning. Two for you. When you look at 2026 and beyond, how do you balance leaning into your organic growth Sean Gamble: led by the sustainability of market share gains Chad C. Beynon: compared to positioning the company for other opportunities like M&A that has not really been in focus for a while? And then, if we could get any update on where things stand with any conversations you have had on the Warner Brothers acquisition, both with either Netflix or Paramount/Skydance? Thank you so much. Melissa Thomas: Thanks, Robert. I will take the first part of your question. In terms of our strategy for investing in growth, we have a balanced and disciplined approach to capital allocation, and we intend to invest in growth opportunities, including new builds, existing theater enhancements, and M&A to the extent attractive opportunities present themselves. When you think about M&A, we evaluate all transactions that come to market and we target high-quality assets with minimal deferred maintenance needs. Consistent with our disciplined approach, we are looking for accretive M&A opportunities at attractive multiples. We prefer to deepen our penetration in markets where we already have a presence to leverage established infrastructure, relationships, and market knowledge to drive growth and create value. Naturally, there are other factors we also look at: scale, strategic importance, competitive positioning, and margin profile. And then in terms of new builds and theater enhancements, we again remain disciplined with our capital expenditures. We are looking for ROI-generating opportunities that are high confidence and that position the company well for the long term and enhance the guest experience. But overarchingly, we are looking to balance among the three, but that is something that we are evaluating on an ongoing basis to try to create value for all shareholders. Sean Gamble: And on that last point for Warner Brothers, I would just add too, they are not mutually exclusive. The good news is with the strength that we have recovered on our balance sheet, we have the opportunity to pursue multiple attractive accretive types of deals, whether they be new build or M&A, to the extent they are there. But as Melissa said, we are going to continue to be disciplined in that approach. Specific to the Warner Brothers deal, I do not know if there is a tremendous amount to update on that. Clearly, the overall transaction remains pretty active and fluid in terms of what direction this may go going forward. Our focus, along with our trade organization, CinemaCon United, has just been to engage directly with all the respective parties as well as the regulators to ultimately pursue an outcome that we believe is in the best interest of our industry, of the creative community, of consumers, and of the local economies that benefit from healthy theaters in their towns. And that is a focus on sustained volume of output with whichever direction this transaction plays out, sustained exclusive theatrical windows in a meaningful way that support the industry, as well as sustained levels of comprehensive marketing campaigns to get that message out. Those are the things that have driven value. They have been moving in a positive direction with new entrants coming in and growth from different players in terms of volume. And we just want to make sure that things continue to progress that way versus any type of risk that might ensue from consolidation of a significant studio like Warner Brothers that has been a strong partner of theatrical exhibition for many, many years and just had a record-breaking performance in 2025. Chad C. Beynon: Sounds good. Thank you, guys. Thanks, Robert. Operator: Thank you. The next question is coming from Omar Mejias Santiago of Wells Fargo. Please go ahead. Omar Mejias Santiago: Good morning and thanks for the question. Sean, market share has been a key driver of Cinemark's outperformance and we were encouraged by the 4Q results despite softer box office. I understand that for the box office to recover there might be some capacity constraints, but how have you guys been able to gain share, and how do you plan to manage your footprint with the busier slate in 2026? Sean Gamble: Sure. Thanks for the question, Omar. It has been a variety of things we pursue. As we unpack 2025, first, we were thrilled with our overall results of 2025. We continue to see the benefits of the varied initiatives that we have been pursuing to build our audiences—everything from our showtime programming to our marketing actions to our pricing strategies to our loyalty programs, which we spoke about earlier. All of those things have helped support increasing our structural market share. 2025 in particular, while we had, at the beginning of the year, expected our market share might moderate a little bit, it actually continued to benefit from a high concentration of family and horror films, as well as what played out to be more of a balanced cadence of releases throughout the year, which limited the amount of capacity constraints we hit and enabled us to fully optimize our screens. So we benefited from that throughout the year. I will flag that obviously our share year to year will fluctuate based on that content mix and how well individual films resonate with our audiences as well as those capacity constraints. So when we look at 2026 in particular, again, we see a highly compelling, diverse profile of films on paper as we look at the composition. There is a little bit more crowding that we do see during the summer and year end, as alluded to a moment ago. You have some pretty substantial films in that pocket, which could lead to more capacity constraints where we are just fully utilized and do not have the benefit of expanding further like we were able to do in 2025, which could create a little bit of a headwind and cause our market share to normalize a bit. Ultimately, it is just going to depend on how the actual results film by film play out and the extent to which any of those dating decisions spread a bit more from the way they are organized right now. Omar Mejias Santiago: Great. And on alternative content, you guys have seen some notable success recently. Just curious how Cinemark is leaning into this category and what untapped opportunity you see within this vertical? Thanks. Sean Gamble: Absolutely. Alternative content is definitely one of the real positive signs we are seeing with nice growth, similar to younger moviegoers—we are seeing nice growth in younger moviegoers—but specific to alternative content, we have had multiple consecutive years now where alternative programming has been more than 10% of our box office. And that is not just because of the overall box office; the pure proceeds from alternative content, as an example, in 2025 are up more than double what they were in 2019. So audiences continue to be attracted by this content. And it is a range of different areas—everything from faith-based films to anime to other foreign films, content creator concerts. There is a whole slew of things: repertory films—they just continue to grow in their scale and magnitude. And to your specific question on what we are doing, we have a team that is dedicated to finding these kinds of opportunities, pursuing them, and then trying to really understand what the potential is so we can optimize how we are programming that throughout our circuit. And it has been really successful, and we expect, or at least we are optimistic about, continued growth in this area as we move forward. Omar Mejias Santiago: Great. Thank you, guys. Operator: Thank you. Operator: Our next question is coming from Mike Hickey of Stonex. Please go ahead. Mike Hickey: Hey, Sean, Melissa, Chanda, congrats, guys, on 2025, and I appreciate this new format as well. It is very helpful. First question from us is just, Sean, the impact on AI. We have obviously seen AI sort of, you know, pun intended, rewrite the script here of a lot of companies and be, I guess, destructive. But it seems like out-of-home entertainment is in a really sweet spot in terms of not being negatively impacted. I guess the flip side, the positive impact, although delicate, I am sure, but on film development, it seems like there is a lot to reduce expense and time and ultimately increase volume. So I am just curious overall your view on AI and how helpful it can be to your business? And I have a follow-up. Sean Gamble: Sure. You captured some of the points nicely there, Mike. I would say broadly, we are optimistic and enthused about the potential AI has in a number of areas. Specific to things we are doing within our company, the ability to both drive efficiencies as well as support our revenue growth objectives, we see lots of opportunity. We are already incorporating it into pricing optimization, some of the showtime optimization efforts I mentioned, our app development work in terms of how we are doing our software development. We have even got it going in our hiring activities within HR and our guest services. So there is a whole range of things that we are looking to utilize this for within our own company. And then on the content creation side of things, as you just mentioned, we see lots of potential for AI to unlock new types of capabilities, whether that is in visual effects, previs, and efficiencies in terms of moviemaking with timelines and things of that sort, which could lead to an increased volume of movies being made as well as new quality enhancements along the way. So we see a lot of potential for that. Just as every filmmaker has his or her own unique way of bringing stories to life, it would appear that AI is another tool that can enable select filmmakers to use it effectively and do new things that we have not seen before. Obviously, there is quite a bit of risk regarding IP and copyright infringement, and we very much support filmmakers and creatives and our studio partners in their efforts to protect their IP as AI evolves. But it seems like if that balance can be struck appropriately and the right measures and safeguards are in place, there is just a tremendous amount of potential that AI provides for our business specifically and broadly for the industry. Mike Hickey: Nice. Thanks, Sean. The next question on the Warner Brothers deal, and I guess specifically focusing on Netflix here. Definitely not asking you to bless anything, but just holistically your view on a couple of things. One, Netflix was originally thinking of a 17-day window, and I think they shocked and awed a few of us here and went to a 45-day window, and maybe that is in front of streaming, so that is a consideration. But just thinking about a new partner here with the 45-day window, whether that is workable or not. And then, just your own view, Sean, in terms of Netflix being sincere or maybe if you believe—obviously, you have conversations with them that are ongoing as part of your business—if you believe they can be a real theatrical partner for you, not just with the Warner Brothers asset, but maybe the core asset as well. Thank you. Chad C. Beynon: Sure. Sean Gamble: Thanks, Mike. I would say we have said this before for a long while. We have been optimistic that in time Netflix would recognize the opportunity that theatrical exhibition provides their platform and their content, much like all their other peers are doing, whether it is traditional studios, Amazon, even Apple getting a bit into the space. We have seen through data and we have heard from the conversations that theatrical exhibition provides a real meaningful lift to engagement and retention and interest in those platforms. So we thought for a long while there is just value that was being ignored by not taking advantage of that opportunity. We obviously look at the recent comments as providing some element of encouragement. I would say that we, much like our industry at large, are a bit apprehensive in placing too much stock into those comments just given how contradictory they now are to many of the other disparaging remarks that have been made over the recent years, even as recently as the middle of last year when there were references to the industry being outmoded as an idea. So I think there is going to need to be more action versus comments and firmer assurances to give everybody comfort that what is being said is real. A 45-day window, I think, generally speaking, we all view that as a good target point that strikes the right balance of giving studios more flexibility with getting content into the home and capitalizing on the marketing campaigns that have been spent in the theatrical space without creating too much adverse risk to theatrical performance. As mentioned earlier, in some cases, things have kind of overshot that a bit, and it is causing some concern about what that might mean on select films. It is a good starting point, but it also begs the question of 45 days to what? Forty-five days to a transactional type of offering in home, like a premium video on demand, is one thing where there is a price point there. Forty-five days to an SVOD, which consumers generally view as free, is a different type of construct. So there is a lot still to clarify with what exactly is being referenced, and again, I think we are all looking for much firmer assurances that are long-standing for not only a window but levels of continued investment and also sustained marketing, which is a critical component of this too, versus just verbal comments and promises. Mike Hickey: Nice. Thank you, guys. Operator: All right. Thanks, Mike. Thank you. Our next Operator: question is coming from Stephen Neild Laszczyk of Goldman Sachs. Please go ahead. Stephen Neild Laszczyk: Hey, great. Thanks for taking the questions. Sean, would love to get your latest thoughts on what you are expecting to see on the competitive front this year, and if you are seeing anything as you make your way out of 2025 into 2026 that might make you more confident that some of the recent gains in market share are perhaps more structural or could become structural Andrew Edward Crum: with how you position the brand as you look ahead into this next year? Sean Gamble: Sure. I think from a broad competitive landscape, competition just continues to grow. We see the industry at large improving marketing capabilities and continuing to lean into amenities and upgrades. I think that is a good thing on the whole because it creates an overall lift for everybody. We too, obviously, are continuing to ratchet up our competitiveness, pursuing ongoing initiatives in the different areas we have talked about before, to try to push our share even further. I think the structural gains we have talked about we are very pleased about. We do our best to tease out how much is content mix and capacity constraints relative to structural things, but we believe at least 100 basis points—growing beyond that, over 100 basis points—of our gains since pre-pandemic levels are sustainable, and we continue to push that further. So I think we feel good about the direction we are heading in and our ability to continue to compete as overall competition grows. Andrew Edward Crum: Great. Thanks for that. And then, Melissa, maybe just a follow-up on margin. Curious if there is any more help you could perhaps Stephen Neild Laszczyk: provide investors just on the magnitude of margin expansion you would Alicia Reese: expect to see in 2026 if box performed in line with expectations, and some of the puts and takes you called out on the expense side a bit earlier? Stephen Neild Laszczyk: Thank you. Melissa Thomas: Yes. From a margin perspective, again, as I mentioned earlier, really box office and attendance are going to be the primary drivers, and given anticipated growth, we do believe that supports margin expansion. But there are a number of other variables at play. We have talked about, on the average ticket price side and per cap side, that we do expect to continue to grow those top-line measures. We talked about market share a bit. We will have to see how the film slate, how individual films, shake out to see where market share trends. And then from a big-picture expense standpoint, as I was alluding to earlier, we do expect to gain some leverage over our fixed costs, and that is particularly in the U.S., where we have a higher fixed-cost structure. On the variable expense side—film rental and advertising, salary and wages, concession supplies, and then in the case of international, facility lease expense—those will fluctuate based on attendance and box office performance, although not necessarily at the same rate. Other factors from a modeling standpoint to consider would be ongoing inflation impacts on wage rates and certain concession categories. Also, from a film rental standpoint, just keep in mind that that is going to vary depending upon Operator: the Melissa Thomas: mix of blockbuster content. And then utilities and other expenses, I would just call out there. We expect them to remain elevated as we continue to address deferred maintenance needs across the circuit, albeit from a year-over-year standpoint, I do not expect that to be a meaningful headwind given that we started those efforts in 2025. Also on utilities and other, just keep in mind electricity costs, which continue to be impacted by rising market rates. Outside of that, we continue, as always, to pursue productivity initiatives and cost mitigation strategies to maximize our profitability and margin potential. Alicia Reese: Great. Thank you both. Stephen Neild Laszczyk: Thanks, Steven. Thank you. At this Operator: time, I would like to turn the floor back over to Mr. Gamble for closing comments. Sean Gamble: Okay. Thank you, Donna, for your help, and thank you to everyone for joining us this morning. We really appreciate the time and all your questions, and we look forward to reconnecting in a few months to share and discuss our first quarter 2026 results. Have a great day. Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the website at this time and enjoy the rest of your day.
Operator: Good day, everyone, and welcome to the Verisk Analytics, Inc. Fourth Quarter 2025 Earnings Results Conference Call. This call is being recorded. Currently, all participants are in a listen-only mode. After today's prepared remarks, we will conduct a question-and-answer session where we will limit participants to one question so that we can allow everyone to ask a question. We will have further instructions for you at that time. For opening remarks and introductions, I would like to turn the call over to Head of Investor Relations, Stacey Brodbar. Stacey, please go ahead. Thank you, operator, and good day, everyone. We appreciate you joining us today for a discussion of our fourth quarter 2025 financial results. On the call today are Lee M. Shavel, Verisk Analytics, Inc. president and chief executive officer, and Elizabeth D. Mann, chief financial officer. The earnings release referenced on this call as well as our traditional quarterly earnings presentation and the associated 10-Ks can be found in the Investor section of our website, verisk.com. The earnings release has also been attached to an 8-K that we have furnished to the SEC. A replay of this call will be available for 30 days on our website and by dial-in. As set forth in more detail in today's earnings release, I will remind everyone that today's call may include forward-looking statements about Verisk Analytics, Inc. future performance including those related to our financial guidance. Actual performance could differ materially from what is suggested by our comments today. Information about the factors that could affect future performance is contained in our recent SEC filings. A reconciliation of reported and historic non-GAAP financial measures discussed on this call is provided in our 8-K and today's earnings presentation posted on the Investors section of our website, verisk.com. However, we are not able to provide a reconciliation of projected adjusted EBITDA and adjusted EBITDA margin to the most directly comparable expected GAAP results because of the unreasonable effort and high unpredictability of estimating certain items that are excluded from projected non-GAAP adjusted EBITDA and adjusted EBITDA margin, including, for example, tax consequences, acquisition-related costs, gains and losses from dispositions, and other nonrecurring expenses, the effect of which may be significant. And now I would like to turn the call over to Lee M. Shavel. Thanks, Stacey. Lee M. Shavel: Good morning, and thank you for taking the time to join us this morning. Today, I will provide a broad overview of our fourth quarter and full year 2025 results and portfolio actions as well as our financial and strategic outlook for the year ahead. Elizabeth will give a more detailed view in our financial review. I will also offer recent perspective on our industry engagement including client discussions around current operating environment and developments around the uses of advanced technologies including the evolution of AI. Finally, I will finish with some updates on recent inventions we have introduced into the market to provide some context on how we are leveraging the demand and opportunity. Turning to the results. I am pleased to share that Verisk Analytics, Inc. delivered solid financial results for 2025 marked by organic constant currency revenue growth of 6.6%, organic constant currency adjusted EBITDA growth of 8.5%, and strong free cash flow growth. This growth was in line with the guidance that we provided at the beginning of the year and was achieved despite some temporary headwinds including a year of very low weather activity. The solid financial results in 2025 close out the three-year period with growth at or above the midpoint of the long-term expectations we set at Investor Day in 2023. As we look ahead, we continue to have confidence in delivering against our long-term growth targets based on the ongoing adoption of data and technology across the global insurance industry and our opportunity to support the needs of our clients and address their objectives with our distinct capabilities. Before we turn to the strategic discussion, I want to address the two portfolio actions taken at the end of the fourth quarter. Operator: First, Lee M. Shavel: we made the difficult decision to terminate the definitive agreement to purchase AccuLinks. We had strong conviction that the acquisition could create substantial value for the insurance ecosystem and would drive growth and generate strong returns on capital for Verisk Analytics, Inc. We went to great lengths and made extensive efforts to address FTC requests. That said, following the notice from the FTC that the review would be extended, the opportunity cost of waiting on the sidelines through a long, uncertain, and costly approval process was too high given the rapidly evolving environment. Second, we sold Verisk Marketing Solutions during the quarter. This transaction is a demonstration of our ongoing portfolio management and our commitment to focusing on data analytics and technology solutions for the global insurance industry. Turning to 2026, the insurance industry is healthy, coming off a strong 2025 marked by solid mid-single-digit net written premium growth, and consistently better year-over-year combined ratios, reflecting strong overall profitability. This is positive for the industry's interest and capability to adopt and integrate improved data, analytics, and technology into their businesses, particularly at a time when efficiency, better risk selection, and the adoption and integration of new technologies are top of mind. This is one of the reasons I am so pleased to share that Steve Cotterer has joined Verisk Analytics, Inc. to lead our claims business. Steve brings with him valuable perspective and intensive expertise developed across his three decades of experience working as a consultant at firms including McKinsey, Operator: Bain, Lee M. Shavel: and most recently Parthenon. Steve has focused on advising leading global carriers and brokers on transforming insurance industry workflows using data and technology including AI, and will be instrumental in advancing our client engagement and building on our active partnership with the industry. Turning our attention to client engagement, we are in constant dialogue with our clients covering strategic and technological issues and over the last year, I have been part of many C-suite conversations with chief underwriting officers, chief risk officers, and chief claims officers to discuss their AI strategies and how they would like to work with Verisk Analytics, Inc. in adapting our data, analytics, and connectivity to their evolving needs. There were two common elements in these conversations. One, how can we continue to enhance the critical data that the industry overwhelmingly trusts us to provide and two, how can we help support practical, safe, and regulatorily approved applications of evolving AI technologies with good ROIs. The unique nature of the insurance industry requires a massive amount of specific and representative data in order to ensure rate adequacy, evaluate claims fairly, promote competition and innovation as well as satisfy the needs of regulators. High quality data is critical for accuracy and effectiveness. And Verisk Analytics, Inc. is in a unique position as one of very few providers who currently aggregate data from multiple sources, organize it, and normalize it, in order to glean insights about risk at a granular level and include that in innovative products and services it files on behalf of our clients. In fact, Verisk Analytics, Inc. submits over 2,000 regulatory product filings each year on behalf of our clients and our government relations teams interact with all 50 state regulators on a daily basis. And it is this data quality, breadth, and organization that is essential to effective AI deployment. We already have the data infrastructure in place, and, in many instances, have AI tools built into associated workflows to enhance carrier accuracy and efficiency. In fact, we currently have more than 35 AI-powered projects and solutions for both internal and external purposes in use today. And we have plans to introduce many more throughout 2026. In order to illustrate this more concretely, I wanted to share one very specific description of our integration of the evolving range of AI technologies into our products, its adoption by our clients, the unique strengths we bring to that process. I recently returned from our Elevate conference in Salt Lake City where we bring together key participants in the claims process including carriers, adjusters, contractors, and other ecosystem technology partners to discuss technology development and adoption for this professional community that is dedicated to helping policyholders recover from damage to their property. At the conference, we unveiled the next generation of our AI-enabled estimating products, ExactGen. This product builds on a progression of AI technology that started with Exact Expert which we launched in 2023. Exact Expert uses rules-based logic and machine learning to assist estimators with identifying discrepancies in their estimates, providing advice on what questions should be asked, and correcting errors based on their employer's established rule set and experience. Exact Expert has been rapidly adopted industry wide including by seven of the top 10 homeowners insurers and now serves tens of thousands of adjusters and estimators. At the conference, a major restoration contractor referred to Exact Expert as, quote, an industry game changer. The rapid adoption of the product relied on trust in our proprietary cost repair data sets that underlies the technology and that estimators rely on for their work, and the common process platform in Xactimate that connects industry professionals. We expanded our offering of advanced technologies in our property estimating solutions in October 2025 with the launch of Exact AI. Exact AI applies generative AI to the production of initial estimates with content input from the Xactware platform. As part of the conference, I hosted a fireside chat with the CEO of one of the leading adjusting firms, shared his excitement about the AI platform, and shared that they are training thousands of their employees on the technology. Again, this solution builds on our established and proprietary datasets as well as the workflows relied upon by carrier claims professionals, independent adjusters, and contractors to smoothly settle and resolve a claim, ultimately benefiting policyholders. And now the addition of ExactGen, are adding agentic AI to handle content gathering from many sources, including aerial imagery providers, policyholder photos, and policy information from the carrier, amongst others, to generate near-complete exterior and interior estimates and facilitate settlement and resolution with the involved parties. Not only does ExactGen benefit from the established network of carriers, contractors, and adjusters, but we are integrating data and content from the broader network of technology providers who we have incorporated into our ecosystem. This reduces the burden of on-site professionals because they are spending less time gathering and waiting for information and more time with the affected insured client, accelerating the pace of recovery. The feedback was enthusiastic about how this could improve efficiency and help reduce resolution times, which have long been challenges for the industry. I could take you through similar examples across our other businesses, but the themes and our competitive advantages would remain the same, namely, one, the critical value of our data sets to AI, two, an established industry process and domain expertise to innovate from, three, the importance of existing connectivity to multiple parties in the ecosystem, and four, the ability to invest in innovation at scale and deliver technology across a large installed base, providing an economic advantage to the client and a stronger return on invested capital. It is these same competitive advantages that we capitalize upon to create growth and value for the insurance industry through prior technology transformations, including digitization, cloud, and SaaS. As our 2025 results demonstrated, our business and economic model are strong, as we crossed the $3 billion mark in revenue and delivered another year of solid growth and profitability, robust free cash flow generation, and strong returns on invested capital. We are well positioned to benefit from AI, drive new innovation, further connect the insurance ecosystem, and deliver growth in line with our long-term growth targets. We are energized by the opportunity that lies ahead and are looking forward to speaking about our plans in more detail at our Investor Day on March 5. I will now turn the call over to Elizabeth. Thanks, Lee. Elizabeth D. Mann: And good day to everyone on the call. On a consolidated and GAAP basis, fourth quarter revenue was $779,000,000, up 5.9% versus the prior year. Net income was $197,000,000, a 6.2% decrease versus the prior year, while diluted GAAP earnings per share were $1.42, down 1% versus the prior year. The decrease in diluted net income and GAAP EPS was due to non-operating items including costs incurred in the current year associated with the early extinguishment of debt, and net gains on the settlement of investments recognized in the prior year. Moving to our organic constant currency results adjusted for non-operating items, as defined in the non-GAAP financial measures section of our press release, Verisk Analytics, Inc. delivered OCC revenue growth of 5.2%, with growth of 7.2% in underwriting, and 0.5% in claims. This growth compounded from 8.6% growth in the prior year period which included the impact of Hurricane Helene and Milton, and was delivered despite the temporary headwinds we had called out previously, namely a historically low level of weather activity and a reduction in a government contract. Together, those two factors combined for an impact of approximately 1% to overall OCC revenue growth in the quarter. For the full year 2025, we delivered OCC revenue growth of 6.6%, marking another year of growth in line with our expectations and in line with our long-term targeted growth range. The continued strong growth of our subscription revenues is the clearest demonstration of the ongoing health of our business. Subscription revenues, which comprised 84% of our total revenues in the quarter, grew 7.7% on an OCC basis, compounding from the 11% organic constant currency increase that we delivered in 2024. The drivers of growth in the quarter were consistent with trends we have seen throughout 2025, including strength across our largest subscription businesses, namely forms, rules and loss costs, catastrophe and risk solutions, and antifraud. Just a quick note, we have officially renamed our Extreme Event Solutions to Catastrophe and Risk Solutions, which we think more accurately describes the breadth of solutions we deliver to the global insurance ecosystem. In forms, rules and loss costs, we continue to execute against and realize the benefits of our Coreline Reimagine program, which is driving strong value realization throughout the renewal process. Throughout 2025, we enhanced our engagement with clients both in terms of frequency of meetings, and seniority of teams we are engaging with. The net result was over 600 client engagements including deep dives, that have served to help us better understand how our clients are leveraging our innovations, while providing us with feedback on how to continue to enhance our solutions in a rapidly evolving environment. In total, we released 22 customer-facing modules, ahead of our target of 20 for the year, with a further 25 modules planned for release in 2026. Once those modules are introduced this year, we will have delivered upon the original scope of the Reimagine investment program. We will continue to drive further enhancement of our proprietary content with additional tools and functionality powered by the evolution of AI, enhancing the value for our clients and for Verisk Analytics, Inc. Within catastrophe and risk solutions, we delivered another quarter of double-digit growth driven by the expansion of contracts with existing clients, solid renewal, and the addition of new logos, including competitive wins. We are seeing strong interest in Verisk Energy Studio, and clients are expanding their hosting relationships with Verisk Analytics, Inc. in preparation for the launch of the platform later this year. Lee M. Shavel: In antifraud, Elizabeth D. Mann: our ecosystem strategy was further enhanced this year, through the introduction of new partnerships, bringing us to a total of 18 integrations offering new features and functionality to the industry standard ClaimSearch platform. This has helped us drive strong value realization. Additionally, we have continued to drive growth with non-carrier clients including third-party administrators and health care subrogation companies. While we remain in the early stages of commercialization, we are seeing strong interest and uptake in new advanced antifraud inventions, including Claims Coverage Identifier, and Digital Media Forensics. Our transactional revenues, which comprise 16% of total revenues, declined 6.5% on an OCC basis in the fourth quarter. The primary driver of the transactional revenue decline was lower volume in our Property Estimating Solutions business, resulting from continued low levels of weather activity. As a reminder, 2024 included a transaction benefit of slightly less than 1% of total revenue associated with Hurricanes Helene and Milton. Additionally, as we noted on our prior call, softness in our personal lines auto business also negatively impacted growth. Moving to our adjusted EBITDA results, OCC adjusted EBITDA growth was 6.2% in the quarter, while total adjusted EBITDA margin, which includes both organic and inorganic results, was 56.1%, up 200 basis points from the prior-year period. This quarter's margin benefited by approximately 50 basis points from favorable foreign currency translation, with the balance driven by leverage on solid sales growth and ongoing cost discipline. For the full year 2025, OCC adjusted EBITDA grew 8.5%, while adjusted EBITDA margins were 56.2%, up 150 basis points year over year. This margin reflects core operating leverage on solid revenue growth and our continued cost discipline, while absorbing the impact of our self-funded investments back into our business to fund future growth. On a full-year basis, foreign currency translation improved margins by 40 basis points. As such, the normalized operating margin would have been 55.8% for 2025. We do not anticipate large foreign currency impacts on our margins as we move into 2026, as we have taken structural balance sheet actions to reduce volatility going forward. Continuing down the income statement, net interest expense was $57,000,000 compared to $35,000,000 in the prior-year period, due to higher debt balances and interest rates as well as debt issuance costs. This was partially offset by higher interest income on elevated cash balances. On 01/06/2026, we redeemed the $1,500,000,000 in senior notes that were issued in connection with the previously announced planned acquisition of AccuLink. These notes were redeemed following the termination of the definitive agreement to purchase AccuLink in accordance with their special mandatory redemption feature. Pro forma for the redemption, our leverage would have been at 1.9 times at year end. Lee M. Shavel: Our reported effective Elizabeth D. Mann: tax rate was 19.5%, compared to 26% in the prior-year period. The year-over-year decline was primarily due to tax benefits recognized in connection with the sale of Verisk Marketing Solutions, as well as other discrete tax items. On a full-year basis, our tax rate was 22.5% as compared to 22.6% in the prior year. Adjusted net income increased 11.3% to $253,000,000, and diluted adjusted EPS increased 13% for the quarter. The increase was driven by solid revenue growth, strong margin expansion, a lower tax rate, and lower average share count. This was partially offset by higher interest expense. For the full year, adjusted EPS of $7.16 was up 7.8%, reflecting strong operational results and a lower share count, offset in part by higher interest expense and higher depreciation expense. From a cash flow perspective, on a reported basis, net cash from operating activities increased 34% to $343,000,000, while free cash flow increased to $276,000,000. On a full-year basis, free cash flow increased 30% to $1,190,000,000, reflecting solid operating profit growth and some benefit from the timing of certain cash tax payments and the timing of interest income and interest expense paid. We are committed to a shareholder-centric deployment of that powerful free cash flow generation. During the quarter, we returned $286,000,000 through repurchases and dividends. Today, I am pleased to announce our intention to execute a $1,500,000,000 accelerated share repurchase program in the coming days, supported by our Board's approval of an increase in our share repurchase authorization to $2,500,000,000 inclusive of the previously remaining authorization amount. After the ASR, we will have a further $1,000,000,000 in authorization, which will provide flexibility for continued open market purchases subject to market conditions. Our Board has also approved an 11% increase to our dividend to $2 per share annually. As we discussed, we enter 2026 with clear strategic momentum, and are capitalizing on the substantial opportunity in a rapidly evolving environment. To that end, we are pleased to deliver our outlook for 2026 which builds upon the solid performance from 2025. All guidance figures reflect the impact of the sale of Verisk Marketing Solutions, which contributed $68,000,000 in revenue in 2025 and was included in our underwriting subsegment. Our guidance also assumes current foreign currency exchange rates and current interest rates. Lee M. Shavel: More specifically, Elizabeth D. Mann: we expect consolidated revenue for 2026 to be in the range of $3,190,000,000 to $3,240,000,000. We expect adjusted EBITDA to be in the range of $1,790,000,000 to $1,830,000,000 and adjusted EBITDA margin in the range of 56% to 56.5%. This margin compares to the normalized baseline of 55.8%, as reported margins in 2025 included a 40 basis point nonrecurring benefit from foreign currency translation that I spoke about earlier. We expect interest expense to be between $190,000,000 and $200,000,000. This level reflects our plan to use some of our excess balance sheet capacity to execute the $1,500,000,000 ASR. We expect capital expenditure to be within the range of $260,000,000 to $280,000,000 as we continue to prioritize organic investment in our business, our highest return on capital opportunities. We expect our tax rate in 2026 to be in the range of 23% to 26%. This range is slightly above our long-term structural rate, reflecting our expectation of a lower level of stock option exercise activity. This culminates in adjusted earnings per share in the range of $7.45 to $7.75. We would note that the sale of Verisk Marketing Solutions presents an $0.11 headwind to EPS. Specific to the pacing of growth throughout the year, we want to bring a few things to your attention. First, we have tougher comparisons in the first half of the year as 2025 benefited from a strong subscription renewal cycle across our largest underwriting businesses in particular. Lee M. Shavel: Second, Elizabeth D. Mann: because of the low level of weather activity in 2025, we enter the year with a lower run rate of volume in our property repair estimating Lee M. Shavel: platform. Elizabeth D. Mann: Especially compared to the prior year, which had carryover impact from the storms in the fourth quarter 2024. And third, there is a work stoppage on a certain government contract that started in the first quarter and will impact revenue growth. Taking all this together, we anticipate first quarter 2026 reported revenue will be lower than reported revenue in 2025 by a low single-digit percentage, given the divestiture of Verisk Marketing Solutions. Lee M. Shavel: We do expect growth in reported revenue Elizabeth D. Mann: on a year-over-year basis and on a sequential basis when normalized for the sale of Marketing Solutions. Additionally, we anticipate the first quarter to be the trough both in terms of reported dollars and growth rates. A complete listing of all guidance measures can be found in the earnings slide deck which has been posted to the Investors section of our website, verisk.com. And before I turn the call over to Lee for some closing comments, I would like to remind you that we are looking forward to hosting everyone at our upcoming Investor Day on March 5. Lee M. Shavel: Thanks, Elizabeth. We are excited about the growth opportunities ahead and have confidence in delivering a year of growth in 2026 that is in line with our long-term growth targets and compounds the solid year in 2025. We continue to appreciate all the support and interest in Verisk Analytics, Inc. Given the large number of analysts we have covering us, we ask that you limit yourself to one question. With that, I will ask the operator to open the line for questions. Thank you. Operator: We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press 1 again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question only. Thank you. And our first question comes from the line of Toni Michele Kaplan with Morgan Stanley. Your line is open. Thanks so much. Lee, you mentioned that you recently had many conversations with your clients. And so I was wondering when you are talking to them, would they prefer to be the ones to use your data to create AI products themselves so they have an advantage versus other insurers, or would they prefer that you create the AI product so that they do not have to spend the capital doing it? And maybe also, are they able to use your data as an input into third-party AI products? Thanks. Lee M. Shavel: Yeah. Toni, thank you very much for the question. I know it is a great, great question to, I think, frame the conversations. And the answer is both based upon the nature, typically the scale, sometimes the sophistication of the client. But in those conversations, particularly with our largest clients, they want to compare what their objectives are in AI, recognizing that our data is a critical input for that function, and so they first want to have a coordinating or an alignment discussion to make certain that we are delivering the data in a format that can be effectively utilized by AI. We have been working on establishing model context protocols and MCP servers to be able to meet those needs. But part of that discussion is also look. Here is what we are looking to develop, and what do you have, or how are you integrating AI that may be an efficiency for them so that they can dedicate their dollars to more differentiating, competitively oriented applications. On the smaller side, I think we have a lot of clients that are daunted by the breadth of AI development. And so in those contexts, there is clearly more interest in how they can get a clearer and stronger return on their investment by testing and utilizing a number of the AI products that we are applying to our existing processes and our products. That was something, as I mentioned in my prepared remarks, where you could see particularly in the contracting firm, the estimating firm, and on the claims professional side, where there is strong adoption of that AI because in many cases, those are smaller midsized companies and we can deploy that are more interested in getting that immediate, immediate benefit. AI across an established process that they are familiar with. So I think it is both, but the important thing is our data is at the core because that analytics function relies on good quality industry-wide data. And there is a recognition that Operator: Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in the conference, and we will resume shortly. Lee M. Shavel: Thank you. Operator: Please stay on the line. Hello there, everyone. This is the operator again. Our speakers are in. Please proceed. Yep. So, Toni, can you let us know where we dropped off Lee M. Shavel: in terms of the answering? How much of that did you catch? Operator: Yep. Oh, Toni may have dropped as well. So I am just going to recap Lee M. Shavel: briefly the question from Toni. Is, you know, to what extent are clients looking to utilize your data and Verisk Analytics, Inc.'s applications relative to their own applications? And my answer was, there really is a range from our largest, most sophisticated clients who emphasize that they want to use our data, in many cases are looking to develop their own AI applications, also interested in what they can leverage in terms of what they are doing on existing either underwriting or claims applications, and from smaller and midsized there is more of an interest in relying on the AI that we are integrating into our product and process given their scale and desire to achieve a faster return on investment. So, you know, that is in essence, the response to Toni’s question. Operator: Thank you. Our next question comes from the line of Manav Shiv Patnaik with Barclays. Your line is open. Lee M. Shavel: Thank you. Maybe just to follow up on that question to a certain extent. You have talked about the softwareization of Andrew Owen Nicholas: Verisk Analytics, Inc. over the years. I was just curious how much of the software and analytics that you sell come tied with the data that you have versus separate and, you know, how those relationships and contract structures might change in this new environment? Lee M. Shavel: Yes. Thanks, Manav. Also a great question. And I think the primary application of software in our context is in the delivery of data and the integration of the ecosystems to deliver the data and the outcomes that facilitate improved efficiency and functionality of those ecosystems. So it is inherently a data delivery device and a data connectivity element that is integral to that core process. And I think we see that in whitespace. We see that in the Core Lines Reimagine upgrades where we have provided new connectivity and deeper connectivity to our data sets. On the claims side, the Xactware function, the antifraud functions are software delivered, but at the core, it is a data and analytics function. Some of the smaller businesses, like our life business, is going to be a policy administration system, but it is tied to data and is delivering significant economic benefits to participants within the marketplace. But the predominance of our software footprint is related to that data delivery and integration function. Operator: Next question comes from the line of Faiza Alwy with Deutsche Bank. Your line is open. Yes. Hi. Thank you. So, also wanted to follow up on the same topic. And, you know, I guess I wanted to ask that as you are rolling out these new technologies, do you expect to see sort of better ability to take pricing for the value that you are providing and if there is any differentiation in terms of customer type? And, you know, similarly, what does this mean for margins in terms, you know, cost of innovations versus the efficiencies that you are now able to generate? Lee M. Shavel: Thank you, Faiza. So all of our businesses are fundamentally value-driven from a pricing standpoint. And I think there are kind of two key elements. One is that are we able to make that investment, monetize it and deliver that functionality at a lower cost relative to what our client is able to deploy, and are we able to find new uses of data that create value through our clients’ utilization of AI. Both of those are going should drive incremental revenues because we are creating value for the client. And as we are with a number of our investments looking to participate in that value creation. From a margin standpoint, I think the incremental margin on the use of that data, I think there is inherent operating leverage associated with that. That is beneficial. And we are also implementing AI in a variety of contexts that improves the productivity of the functions, whether it is on the coding side or whether it is on the data ingestion or data normalization function, is beneficial from an operational standpoint. And so we do believe that this is supportive of our operating leverage and serves to fund a lot of the investment that we are making in AI. Operator: Next question comes from the line of Andrew Owen Nicholas with William Blair. Your line is open. Andrew Owen Nicholas: Hi, good morning. Appreciate you taking my question. Lee M. Shavel: I wanted to switch gears a little bit and just talk about transactional growth or declines of late. And Elizabeth, if you could speak to the path to recovery there. I appreciate all the commentary on first quarter. But as we think about kind of the acceleration of that line over the course of the year and looking ahead to Andrew Owen Nicholas: to '27, do you feel like that is a Lee M. Shavel: line that can grow organically at some point in '26, or what are the different levers there that we should have in mind? Andrew Owen Nicholas: Thank you. Elizabeth D. Mann: Yes. Thanks for the question, Andrew. In the let me start with, you know, in the fourth quarter itself, really, the primary contributor to that drop is comparison to the Charles Gregory Peters: storm in the prior year, and that makes up far the bulk of that decline. There are other areas of tough comps and some of the temporary factors that we talked about. There are also other areas of strength in that underlying that fourth quarter transactional growth, such as the securitization. If you look at it on a three-year basis, it is still a three-year positive CAGR on the transactional side. And there have been a couple different factors that moved through in 2024. There were challenging comps to the double digits in the prior year. There was also the conversion of transactional revenue to subscription, which was kind of throughout some of '24 and some of '25. And then more recently in '25, we have had some of the tougher comps on weather and lower weather volumes, as well as the auto side. So all those things said, we do expect to work through those through the '25, '26. And do over the long term expect transactional revenue to be a source of strength. Operator: Next question comes from the line of George Tong with Goldman Sachs. Your line is open. For your guidance for 2026 EBITDA margins, it looks like you are Alexander Kramm: looking for not a significant amount of margin expansion. Can you discuss some of the puts and takes you are embedding into your margin outlook for the year in terms of balancing investments with cost efficiencies? Elizabeth D. Mann: Yes. Thanks for the question, George. So first of all, we Charles Gregory Peters: we look at it, we should look at 2025 on a normalized basis. While the reported margins were 56.2%, we did call out that that included 40 basis points of foreign currency translation kind of balance sheet impact that we do not expect to continue. So we view the normalized, the operational baseline, 55.8. The 56 to 56.5 is that guidance is, does show modest but meaningful margin expansion from there, which balances the efficiencies that we are able to get in our business, the operating leverage that we continue to expect, while managing to significantly fund exciting and in some of the AI products that Lee had talked about. Alexander Kramm: Got it. Thank you. Operator: Next question comes from the line of Wenting Zhu with Autonomous Research. Your line is open. Hi. Good morning. Thanks for taking my question. Was wondering if you can talk a little bit more about any recent changes to the broader selling environment or sales cycle that you are seeing as P&C insurance industry transitions from hard to soft markets, think the profitability of the carriers should improve and that should translate to better budget environment for data and analytics. So just curious if you are seeing or hearing that from your customers. Thanks a lot. Lee M. Shavel: Thank you, Kelsey. I am glad to address that. So I would say that cautiously I think we are seeing an improving sales cycle in this. And as you have indicated, as we have seen a normalization in the net written premium growth, there is always a growth motivation from the carriers. There is obviously always a risk and a profitability focus on their part. And in a lower growth environment, I think there is a tendency to look to utilize more tools, whether it is data or analytics, to help them understand where their opportunities for profitable growth are and how their risk assessment can be improved in a more difficult environment. And so I think that, you know, that, along with the heightened profitability that they have experienced, you give them the resources as well as the motivation to explore more interest in selling. And then that ties into, I think, the opportunity on AI side to see how that is additive to their functions from a process and from an efficiency standpoint. So I would say we view that as a net positive from an environmental standpoint. Operator: Next question comes from the line of Gregory Peters with Raymond James. Your line is open. Lee M. Shavel: Good morning, everyone. Alexander Kramm: I guess I am going to focus my question on the annual price increases in OCC. Lee, you mentioned how you have been talking with your customers and I am curious about the feedback they are providing you on the annual Lee M. Shavel: price increases that are embedded into your contracts. And maybe, Elizabeth, you can remind us when we think about '26, or '27, Alexander Kramm: what component of OCC will include or be benefited by the price increases that you expect to get? Yep. Lee M. Shavel: Thank you. Thanks, Greg. Let me start off, and then Elizabeth will follow up. So I think the general comment that I would make, and it is more than what we are hearing, although hearing what we are hearing from clients has been positive. It is also in terms of what we have been able to achieve in our longer-term multiyear contracts with our largest customers. And so what we are hearing is a clear recognition of the value of the investments that we have made to improve and digitize a lot of those datasets, providing more access, more functionality, more insights onto what we are doing, and more connectivity. So I will talk about it first on the underwriting side. The ability to provide more frequent updates, for instance, on our loss experience that we are now providing quarterly within that business is a clear value enhancement for our clients to be able to see the trends more accurately. The broader industry insights within lines of business has been well received. And so they have felt as though they are getting more value. They have seen the investments that we have made. And that has translated into strong renewals with, you know, annual increases that reflect the value that our clients are driving. This goes back to the point, you know, all of our growth is value oriented. And that is what we are hearing, and that is what we are experiencing. You know, similarly, coming off of the Elevate conference in our claims property estimating solutions area, our success in integrating now over 140 ecosystem partners has provided a lot of value and improved connectivity for our clients that has been very well received. It has reduced their costs and effort of purchasing the incremental analytics or functionality that those players provide, which creates value for them, and provides new sources of data to assess their operational performance. And so similarly, notwithstanding the weather dynamics, you know, we have gotten very positive feedback and engagement from clients around how they see the value, and that naturally supports the pricing environment. So that is the way I would describe it, Greg, and I will turn it over to Elizabeth to add her perspective. Elizabeth D. Mann: Yeah. I think that is a great perspective. You know, not too much to add because, Greg, we do not give, you know, sort of specific annual price ranges per year. There is a wide range of outcomes for the carriers. I think, in general, we would comment that after three years of historically very strong pricing environment, it may be modestly coming down versus the prior year, but still historically very strong, reflecting the value of the solutions that Lee talked about. Operator: Next question comes from the line of Scott Wurtzel with Wolfe Research. Your line is open. Alexander Kramm: Hey. Good morning, guys, and thank you for taking my questions. Just wondering if you can give an update on sort of the competitive dynamics on the kind of auto personal line side of things. I know that that has been a little bit of a headwind to growth. But just wondering if you can give an update on some of the maybe actions you are taking to, you know, maybe stem some of those competitive dynamics. Thanks. Lee M. Shavel: Yeah. Scott, thank you very much for the question. I am going to turn over to my colleague, Robert Newbold, who has responsibility for our auto underwriting business to share some color there. Yeah. Thanks, Lee. So Andrew Owen Nicholas: as I have looked at the business, we see the challenges in the business come from first, the one-time revenues that peaked in 2024 and is minimal now due to the lack of Lee M. Shavel: demand for nonrate action products. And then secondly, you know, where we have products that are not differentiated in marketplace, and that is where the competitive challenges come from. And we will work through those challenges through 2026. But where we are focused on is delivering differentiated analytics that drive long-term subscription growth. And to that end, we have launched a new enhancement to our SLAC Jeffrey Silber: coverage verified product that delivers Andrew Owen Nicholas: new readable insights at the point of growth. Jeffrey Silber: Now this is an innovation that is the subject of almost all our client conversations today, and we are encouraged by the interest that they are seeing in this solution. So our focus going forward will be on these differentiated analytics that drive long-term subscription growth. Operator: Next question comes from the line of Jason Daniel Haas with Wells Fargo. Your line is open. Andrew Owen Nicholas: Hi, good morning, and thanks for taking my question. I wanted to follow up on some of the margin commentary. Lee M. Shavel: Correct me if I am wrong, but I was getting about a 60 bps tailwind from the divestiture of VMS. So that would mean that all the Andrew Owen Nicholas: that is right. That would mean basically, all the margin expansion you are guiding to is coming from that. So can you talk about if that is all correct, Lee M. Shavel: can you talk about why there is no Andrew Owen Nicholas: margin expansion X the VMS divestiture for 2026? Is it investment in the business? How should we think about, like, the long-term trajectory of margins going forward? Thank you. Elizabeth D. Mann: Yeah. Thanks. Thanks, Jason, for the question. I am not Charles Gregory Peters: sure where you are getting that VMS comment. We can take that offline with you. But there may be other elements in that in some of the M&A line. There are some acquisitions as well. So let us take that offline. We are still exhibiting operating leverage across our businesses to deliver margin expansion. Operator: Next question comes from the line of David Paige with Rothschild and Company Redburn. Your line is open. Jeffrey Silber: Yeah. Hi, everyone. Thanks for having me on. We had a follow up on the cross Saurabh Khemka: sell environment as carriers are improving their profitability. You mentioned module deployment has been very strong, but any incremental color you could give on adoption of these modules would be very helpful. And then as you move past Core Lines Reimagine, how you are thinking about what drives the leg of pricing and the sustainability of those increases? Lee M. Shavel: Henry. So I will take the first part and then turn it over to Saurabh Khemka on the incremental functionality on the core lines. So in terms of module adoption, I think what we are seeing is that having introduced this, the clients to varying extents have adopted and adjusted that new functionality. But it is a process in some ways of training the clients and their employees on how to utilize it effectively. And so we have been dedicating a lot of time to training for our clients to make certain that they are getting as much value as possible out of those modules. None of that suggests that the clients do not see the value, and we have heard that repeatedly. In fact, clients have told investors, when asked the question, that they have seen significant productivity gains. But we will continue to work to make sure they are getting as much value of those enhancements as possible. At our upcoming Verisk Insurance Conference, we often couple that with extensive training, opportunities for them to understand what is available to them. So I think we will see continued uptake and continued value realization as our clients become more familiar, and we will continue to enhance that as I am sure Saurabh can describe. Saurabh Khemka: Yeah. Absolutely. So two things. One, the original scope of Reimagine is what we are talking about in terms of complete. So we will put all our content on this digitized new platform. And the adoption of that platform will continue, and the adoption of these new analytics will continue. The second thing I would say is that we have really created a culture of continuous innovation through Reimagine. So as we now have this platform, we will continuously innovate on the underlying content and put it on the platform that will drive new use cases for our customers like AI. As Lee mentioned, lot of these use cases drive better insights but also drive productivity gains. So we see continuous opportunities for us to drive value for our customers. Lee M. Shavel: And let me add to that, Henry. One thing that I have to tie in to tie in the AI component, is we have asked Saurabh and our colleague Tim Rayner who runs our UK businesses in the SBS to partner to think about what our enterprise AI strategy is with an orientation to product implementation and understanding how our clients are working with the technology. So many of the lessons, and the successes that we have had in identifying how we can improve that technology, understand what our clients' needs are, are going to drive that close integration of the AI opportunity as well. We think will continue to increase the value of what we have done with core lines. Operator: Next question comes from the line of Jeffrey P. Meuler with JPMorgan. Your line is open. Jeffrey Silber: Hey, guys. This is Justin on for Andrew. Thanks for taking our Lee M. Shavel: questions. First, I just wanted to ask, you know, Lee, when you look at Verisk Analytics, Inc.’s most sophisticated clients in terms of willingness to adopt AI, do you think these clients are using more or less Verisk Analytics, Inc. data today, and why? And then if I could just Jeffrey Silber: follow up quickly on some of the color you provided about the first quarter Lee M. Shavel: revenue guide. I think you are expecting it to be down low single digits on a sequential basis. Could you just help us think through what that might mean on an organic constant currency basis year over year? Thank you. Alexander Kramm: Great. Thanks, Justin. I will let Lee M. Shavel: Elizabeth handle the second part of that on the revenue guide. In terms of your first question, I think the way that we see it and it is very similar to other technology deployments. And if you think about Saurabh Khemka: what Lee M. Shavel: the primary driver of our ability to grow at a faster rate than the insurance industry has been the ongoing adoption of technologies that utilize the data sets that we are able to gather and normalize across the industry. And so when we have these AI strategic alignment discussions, it is clearly founded on a recognition that the underlying data that we are able to provide, one that has kind of industry-wide value, two, is more efficiently gathered through a trusted third party, and which can be integrated easily into processes because of our connectivity, that is fundamentally, as valuable in an AI context if not more so. And that AI is improving the productivity of core underwriting functions, claims functions, risk management functions. And so it becomes an incremental opportunity to use that data set to inform those decisions more effectively. And I think there is an understanding from our clients that that will enhance their value. And in fact, we see an opportunity to expand those data sets in a more connected environment. We have talked in the past about the development of new data sets in the excess and surplus market which I think has been driven by this trend of being better able to connect and associate data sets, leveraging the connectivity that we have with P&C carriers that are writing both admitted lines and excess and surplus lines as well as greater connectivity in the specialty market, where we are beginning to see more requests for data and analytics to support that market. So I think from our perspective, this clearly is an opportunity to utilize that valuable, more efficiently gathered and connected data set to support the implementation of that technology similar to what we have seen in the past. I will turn it over to Elizabeth to talk about your question on the first quarter revenue guide. Elizabeth D. Mann: Yes. Thanks, Justin. And your question, Justin, was on the first quarter OCC revenue growth. We do not give that in specific. We do give you a lot of the ingredients necessary. We talked about the Verisk Marketing Solutions business on a full-year basis. And you can think of that as a quite even quarterly spread, if that is helpful. So we were calling out some of the pressures and the headwind from the temporary factors as continuing in the first quarter from the fourth quarter. In addition, there were some areas of, called out some areas of outperformance and strength in the fourth quarter and the first quarter being, facing some tough comps, particularly on the subscription side. So we just wanted to, between those things, we wanted to call out that we saw the first quarter as the trough from a growth standpoint, with that continuing to improve over the balance of '26. Operator: And our last question comes from the line of David Paige with RBC Capital Markets. Your line is open. Jeffrey Silber: Hi. Good morning. Thank you for taking our question. This is David Paige on for Ashish. Maybe just following up on that last question. Can you remind us what percentage of revenues are derived from contributory data sources? And then maybe at a high level, how should we think about the AI moats across your different business segments, particularly as, I guess, investors are concerned about Vibe coding potentially impact vertical software or just Andrew Owen Nicholas: work? Jeffrey Silber: Or work solution in general? Thank you. Elizabeth D. Mann: Yeah. Thanks a bunch for the question, David. And I think this is something also that we will continue the discussion at Investor Day. In terms of, I think Lee talked about the data that is an input really across most of our businesses. To be very concrete on the contributory data, sometimes said, as you look at our revenues, primarily the forms, rules, and loss costs and the antifraud that are built on those industry-wide contributory solutions. Elsewhere in our business, we have some elements potentially of contributory data, and significant proprietary data and analytics. So we think that, really, most of our business has a lot of defensibility to it with those strong data ingredients. We will talk more about it in a few weeks. Lee M. Shavel: Yep. And it is both the, apart from the contributory data sets, as Elizabeth was describing, there also is an element of proprietary data sets, for instance, in our property estimating solutions, embedded in the value of what we provide, you know, apart from materials and labor costs, which are, you know, located in, that are identified and utilized kind of specifically for estimates, an understanding of what a repair entails in terms of, you know, materials or labor costs is an aspect of that proprietary nature. And there is also an element of it becomes a reference point that the claims professionals at the carriers, the adjusters, and the contractors use to facilitate resolution of that claim. So it becomes an established industry standard that has a valuable proprietary content because all participants understand how that is derived and it is kind of been established as a base point. To your question on Vibe coding, it relates in some way to the question around software that we had earlier. And this is where the nature of our software is one for the delivery of the datasets, you know, not so much the underlying software itself, as well as the connectivity that that software or that platform provides. And so simply the function of AI-driven or Vibe coding does not, in our view, represent a threat to the fundamental data differentiation and connectivity differentiation that we provide. We think that that is a very different software proposition. In some ways, you know, I kind of liken it to the securities exchanges where they are providing connectivity to a large and complex group of market participants. It is a very similar dynamic within our business. But I will also use this as an opportunity to advertise and increase you all to attend our Investor Day, where we will be going through the business and talking about those components from a data, from a software standpoint, from a competitive differentiation for each of our businesses, to a far greater detail and better texture than we can provide in this call. Operator: Ladies and gentlemen, that concludes the question-and-answer session. Thank you all for joining in. You may now disconnect. Everyone, have a great day.
Operator: Greetings, and welcome to the TPG RE Finance Trust, Inc. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Press 0 on your telephone keypad. A reminder, this conference is being recorded. It is now my pleasure to pass it off to our host, Dan Cassell. Thank you. You may begin. Good morning, and welcome to the TPG RE Finance Trust, Inc. earnings call for 2025. Dan Cassell: Today's speakers are Doug Bouquard, Chief Executive Officer, and Brandon Fox, Interim Chief Financial Officer and Chief Accounting Officer. Doug and Brandon are joined by Ryan Roberto, Head of Capital Markets and Asset Management. Doug and Brandon will provide commentary regarding the company, its performance, and the general economy, and will answer questions from call participants. Yesterday afternoon, we filed our Form 10-K, issued a press release, and shared an earnings supplemental, all of which are available on the company's website in the Investor Relations section. This morning's call and webcast are being recorded. Information regarding the replay of this call is available in our earnings release and on the TRTX website. Recordings are the property of TRTX and any unauthorized broadcast or reproduction in any form is strictly prohibited. This morning's call will include forward-looking statements which are uncertain and outside of the company's control. Actual results may differ materially. For a comprehensive discussion of risks that could affect results, please see the Risk Factors section of the company's Form 10-K. The company does not undertake any duty to update our forward-looking statements or projections unless required by law. We will refer during today's call to certain non-GAAP financial measures which are reconciled to GAAP amounts in our earnings release and our earnings supplemental, both of which are available in the Investor Relations section of our website. Now I will turn the call over to Doug. Good morning, everyone, and thank you for joining the call. Doug Bouquard: The broader economic backdrop continues to provide a solid foundation for investment activity within the real estate sector. With dislocation in certain parts of the corporate credit market appearing, we are observing a marginal trend of capital allocation oriented towards real estate credit. As we have observed at the start of the year, the combination of increased dry powder, a 10-year Treasury hovering just above 4%, and favorable real estate fundamentals should be drivers of continued growth investment activity for TRTX. Increased transaction volume is the essential catalyst to price discovery; as more real estate assets trade, investors can more clearly triangulate where valuations have reset, replacing speculation with hard market-clearing data. While we are almost four years removed from when the Fed began hiking rates, this price transparency forms the backdrop for what is shaping up to be an incredibly active year for both borrowers and lenders. 2025 was an important turning point for TRTX. We closed $1,900,000,000 of new investments, drove 25% year-over-year growth in earning assets, and generated distributable earnings of $0.97 per share, which outearned our dividend for the year. Furthermore, we were able to achieve this while maintaining stable risk ratings, further diversifying our liability structure, and ending the year with a 100% performing loan portfolio. From a recent investment perspective, the fourth quarter was incredibly active with $927,000,000 of new loans closed consisting of 62% multifamily and 38% industrial collateral, two thematic sectors that we continue to target. As a testament to the strength of our franchise, this quarter's investment activity was not only one of the most active quarters we have had since the company's founding, but over 90% of our new originations were with repeat borrowers. This demonstrates our deep relationships within the real estate ecosystem, further enhanced by the depth and breadth of TPG's real estate debt and equity investment platform. Capital markets velocity remains healthy on our balance sheet, as we received just under $1,000,000,000 of repayments this past year. Driven by the robust volume of newly originated loans in 2025 and the repayment of older vintage loans, our balance sheet has undergone a substantial evolution. For context, at the beginning of 2022, 30% of our balance sheet was exposed to multifamily and industrial collateral, whereas today, we have increased our combined exposure to those sectors to over 72% of our current balance sheet. In recent years, we have been able to accomplish transformation toward newer vintage loans while generating consistent earnings and maintaining a steady credit profile. From a liability perspective, we continue to grow our lender relationships, optimize our existing capital structure, and are fortunate to have recently issued two CRE CLOs in 2025, which afford the company ample reinvestment capacity over the next two years at an attractive cost of funds. While we are proud that 2025 was a year where we delivered on our strategic goals, we remain laser-focused on continuing to build on the success in 2026. With the insights of TPG's real estate investment platform, combined with a stable balance sheet and an attractive opportunity set, we are confident in our ability to deliver continued strong performance. Tactically, we plan to continue to pull the many levers for growth at our disposal, which include continued net asset growth through prudent investment and risk management, increasing our leverage ratio towards our target of full investment, and utilizing untapped liquidity. In summary, the offensive posture we were able to embrace this year is a direct result of the strategic approach we laid out years ago. Our performance in 2025 has set a high bar, and we enter 2026 with the capital, the team, and the momentum to continue to drive value for our shareholders. With that, I will turn the call over to Brandon to discuss our financial results in more detail. Thank you, Doug, and good morning. Brandon Fox: For 2025, TRTX reported GAAP net income Doug Bouquard: of $200,000. Distributable earnings for the quarter was $18,500,000 or $0.24 per common share. For the full year ending 12/31/2025, TRTX reported GAAP net income of $45,500,000 or $0.57 per share Christopher Muller: and distributable earnings of $76,800,000 or $0.97 per common share, a 1.01 times coverage ratio of our annual dividend of $0.96 per share. We have covered our common stock dividend for each of the last two years. Book value per common share decreased quarter over quarter to $11.07 from $11.25. Our net asset growth during 2025 continues to reflect our focus on allocating capital to new loan investments and actively managing our portfolio. For the full year 2025, we originated 20 loans with total commitments of $1,900,000,000 at a weighted average credit spread of 2.82% and received loan repayments of $987,900,000, including full loan repayments of $931,500,000 on 15 loans where the underlying collateral was 64% multifamily, 20% hotel, 14% office, and 2% industrial. Year over year, we grew our net assets from $3,300,000,000 to $4,100,000,000, or 25%. At year end, our loan portfolio was 100% performing. Our weighted average risk rating for the loan portfolio is unchanged at 3.0. During the quarter, we upgraded two multifamily loans from a risk rating of 3 to 2 based on their continued strong operating performance and downgraded one multifamily loan from a risk rating of 3 to 4 due to operational challenges in the quarter. This loan represents approximately 1% of our total loan commitments at year end. Our CECL reserves slightly increased quarter over quarter to 180 basis points compared to 176 basis points at September 30. We ended the quarter with near-term liquidity of $143,000,000 consisting of $72,600,000 of cash on hand available for investment net of $15,000,000 held to satisfy liquidity covenants, undrawn capacity under secured financing arrangements of $51,400,000, and CRE CLO reinvestment proceeds of $4,000,000. Additionally, we held unencumbered loan investments with an aggregate unpaid principal balance of $127,100,000 that are eligible to pledge under our existing financing arrangements. The company's liability structure is 82% non-mark-to-market, an increase of 6% from 77% at 12/31/2024. Year over year, our cost of funds declined 18 basis points, or 9%, from 2.00% to 1.82%. The continued improvements to our liability structure in 2025 are primarily due to the issuance of our two CRE CLOs, TRTX FL6 and FL7, totaling $2,200,000,000. Total leverage increased quarter over quarter to 3.02 times from 2.64 times as a result of our substantial loan origination volume in the current quarter. At year end, we had $1,600,000,000 of financing capacity available to support loan investment activity and we were in compliance with all of our financial covenants. With that, we welcome your questions. Operator: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before the star keys. Once again, that is 1 to ask a question at this time. First question comes from Christopher Muller with Citizens Capital. Please proceed. Christopher Muller: Congrats on a really strong quarter here. Dan Cassell: So it looks like only one close, one loan Gabe Poggi: closed so far in the first quarter. Do you guys expect origination to slow a little bit in the first quarter? Or will it be more just like later closing past February? And how are you guys thinking about the pace of originations in 2026 Doug Bouquard: or of the quarter rather. And frankly, a lot that did actually occur as well within Q4 for us where we had the bulk of our payoffs in Q4 happen, frankly, closer to the first month of the quarter, and then the bulk of our new fundings occurred really in the last month of the quarter. So we do see that trend continuing. Secondly, as it relates to pipeline, look, our pipeline is incredibly robust. We are seeing a lot of activity across all property types, all regions; a number of our borrowers, including repeat borrowers, have been very active. So I think that from a pacing and investment perspective, I do feel really positive about this year. I mentioned in my remarks that there are a lot of components that are driving that. I would say we are still seeing a lot of those kind of peak-of-the-market purchases from 2021 and 2022; many of those five-year loans are now in some stage of either coming due. When you combine that with the fact that a number of borrowers have generally not sold those assets yet, they are generally coming to us for typically a new financing, in some cases requiring cash in. So I think it is really a combination of a lot of those five-year loans coming due from when there was tremendously high activity. Then I think this year, what has been happening is, if you just look from a macro perspective, there is a little bit more clarity around the path of rates. You have got a 10-year hovering around 4%. And, all in all, credit spreads are relatively accommodative. So I do feel like that is pretty much a recipe for a very active year for us. Gabe Poggi: Got it. So it sounds like the origination volumes in April are not really showing up in interest income yet, which is really good to hear. I guess the other question I have here is it looks like spreads on new loans are about 50 basis points below the portfolio average. Do you expect that type of drop-off on spreads for new loans to continue? And is that due to market competition or more so the type of assets you guys are originating? Doug Bouquard: Yeah. I think it is a combination of really a few things. I would say, first, we have been very concentrated within multifamily and industrial and we have been keeping our LTVs in that sub-65% loan-to-value range. I would say, second, although loan spreads, particularly in the fourth quarter, were a touch tighter than prior quarters, we have seen our cost of funds really rapidly move in line, and that has really been the story the entire year, which is although loan spreads have come tighter, the demand and competition to provide us back leverage continues to be incredibly robust. We saw that both in the closing of our series CLO in Q4 with a weighted average cost of funds of about 1.67%, but then also what is maybe less obvious is the number of bank relationships that we have across the broader TPG franchise that are, I would say, incredibly aggressive right now in terms of leaning into providing us back leverage. So I think all of that has resulted in, despite loan spreads being a touch tighter, our ROE generated is generally static relative to prior quarters. Gabe Poggi: Got it. Appreciate you guys taking the questions, and congrats again on a really solid quarter. Doug Bouquard: Absolutely. Thanks a lot. Operator: The next question comes from Gabe Poggi with Raymond James. Please proceed. Dan Cassell: Hey, good morning, guys. Thanks for taking the question. Can you just talk about target leverage again? I know you are at 3x Gabe Poggi: right now. Just remind us of kind of the ballpark comfort zone you would like to be as we go through the course of 2026. And then just a follow-up, I will give it to you now, is Operator: I know that Doug Bouquard: for an REO is not a lever you need to pull. You have optionality there. But any color you can provide on the REO assets at TRTX at the asset level and how you are thinking about Gabe Poggi: those assets as the year progresses, especially if transaction volume picks up. Operator: Thanks. Doug Bouquard: Yes, sure. Absolutely. So I think first from a leverage perspective, I would say, right now, we are really targeting that 3.5 to 3.75 to 1 range as a target. I think that once we get to that point is where we will, likely, pause, but I feel like that gets us to what I would describe as close to fully invested. Operator: And then Doug Bouquard: secondly, from an REO perspective, last year, we sold two office assets. We do have some REO remaining. Gabe Poggi: But I think you said it well, which is that Doug Bouquard: when we think about levers to growth, we Christopher Muller: I would say, Doug Bouquard: prioritized getting fully invested given the opportunity set, and you are seeing us do that quarter by quarter. In terms of the REO, we do feel like this year is going to be a relatively attractive year to be continuing to sell down that REO. So you will see further progress out of us on our REO portfolio throughout the year. Operator: Thanks, guys. Thank you. The next question comes from Richard Barry Shane with JPMorgan. Please proceed. Doug Bouquard: Hey, guys. Thanks for taking my questions this morning. I have two actually. First is actually, I am going to have to get this right after REO. On ROE, your returns right now are about Operator: call it, Doug Bouquard: SOFR plus 5%. I am curious when you think about the business model Operator: long term, Doug Bouquard: what do you think the appropriate ROE target is as a function of a spread to SOFR. Yeah. Look. I mean, I think that we have generally been able to achieve an ROE in excess of that. And I think that Dan Cassell: when Doug Bouquard: we look at the ROE for a, frankly, lending business that does require some amount of back leverage, I think that really as the health of the back leverage market continues, frankly, it makes our business model incredibly relevant in the market. And so when I think about the longer-term trends, I mean, I think, again, that that 500 number is not too far off from what I would think these businesses, frankly, should look like. I think that when you zoom out more broadly, and obviously, you are hitting on a pretty kind Operator: topical area. Doug Bouquard: You know, real estate credit has been going through a pretty interesting evolution, frankly, over the last decade or two. And that evolution has been a combination of banks pulling back, agencies growing in the space, and then also all the nonbank lenders. We, of course, being one of those nonbank lenders and having a large platform. So when we think about the evolution of real estate lending and real estate credit, we as a platform are very much on the tip of the spear in terms of where that market evolves here. But, again, when I think about what is really driving a lot of the nonbank lending activity, I think that the sort of inside baseball does relate to the regulatory capital regime that is orienting banks towards back leverage. And I think that, again, is something that we are very focused on. And, again, that seems to be a trend that continues to grow. Got it. Okay. And then second question, and it is related. Obviously, there has been a significant transaction in the space with Apollo planning to sell their assets. You guys are ex—well, I would describe that in terms of sort of the continuum of recovery, you guys are very much on the front end of that or leading edge of that, I should say. And your stock is still trading at a, call it, 20% discount to book. I am curious how you think you can close that value gap or does it, you know, is the ARI transaction an indication that at least one sophisticated player in the space is not convinced that that is going to happen for the sector. Look, I mean, I think, you know, first thing, we have set a very clear record around maximizing shareholder value and have been incredibly clear about our strategic goals, and we look back about what we achieved last year and seek to achieve this year. I think that we are well on our way of closing that gap, and that is a big focus for us. I think, too, when I think about the ARI transaction and just other flows in the market, I can say that TPG broadly as a platform is constantly evaluating opportunities, and we are always looking for ways to maximize shareholder value to be creative. Obviously, the firm has a multiple-decade background in platform acquisition and being thoughtful around organic and inorganic growth. I can tell you that we are always thinking about it, and we are going to continue to be searching for opportunities to basically scale and grow. Got it. Look, I realize that is a tricky question, and I appreciate the answer very much. Thanks, Doug. Operator: Yep. Thank you. Thank you. The next question comes from John Nickodemus with BTIG. Please proceed. Doug Bouquard: Hi. Good morning, everyone. Most of my questions have been asked already, but I have one more for the team here. Industrial exposure. Notice that that has gone up a bunch, highlighted it in the prepared remarks. I believe you mentioned, 72% of the book is now in either multifamily or industrial. How are you thinking about target levels for industrial; should we expect to see that continue to rise, just sort of that trend over the course of 2026? Any details you could provide there would be great. Thank you. Yeah. Sure. I am happy to cover that. Obviously, we have mainly grown our industrial exposure from a few years back, frankly, less than 5% generally, and now we are just under 20%. One thing about an appropriate target level: it is probably somewhere in that 25% to 30% range would be an area where I think that perhaps we touch the brakes a little bit. But right now, what we are seeing is, again, as I mentioned, there are many transactions that were done over the last three to five years where there is some amount of recapitalization needed. So we still look at multi and industrial together as sectors that we think we can—you know, we have a particular edge in. Specific to industrial, across our platform we have been an owner of industrial assets. We have a lot of intelligence across the entire market around valuation, leasing activity, and otherwise. So we do feel like we as a platform have a bit of an edge relative to most of the lenders, given the depth and breadth of our franchise. But, again, I think you will see marginally more growth with industrial over time. And, I think as we get to that 25% range, we will, of course, assess and take our views of the market at that juncture. Dan Cassell: Great. Doug Bouquard: Appreciate the color, Doug. That is all for me. Operator: Thank you. There are no further questions in queue at this time. I would like to turn the floor back to management for closing comments. Doug Bouquard: Yes. Just want to thank everyone for joining the call today, and we look forward to keeping you updated on our progress. Have a great day. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
Operator: Thank you for standing by. My name is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to Ternium S.A. Fourth Quarter 2025 Results Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one, on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Sebastián Martí. Please go ahead. Sebastián Martí: Good morning, and thank you for joining us. My name is Sebastián Martí, and I am Ternium S.A.'s Global IR Compliance Senior Director. This morning, we released our results for the fourth quarter and full year 2025. Today’s call is intended to add context to that presentation. Joining me today are Maximo Vedoya, our Chief Executive Officer, and Pablo Daniel Brizzio, the company’s Chief Financial Officer, who will review Ternium S.A.'s operating environment and performance. Following our prepared remarks, we will open up the floor to your questions. Before we begin, I would like to remind you that this conference call contains forward-looking information and that actual results may vary from those expressed or implied. Factors that could affect results are contained in our filings with the Securities and Exchange Commission, and on page two in today’s webcast presentation. You will also find any references to non-IFRS financial measures reconciled to the most directly comparable IFRS measures in the press release issued today. With that, I will now turn the call over to Maximo Vedoya. Maximo Vedoya: Thank you, Sebastián, and good morning, everyone. We appreciate you being here today in our conference call. Can you deliver resilient results in 2025, overcoming challenging market conditions by adapting rapidly and acting roughly to protect profitability. The company's cost reduction and efficiency program generated $250,000,000 in savings in 2025 over 2024. Key initiatives included enhancing blast furnace stability, negotiating service contracts, optimizing iron ore sourcing, and improving logistics. As a result, our EBITDA margin reached 10%. Our performance, however, was affected by a fatal accident at Turnure Mexico in 2025 and another at Ternium Brazil during this quarter. Usiminas also experienced a fatality in 2025. We take safety extremely seriously and consider these events a significant setback. Such outcomes are unacceptable prompting us to reinforce our safety programs. In response, we are ramping up preventive actions with a special focus on critical risk. Let me now review the latest changes in the global trade environment. The United States took significant trade measures in 2025. To counter unfair trade practices from China and other Asian countries. And this is reshaping the global steel market. As other countries around the world are following a similar path. In Mexico, the government recently raised import Maximo Vedoya: tariffs Maximo Vedoya: more than 1,400 tariff lines for countries without a free trade agreement. In the case of steel, import tariffs increased from 25 to 35%. Meanwhile, negotiations surrounding the North American region trade framework are ongoing. Many stakeholders from both sides of the border continue to engage in discussions. We have taken an active role in sharing the concerns and priorities of the manufacturing industry throughout this process. I see broad support for public policies that promote greater regional integrations. The aim is to keep trade fair addressing balance, avoid transshipment, and reinforce rule of origins. It is important to mention that an agreement to intensify trade flows should evolve restrictions on intra regional trade. Like those based on section two three two. As a USMCA, joint review take place removing restriction to trade among its member will be essential to ensuring the benefit of deeper integration. Ternium is also doing its part in this process of greater regional integrations. Since our arrival in Mexico over twenty years ago, we have significantly expanded our footprint in the country, investing in state of the art technology to offer a wider range of high value added products to our customers in the region’s manufacturing industry. In this line, I am pleased to share some exciting news. rolling mill We have started production in our new cold and also in our galvanized line at the Pesqueria facility. This achievement completes our downstream expansion at the site made possible by outstanding teamwork. The entire project also added a picking line and a finishing line center. All these facilities are now operational with the cold rolling and the galvanized lines starting the ramp up phase. Meanwhile, construction of the slab plant is moving ahead as plant. As we expect to start up the facility by the end of the year. This new plant will allow us to produce high quality automotive steel with a lower c o two emission per ton in the industry. Adding a touch of color, in 2025, we secure a 1 and a quarter billion dollar loan through a green financing facility to support this project. The loan received several awards last quarter, including IFR's Sustainable Loan of the Year, the GBM awards sustainable loan deal of the year in Latin America and Caribbean, and honorable mention from Latin finance. Coming to Brazil, the recent implementation of anti dumping measures and the increase in import taxes of nine steel products represent a significant shift the market environment. These decisive action signal a stronger government commitment to support local producers and achieve a balanced competitive Maximo Vedoya: landscape. Maximo Vedoya: Looking ahead, will be key to monitor the market closely to prevent attempts to circumvent these measures, ensuring that these new continue to support fair competition. In Argentina, growing concerns have emerged regarding unfair trade practice from China. In this situation, the new trade agreement between Argentina and The United States is important because both countries have agreed to work together to address unfair trade policies from other nations. While we believe Argentina should further integrate with the global economy, it is crucial to approach this process with cautions, particularly in view of China's excess production capacity and predatory trade tactics. Samiva, I am optimistic about Tarmium's outlook for the coming years. I expect Ternium I expect Ternium's profitability improve in 2026, starting from the first quarter. On one hand, we will continue working on reducing costs and enhancing operational efficiency. On the other, although there are still several important trade issues to be worked out, I am encouraged by the growing support of market economy governments around the world for addressing unfair trade practices. A discussion between The United States and Mexico Advance, I am confident that a mutually beneficial agreement will be reached as a world structure agreement is good for all parties involved. Mexico has demonstrated its commitment to reinforce regional defenses against unfair trade practices and encouraging investment within the region. Align strategy with that of The United States in ongoing negotiations. In addition, promising changes in Brazil steel market environment and advancing economic reform in Argentina give us give us hope for the future in South America. In this context, we have reached an important milestone in the largest industrial expansion in our company's history. Together, these developments will put us in a unique positions as they will help create a stronger foundation for growth across the region. Thank you all for your attention. And before I hand it over to Pablo, let me thank especially our colleagues in in Brazil all the analysts there who made it join us during the Carnival season. So I hope you have a very good holiday. So, Pablo, please go ahead. Thanks, Maximo. Thanks, everybody, for being today with us. In in this conference call. So let me begin with a review of our operational and financial performance. If we move to the page three in the webcast presentation, you you can see that adjusted EBITDA declined slightly sequentially. In the fourth quarter. It was in line with our expectations. EBITDA margin remained relatively stable and there was small seasonal decrease in shipment. As as we move into the 2026, Pablo Daniel Brizzio: we anticipate a sequential higher adjusted EBITDA mainly driven by an increase in EBITDA margin as well as growth our shipments. Let’s move to the next slide. Net income for the fourth quarter totaled $171,000,000 in the fourth quarter, We show a lower operating income mainly impacted by one time charges, mostly related to an impairment in less one of our mining operations in Mexico. On the other hand, we have a better income tax refund. Along with stronger financial results. In the sequential comparison, we have deferred tax write down using in the register in the third quarter. Let’s turn to page five to review the performance of our steel segment. Shipments declined mostly during the quarter. Primarily due to weaker volumes in other markets. Mainly in The US and in Brazil, reflecting seasonally slower activity. This effect were mostly offset by higher volumes in Mexico and in the southern region. In Mexico, we saw better volumes to the commercial market as a result of government measures aimed at curbing unfair trade practices. Looking forward to the first quarter, we anticipate a sequential increase in shipments mainly as a result of the stronger demand in Mexico. Turning to Page six. Steel cash operating income decreased sequentially. Driven by slightly lower sales volume and a decline in realized steel prices. Which was partially offset by reduced raw material purchase lab costs together with efficiency gains. Turning to the next slide, The mining cash operating income increased sequentially, driven by stronger shipments and higher realized iron ore prices partially offset by higher unit cost. We will review our cash performance and balance sheet performance on page eight where we see that in the fourth quarter, we record another solid level of cash generation by operations. Supported by a reduction in working capital primarily driven by a decrease in trade and other receivables. Also, offset by a decrease in trade payables and other liabilities. We are now past the peak of our capital expenditures. Which in the fourth quarter totaled $463,000,000 primarily reflecting continued progress in the construction of new facilities at the Turner Industrial Center in Pesqueria. Mexico. Our net cash position remains stable in the fourth quarter of the year. And we have a neutral free cash flow. In addition, dividend payments to shareholders and minority interest were largely offset by an increase in the value of financial security. Let’s now turn to the final slide to summarize our full year performance. In a challenging year for the steel industry, we were able to defend profitability as we had proactively to mitigate the impact of the drop of steel prices and volumes. And as a result, our EBITDA margin achieved a two digit level. In 2025, cash generated by operation reached strong $2,300,000,000 allowing us to finance demanding CapEx requirement as we completed the downstream project in Pesqueria and keep working on the slab facility. Looking forward, we anticipate a decrease in CapEx in 2026 to a level of around $2,000,000,000. In this context, Therneos was board of directors has proposed an annual dividend of 2.7 per a d dollars per ADS for fiscal year twenty twenty five. Keeping at the same level as for the year 2024. Of this total, we have already anticipated and paid 90¢ as an interim dividend in November. The proposal showed our confidence in the company's prospects even though we are currently undergoing a phase of significant capital expenditure. As the current market price of 10 new NDAs this implies a dividend yield of over 6%. With this, we conclude our prepared remarks. I will now turn the call over to the operator to begin the Q&A session. Thanks. Operator: At this time, I would like to remind everyone, in order to ask a question, press star and one on your telephone keypad. Your first question comes from the line of Rafael Barcellos from Bradesco BBI. Your line is live. Rafael Barcellos: Hello. Good morning, and thanks for taking my questions. So firstly, would like to get a bit more color on your outlook. For the Mexican market. So demand today is still running well below the peak levels we saw a Maximo Vedoya: few years ago. So I am trying to better understand how do you see the recovery path from here. Specifically, I mean, with the recently announced TRC Mexico, I mean, how do you how should we think about the potential impact on demand growth for thousand twenty six? And other than that, I mean, how are you thinking about the likelihood of the timing of a USMCA deal What showing impact if a significant part of this impact could be captured in 2006 or if it is a war story for 2027 and beyond. Could be helpful. And as a second question, turning to Brazil, I would like to get your thoughts on the recently announced anti dumping measures I mean, how do you expect these measures to place into pricing dynamics? Over the past few quarters? Should we think about a relatively quick pass through into domestic prices or is the impact to be a more gradual depending on, inventories and competitive behavior And and if you could even, like, give some color on the magnitude of a potential hikes here. Thanks. Pablo Daniel Brizzio: Thank you, Rafael. Let’s start with the first question. The next Maximo Vedoya: Mexican market and demand. Your quite, right demand is very low. It was very low in Mexico in 2025. Apparent consumption of steel decreased 10% That it is a huge decrease. I have never seen something like that in Mexico. To be honest. And this was even worse if you separate long products and flat products. The the upon consumption in flat products, which is our main market, this was 14% below that of 2024. So this is a huge decrease. Ternium in that Rafael Barcellos: our shipment in Mexico were a little bit Maximo Vedoya: the decrease was smaller because we managed to to gain market share in the flat products. So so it was an important measure. I think in 2026, the the estimation of of Canacero is that the market is gonna grow 4%. But I think all these measures are going to allow the local steel mills to gain more market Rafael Barcellos: share against imports. You have to remember that Maximo Vedoya: in Mexico, there is still a huge amount almost 9,000,000 tons of finished products that are reimported in Mexico. So our target with all these measures is to gain Rafael Barcellos: more market share as we did in 2025, Maximo Vedoya: And although the market is not growing as much Rafael Barcellos: as we expect, gain in our shipment with the market share. Pablo Daniel Brizzio: In 2026, so the timing then the timing in the USMCA it is very difficult at the moment. I mean, Maximo Vedoya: there is a target that is that in July, USMCA should be renewed. I I really do not Rafael Barcellos: know at this moment if that is gonna be achievable. In our projections, we are not seeing a lot of of increase Maximo Vedoya: of the of the timing of the USMCA for 2026. And we are putting that more in the 2027. I mean, of course, Rafael Barcellos: we hope that this is sooner, but we have to expect or we are making our plans Maximo Vedoya: in order that it is a little bit later. Rafael Barcellos: Then Maximo Vedoya: the the the the second question was regarding Brazil. Pablo Daniel Brizzio: And and the dumping measures. Maximo Vedoya: I mean, to give a little more color, I think this is a very important step. If you remember, Rafael Barcellos: have not been Brazil has not been very much advocate in the last years of defending industries again unfair trade policies, the predatory Maximo Vedoya: tactics by by China. But this change with four dumping cases, The the plate one, the the repainting, and and last week, the the cold rolled and the So this is a very important news a very important first step that Brazil joined most of the rest of the economies. I mean, from Europe to India to Mexico to The US, all the countries are are fighting unfair trade from China and from Asia. Impact on prices, I think the impact will be gradual. I do not expect a huge increase in prices because of this. Again, this is a first step But it is gonna be a a more gradual, as you said, impact in in in the future. I think, Rafael, I answered your questions, but I do not know if you you want more clarity. Rafael Barcellos: That is perfect. Thank you. Thanks a lot. Operator: Your next question comes from the line of Carlos de Alba from Morgan Stanley. Your line is live. Carlos de Alba: Good morning, everyone. Thank you very much. Maybe, Maximo, first of all, clarification. You said that Canacero sees demand up 4% or down 4% in 2026? Pablo Daniel Brizzio: Up 4% in 2026. Carlos de Alba: Great. Thank you. Operator: Fantastic. Okay. And then, my my two questions will be first, Pablo Daniel Brizzio: on USMCA. And what would be Maximo Vedoya: in the event that there is not a a renewal of USMCA and and so that Mexico cannot reach a commercial agreement, stand alone with the US. Carlos de Alba: What would be attorney's plan b? Maximo Vedoya: Given that a lot of the particularly on the auto side, Carlos de Alba: you the volumes going to that sector and then Maximo Vedoya: Mexico exports a significant amount of the cards that that that are producing in the country. And and my second question, if you can give us maybe a little bit of an outlook on how do you see earnings volumes performing in 2026? What are the expectations in terms of volume growth, in the different in the different countries where you are or operation where you are Carlos de Alba: actively right now. Maximo Vedoya: Yeah. Can you repeat the first question of the USMCA? Because we Yeah. We did not hear very well. Yeah. Sorry. Just what would be what is Theranos plan b? What would be your strategy if if there is not a renewal of of the trade agreement? And also Mexico does not reach an agreement exclusively with the US. Yeah. I mean, we operate all twenty twenty five with these premises. There is no I mean, on a sense, the USMCA, if it is renewable, the the great benefit is that the section two three two is gonna disappear between Mexico and The US. I do not see a renewal of agreement with the two three two onboard. And and that would be the biggest benefits of the renewal. So in 2025, we operate without it it is a USMCA, but the two three two in in steel derivative and a lot of products Carlos de Alba: made it the way to operate if there is not a renewal. Maximo Vedoya: Again, I think that some of these measures are going to be taken away, although prob if or the the renewal is postponed. So we are operating in this environment, Carlos. Pablo Daniel Brizzio: The Maximo Vedoya: volumes of 2026 Okay. Let me take that one. I am not sure. Pablo Daniel Brizzio: As as you know, as you hear, you know, we are at you know, with Outlook, we are expecting volumes to start increasing already through the first quarter. And in this case, mainly coming from from Mexico. So let let me divide the the the answer to this question into a different market where we are. Because there we have different situation. In in in South America, the first quarter is the seasonally lowest quarter. Of the year. So you are not seeing any any increase during the first part of of of the year, during the first quarter. And the opposite situation is in Mexico where we seasonality is coming at the last part of the fourth quarter. So taking into consideration what Maximo said that expectation is at least an increase of 4% in peak consumption for the year. And the possibility of, further increases in our market share because of the volumes that we will be able to increase and produce with the new facilities. And even even without taking into consideration the the possible outcome of the USMC annualization and the consequences of that, we are positive that that the increase in the Mexican shipments will be above at least the numbers that Maximo mentioned and expectation for for for the for the for the Mexican market. In the case of Argentina or the southern region, you know that volumes were decreased, at the beginning of the 2025 because we were getting out from a big recession in Argentina. So numbers tend to recover volumes tend to recover in the part of the year. So we are expecting to have a positive number coming out in in the second vision. In initiating in the second quarter of the year, not during the first quarter. Differently, the situation in Brazil where we saw volumes, but healthy level during 2025, and going with the increase of the GDP growth of the country. So expectation for Brazil is to keep growing at moderate levels. So volumes will be more related to these changes in the general economy of the country. Operator: Thank you. Pablo Daniel Brizzio: Thank you, Carlos. Operator: Your next question comes from the line of Timna Tanners from Wells Fargo. Your line is live. Timna Tanners: Yeah. Hey. Good morning. I wanna to drill down, if I could, please, on the EBITDA margin in the past, you have guided to a normalized level of 15 to 20%. And in the second quarter call, you had said you expected 15%, the low end by the fourth quarter. I am just wondering, you know, the last two years have been challenging. I I I acknowledge that. But just trying to get a sense of what it takes to get back to that 15 to 20%. Could could we see that in 2026? What, you know, what what are gonna be the puts and takes to to get there again? Thanks. Pablo Daniel Brizzio: Hi, Timna. This is Paulo. How are you? So let me let me try to answer your question, which first of all, you are right. We were expecting further recovery in the last part of last year that at the very end did not materialize because among other things, the the the impact of of certain things are happening in the different markets the the impact on on in Brazil because of of the imports, especially coming from China and the lack of of anti dumping measures at the moment. So depressing prices in the market. The impact on the changes in the new rules of of trade coming from The US that impacted especially industrial sector during the second semester of the year. And the increase of the two three two margin during the year. So that is put a lot of pressure on on margins and and did allow us to to reach the original expectation. In the in the meantime, taking that into consideration, we implemented a cost reduction program that, as Maximo explained, gained more than around $250,000,000 during the year and, clearly, we will continue. Maximo Vedoya: Doing that. So Pablo Daniel Brizzio: the kind of explanation why we were not able to reach the number that we were expecting. I I have probably would not say exactly the same, but we have the chance to reach the number by the end of this year because we we will not reach that number during the first part of the year for sure. Though even we are announcing and and it will allow us very clear on that, that we will increase the margins during during this first part of the year. Because of, increases in prices across the board, of course, that we also have an impact on cost that will be also increased, but we are expecting to have better margins during the first quarter of the year. We will continue to work, as I mentioned, in in further core reduction program to further increase this margin. But a lot will depend on what we have been discussing up to now and Maximo described at length. Which is the consequence or the situation related to the negotiation of February and the impact that is we have. So again, not initially, we will not be able to read the number, We have a chance, and we will work for that to reach the number which is, as you know, our goal. You mentioned between 15 to 20% All I am saying is to try to reach initially 15%. And and and keep you working on that. As you know, the company is always working with that goal and trying to find ways to reduce our cost and to be able to take advantage of the situation that appear in the market. Maximo Vedoya: So, again, Pablo Daniel Brizzio: hopefully, this year, we will do right. Timna Tanners: Okay. Very helpful. If if I could follow-up on that, I saw with interest in the DIO CCIL yesterday. You have the announcement that Mexico is doing a dumping investigation into cold rolled imports. From The US. And I guess it just prompted me to think that you know, is is it enough to to have the trade action so far in Mexico and Brazil especially when you have 50% tariffs in The US, but also the 50% coming in steel action plan in in Europe. And the CBAM, of course, already implemented. So even if the, you know, Mexico and Brazil started some actions, the rest of the world is taking even more aggressive actions. So I am just wondering if you think these are enough to move the needle, as much as as as necessary to to reach those goals you have just enumerated. Maximo Vedoya: Thank you, Steven. Hello. How are you? You made a very good point. I think all the things that you are saying are very positive. I mean, again, I think that, as I said before, Brazil this is a very good first step. As you say, The US, Canada, even Mexico, Europe, are much more ahead in this trade measures against unfair trade. Than than Brazil. But it changed a lot from last quarter to this one. All these change of mood in in Brazil. And Mexico the the dumping case against the cold rolled, it is it is not only from The US. US, Malaysia, and China. Remember? And and I think, again, we will continue Pablo Daniel Brizzio: presenting dumping cases if we see Maximo Vedoya: that they were pursuing. In the in this case, we think it is, and the Mexican government accept the petition to open it. So they they see some merit or they see merit in this investigation. But Mexico is also going continue probably with some measures to not duplicate by but trying to be similar to The US market. Maximo Vedoya: And so all these measures are are counting, and I think Maximo Vedoya: more are coming. So you are right. They are not sufficient, but they are in the right path. Timna Tanners: Okay. Great. Thank you. Pablo Daniel Brizzio: You are welcome. Operator: Your next question comes from the line of John Brandt from HSBC. Your line is live. Hey, good morning, guys. Thanks for taking my question. John Brandt: First wanted to ask about CapEx. I know you said $2,000,000,000 for 2026. Presumably, that continues to fall as we go into 2027 and 2028. So I am I am hoping you can give us a little bit of guidance as to what those numbers might might be or what a normalized CapEx number might be as the major CapEx is rolling off and the projects are are completed. And then, you know, what then does that mean for, you know, the additional free cash flow that you have? Right? I mean, you you painted a good picture of increasing demand, increasing prices, improving profitability, falling CapEx means there is some free cash flow. So I am wondering about capital allocation, if we should see your net cash position has also fallen over the years as these CapEx has ramped up. Should we expect the net cash position to rise? Or are there other alternatives for this cash? And I guess my second question is kind of related to that Now that you have sort of completed the acquisition of Nippon stake and Usiminas, is there any sort of additional consideration about potentially taking out the minorities in Usiminas Have you analyzed what sort of benefits or cost savings you would have if if you own that a 100% Anything you could tell us there would be great. Thanks. Maximo Vedoya: Thank you, John. Good morning. CapEx, Pablo Daniel Brizzio: CapEx as you said, 2,000 this year would be around 2,000,000,000. Maximo Vedoya: 2027 will be around 1,200,000,000.0, so it is decreasing. And then in 2028, we do not have an exact number, but it is gonna be around 800. Million, the CapEx. That is a regular CapEx This is including Usiminas. So you are right. The capital allocation for Pablo Daniel Brizzio: probably the 2027 We are gonna have a different view. Today, 2026, Maximo Vedoya: we still are are going to have a a huge CapEx, and probably we have to increase, our working capital. Because the last three week three quarters, we have a decrease in capital. So I do not know if I do not think it is gonna change lot, but I do not know if you want to add something, Pablo, to that. Yes. Okay. Hi, John. How are you? Pablo Daniel Brizzio: Let me add a little bit into that because 2256 for for sure will be a year in which we will be using cash and capital because if you add up the $2,000,000,000 in CapEx, The dividend that we are paying and the the amount that we, as you mentioned, already paid for the shares of of Usiminas from from Nippon. So these these add up more than or close to $3,000,000,000 and and and most probably the the cash generation that we were describing will be in in with this year or even higher, but also take into consideration that we will reverse the reduction working capital and probably we will need to allocate certain certain cash over there. So for sure, we will be reducing our net cash position that we end up at the 2025 with $700,000,000 of net net cash. This will be reversed Maximo Vedoya: So we will move Pablo Daniel Brizzio: to a net debt position but again, at very low levels. And then move to 2027, as Maximo mentioned, we will be reducing our CapEx. We will be we will we will not know yet the how the outlook for the working capital will be will continue with the payment. So probably, we will be able to regenerate a little bit the the the or reduce the net debt position at this moment. But we are not seeing significant changes in in our capital allocation at the moment. We will continue the CapEx. We will continue with the dividend. And we already made an investment in in the case of of. So, clearly, 2026 will be a year to use and probably 2027 will be a year to recover a little bit of cash. But, Martin, I think that you have a well, there was a different part of the question from from John. Yeah. Then the the the Nippon and Maximo Vedoya: and the minority shares of Usiminas Today, we are not considering launching a tender offer or buying share the the the rest of the shares of of convenience. To be clear. But, you know, Brazil for us, Fortunium is a very important market. We have already a significant footprint in in country with our stake in Usiminas, with our operation in Tamil Brazil, in in Rio De Janeiro, also know we have a a huge commitment to the community investing $45,000,000 in the new technical school for the community of of Santa Cruz near our plant in Rio De Janeiro. Pablo Daniel Brizzio: So we will continue looking to to further opportunities Maximo Vedoya: As I said, we do not have any plans today. Of doing anything, but we are continuously looking for for new opportunities to grow. I hope, John, I answered the question there. John Brandt: That is great. Thanks, Maxwell. Pablo Daniel Brizzio: You are welcome. Operator: As a reminder, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. Your next question comes from the line of Henrique Marquez from Goldman Sachs. Your line is live. Henrique Marquez: Hi, everyone. Thanks for taking my question. Just wanted to get more details on the upstream project in Piscataea. Think that is in the end increasing volumes. Relies a lot on on the market situation. But do you think there is room for higher Maximo Vedoya: steel volumes when you finish the project? And Henrique Marquez: also, if you could share more details on how much you expect to save in terms of cost, with your own slide production versus third party purchase, that would also be great. Thank you. Maximo Vedoya: Yeah. Remember, the the Pesqueria project, we have the the upstream project was always focused for the automotive industry. As you remember, when the USMCA was negotiate, was a clause for 2027 where most of the automotive industry has to have melt and pour for gaining origin. So this project Pablo Daniel Brizzio: is going through that. Maximo Vedoya: Probably, it is gonna allow us to sell even more volume to the automotive industry that we are selling today We have a footprint of around 2,000,000 tons for the automotive industry. And probably with this project, we will be able to sell much more. These 2,000,000 tons today comes from slabs that we make in in Brazil, and we shipped to Pesqueria for the hot roll, cold roll, and galvanize. So we are changing that and probably will allow us to replace more volume from Japan, from Korea, from other region, from even Europe that are selling in Mexico. So it is not a a a safe cost. Then again, we have more capacity today of hot rolled. So if the market improve, we will be able to serve other different sectors with our spare capacity that we have today in Mexico. John Brandt: I I hope, Enrique, this was clear or Pablo Daniel Brizzio: if you want more Henrique Marquez: more on this. Maximo Vedoya: Yeah. No. Just sorry. I I think I I just wanted to Henrique Marquez: better understand, like, Caio Greiner: when you produce in these labs in Mexico, like, how much of that connection, like, save you in terms of cost, in terms of logistics, Just to to try to better understand the I know it is the motive of of the project is is also strategic, but just to try to get, like, the benefits from the from the production project. Apart from increasing volumes in the in the outdoor in the outdoor industry. Pablo Daniel Brizzio: Hi, everybody. This is Paulo. Let me try to add a little bit to them. As as I was explaining, we are, substituting slabs that we are bringing from some other places or even from Brazil or the ones that we will produce. So there, you will gain part of the margin because you will move from from buying to produce. Which is already an important saving, then this will be a very efficient and sophisticated facility And and and, also, the this will allow us to produce products that we were not able to produce before with our own with our own facility. So that will also add savings in logistics, savings in in the way we produce, and also we will have we will give out the possibility. Of course, probably this will take a a little longer. To be realized the possibility to increase volumes of sales because we have a higher capacity of the one that we are utilizing today for the auto sector. And if the market continues to grow as we expect, after a good negotiation with USMCA, this could allow us further increase volume. So all in all, it is it is a key project for for Ternium. For for many different reasons. And among that reasons is because of the savings and the reduced cost that we were able to take from from that process. Caio Greiner: Right. Thank you. Henrique Marquez: You are welcome. Operator: Your final question comes from the line of Caio Greiner from UBS. Your line is live. Caio Greiner: Hello. Good morning. Thank you, everyone. Two follow ups from me. The the first one on on to Timna’s question. I wanted to understand what do you guys see in terms of margin potential for Turing that does not rely on on The US removing or lowering section two three two. So what what level of so how how much more do you see EBITDA margin rising over the next couple of quarters? Again, assuming that Section two thirty two is not withdrawn or is not lowered, by The US. And the second question, also a follow-up to to John’s question on on capital allocation. So thank you guys for the visibility that you provided for for 2026 and 2027. That is that is really helpful. But I think, it would be interesting to hear your, your thoughts for Ternium post 2027. So we still have a a hard time understanding what the company, looks like, in the next five years, in the next ten years. And what are management’s priorities? And we do know that in the batch, you have talked about corporate simplification, especially with focus on Argentina. Again, John has asked specifically about the Ximena’s minority stake Also, I wanted to know if any of these again, are your priorities or you could have other priorities going forward being that growing through M and A, being that doing working on other projects in Mexico, organic projects and, or it is all of this is still or or if management management still has little visibility on all of this provided that that we still do not have visibility on the USMCA agreement and so on. Be I would be keen to hear your talk on this. Thank you. Pablo Daniel Brizzio: Thank you, Caio. Did you take the first one, Pablo? I will the first one. Relationship to emergency. After a good negotiation of the SNCA for for first of all, Cairo, thanks for the question. First of all, the as already was mentioned during one of of the answers, the the real impact of a good negotiation of recent 2027. So if that is the case, there should be an adjustment on pricing environment in the North American market where there needs to be a reaction of the impact of the tariff and this will help help using that one and increasing margins for for premium with of course, we never know where this will end up being. And, also, if that is the case, there should be an and this is not merging, but this is volumes and increasing volume that will help us numbers of of of of forward. Again, there is still a lot of of discussion, negotiations to be take that needs to take place. And and that is is something that we will see during this year. There is uncertainty the timing on the agreement. There is uncertainty on the expected result. Of that agreement. So we are positive on the outcome, as Maximo explained very clearly. And so we should we are positive on the on the outlook and the possibility of of turning increasing and enhancing margin. And, again, this was part of of the answer, as you mentioned, to to team language we are expecting that margins to increase and to get back to the places or or the place where we used to be in the past. And and regarding the capital allocation, CAIO for the further for the long term, as as you put it, five, ten years, Maximo Vedoya: Simplification is still a goal that we have. And and we always are we are are going to see when is the best moment on when or when it can be done. Caio Greiner: Depending on which part, Maximo Vedoya: But it is always in in in our to do list in a sense. Pablo Daniel Brizzio: I think that we tend to shareholders where so we would always be Maximo Vedoya: a priority in our capital allocation. And I do see further opportunities Caio Greiner: then in the long term or the medium term both in Brazil and Mexico. As you know, Maximo Vedoya: both markets are growing, Caio Greiner: And and and as I said before, Mexico has a huge opportunity of of growing against, imports Maximo Vedoya: and the market our customers have very willingness to to to buy from us. So I think there is still opportunities over there. I think it is too early to to try to to put them on on a paper or make it public, but we are always analyzing these opportunities in time, in Brazil and Mexico. Think, Caio That is great. That answer your question, but Caio Greiner: Yes. That is that is great. So just just maybe two follow ups, if I may. Pablo, I think you mentioned that you see margins recovering towards the normalized range of 15 to 20% And I am just not sure, if if you if you mentioned that that is including, the upside potential from, from US sensing renegotiations or if that is, those factors. My my question was, if, assuming that, that the current environment stays. So it is assuming that nothing changes regarding the USMC agreement, what level, what level of margin, of what level of margin upside do you do you still see that Ternium can reach without without that specifically? Thank you. Pablo Daniel Brizzio: Yeah. Sorry. Sorry. Probably, I did not answer it correctly what you what you were asking for, but my intention was that because we believe, as Maximo said, that the impact of the USMC negotiation is positive as we believe will not be during this year. So this is more for for 2027. So my answer before, our intention for answering that we will work and we will be enhancing our margin that we have, we could have a possibility of reaching the 15% of the lower part of the range that we are looking for was without taking into consideration any impact of of the negotiation. We are already expecting an enhanced on our margins during the first part of the year. Of course, not reaching 15%, and we will continue working. We think there is a chance that possibility for Telion to reach by the end of the year a better margin than the one that we will have during the first part, hopefully reaching that target by the end of the year. Of course. After failing on on the presentation last year, we will be be more conservative and cautious on on making the same one during this year, but the chance exists. Caio Greiner: Understood. Thank you. And since since I am the last question, I will I will I will take the opportunity and and ask another follow-up and, to to Maximo on capital allocation. Maximo so from from your answer, I can understand that that the company is still sees still sees great opportunity for growth at its main markets. So is that gonna be a priority instead of, potentially raising dividends further or creating a dividend policy that could maybe increase the company’s dividend potential going forward or even a buyback program? Thank you very much, guys. Maximo Vedoya: Thank you, Caio. Maximo Vedoya: I think that the the two priorities for us, increase dividends, I mean, returning to shareholders and looking opportunities in our main markets that we know that we can value a lot of profitability or add added to our business growing in those markets. I think they are both. I I do not think at Caio Greiner: as we have discussed in the past, I do not think the share buyback Maximo Vedoya: is something we are gonna do because of Caio Greiner: of how much shares are in the market. But the the other two are one priority. Both are priorities for us. Maximo Vedoya: Caio. Caio Greiner: Thank you very much, guys. Operator: We actually have one more question from John Brandt from HSBC. Your line is live. John Brandt: No. Operator: John, your line is live. John Brandt: Guys. Sorry about that. Thanks for taking my follow-up. Kyle’s question actually got me thinking a little bit. You mentioned there were some opportunities to grow in in the main markets, and that is kinda one of the things you are looking for And I think I know the answer to the question, but I will ask it anyways. CSN have said they are looking for a potential partner or to do something with their their steel assets in in Brazil. I am wondering if is that a potential opportunity for you to grow? Or can you sort of rule out any, say, pot with them? Thanks. Pablo Daniel Brizzio: Thank you, John. Maximo Vedoya: Yeah. We we we heard what what CSN is doing. Its main focus is the cement and and I think the infrastructure assets they have. Regarding the steel, we at this moment, we are not analyzing any of the any thing with CSN. But as I said, before and I said several times, Brazil is important for us. So we are always open to analyze different opportunities if they appear. But at this time, with this CSM, we are not analyzing anything. John Brandt: Okay. Thank you. Pablo Daniel Brizzio: You are welcome, John. Operator: Concludes the question and answer session. I would now like to turn the call back over to Ternium S.A. CEO for closing remarks. Pablo Daniel Brizzio: Okay. Thank you all for joining us today, and please feel free to Maximo Vedoya: share any comment with us. And goodbye. Have a good day. Thank you very much. Operator: That concludes today’s meeting. You may now disconnect.
Operator: Good morning, and welcome to OPENLANE, Inc.'s fourth quarter 2025 and full year earnings call. All participants will be in listen-only mode. After today's presentation, please note this event is being recorded. I would now like to turn the conference over to William Wright, Vice President, Investor Relations. Please go ahead. Thank you, operator. Good morning, everyone. William Wright: Welcome to OPENLANE, Inc.'s fourth quarter 2025 and full year earnings call. With me today are Peter Kelly, CEO of OPENLANE, Inc. and Bradley Herring, EVP and CFO of OPENLANE, Inc. Our remarks today include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties that may cause our actual results or performance to differ materially from such statements. Factors that could cause such differences include those discussed in our press release issued today and in our SEC filings. Certain non-GAAP financial measures as defined under the SEC rules will be discussed on this call. Reconciliations of GAAP to non-GAAP measures are provided in our earnings materials and available in the Investor Relations section of our website. Please note that all financial and operational metrics presented during this call are on a year-over-year basis otherwise specifically noted. With that, I will turn the call over to Peter. Thank you, William, and good morning, everyone. I am pleased to be here today to share OPENLANE, Inc.'s strong fourth quarter and 2025 full year results. I will start with a few highlights and my outlook for the year ahead. Then Bradley will walk through our detailed financials and the specifics around our 2026 guidance. At the start of 2025, I challenged the OPENLANE, Inc. team to achieve four key goals. Grow our customer base, grow vehicle transaction volumes, improve our financial performance, and position OPENLANE, Inc. for long-term success. I am very pleased that we exceeded our expectations on each of these goals. Our fourth quarter and full year results are proof points to the strength of OPENLANE, Inc.'s strategy, and we continue to execute that strategy with focus and conviction. By doing so, we are making wholesale easy for our customers and further differentiating OPENLANE, Inc. in terms of dealer preference, market share, and our pace of growth. During the fourth quarter, we grew consolidated by 9% and delivered adjusted EBITDA of $76 million, which was a 5% increase over the prior year. Operator: This was driven by strong performance in the marketplace business with both commercial and dealer customers, William Wright: as well as a strong Q4 performance by AFC. As a reminder, these results were achieved against Peter Kelly: the prior year that included contributions from the automotive keys business that we divested during 2024. In our dealer-to-dealer business, we delivered 9% year-on-year unit growth in the fourth quarter, with both very different dynamics and performance between the U.S. and Canadian markets. In Canada, we saw a weaker macroeconomic and automotive retail environment in Q4 and this resulted in fewer dealer-to-dealer vehicles sold in Canada compared to one year ago. In the United States, however, OPENLANE, Inc.'s positive momentum in dealer-to-dealer continued to accelerate. In Q4, we outperformed the industry, gained share, and our year-on-year growth rate increased from the high teens in Q3 2025 to over 20% in Q4, the highest year-on-year growth rate we have seen in dealer-to-dealer for many years. On the commercial vehicle side, the 2% decline in volume was less of a decline than we had anticipated. And actually, we saw commercial volumes inflect in December, reinforcing my expectations that we have turned the corner on commercial volumes, and we will see commercial volume growth in the current quarter Q1 2026. Our Finance segment also had a great quarter, growing loan transaction yields and average receivables managed while holding the loan loss rate to 1.6% and increasing adjusted EBITDA by 6% year on year. All of this contributed to what I consider a very strong and very compelling performance by OPENLANE, Inc. in 2025. On a full-year basis, OPENLANE, Inc. sold nearly 1,500,000 vehicles, generated $1,900,000,000 in total revenue, $333,000,000 in adjusted EBITDA, and $392,000,000 in cash flow from operations. This strong financial performance was driven by contributions across the entire business: our 15% increase in dealer-to-dealer volumes, a 13% increase in auction and related fees revenue, and a 17% increase in adjusted EBITDA for the full year 2025. Our gross merchandise value also increased by 6% to $29,000,000,000, another powerful proof point of the velocity that OPENLANE, Inc. is building. The 1.6% near the bottom end of our historical range, and generating 11% growth in adjusted EBITDA. In summary, I believe our fourth quarter and full year results further reinforce the strength and scalability of OPENLANE, Inc.'s digital operating model. The investments we have made in people, technology, and the OPENLANE, Inc. brand are further differentiating us in the market and compounding our growth. This, coupled with several encouraging factors I will discuss in a few moments, fuels my confidence in OPENLANE, Inc.'s ability to deliver long-term growth, profitability, and shareholder value. So now let me turn to our strategy and outlook for 2026. OPENLANE, Inc.'s strategy is anchored in our purpose, which is to make wholesale easy so our customers can be more successful. We are making wholesale easy by focusing on three enabling priorities: first, by delivering the best marketplace, expanding our depth and breadth with more buyers and more sellers and offering the most diverse commercial and dealer inventory available. Second, by delivering the best technology, innovative products and services that help our customers make informed decisions and achieve better outcomes. And third, by delivering the best customer experience, keeping our marketplace fair, fast, and transparent, making it easier for customers to transact, and making OPENLANE, Inc. the most preferred marketplace. While we will continue to evolve our approach to fit the market and the needs of our William Wright: customers, Peter Kelly: our core strategic priorities will remain the same in 2026. I firmly believe our continued focus on these priorities will help us navigate any uncertainty in the market while capturing the opportunities ahead. So now let me turn to our outlook for 2026, and I will begin with the U.S. marketplace, which will be the primary driver of OPENLANE, Inc.'s growth this year and the primary focus of our investments and execution. Let us start with commercial, where I can confidently predict off-lease volume growth beginning in the current quarter, growth we expect to sustain throughout the year. Given our strong market position supporting the majority of off-lease programs in North America, OPENLANE, Inc. will be a primary beneficiary of this off-lease return. Additionally, there are several factors that we believe will positively compound this tailwind. First, new lease origination rates were healthy throughout 2025, as they were in 2024. This should extend a stable supply of off-lease vehicles through 2028 and beyond. Second, consumer lease equity is at its lowest level in recent years, which should meaningfully reduce consumer in-grounded dealer payoffs, allowing a greater percentage of vehicles to reach the OPENLANE, Inc. marketplace. Third, several commercial customers have expressed a desire to increase online conversion to avoid the time and cost associated with physical auctions. So we plan to expand some of our successful pilots from last year and pursue launching them with additional customers in 2026. Finally, I am very pleased to announce that our latest commercial private label program is now officially live, bringing in more than 900 new dealers to OPENLANE, Inc. Moving to our U.S. dealer-to-dealer business, we will continue to execute the successful playbook that, based on our analysis of publicly available data, drove meaningful market share gains in 2025 and volume growth that significantly outpaced the industry. From a TAM perspective, we anticipate a relatively stable dealer-to-dealer market in 2026 and a continued migration towards digital channels. We believe our value proposition in terms of speed, ease, and better outcomes for dealers positions us well to capture a greater share of the millions of dealer transactions still conducted at physical auctions and through other digital and wholesale channels. Here is why. First, we expect to see compounding benefits from our sales staff hired in 2024 and in 2025, as they establish OPENLANE, Inc. into new markets and expand market share and wallet share in existing OPENLANE, Inc. geographies. Next, in Q4 and for the full year, our digital marketing and inside sales teams drove record new dealer registrations, record unique vehicle listings, and record buyer and seller engagement. Those teams are well primed and already executing on aggressive 2026 plans. We will also focus on growing private label franchise dealer participation as buyers and sellers in the OPENLANE, Inc. open sale marketplace. This cross-pollination effort grew engagement by double digits in 2025 and will remain a core focus in 2026. Next, as we continue to gain traction on wallet share with some of the largest dealer groups across North America, we will look to win new high-value target accounts while expanding our 2025 pilots with other customers into multi-store programs. Again, one of the greatest growth opportunities within our control is further leveraging the 15,000 independent dealer relationships at AFC, which I will speak to in just a moment. But first, I will just touch briefly on Canada and Europe. As I mentioned earlier, Canadian new car retail sales declined in the fourth quarter and again in January 2026. Given our strong market position in Canada, we are exposed to these external market and economic shifts. So from a volume perspective, we expect marketplace volumes in Canada to be relatively flat. We expect our business to benefit from operational efficiencies, pricing elasticity, and the release of new revenue-generating non-transaction-based products and services. In Europe, while our marketplace business remains a smaller contributor to OPENLANE, Inc.'s overall results, we expect modest growth in volume to drive EBITDA growth in 2026. Turning to AFC, AFC is a category leader that made significant contributions to OPENLANE, Inc. in 2025. As we look to 2026, we expect some headwinds from a lower interest rate and a higher risk environment that Bradley will discuss in a few minutes. While our target loss rate range remains at an industry low of 1.5% to 2%, even small upward movements within that range could impact AFC's performance. We expect a solid performance from AFC in 2026, but we expect that to be moderated by these headwinds and our own deliberate, responsible balance between risk and growth. We also still see a significant opportunity for AFC to help power OPENLANE, Inc. marketplace growth in 2026. We had promising early successes on this front in 2025, cross-enrolling hundreds of new and active AFC dealers, recommending OPENLANE, Inc. vehicles to AFC dealers whenever a floorplan loan is paid off, and integrating our technologies to enable bundled promotions and offerings. With these strategies proven out, we are now full speed ahead in 2026. Sales teams have shared incentive-based goals around dealer enrollment and engagement, and our marketing and technology teams are working more closely than ever to capitalize on this unique opportunity. On the technology front, we continue to advance our pipeline of innovation aimed at empowering our customers with technologies, data, and insights. We are injecting AI and our decades of wholesale transactional data into key areas such as vehicle recommendations, predictive pricing, and inventory management. By combining these innovations and our teams under the recently announced OPENLANE, Inc. Intelligence umbrella, we are able to develop, scale, and bring new solutions to market more quickly than ever. From a brand perspective, while we operate a leading digital business, we recognize the strength of our customer relationships is a foundational pillar of our success and of our future growth. Our focus on the customer experience drove 2025 transactional NPS scores that were consistently in the great to excellent range. We continue to make gains in brand awareness, penetration, and preference, according to our own dealer surveys. We begin 2026 as the most preferred digital pure-play marketplace for franchise dealers based on the most recent third-party research. Finally, we entered 2026 operating from a position of financial strength. During the fourth quarter, we completed the repurchase of over 50% of the convertible preferred stock to the benefit of our remaining shareholders. Add to this our strong 2025 earnings and cash flow, and our performance gives me great confidence in the future of this company. The business is growing, with strong cash flow characteristics that enable OPENLANE, Inc. to fund organic growth investments, manage what is a very low level of debt, and return capital to shareholders. Just to summarize, OPENLANE, Inc. had a very strong year and we are well positioned to capture the opportunities of 2026, and we are executing a strategy that is resonating with our customers. Because of that, I believe the key elements of our value proposition for investors remain very compelling. OPENLANE, Inc. is a highly scalable digital marketplace leader focused on making wholesale easy for automotive dealers, manufacturers, and commercial sellers. There is a large addressable market in North America and Europe, and OPENLANE, Inc. is uniquely well positioned in both dealer and commercial. Our customer surveys and third-party research indicate that we are the most preferred pure-play digital marketplace in the industry. Our technology advantage is a competitive differentiator. Our floorplan finance business, AFC, is a high performing business that is highly synergistic with the marketplace. We are cash flow positive with a strong balance sheet, and we believe our business has the capability to deliver meaningful growth, profitability, and cash generation over the next several years. So with that, I will now turn the call over to Bradley. Thanks, Peter, and good morning to everyone joining us today. William Wright: Before I get into results, I want to mention some changes to our face financial statements that you will see reflected in our earnings release material and 10-Ks. Specifically, we have consolidated all of our revenue streams that are associated with volumes transacted on our digital platform into a single line called auction and related fees. Non-volume-driven revenue streams in our marketplace segment have been renamed SaaS and other revenues. This change is part of an overall effort to improve transparency into the drivers of our marketplace business that we are going to be discussing in more Bradley Herring: detail at our Investor Day on March 3 in Fort Lauderdale. There were no changes to purchased vehicle sales, finance revenue, or total revenues. For comparative purposes, our earnings slides include quarterly revenue streams in this revised view going back to 2023. Moving on to our results for the quarter, we reported total revenues of $494,000,000, which represents growth of 9% over the same quarter last year. Revenue growth in the quarter was heavily concentrated in the marketplace segment, which I will discuss more in a minute. Consolidated adjusted EBITDA for the quarter was $76,000,000, which represents an increase of 5% over the same quarter last year. I will break down the EBITDA results with the discussions of each particular business segment. As I mentioned on previous calls, we will be discussing adjusted free cash flow conversion on a rolling twelve-month basis due to the inherent volatility in our quarterly cash flow numbers. As a reminder, this volatility is driven by calendaring impacts within the settlement processes of our marketplace segment as well as the seasonal expansion and contraction of our receivables portfolio in our finance segment. With that context, our reported conversion rate for the calendar year 2025 was 89%. This conversion rate benefited from some year-end timing considerations in our working capital accounts that would normalize results in a conversion rate of 74%. I have mentioned before that we expect our trailing twelve-month free cash conversion rate of around 75%. However, with the addition of our debt instrument in Q4, we are revising that number to an adjusted free cash flow conversion rate between 65–70%. It is important to note that this revision is entirely related to a change in the mapping of our financing cost as a portion of our dividend payment has now shifted to a tax-deductible interest payment. The absolute cash generation of the business remains largely unchanged. Moving to the performance of our business segments, I will start with the marketplace. In Q4, we transacted GMV totaling $7,100,000,000, which represents growth of 8% over the same quarter last year. Year-over-year growth in GMV is comprised of 8% growth from our dealer customers and 7% growth from our commercial customers. Auction and related revenues, which I mentioned before now includes all volume-related fees associated with our digital platform, were $200,000,000, up 12% over the same quarter last year. Consistent with recent quarters, the primary drivers of revenue growth were higher volumes in the U.S. dealer business combined with some modest price increases put in earlier in 2025. Offsetting that growth was macro pressures in Canada that decreased year-over-year volumes. SaaS and other revenues in the quarter were $62,000,000, which is down 10% from the same quarter last year due to the December 2024 divestiture of our keys business. Excluding the impact of that transaction, our SaaS and other revenues were up 2%. Q4 adjusted EBITDA for the marketplace segment was $32,000,000, which represents an adjusted EBITDA margin of 8.2%. This reflects 2% year-over-year growth in adjusted EBITDA and a 60 basis point decrease in the adjusted EBITDA margin. On a year-over-year basis, margins were depressed due to a higher mix of purchased vehicle revenue, go-to-market investments, and incremental variable compensation driven by strong 2025 performance. William Wright: Excluding the divestiture Bradley Herring: of our keys business in 2024, the year-over-year comparatives would have been 10% growth in adjusted EBITDA and consistent margins. In our financing segment, the average outstanding receivables managed in the quarter was $2,500,000,000, which is up 9% year over year. Year-over-year growth was driven by a 4% increase in the average vehicle value and a 2% increase in transaction counts. Net yield for the quarter was 13.2%, which is down 50 basis points year over year. The decrease was primarily attributable to a 90 basis point decrease in transaction fee yields driven by higher loan values, partially offset by higher net interest spreads. The Q4 provision for credit losses was 1.6%, which is consistent with our results from last quarter and 24 basis points lower than last year. With regard to our loan loss provision, we reiterate a target loss rate in the 1.5% to 2% range. The culmination of the changes in the portfolio balance, the net yield, and loss provision are an adjusted EBITDA for the finance segment of $44,000,000, which is up 6% over the same quarter last year. With respect to capital considerations, I will highlight the previously mentioned repurchase of our Series A convertible preferred shares that we closed on October 8. As a result of that transaction, we ended the quarter with $550,000,000 in debt outstanding and a fully diluted share count of 125,000,000 shares. Consistent with our previous disclosures, the 125,000,000 fully diluted share count assumes full conversion of the remaining Series A preferred shares. In addition to closing the buyback of the Series A preferred shares, in Q4 we repurchased 369,000 shares of our common stock bringing our full-year share repurchases to 1,800,000 shares at an average price of $24.71 per share. With regard to liquidity, we ended the quarter with an unrestricted cash balance of $142,000,000 and capacity of over $400,000,000 on our existing revolver facilities. I want to take just a minute to highlight two specific items that are flowing through our GAAP financials for the quarter. First, the repurchase of the Series A shares resulted in a deemed dividend of approximately $242,000,000. This deemed dividend is charged directly to retained earnings and while it does not impact GAAP net income, it negatively affects our Q4 GAAP EPS by $2.20 per share. Second, based on our improved profitability and outlook, we concluded it is no longer necessary to maintain a valuation allowance against certain deferred tax assets. As a result, we recorded a non-cash tax benefit that increased GAAP net income by $35,000,000 and GAAP EPS by $0.32 per share. Neither of these items impacted our adjusted EBITDA, adjusted free cash flow, or adjusted operating net income per share figures. Now that we have covered the highlights for the quarter, I want to move on to setting expectations for 2026. I will start with the numbers, then provide some additional context of how we got there. For 2026, we expect adjusted EBITDA to land between $350,000,000 and $370,000,000. That represents a range of growth from 5% to 11%. Nearly all of the growth in adjusted EBITDA is expected to come from the marketplace segment, which we anticipate to grow between mid and upper teens. The growth in the marketplace is a function of, one, high conviction in our ability to win share in our U.S. dealer business and, two, our ability to capitalize on our strong position in the U.S. commercial business as those secular tailwinds turn in our favor. We also have to recognize that because of our strong presence in Canada, our results there are more aligned with overall macro conditions. We expect the macro conditions in Canada to remain challenged into 2026 and therefore predict our growth opportunities in Canada will be limited. With respect to our finance segment, we anticipate 2026 to be largely flat to 2025 due to a number of factors. Working in our favor is the ongoing growth in our loan portfolio; we continue to onboard new dealers and asset values continue to rise. As headwinds, we anticipate net yield pressure from anticipated rate cuts and a risk environment that gradually returns to more normal levels. In summary, OPENLANE, Inc. delivered yet another solid quarter of results. These results represent the coordinated efforts of our nearly 5,000 employees executing on a consistent mission to make wholesale easy for our customers. Looking into 2026, we have a large number of things to feel good about, including strong momentum in the U.S. dealer market, the recovery of our commercial customer category, and continued contributions from our finance segment. I cannot close the call without a final plug for our upcoming Investor Day on March 3 in sunny and warm Fort Lauderdale, where we are looking forward to providing more information on our markets, our business, our technology, and our financials. Now, I will turn the call back to the operator for questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, the first question comes from Jeffrey Francis Lick with Stephens. Please go ahead. Jeffrey Francis Lick: Good morning and thanks for taking my questions. Congrats on a great quarter and a great year. William Wright: Peter, Jeffrey Francis Lick: if you break your marketplace business down into dealer and commercial, it appears that as we exit 2025, both of those line items are probably going better than you expected Peter Kelly: the beginning of the quarter and certainly at the beginning of the year. I was wondering if maybe you could just take both of them and just why you think they are going so well and, you know, things that you have done internally and then maybe, you know, market tailwinds as well. Peter Kelly: Yeah. Thank you, Jeffrey. I appreciate the question. Thanks for the good wishes there. Listen, I feel really good about the quarter and the year. I think you are right. I feel really good about how we are positioned in the marketplace with both dealer and commercial. I think we are at a great point in both. I will start with commercial. As we have spoken about for a number of years now, we are expecting off-lease maturities to increase in 2026 and again in 2027, where 2028 is another strong year, so a good outlook for off-lease maturities. Compounding that, we see average lease equity at the end of those leases has declined. So payoffs from consumers and dealers are declining, which means a higher percentage of those vehicles are entering our platform. Also because of that equity situation that I just described—lower lease-end equity—those vehicles tend to flow deeper in our funnel where we monetize them at higher rates. So we get a better mix of transactions there as well. As I mentioned, we have onboarded a new customer. The outlook for volumes is strong. The decline in Q4 was less than I had expected, and I am confident at this point that we will see commercial volume growth starting in Q1. I knew there was some ambiguity on that on the last call—whether it would be Q1 or Q2 or when—but I am confident it will be in Q1. So I think commercial looks really strong. Customer relationships are strong, conversion rates are strong. I feel really good about that. Over on the dealer side, the 9% growth in Q4 on Facebook was a versus Q3. However, in the United States, which is the biggest market and the core growth opportunity, it was an acceleration. Our dealer volumes accelerated, our year-on-year growth accelerated in Q4 versus Q3. We are accelerating off big underlying numbers at this point. So I feel really good on that. What is driving that growth? I think that was part of your question. I think it is a lot of the things that we have talked about on other calls that we continue to execute on. It is making sure the technology is great, that the platform is easy to use. For sellers and for buyers, they have a good tool set to transact vehicles in the marketplace. Obviously, go-to-market investments which we increased starting in 2024 continue to pay off. So we stepped up on those go-to-market investments as well in Q4, added some resources, which are really just getting onboarded and trained right now. Customer feedback, the focus on customer experience, is a real important focus here. Customer feedback and NPS scores are very strong. That is something we look at critically all the time. I think that is generating some word-of-mouth, some brand recognition, some increased awareness among dealers that put us in a good position. Canada was a little bit of a headwind on dealer volumes in Q4, as I mentioned in my remarks. But fundamentally, we have got a great position in that market. Even though Q4 was weak and January continued in a similar vein, we have actually seen a little bit of improvement in Canada late January and into February. We are starting to trend back towards last year's numbers, and last year was a very strong comp. The first half of last year in Canada was very strong. Again, put all those together, I feel really optimistic and positive about the trends that we are seeing. Jeffrey Francis Lick: And just a quick follow-up on commercial. On the last call, you had talked about units in the open auction lane, the final phase of the waterfall, commercial units were already up year over year. I am assuming that that is the case now. And then if you could elaborate, you talked about in your prepared remarks about certain OEMs being more open to using kind of a digital disposition as opposed to taking it to the physical. Any details there would be helpful because that really is where the sizzle is in the commercial business. Peter Kelly: Yeah. Thanks, Jeffrey. Commercial volumes have been flowing deeper in the funnel, as I mentioned. The growth in commercial in our open sale has been strong. It was again close to a double year on year in Q4. Obviously, top of the funnel did not double. Top of the funnel was actually down a little bit in Q4. Total commercial volumes were down a little bit in Q4, 2%. But commercial volumes sold in the open channel were up almost double, or maybe even a little bit more than double, but approximately double, let us say, in the fourth quarter. Again, that is a very positive sign. I think it speaks to some of the trends we have talked about in terms of consumer equity, but it also speaks to the strength of the marketplace, and that we have got a marketplace that can convert these vehicles into cash, into transactions. We can do that quickly at low cost for the seller. We can do it for ICE vehicles, we can do it for EV vehicles, we can do it for hybrids. So I feel really positive about that. I think that is going to be a long-term positive for this company. Jeffrey Francis Lick: Thanks so much and look forward to seeing you in a couple of weeks. Peter Kelly: Yes. Thank you, Jeffrey. Operator: The next question comes from John Babcock with Barclays. Please go ahead. William Wright: Hey, good morning and thanks for taking my questions. Just quickly, you mentioned that your growth is accelerating in, or accelerated rather, in the fourth quarter. I am just kind of curious, how did the U.S. perform through the earlier part of 2025? I mean, were you up in that 20% growth range? Or I do not know if there is a way you might be able to benchmark John Babcock: you know, how you performed earlier. Peter Kelly: Yeah. Thanks, John. We do not disclose the exact number, but I think through my prepared remarks, and I am going a little bit from memory here. In the early part of the year, I think the U.S. growth rate in dealer-to-dealer was approximately the same as our publicly reported growth rate in dealer-to-dealer. In Q3, I recall saying that while I think our total growth rate in dealer was like 15%, our U.S. growth rate was high teens. Then as I just said, in Q4, our U.S. growth rate in dealer-to-dealer was above 20%. So we have seen an acceleration in our year-over-year U.S. dealer-to-dealer growth rate throughout 2025. Obviously, that is very positive, and I think it reflects some of the actions we have taken, but we will have to see how it trends in 2026. I feel really good about the strength of the offering and the feedback we are getting from customers as well as the volume trends. John Babcock: Yeah. Thanks. That is very helpful. And then next, weather was pretty bad in January here. I am just kind of curious, does that impact your volumes meaningfully? Or how should we think about that for 1Q? Peter Kelly: Yeah. Weather can impact volumes for sure, and there were weather impacts from that. That was a pretty aggressive and widely distributed storm, let us just say. That impacted retail sales and it impacted volumes. But on the other hand, John, I think in any Q1, there is going to be one bad weather week somewhere in some part of the country at least. So there are always some weather impacts in Q1. It is just a question of when they hit. I definitely think that is behind us now. If I was to look at our sales by week, clearly, our weakest week year to date would have been that week, but I think it has recovered and we move on. I am not concerned about it. John Babcock: That is very helpful. And then last question before I turn it over. There has been a lot of discussion about AI and its potential to disrupt over the last week, two weeks or so. I was wondering if you might be able to talk about how you are thinking or planning ahead for that and also what you are doing ultimately to position the business such that that disruption hopefully will not have a meaningful long-term impact for you. Peter Kelly: Thanks, John. Fundamentally, I think AI will be more of an enabler for our business model than a disruptor. The core aspects of our digital marketplace—that we are a network-effect business with buyers and sellers, we are dealing with significant assets that take up real physical space and have to be moved and inspected—I think those are fundamental facts on the ground about our marketplace. But I think AI can help us deliver improved technology solutions that benefit our customers, and that is why I see it as an enhancer and enabler and an accelerator in some respects. We are leaning into AI across our organization. I would say we are leaning into it in three principal areas. The first would be in our engineering and software development operations. We are certainly leaning in more aggressively there. Our team is actively using it to help them design products, write code, test code, and accelerate our time to market for new software products as well as accelerate the time for technology consolidation, which is another thing we have been looking at here. We are also using it in certain customer-facing areas. We have AI deeply integrated into the inspection reports, both on the visual identification of damage through the photographs—we have AI looking at that. We have AI on the audio recording of engine noise. We have AI involved in the decoding of the onboard diagnostic codes that we take through the readouts. We are also starting to leverage AI in terms of pricing advisory for sellers and buyers as well as vehicle recommendations for buyers when they log on to the marketplace. The third area we are looking at AI is in operations. Obviously, with one and a half million vehicles sold last year, it is 1,500,000 titles processed. There are a lot of customer calls to go with that. There are funds flows between sellers and buyers and all that sort of stuff. There is a significant operations capability here and opportunities for further efficiencies in those processes as we leverage AI tools within those areas. I feel fundamentally optimistic as to the benefits. Obviously, the landscape is changing weekly, so we have to stay close to it, which is what we are doing. We will continue to do that. John Babcock: That is very helpful. Thanks. Peter Kelly: Thanks, John. Operator: The next question comes from Rajat Gupta with JPMorgan. Please go ahead. William Wright: Great. Thanks for taking the question. I had a question on the guide, if you could unpack that a little bit. I know you gave us some color on Canada and Europe. I am curious what is embedded. I am sorry if I missed this. What is embedded for volume growth in the U.S. in the guidance and split between dealer and commercial for the full year? Any more details you could give us there? Also within that, Rajat Gupta: what is your market share growth expectation in dealer for 2026? Bradley Herring: Rajat, this is Bradley. I will take the first part of that on guidance, and then I will let Peter talk about some market share dynamics. With the guide, we are not disclosing anything specifically around volume related to dealer and commercial, but we were pretty prescriptive around what the guide represents, which is really continuation of what we are seeing in the U.S. dealer business and, obviously, the recovery in the commercial business, mainly coming from the U.S. We do expect Canada to be relatively flat year over year just given some of the macro conditions there, and same with AFC, and I mentioned some of the key reasons there. What is important to understand when you think about our guide for next year is how that growth profile is changing a little bit over 2025. In some respects, especially when you look at the marketplace business, we are expecting similar growth in terms of EBITDA performance in 2026 over 2025 with respect to percentage gains. We grew the mid-teens for 2025 in the marketplace. We are expecting to either stabilize at that number or even increase that number into 2026 off of a bigger base. We are really proud of how that marketplace business is going to grow. A fair amount of the growth in 2025 came from AFC, which we do not expect to repeat in 2026. If you remember, a lot of that EBITDA performance in 2025 was related to improvement in the credit situation and loss provisions. We do not expect that to recur for next year. We feel good about the guide. It is really driven by, like Peter mentioned, the U.S. dealer business and U.S. commercial business. But at the end of the day, we feel the marketplace is still going to have another stellar year just like it did in 2025. Peter Kelly: Yeah. Understood. Thanks, Bradley. Rajat, I will comment just a little on volume. It is not easy to get a firm number on all the different wholesale channels across this industry, to get a sort of a precise market share number. We track our volumes vis-à-vis competitors. We track our volumes vis-à-vis AuctionNet. I think for the year overall last year, our U.S. dealer volumes grew north of 15%. I think our total dealer volume was 15% growth, but our U.S. volume was higher than that. I believe AuctionNet dealer-to-dealer volumes, which is really physical auction dealer-to-dealer volumes in the U.S., grew around 4%. Within that, you can see that there is a share gain, if you like, for OPENLANE, Inc. We grew north of 15%; the physical auction D2D industry grew 4%. We saw a widening gap in Q4. Our growth accelerated into north of 20%, and I believe physical auction dealer volumes declined 4% in Q4. On prior calls, I have said that on a long-term basis, we would like to be outgrowing the industry by the mid to high single digits on a consistent basis. I still think that is a reasonable number to use. Clearly, we have done better than that in recent quarters. Obviously, we are going to continue to do the very best we can, but I have not moved off that expectation as a long-term kind of what investors should expect over, say, a one-, two-, three-year period. William Wright: Understood. Fair enough. Rajat Gupta: Just a follow-up on the SG&A side. I think you mentioned earlier that you are expecting to start to lever a lot of those investments you made last year as they mature. I am curious, is 2026 more of just leveraging a lot of the prior year's investments? Is this another big investment year that is embedded in the guide? I am curious if you could dive into that a little bit. Thanks. Peter Kelly: Yeah. I will start and then Bradley can get into the numbers. At a strategic level, our SG&A investments have been principally focused in the U.S. market and have had a particular focus on the D2D marketplace and share growth there. Obviously, we can see positive results from that. We have also done a number of waves of those investments starting in 2024, the most recent one really at the end of last year into the current quarter. It does take time for those to ramp up and really get productive. We can certainly see some early indications of impact in the sort of a 60- to 90-day framework, but I think you really have to be a year in before you really start to see it mature and really start to get to its fuller level of performance. So there is that going on. I will also say we have tried to fund those investments by reducing SG&A in other parts of the business. I guess what I would say is Bradley Herring: we are Peter Kelly: not looking to have to continue to do incremental waves. At some point, we think the SG&A growth should plateau out and the volume growth should hopefully continue. So we expect to see some continued separation there. We are going to be watching carefully for that. I do not have at this moment another wave sort of planned in our 2026 plan. I think we are going to run with what we have got for the most part. Obviously, we will monitor and see. To the extent we are continuing to see very strong benefits, we will keep that under consideration. That is my thinking on it. Bradley, do you want to speak to it? Add a little bit of color to that. So Bradley Herring: when you look at SG&A 2026 versus 2025, there are a couple of moving parts. One, we have talked before about the incremental variable comp that will actually kind of peel off when we get into 2026. It will not recur in 2025. So that is going to be a good favorability for SG&A. You are going to see, to Peter's point, more of the annualization of our 2025 go-to-market investments. There are some slight increments being added, but the impact in 2026 is mostly going to be the annualization of investments that were made mostly in the back half of 2025. So you will see some incremental adds there. Then to Peter's point also, there are some ongoing efficiency exercises around consolidations of some tech stacks and some functionality that is going to be funding some of that as well. Those are kind of the big John Babcock: Got it. William Wright: Thank you. Operator: Thank you. The next question comes from Robert James Labick with CJS Securities. Please go ahead. Robert James Labick: Good morning. Thanks for taking our questions and congratulations on the quarter and outlook. William Wright: Peter, in your prepared remarks, you talked about John Babcock: off-lease vehicles ending with negative equity. I think it is to negative $1,000 for the first time in a very long time. And Robert James Labick: thus flowing deeper through the funnel. Rajat Gupta: You also talked about Peter Kelly: some pilot programs you did in 2025 to increase John Babcock: online conversion. I was hoping maybe you could expand a little bit about the pilot programs and what you can do to increase online conversion and how you see that playing out this year and beyond? Peter Kelly: Thank you, Robert. I appreciate the good wishes there. Let me start with the negative equity. I am sure we are looking at similar data to what you are referencing there. We have seen equity decline. One public source shows that actually first time in the negative territory at the end of last year, first time in a long time. I think that is actually a mix. I think the equity situation within our customers' portfolios remains, I will say, widely distributed. EVs: heavily negative equity. A lot of vehicles—increasing numbers of vehicles—sort of in the zone of close to zero or low levels of equity. Then some vehicles remaining still with significantly positive equity. Some brands, some vehicle types. So it is maybe a more widely distributed variation bell curve than would be typical given the different types of vehicles in those portfolios. Nevertheless, in aggregate, it has trended down. I think it is going to continue to do so for all types of vehicles in my view. I think the outlook there looks positive. We are going into that in more detail at our Investor Day here in a few weeks as well. We will talk more about the impacts here. Some of the pilots—at the highest level, what we are trying to do is get our commercial sellers to engage in a more digital auction price discovery, use our marketplace to really discover what the true market demand is for that vehicle and drive higher conversions, which is kind of what dealers do. When a dealer has a wholesale unit, they have got a view that, “I think this car should be worth X. I paid the consumer X when I bought it as a trade-in, but I am not really sure. I am going to put it in the marketplace. I am going to see what the market brings.” Dealers have learned that our marketplace—the liquidity of the marketplace, the number of buyers, the tools like absolute sale—get them full market value, very competitive outcomes versus any other channel, and we will do it fast and at a low cost. We are trying to get our commercial sellers to really experience that same type of situation. As you probably know, in the past our commercial sellers kind of have this waterfall process. They set a price and then it is there for the buyer to take it or leave it. If the price is set too high, then obviously we do not have a buyer for that car; it is going to go downstream to a physical auction. In all probability, it is going to sell for less than that price the seller was asking for. We are trying to engage the seller in those price discovery tools. We had pilots running with a number of brands in 2025. Those pilots gained traction over the course of the year. Fundamentally, we are trying to expand that and drive two things: one is a very strong conversion rate for commercial vehicles overall, and an increasing percentage of those vehicles selling in the open marketplace channel. Obviously, this benefits our sellers, benefits our buyers, and benefits our business as well. Rajat Gupta: Yeah. That is really exciting. I think that is the John Babcock: huge opportunity as you can continue to grow that. And then just as my follow-up, you mentioned this and I think actually looking at Rajat Gupta: off-lease volumes in a little more detail for next year, the growth is in EVs and plug-ins and a little hybrids, and ICE might even be down a little bit. How have your experiences been so far with off-lease EVs given the John Babcock: as you said, the very high negative equity because of the rapid depreciation and the incentives given before. So how has your Rajat Gupta: experience been so far with EVs, and what do you expect that to John Babcock: look like through 2026 and beyond? Peter Kelly: Thanks, Robert. Our experience to this point has been very good with EVs. We are still early days, so I do not know that I have got enough data to say this is purely locked in and this is all done and dusted, but it gives me a lot of confidence for what we are seeing. What are we seeing with EVs right now? First of all, we are seeing our overall conversion rate on EVs from commercial sellers is, to all intents and purposes, the same as our overall conversion rate for ICE. It is actually a couple of percentage points lower, but immaterial. The conversion rate on both types of vehicles today in our portfolio is in the upper 60s, low 70%. William Wright: Okay? Peter Kelly: We are seeing EVs, because of the lower equity—and this is something we have talked about generally for vehicles—but because they have lower equity, they are flowing deeper in the funnel. So we are actually converting the EVs more not at the grounding dealer level, more at the non-grounding and open sale level, which obviously has a nice revenue mix impact for us. I am not saying I would lock in on either of those things as the way it is going to be forever, but it is the way it is today. I feel really good about that as we are going into a higher volume season here over the next three, four, five, six quarters with these types of vehicles. I will also say that having talked to our commercial sellers, they recognize that they are going to be underwater vis-à-vis the residual value. In most cases, I think they have accounted for that ahead of time because this was something that was foreseen. They also recognize these vehicles probably are not appreciating in value. They really need to liquidate them as quickly as they can. Ultimately, they and their dealer base have to find a price point at which these cars are going to move back into the retail channel as used EVs. They are very practical about it: “I do not want these cars accumulating in some parking lot somewhere thinking they are going to go up in value. That is not going to happen. I better sell them today and OPENLANE, Inc. is a great partner to help me do that.” We are working very collaboratively with our sellers to achieve those outcomes, and I feel really good about where we are at so far. Rajat Gupta: Okay. That is super. Thanks so much. Peter Kelly: Thank you, Robert. Operator: The next question comes from Gary Frank Prestopino with Barrington Research. Please go ahead. Peter Kelly: Hi. Good morning, Walt. Hey, Peter. A couple of questions here. First of all, great growth on the dealer side for the year. I believe it was 15% in units. Right? So maybe could you possibly parse that out on both the same-store basis and new dealer additions which are driving that growth. Can you give us some idea of how that shaped out in 2025? Gary Frank Prestopino: Yeah. Peter Kelly: Thanks, Gary. I appreciate that. First of all, we do not disclose same-store as part of our quarterly cycle, but here is what I will say. We are very pleased with the dealer growth. The dealer growth has also been driven by equivalent growth in the number of sellers participating in our marketplace in any given quarter. Again, we saw north of 20% growth in active sellers in our U.S. marketplace in Q4. Also the number of buyers active in our marketplace—that growth was also north of 20% in Q4, the number of active buyers in our U.S. marketplace. Those additional increases in customers help drive the increase in growth. We also find that when we onboard a new customer, particularly on the sell side, they do not come in as a mature customer on day one. It takes them time to ramp up to a level where they are generating a comparable volume to the rest of our customer base. I feel really good about the stickiness of our platform. I feel really good about the NPS scores we are getting. I certainly feel great about the customer enrollment. We have talked about leveraging the private label, leveraging AFC, leveraging the go-to-market resources that are driving those customer adoption rates. All those things together are contributing to the volume growth that we are delivering. Gary Frank Prestopino: Okay. Peter Kelly: You also said you onboarded a new client in commercial this quarter? Or last quarter? Is that correct? Like turn quarter. William Wright: Turn quarter, there was Peter Kelly: I think in the last call I said it would be in Q1. I can confirm it did happen in January. Very successful launch, and excited to see that live. Was that an OEM or was that a financial Operator: institution? Yeah. It was an OEM with a number of Peter Kelly: you know, a multi-brand OEM. No. That is great. That is great to hear. Then just lastly, I do not know if you have any data on this, but are you starting to see more new dealers come into the fold, particularly on the buy side, that just really exclusively sell EVs and hybrids and all. I mean, there are a couple of dealers out here in the west suburbs of Chicago that are strictly selling EV cars. Are you seeing more and more of that nationwide? We are seeing a little bit of that. That is true, Gary. Just on the last question, I talked about EVs. When I drill in and look at who is buying these EVs, I will say it is a mix. Some of them are being bought by regular franchise dealers who just think, “This is a high-quality EV, I can retail it—two years old, three years old.” Some of them are bought by independents, but some of those independents, you can just tell by their name that they are exclusively EV-focused. Obviously, they look at a profit opportunity here; these are high-quality vehicles, one owner, low mileage, and they can buy them in our wholesale market and sell them retail in their market just like you described. So, yeah, we are certainly seeing some of that, Gary. Okay. Thank you. Operator: The next question comes from Craig R. Kennison with Baird. Please go ahead. John Babcock: Hey, good morning. Thanks for taking my question. You have really addressed most of them already, but I thought I would ask for an update on Europe. Peter Kelly: Thanks, Craig. Good to hear from you. Europe had a strong year last year. It was its best-ever year in our business, so it was a contributor to the good results that we delivered. It is a relatively smaller part of our business. It is less than 10% of our total transactions. However, it does show up a lot in the purchased vehicle number because a lot of those European transactions move cross-border. Because of the cross-border implications of that, we have to take ownership of the vehicle for a week or two while it is going through that process. So it shows up there. It had a very strong year. I believe in 2026 we can continue to grow those volumes. I would say our growth expectations are modest, but those modest growth expectations hopefully will drive another record year for the European business in 2026. William Wright: Thanks. And then there is a line item in your adjustments to John Babcock: EPS for ERP. If you could just give us an update on what you are doing to implement Peter Kelly: ERP and what you hope to accomplish there? Bradley Herring: Yeah. Sure, Craig. I will take that. This is Bradley. We are moving down the path of doing some ERP consolidations. It is a byproduct of some acquisitions that were made over the last number of years. We are still running a handful of ERPs attached to those acquisitions, so we are going to consolidate those with a central provider. That is going to go on this year and next year. Rajat Gupta: A couple Operator: Excuse me. There is an interruption, apparently. Just a moment, please. We lost the speaker location. Are you still there, Bradley? Peter Kelly: We are still here. We are still here. Yeah. Operator: Please go ahead. Bradley Herring: Yeah. Sorry about that, Craig. So yes, consolidation creates more efficient back-office capabilities and also solidifies a lot of our data collection. We do data translation John Babcock: at the end— Operator: Craig. Bradley Herring: We kicked that off in 2025. I am not sure if that went on mute and you got some of that— Operator: I caught some of it. Some of it was on mute. But I am getting the drift. Rajat Gupta: Yeah. Just think of ERP for consolidation, data consistency, Bradley Herring: a two-year program kicked off into 2025. By the time we get done with mid to late 2027, we should be pretty wrapped up. William Wright: Great. Thank you. Peter Kelly: Okay. I think that is all the time we have for questions today. I apologize for the technical issues in the last minute or two here. I appreciate you being on the call and your continued interest in our company. I know we have mentioned it a few times on the call, but I want to give one more plug for our upcoming Investor Day event. March 3, 2026, Fort Lauderdale, Florida, runs from 8:30 to noon. You can find out more details on our investor page or by contacting William Wright, our VP of Investor Relations. We hope to see you there so you can learn more about our business, our leadership, and our strategy. We are going to go into more depth on all of those things. I am excited about 2026. There are many opportunities for OPENLANE, Inc. this year and beyond as commercial volumes inflect and as our dealer business continues to gain momentum. Because of that, I remain confident in our positioning for growth and our ability to deliver long-term shareholder value. Thank you again. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome to The Vita Coco Company, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Liz. I will be coordinating your call today. Following prepared remarks, we will open the call for your questions and instructions will be given at that time. I would now hand the call over to John Mills with ICR. John Mills: Thank you, and welcome to The Vita Coco Company, Inc. fourth quarter 2025 and full year earnings results conference call. Today's call is being recorded. With us are Mr. Michael Kirban, Executive Chairman; Martin F. Roper, Chief Executive Officer; and Corey Baker, Chief Financial Officer. By now, everyone should have access to the company's fourth quarter earnings release issued earlier today. This information is available on the Investor Relations section of The Vita Coco Company, Inc.'s website at investors.thevitacococompany.com. Also on the website, there is an accompanying presentation of our commercial and financial performance results. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also during the call, we will use some non-GAAP financial measures as we describe our business performance. Our SEC filings as well as the earnings press release and supplementary earnings presentation provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures and are available on the website as well. And with that, it is my pleasure to now turn the call over to Michael Kirban, our Co-Founder and Executive Chairman. Thanks, John, and good morning, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2025 financial results and our expectations for our performance in 2026. I want to start by thanking all of our colleagues across the globe for our continued strong performance overcoming the unusual challenges of 2025 to deliver a record year while also staying committed to The Vita Coco Company, Inc. and advancing our mission of creating ethical, sustainable, better-for-you beverages that uplift our communities and do right by our planet. I am incredibly pleased with our 2025 full year performance and yet even more excited about the opportunities for our category, our current momentum, and our ability to deliver very high execution levels which all bodes well for our future. Coconut water remains one of the fastest growing categories in the beverage aisle according to our retail data for 2025, growing 22% in the U.S., 32% in the U.K., over 100% in Germany. For the full year, Vita Coco coconut water, excluding our coconut milk products like Treats, grew 21% in retail dollars in the U.S., 32% in the U.K., and over 200% in Germany. This helped drive our strong full year growth in global net sales, gross profit, net income, and adjusted EBITDA. Our international business is accelerating, driven by strong performance in Europe. Our increased investment in the U.K., Germany, and other select European markets is paying off with healthy growth and brand share wins such that the international segment growth contributed 29% of the 2025 total company net sales growth. We will continue to invest in these core markets while exploring opportunities in additional international markets where we are well positioned to enter or drive profitable growth long term. Our recent appointment of Charles Van Asch as Chief Commercial Officer with global responsibility is indicative of our focus on international business, and our commitment to strategically invest in this long term opportunity. Charles has been with Vita Coco almost ten years, most recently leading our U.S. sales team, and has delivered years of strong growth as he built our sales and category management capabilities. Michael Kirban: I am excited that he is taking on this larger role as I believe that our international business could eventually be as large as our U.S. business is today. In 2026, we will continue to double down on active hydration across markets as a driver of consumer growth, positioning Vita Coco as the natural choice for performance-minded consumers. Building on our strong occasion-based marketing framework, we will be expanding more deliberately into sport and recovery. We will endeavor to leverage professional athletes and partnerships to authentically demonstrate the role Vita Coco plays in real performance and recovery moments. With three and a half times the electrolytes of the leading sports drinks and clean ingredients, we believe that Vita Coco is uniquely positioned to recruit new consumers, increase usage frequency, and even further unlock the next phase of sustained consumer growth. The acceleration of the category that we saw in late 2024 continued through 2025, which combined with improved inventory and strong execution produced our excellent full year results. Looking forward, we expect to maintain strong growth trends as we invest in and develop the coconut water category in our priority markets and develop and nurture new markets. Operator: Our asset light model, Michael Kirban: leading market share, and strong cash generation positions us well to take advantage of the opportunities ahead. As I have said before, I believe that the coconut water category is in the very early stages of gaining mainstream appeal on a global level. Coconut water appears to be transitioning from niche to mainstream, and we are at the forefront of that trend. If we continue the household penetration and consumption gains that we are seeing, I am confident that coconut water will one day be as large as some of the major categories across the beverage aisle. And now I will turn the call over to our Chief Executive Officer, Martin F. Roper. Martin F. Roper: Thanks, Michael, and good morning, everyone. I am pleased to report Vita Coco's record performance in 2025. We finished with net sales up 18% driven by full year growth of Vita Coco Coconut Water of 26%. Our brand trends are very healthy and driving the company growth. Our recent private label trends represent the previously discussed net effects of lost and gained business Michael Kirban: with some business wins expected to start in 2026 which will improve these trends. Martin F. Roper: Our Q4 branded scan results in the United States continue to be very strong, with a small benefit at the end of the quarter from the Walmart reset that took place mid-November, in which we recovered most of the distribution loss at the 2024 end and improved our total distribution and space allocation from 2024 levels, now in what we believe is a higher traffic aisle. We show some photos of a range of the sets in Walmart in our investor deck to demonstrate the improvement. Our U.S. Vita Coco branded business is benefiting from strong volume growth and also the net impact of the two price increases taken in the U.S. last year. In November, it was announced that going forward, most coconut water products would be exempt from the tariffs announced Michael Kirban: earlier in 2025. Martin F. Roper: These changes are applicable to most of our products sold in the U.S. but do not materially affect our fourth quarter results Michael Kirban: as we continue to sell inventory which has been imported subject to tariffs in place before these changes. We expect Martin F. Roper: cost of goods in 2026 to benefit from the tariff exemption for coconut water, and from lower full year average ocean freight costs, with those benefits partially offset by increased finished goods costs driven by normal inflationary pressures and some weakness in the U.S. dollar and increased domestic logistics costs. We believe average ocean freight rates during the quarter were still slightly elevated relative to historical levels, even as we saw rates soften through the quarter. We operated the quarter primarily on spot rates, with some fixed price arrangements on certain lanes to secure capacity. At the end of the quarter, we started exploring medium term fixed price commitments as we received offers closer to spot. We have made some commitments as of today that would cover approximately 25% of our expected 2026 ocean shipping requirements. Michael Kirban: This will allow us to reduce volatility in 2026 from potential fluctuations in ocean freight rates. Martin F. Roper: As we look to 2026 we expect healthy brand growth in our focus markets and positive growth in private label after the first quarter, benefiting from the new and regained business referenced earlier. We have secured capacity to support our expected growth and are well positioned with inventory and supply capability. We are excited by our start to the year, particularly the Circana U.S. trends of 24% growth for both the coconut water Operator: category Martin F. Roper: and Vita Coco Coconut Water through 02/08/2026, where we have benefited from some favorable timing of promotional activity earlier in the year Michael Kirban: and the impact of the improved distribution at Walmart which we estimate is adding approximately 6% to the year-to-date brand trends. Martin F. Roper: While we expect to hold most of our pricing taken in 2025 to cover our inflationary cost of goods pressures, Michael Kirban: we do anticipate some increase Martin F. Roper: in promotional initiatives so that we remain competitive. We still have the residual impact of the 2025 tariff on our inventory which means we will not see the long-term cost of goods representative of our ongoing business until Q2. From an investment perspective, we are endeavoring to deliver leverage on our SG&A spend even as, with the strong momentum for the category and our brand, Michael Kirban: we plan to increase investments in marketing and sales to secure long-term brand growth opportunities. Martin F. Roper: To summarize, our category is very healthy, our brand is performing well, and we are turning around our private label trends. We expect our international business to continue to grow at strong rates off a larger revenue base, which should contribute more meaningfully to our total growth. Our supply chain is performing well and capable of supporting continued strong growth. We are confident in our team's ability to execute and deliver on our plans for 2026, and our confidence in the category and Vita Coco brand trends remains very high. With that, I will turn the call over to Corey Baker, our Chief Financial Officer. Corey Baker: Thanks, Martin, and good morning, everyone. Corey Baker: I will now provide you with some additional details on the full year 2025 financial results and our outlook for 2026. For 2025, net sales increased $94,000,000, or 18% year over year, to $610,000,000, driven by strong Vita Coco coconut water net sales growth of 26%, partially offset by private label declines of 19%. On a segment basis, within the Americas, net sales grew 15% to $509,000,000 led by Vita Coco Coconut Water that grew net sales by 24% to $424,000,000. That was partially offset by private label which decreased 30% to $63,000,000. Vita Coco coconut water saw a 19% volume increase and a 4% net price mix benefit. Our Q4 shipments benefited from stronger than expected shipments at the end of the year, which resulted in higher distributor inventory than we had anticipated. We estimate that this inflated our fourth quarter net sales by approximately $7,000,000. Private label sales decreased 30% driven by a 26% decrease in volume, and price mix decrease of 5%. The weakness in private label Americas shipments was due to the loss of regions at key retailers that started early in Q2. Our international net sales were up 37% where we saw continued strong net sales growth across branded and private label coconut water. Vita Coco Coconut Water net sales grew 43%, and private label increased 34%. Consolidated gross profit was $223,000,000, an increase of $24,000,000 versus prior year. On a percentage basis, gross margins finished at 37% for the year. This was down approximately 200 basis points from the 39% reported in 2024. The decrease in gross margins resulted from higher product cost and the impact of tariffs, partially offset by branded coconut water pricing and favorable product mix. Within the year, we expensed $14,000,000 of the $16,000,000 in tariffs we paid, representing about two points of gross margin impact on the year. The remaining $2,000,000 of tariffs capitalized in inventory will flow through our P&L in early 2026. Moving on to operating expenses. SG&A costs increased to $140,000,000 driven by increased investments in people resources focused on driving future growth, and adding supply capacity in addition to increased marketing spend. Net income attributable to shareholders was $71,000,000, or $1.19 per diluted share, compared to $56,000,000, or $0.94 per diluted share. The 27% increase in net income was primarily driven by the increase in gross profit, and a gain on the fair value adjustments to FX derivatives in the current year versus a loss in the prior year, partially offset by higher SG&A investment and increased income tax expenses. Our effective tax rate for 2025 was 23%, versus 21% last year. The increase in the effective tax rate is largely driven by the mix of discrete tax items recognized during the year which were less favorable than in the prior year. Adjusted EBITDA was $98,000,000 or 16% of net sales, up from $84,000,000 or 16% of net sales in 2024. The increase was primarily due to the increased gross profit partially offset by higher year-on-year SG&A expenses. Turning to our balance sheet and cash flow. As of 12/31/2025, our balance sheet remained very strong, with total cash on hand of $197,000,000 and no debt under our revolving credit facility. For the full year, we generated $32,000,000 of cash driven by strong net income, partially offset by increase in working capital, mostly due to our $27,000,000 investment in inventory to support service levels and expected growth in 2026, share repurchases of $11,000,000, and $8,000,000 of capital investments primarily related to our new office spaces, which is significantly above our normal CapEx levels. We started 2026 with very strong category trends in our major markets, healthy inventory levels, and confidence in our team and our Vita Coco brand. We are excited about our ability to continue to deliver strong results. We expect net sales between $680,000,000 and $700,000,000 with expected gross margins for the full year of approximately 38%, delivering adjusted EBITDA of $122,000,000 to $128,000,000. We are planning strong net sales growth based on the U.S. category growing mid-teens and our international business, led by the U.K. and Germany, maintaining their healthy growth rates. We expect consolidated growth of Vita Coco Coconut Water of low to mid-teens with our U.S. Vita Coco net sales slightly lagging the category due to the impact from the strong year-end 2025 shipments to our DSD partners mentioned above, as well as investments in distributor incentives to deliver growth and the anticipated impact from the launch of private label at a large U.S. retailer. We expect strong private label net sales growth of 20% to 25% in the U.S. as we regain some geographic regions at multiple retailers and launch a new one as previously discussed. From a phasing perspective, we expect a Vita Coco promotion at a major U.S. retailer to move forward by one month. While this will result in consistent major promotions over the first half, we expect a shift of proportion of our net sales from Q2 to Q1 for Vita Coco Coconut Water. Michael Kirban: We expect Corey Baker: 2026 gross margins to improve from 2025 levels as we benefit from the branded pricing taken in 2025, the removal of tariffs, and favorable ocean freight rates, offset by the aforementioned promotional and incentive impact. We expect to invest a portion of the pricing we took in 2025 into incremental U.S. branded promotions. We expect that this will result in full year branded pricing increases of low single digits, with a higher mix of private label resulting in consolidated net price realization growing slightly. The phasing of branded pricing actions implemented in Q2 2025 will result in stronger net pricing early in the year and potentially declining net pricing starting in Q3 due to the promotional investments. We expect SG&A to increase mid- to high-single digits as a percentage of net sales as we increase investments in marketing and key personnel areas to deliver the expected 2026 results and invest for long-term growth. These investments will be partially offset by a planned reduction in incentive compensation. We expect to deliver SG&A leverage of about one point over 2025 as we continue to deliver strong growth with disciplined investments. And with that, I would like to turn the call back to Martin for his closing remarks. Martin F. Roper: Thank you, Corey. To close, I would like to reiterate our confidence in the long-term potential of The Vita Coco Company, Inc., our ability to build a better beverage platform, and the strength of our Vita Coco brand and the coconut water category. We have strong brands and a solid balance sheet and believe that we are well positioned to drive category and brand growth, both domestically and internationally. We are confident in our ability and are excited about our key initiatives to drive long-term growth. Thank you for joining us today, and thank you for your interest in The Vita Coco Company, Inc. That concludes our fourth quarter 2025 prepared remarks. We will now open for questions. Operator: Star 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press Star 11 again. Our first question comes from Eric Des Lauriers with Craig-Hallum. Your line is now open. Eric Des Lauriers: Great. Thank you for taking my questions and congrats on another very strong quarter. My first question is on private label. So there has certainly been a lot of movement Michael Kirban: in recent years. Nice to see the regained regions and some new additional wins. Eric Des Lauriers: Can you give us a bit more of a sense of the cadence of growth expected throughout the year? I think you said you expect it to improve after Q1. And then just in general, with all the movement in recent years, how should we think about the white space opportunity in private label in the Americas? Michael Kirban: Just from here on out. Eric Des Lauriers: Thank you. Corey Baker: So, Eric, as we talked about, the phasing of the private label is quite hard. We have a difficult lap in Q1 as we still retain many regions, and then post Q1 we should start to see that new business impact the P&L. What is still hard to call because of the way we account for it is when new customers will come on board. So you should see that full year growth 20 to 25 in Americas starting in Q2, but somewhat of a ramp towards the back half. Eric Des Lauriers: Okay. That is helpful. And then And I would just add that the amount of white Michael Kirban: the private label business is much more diversified than it would have been in the past, both new retailers that have been added or being added in the U.S., also internationally. Eric Des Lauriers: Okay. Great. Michael Kirban: Then this Eric Des Lauriers: in terms of the white space opportunity in private label, should we think of there as being, you know, considerable more opportunities for you guys to win Michael Kirban: in Eric Des Lauriers: the Americas, or, you know, are you sort of, you know, like you mentioned, you are diversified, you have a solid chunk. Should we not look for that as being a major growth driver in the U.S. going forward? Again, just trying to get a better sense of the white space opportunity after you have, you know, won all these new regions? Yeah. In the U.S., you know, private label is a little bit dominated by one major club player. Corey Baker: And just putting that player aside for a bit, in the remaining private label universe in the U.S., Martin F. Roper: we are not supplying at all. There are still some retailers there that we would look at that business and say it was Michael Kirban: attractive Martin F. Roper: and so there are still opportunities to win that business or parts of that business with some retailers that we currently do not service. As it relates to the major player, we have serviced that player sort of pretty consistently but reduced regions over time, and we remain open to adding more regions or, you know, I suppose, could take regions away. It is the nature of the business. Right? We have described it as lumpy. But given their size, you know, their decisions are significant decisions to our business. Yeah. No. That all makes sense. And then just last for me. Just looking to drill down a little bit more into international. Certainly very encouraging Eric Des Lauriers: results there. I think we have talked previously about I think this was Martin F. Roper: sort of specific to Germany about, you know, the need to sort of get in via private label first, and it is sort of, you know, a crawl, walk, run Eric Des Lauriers: you know, type ramping. Just wondering if you could provide a bit more kind of Martin F. Roper: qualitative assessment of the international as we kind of look at it right now. Are we sort of poised to see, you know, continued Eric Des Lauriers: acceleration in growth here? Are we still in Martin F. Roper: the sort of building out phase? Just a bit more color on the international opportunity would be great. Thank you. Michael Kirban: Sure. I think, you know, you can see in our reported numbers Martin F. Roper: international sales, I think, grew 37%, which is an acceleration on the growth the prior year, and now off a larger base. Right? And so I think we have said all along that over time, international will become a large part of our business. So it should grow faster than our overall business, and as it does so, will add more incremental growth to our business over our base domestic business. We still look at Europe as a developing market. Obviously, within that, there are different countries that are different developed. If you look at our investor deck from June, you will see some per capita consumption numbers by country, which give you a sense for at least where those countries were. I think that data is 2024. Where those countries were in their development. And so I think we have talked about how the U.K. is five to ten years behind the U.S. in development. And then you have got our next largest market we talked about is Germany, which is at least five to ten years behind the U.K. So there is a long ramp there. I think if you imagine that Europe could have the same per capita consumption as the U.S., then there is no reason to believe that, you know, Europe and therefore international markets can be as large as our American business today. But, you know, our American business today is still growing sort of double digits. Right? So that is a moving target. And so we aim to close that gap in market development, but we know it will take time and we are doing it one market at a time as we see the opportunities, as we put people into that market to sort of seed it and then get it going, and then make sure we can ramp it up from a supply perspective. It is going really well. The European team is doing a great job and we look forward to, you know, hopefully many years of ongoing growth. Obviously, as the base gets larger, the growth rates will come down. But our plan is for international to continue to provide a significant part of our total growth, you know, for the foreseeable future. Very helpful, great to hear. Congrats again on the strong results, guys. Michael Kirban: Thanks, Eric. Operator: Our next question comes from James Ronald Salera with Stephens. Michael, Martin, Corey, good morning, guys. Thanks for taking our question. Martin F. Roper: Good morning, Jim. Hey, Jim. I wanted to Michael Kirban: to start off if maybe you can give us some detail around Martin F. Roper: the Walmart placement, given the stepped-up visibility there. Is there any characteristics Martin F. Roper: of the consumers Michael Kirban: that are coming to the product via that channel that you might be able to share? Martin F. Roper: Primarily new to the brand? If there is any Michael Kirban: like I said, age or kind of demographic characteristics you could share given the significant increase in visibility being in that new set? Martin F. Roper: So I think it is too early for any information on that buyer or change in buyer or the impact of new set to show up in our consumer data. Right? It is two, three months old. I think what we would say is we are very happy with the outcome of the set process. We have had an opportunity to go into Walmart. Depending on the type of Walmart you are in, you will see a slightly different set ranging from absolutely huge, and I would refer you to slide 10 in our investor deck on the right-hand side where you have got an example of one of the really large ones, to more normal, which will probably be the left-hand side, and then the smaller ones is sort of the central photo. Right? All of them are significant improvements over where we were before in terms of SKUs that we have in store and also shelf space and visibility. And that is showing up in our data on Walmart as growth. I think we said in the remarks, Walmart is adding 5% to 6% to our total scans right now, which is very cool. And, you know, given that growth rate, Walmart is gaining share of the coconut water category as a retailer. So that is really good. So I think that shows that the consumer is there. Obviously, this set, while it is in the same aisle, now it is a little bigger and maybe it moved a few feet. So people need to find it. But the actual consumer data will not show up if the data sets are not locked up or, you know, quite a few months or maybe even twelve. What we would say is the Walmart consumer is showing that they are willing to buy coconut water. We do not see any reason why Walmart should not be as a strong coconut water destination, and certainly that was our pitch to them. And they seem to have bought off on that in how they have used coconut water to anchor that part of the set on the juice aisle. And so, you know, we are excited. But, you know, in the big scheme of things, Walmart is a certain percentage of the business and this growth helps, but it does not necessarily significantly move the top line. But it is certainly very helpful. And I think we look at it and we think it is more likely that other retailers will follow Walmart in allocating space because people follow Walmart and they want to be competitive. So for us, it is a very positive leading indicator for what might happen this year or next year in the rest of the market. Great. And then Michael, I wanted to follow up on Michael Kirban: some of the commentary you had around the hydration use occasion, particularly Martin F. Roper: kind of more active Corey Baker: users as a sports drink replacement. Martin F. Roper: I know there is a lot of opportunity in these different Michael Kirban: for these different use cases, but sometimes consumers Corey Baker: do not really know what use occasion coconut water fills. Martin F. Roper: Do you have anything, whether it is on advertising campaign or in-store activations, packaging, Michael Kirban: planned for this year? Martin F. Roper: That will really drive home that Michael Kirban: particular kind of active hydration use occasion? And if so, any thoughts of kind of how that should layer in for the year and when we should expect to see that really driving that visibility to that use occasion? Yeah. Well, it is being built more into our overall communication in general, the three and a half times the electrolytes of the leading sports drinks, and being all natural from a tree, not a lab. So it has become a bigger part of our communication. We are activating in youth sports in a big way. I do not know if you have seen our partnership with Rush Soccer and getting into other youth sports programs. We have a program around some of the U.S. World Cup soccer players for World Cup activation. And so we are really focused on these types of activities. But all in all, it is, and we are also, we have actually been testing some media, which some of you might have seen. TV specifically. So all in all, it is a big focus, but it is the underlying reason that coconut water has been and is becoming so successful and the category is continuing to grow. The main functionality, whether the product is used in a smoothie or in a cocktail or all the other usage occasions, the hydration aspect, the electrolytes, I think, is the underlying reason and the functionality that is working so well. James Ronald Salera: Great. Great. I appreciate the thoughts. I will hop back in the queue. Yep. Operator: A reminder, if you would like to ask a question at this time, please press. Our next question comes from Michael Scott Lavery with Piper Sandler. Michael Scott Lavery: Hi, guys. Good morning. This is Corey Baker: on for Michael. Thanks for taking our question. Michael Scott Lavery: Just want to ask what your just want to ask what your expectation for cash is. You are sitting on about $195,000,000 of cash. I know you guys have always had M&A on your to-do list, but Martin F. Roper: there has not really been something interesting or at the right price. But how do we think about what cash is meant to go for? Martin F. Roper: Thanks. So Corey Baker: Michael, you are right. You know, the priority is to continue to grow the core brand and grow the category. And as we said, we do believe M&A will play a role at some point. It has not yet, and we remain active but disciplined. We have returned some cash to shareholders through repurchases. So at this point, we will continue to look for opportunities and continue to work with our board and subsets of our board on repurchases as we move along. So really no overall change in our approach at this point. Michael Scott Lavery: Okay. That is great. Thanks. And Corey Baker: can I just ask about innovation for 2026? Is there anything in the pipeline Michael Kirban: and separately then, what are your expectations for marketing spend in 2026? Martin F. Roper: Did not hear the second part. The marketing spend. Oh, okay. On the innovation side, you know, we are continuing to push things we were pushing last year. Treats has performed nicely, getting additional distribution. And we expect at some point in time to add an additional flavor, and I do not think we are quite ready to announce that on these airwaves right now. But that is our expectation, and it looks pretty promising. And then we obviously are continuing to push the multi-packs and, you know, the different pack formats. Innovation is playing a role by driving new news and sort of building our shelf space. When you look at the Walmart shelves, it is obvious that we are going to need a pipeline of pack innovation to maintain that as fresh longer term. So we are working on that. And then as it relates to marketing, we are increasing marketing. We want to increase marketing maybe a little faster than net sales of the branded side, partly because we believe that those opportunities, as we have talked about, in pushing the hydration method, and we are excited by some of the programs that Michael talked about coming this summer. Partly also to protect the brand versus private label. The private label price gaps that are currently there may widen as the private label vendors sort of pass tariff savings back, and we are prepared to try and hold our price where it is and see what happens, but reserving sort of price promotional investment, which is obviously part of how we think about marketing, as a way to potentially react. And that is how we are thinking about the planned increase, you know, pricing that we investment that we think for the rest of the year. So we are going to watch that closely, and we will balance increased marketing versus pricing actions to try and maintain our position relative to the competitors in the marketplace as they adjust pricing or not through the year. Michael Scott Lavery: Great. Thanks, guys. Operator: That concludes today's question and answer session. I would like to turn the call back to Martin F. Roper for closing remarks. Martin F. Roper: Thanks, Liz. Thanks, everybody. We know a lot of folks are down at CAGNY, and we are looking forward to sharing a coconut water-based cocktail with folks Thursday night or Friday. So hope everyone has a good week, and thank you for your interest in The Vita Coco Company, Inc., and we look forward to talking to everybody when we announce our Q1 results in late April. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning and welcome to the Fiverr International Ltd. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a 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 Emily Greenstein, Investor Relations. Please go ahead. Thank you, Operator, and good morning, everyone. Thank you for joining us on Fiverr International Ltd.'s earnings conference call for the fourth quarter that ended 12/31/2025. Emily Greenstein: Joining me on the call today are Micha Kaufman, Founder and CEO, and Ofer Katz, President and CFO. Before we start, I would like to remind you that during this call, we may make forward-looking statements, and that these statements are based on our current expectations and assumptions as of today, and Fiverr International Ltd. assumes no obligation to update or revise them. A discussion of some of the important risk factors that could cause actual results to differ materially from any forward-looking statements can be found under the Risk Factors section in Fiverr International Ltd.'s most recent Form 20-F and other filings with the SEC. During this call, we will be referring to some key performance metrics and non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, and free cash flow. Further explanation and the reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP measures are provided in the earnings release we issued today and our shareholder letter, each of which is available on our website at investors.fiverr.com. I will now turn the call over to Micha. Micha Kaufman: Thank you, Emily. Good morning, everyone, and thank you for joining us. Let me start simply. 2025 was an execution year, and we delivered. Revenue grew 10%, accelerating from 8% in 2024. Adjusted EBITDA reached $92,000,000, up 23% year over year with a 21% margin. We met the revenue and profitability targets we set at the beginning of the year while continuing to generate strong cash flow. Importantly, we achieved this while repositioning the business for where the market is headed. Products like dynamic matching and managed services are enabling us to expand into larger, more complex projects and drive sustainable wallet share growth. Spend per buyer increased 13% year over year, accelerating from 9% in 2024. Buyers spending over $10,000 annually grew 7%, and GMV from projects over $1,000 increased 23%. These are not just product milestones. They reflect a broader shift in how businesses engage with talent. As many of you saw in the shareholder letter we published this morning, following the restructuring we undertook a few months ago, we have since developed and begun executing a comprehensive multiyear plan to transform Fiverr International Ltd. from a transaction-oriented marketplace into a trusted work platform, one that enables businesses, AI models, and agents to collaborate with talent on complex, high-value outcomes through intelligent matching, integrated workflows, end-to-end orchestration and fulfillment, and durable trust. Before I go deeper into that transformation, it is important to step back and understand the broader environment that led us here and why we believe this is the moment to act decisively. There is a prevailing narrative that AI eliminates labor. That framing is incomplete. What AI actually does to work is one, it compresses task duration. What took weeks now takes days. Two, it expands project ambition. When execution becomes cheaper, scope grows. Operator: Scope grows. Micha Kaufman: And the number of projects grows exponentially. Three, it democratizes capability. Individuals can operate with domain expertise beyond their original knowledge base. The result is not less work. It is more ambitious work. Human talent remains essential. What changes is where value resides: in context, judgment, orchestration, trust, and ownership of outcomes. There will be displacement in lower value transactional work. We are already seeing that dynamic. At the same time, demand for higher value specialized work is accelerating at a healthy double-digit rate. As work becomes more nuanced and complex, matching talent becomes harder, not easier. That makes Fiverr International Ltd.'s core mission of connecting businesses with the right human talent more relevant than ever. Looking ahead, much of the workflow will become human-in-the-loop. Hiring decisions will increasingly be influenced and, in some cases, initiated by AI agents. In that environment, traditional resume-driven hiring models become inefficient and unreliable. Precision matching, contextual data, and outcomes become critical. So what does this mean for Fiverr International Ltd.? First, we see a significant opportunity. Today, projects over $1,000 represent less than 15% of marketplace GMV, yet they are growing 23% year over year. With focused execution, we believe this segment will become a materially larger contributor to our business. We are prioritizing two categories of high-value work. The first is complex, orchestrated engagements requiring collaboration between businesses, talent, and Fiverr International Ltd. For example, through managed services, we support a Georgia-based automotive technology company with ongoing multilingual UGC production for the Canadian market, coordinating multiple creators each month. This reflects growing demand for scalable, always-on creative production powered by global talent. The second is AI-native work building the AI-enabled economy. For example, we are partnering with AI model safety companies to provide domain experts who help identify vulnerabilities in foundational models. In another partnership, we are enabling enterprises to build AI workflows automation through a white-labeled solution that allows them to deploy AI agents quickly and cost effectively. In one case, we streamlined a historical case discovery workflow in Salesforce and Jira, reducing knowledge gaps and improving support efficiency. What would have required two weeks of internal implementation was delivered in one and a half days at the cost of $6,000, reducing deployment time by roughly 90%. These examples illustrate where the market is moving and where Fiverr International Ltd. is leaning in. Fiverr International Ltd. has a strong right to win in this AI-enabled talent economy. First, the future of work is human-in-the-loop. Scarcity lies in high-quality human expertise, not AI agents. Fiverr International Ltd. operates one of the largest global talent networks and has deep expertise managing liquidity, quality, and engagement at scale. Second, our end-to-end transaction model is built around outcomes. That structure integrates naturally into AI-enabled workflows and eliminates much of the friction inherent in traditional hiring systems. Third, our data is a durable advantage. Over sixteen years, we have captured not only millions of transactions, but the contextual relationship between buyers and sellers: what was delivered, in what context, and with what results. That depth of data enables precision matching in an increasingly complex environment. Capturing this opportunity is why we are making foundational investments across data infrastructure, back-end systems, and product experience, accelerating Fiverr International Ltd.'s evolution into a fully AI-native talent platform. While we have made steady progress over the years, the velocity of AI innovation requires us to move faster and more decisively. A few months ago, we initiated a company-wide effort to accelerate this shift. We have since developed a multiyear execution plan built around four pillars. The first is matching, building advanced semantic and reasoning layers powered by proprietary data to enable AI-native talent matching. The second is product, transforming the experience across match, fulfillment, collaboration, and talent management. The third is go-to-market, expanding into enterprise and AI-native distribution channels with scalable growth engines. The fourth is operational excellence, becoming an AI-native organization across engineering, product, and operations. We expect tangible impact within four to six quarters, including a stronger high-value work flywheel and proven AI-native growth loops. These milestones will position us for meaningful revenue expansion in the years ahead. Let me be clear. This is the moment to lean in. AI is not shrinking the market for human talent. It is reshaping access and expanding ambition. Platforms that own the intelligent matching layer between business demand and human capability will capture significant value. Fiverr International Ltd. has the assets, infrastructure, and strategic clarity to lead in that environment. 2026 will be a transformational year, positioning us for accelerated growth in 2027 and beyond. Before I turn it over to Ofer, I want to acknowledge that today marks his final earnings call as CFO. Ofer will continue as President focusing on strategic investments and M&A as we execute this next chapter. Esti Levy Dadon, after ten years at Fiverr International Ltd., and four years as EVP Finance, will assume the CFO role. Her deep institutional knowledge and disciplined financial leadership provide important continuity as we execute through this transformation. Jinjin Qian, after seven years leading IR and strategy, will step into a newly created Chief Business Officer role overseeing revenue, talent, fulfillment, and business operations. As part of this transition, she will be relocating her husband and two young children from San Francisco to Tel Aviv to take on this expanded responsibility. I am truly excited about our expanded leadership team that will strengthen our ability to execute with focus and velocity as we move forward. I will now turn the call over to Ofer for the financial details. Thank you, Micha, and good morning, everyone. Ofer Katz: I am excited about the transformation we are undertaking and very happy to welcome Esti and Jinjin into their expanded leadership roles. The work ahead is ambitious, but across the management team and the broader organization, there is strong alignment, clarity, and conviction on the direction we are taking. Most importantly, there is a shared sense of purpose that ties us back to Fiverr International Ltd.'s founding sixteen years ago. That shared sense of purpose brings tremendous focus, energy, and confidence as we enter 2026. With that, let us turn to financial highlights. As we wrap up 2025, we delivered fourth quarter revenue of $107,200,000, up 3% year over year, while achieving record adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA for Q4 was $26,500,000, representing an adjusted EBITDA margin of 25%, an improvement of 470 basis points from a year earlier. We continue to generate healthy cash flow with $21,800,000 of free cash flow in Q4 2025. We had a convertible note with a principal amount of $460,000,000 which was fully repaid during Q4 2025. We continue to execute a disciplined, thoughtful capital allocation strategy, and our strong balance sheet allows us to invest in growth, return capital to shareholders, Micha Kaufman: and remain opportunistic Ofer Katz: at the M&A front. Diving into our Q4 results, in Q4, Marketplace revenue was $71,500,000, driven by 3,100,000 active buyers, $342 in spend per buyer, and a 27.7% marketplace take rate. Growth in this segment continues to be influenced by broader softness in the SMB sentiment and muted freelancer hiring demand. More importantly, we continue to see diverse trends on the marketplace between low-end transactions and high-value work. GMV from transactions over $1,000 grew 22.8% year over year in Q4 and continued to accelerate. Looking ahead, we expect elevated volatility in marketplace revenue this year compared to last year, as the transformational work we are doing intentionally deprioritizes efforts to optimize low-end transactions, which today represent the majority of the marketplace. As we make progress towards strengthening our flywheel for high-value and AI-native work, we expect this focus area to become a larger portion of our overall business and lead to reacceleration of this segment. Services revenue in Q4 was $35,600,000, representing year-over-year growth of 18% and accounting for 33% of our total revenue in Q4. The upside was driven by the continued strength in Fiverr Ads, subscriptions, and e-commerce solutions. For 2026, we expect more moderate growth in service revenue as the impact from the AutoBS acquisition normalizes and the pace of expansion for Fiverr Ads and Seller Plus moderates compared to 2025. As Micha mentioned, 2026 will be a transformational year with critical conventional investment across data infrastructure, core technology, and product experience to strengthen our high-end talent flywheel. It is important to note we are committed to executing this plan with strong financial discipline. The structural profitability of our core marketplace remains strong and is expected to stay north of 20% as we retain significant control to maintain the health and the profitability of the business. At the same time, we will use a portion of the cash generated to fund the transformational work ahead. We expect that to impact the adjusted EBITDA by approximately 200 basis points in 2026. On capital allocation, we maintain a disciplined approach and expect to continue executing our buyback program in a balanced manner. As of 12/31/2025, we have $67,500,000 left on the current authorization. Now on to guidance. For the full year 2026, we expect revenue to be in the range of $380,000,000 to $420,000,000, representing year-over-year growth of negative 12% to negative 3%. Adjusted EBITDA is expected to be in the range of $60,000,000 to $80,000,000, representing an adjusted EBITDA margin of 18% at the midpoint. For the first quarter of 2026, revenue is expected to be between $101,000,000 to $108,000,000, representing year-over-year growth of negative 7% to 1%. Adjusted EBITDA is expected to be $19,000,000 to $23,000,000, representing an adjusted EBITDA margin of 20% at the midpoint. The wider-than-normal revenue guidance for the full year and the first quarter reflects the elevated uncertainty as we execute our transformational plan focused on high-value work alongside evolving market conditions. On the adjusted EBITDA side, the updated guidance for this year reflects the revenue trend we see as well as the impact from the investment into foundational works. That said, we do not expect factual change to the core business unit economics, and we expect our ability to drive and strengthen leverage on the marketplace business model remains intact. With that, we will now turn the call over to the Operator for questions. Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad. 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. The first question comes from Ronald Josey with Citi. Please go ahead. Micha Kaufman: Great. Thanks for taking the question and the insights on the call. I had two, please. Micha, you talked about product, go-to-market, and operations, and talked about an execution plan around matching given the progress, I think, that we have seen around managed services and dynamic matching, Ronald Josey: just talk to us about how you see these investments in those four core areas sort of unfold. Meaning, do you have more work to do on product before we start investing in enterprise go-to-market? Any insights there would be helpful as we think about this multi-quarter transition. And then Ofer, over the balance sheet, we ended the year with approximately $300,000,000 in cash. I know we have mentioned M&A a few times on the call and Ofer in your new role. Talk to us about what you are looking for maybe on M&A or just overall capital allocation. Thank you. Micha Kaufman: Thank you, Ron, for the questions. Good morning. Ofer Katz: So Micha Kaufman: essentially, the way we are thinking about the investment is really to deprioritize low-end and low-value transactions and focus most of our investment in high-end, high-skilled, larger scope projects, a segment that is currently under 15% of our Ofer Katz: revenues. Micha Kaufman: And we think it should and it will contribute much more to bring us back to GMV growth. That is what 2026 is all about: making that turn so that 2027 and beyond will be growth Ronald Josey: years. Micha Kaufman: Now, bear in mind that the nature of the transactions that are happening on our platform are changing, and we are running a platform that has been built over sixteen years. Some parts of it need to be rebuilt, some parts of it need to be reinvested in and aligned into this new reality. As I have said in my opening comments, the matching portion of it has to deal with the more nuanced needs of businesses today, so we need to calibrate this and make sure that we maximize the usage of our very deep data asset in order to do this. The same goes for product. When we think about the entire matching and fulfillment management, we need to understand that larger projects require more sophisticated fulfillment and collaboration and matching capabilities, also understanding that on the demand side, we may not just see companies and human beings, but also AI agents that can actually take care of or find benefit from using our platform. When we think about go-to-market, Ofer Katz: again, in this case, Micha Kaufman: we are expanding our go-to-market flywheels. So first of all is the high-value project outworking, then is the aspect of AI-native use cases, and I have given a few examples in my opening comments and in our letter to shareholders, where we see more and more businesses and foundational companies that are building more AI models and more agents, and all of them require human-in-the-loop to continue calibrating, ensuring their security, their integrity, and overall being able to make them customer-ready. And we are seeing more businesses that are coming to Fiverr International Ltd. because we probably have the largest and widest-scale talent in the world on our platform. And so adjusting for all of these new needs will help us accelerate that portion or that segment of the market, which we feel is the most durable and most sustainable to ensure that we can continue growing for many years ahead. Ofer Katz: Ron, on the M&A front, I will start by saying that we have $300,000,000, but the amount of cash is growing and expected to grow throughout the quarters. And then, you know, we continue to be highly disciplined in the way we utilize this cash, looking for tuck-ins and then larger transactions Micha Kaufman: at the same time. Ofer Katz: Of course, we are looking to grow in the market and any M&A should support Micha Kaufman: support this high-end Ofer Katz: and flywheel as Micha mentioned Ronald Josey: earlier. Great. Thanks, Micha. Thanks, Ofer. Micha Kaufman: Thank you, Ron. Operator: The next question comes from Eric Sheridan with Goldman Sachs. Please go ahead. Ofer Katz: Thanks so much for taking the question. Just want to come back to the theme of deep Eric Sheridan: prioritization of the lower end as you realign the platform. How should we think that manifests itself in financials as we move deeper into the year? Are there any elements of things that will impact the OpEx line as you sort of pare back investments in the lower end of the market or elements where there could be more volatility than usual as we think about either the first half or second half dynamic as you sort of reposition the business for the longer term? Thanks so much. Micha Kaufman: Good morning, Eric. Thanks for the question. So when we think about the deprioritization, it is really to ensure that the majority of our resources are directed in growing the segment that, as we demonstrated, has grown significantly over last year, and to make sure that it becomes a much larger portion of our market. As a reminder, when you look at the low skills and small scope, a lot of that is being replaced Ofer Katz: with AI solutions, Micha Kaufman: and still, that is a large portion that contributes to Fiverr International Ltd.'s growth. In that segment, we are seeing a decline, and we have been talking about this, and we do not foresee that that decline is going to slow down. The assumption is that with the newer developments around AI, this will continue to be the case. And so Ronald Josey: that centralization Micha Kaufman: in our business has to change. And, therefore, we are shifting those resources into ensuring that the high-end portion of our business that has been growing will become a larger portion of our overall GMV contribution. That is extremely important, and we want to make sure that we put every available resource towards that. But we are very committed to execute this transformation with a very high degree of financial discipline. So we are going to protect the core business to continue generating healthy cash flow, and we talked about the structural profitability of the core business to stay north of 20%. I hope this answers your question. Eric Sheridan: That is helpful. Thank you. Micha Kaufman: Thank you, Eric. Operator: The next question comes from Bernard Jerome McTernan with Needham and Company. Please go ahead. Micha Kaufman: Great. Thanks for taking the questions. Maybe just two for me. How should we expect the margin profile of the company to look after Fiverr International Ltd. 4 is done or complete or some progress on it? Is this going to be a higher margin company or lower margin company than before? And then how does Fiverr Go fit into this? Are you seeing Fiverr Go help higher value transactions already or just interested in terms of if this is still a key product going forward? Thank you. Ofer Katz: I think on the margin profile, we are going to see some lower margin in terms of EBITDA in the short term, but we anticipate the long-term EBITDA Micha Kaufman: to go back to the Ofer Katz: 25 long-term EBITDA shortly after. In terms of gross margin, I think it is going to remain the same. It is all about the profile of investment, and that is putting a little bit more into R&D, which is why we anticipate some pressure on the margin. I am sure. Micha Kaufman: Bernie, on your question about Go, essentially, a lot of what we built into Go has already been integrated into several aspects of our product. And when we talk about the investment that we are doing in the product side, that is one of the pillars of this year. A lot of what we have taken from Go and how it can help buyers and sellers communicate more effectively, scope their work, the nuanced understanding of exactly what they need and what is the most suitable talent for the task, is going to be integrated further Ofer Katz: into the product. Micha Kaufman: So we are not focusing on Go as a product by itself, but actually taking the assets Ofer Katz: that we have developed for that project Micha Kaufman: and integrating them into the customer experience. Understood. Makes sense. Thank you both. Operator: The next question comes from Jason Helfstein with Oppenheimer. Please go ahead. Micha Kaufman: This is Chad on for Jason. You know, it seems like taking one step back for kind of two steps forward. You are cutting a lot of cost out of the business with the restructuring. Is that having a bigger impact on revenue in 2026 than maybe you previously thought? Eric Sheridan: And then how should we think about OpEx growth in 2026? Micha Kaufman: Do you have to invest more in the business? Or, you know, that is it. Thank you. Thanks for the question, Chad. So on the first question, the answer is no. The revenue is not impacted by restructuring. It reflects the ongoing trends on the marketplace, meaning lower end versus higher end, lower end seeing a decrease, higher end seeing an increase. And, again, going back to our strategy, the entire idea is to double down on high end and to make it grow faster and make it become a more meaningful contributor to our GMV growth. We have been talking about this for a couple of quarters. What we have seen is an elevated sense of urgency to move faster, which is why a lot of the strategic, the multiyear strategic plan that we have is all about that. And we said that once the high end is going to become a more meaningful contributor to GMV, GMV will go back to growth. And, again, we are seeing this with double-digit percentage growth in transactions over $1,000, and so we are doubling down on that. So, again, the reflection is just ongoing trends of what we are seeing in the low-skill versus high end. Ofer Katz: Then on the second part, on the OpEx, in fact, we think that the core business will continue to deliver a 20% plus margin. The portion of what we will reinvest into the business on the transformational work, Micha Kaufman: the impact of that is going to be around two percentage points. Ofer Katz: And I think it is Micha Kaufman: I think it is also worth noting that due to recent appreciation of Israeli shekel to US dollar, FX has added over $10,000,000 of headwind on EBITDA guidance for the year. Operator: The next question comes from Marvin Fong with BTIG. Please go ahead. Eric Sheridan: Great. Thanks for taking my questions, and congrats to Jinjin and Esti. Micha Kaufman: My first question talked about returning to growth in 2027. Marvin Fong: And I just wanted to understand that commentary a bit better. So are you expecting the high-value work to reach a majority of the marketplace by 2027, even in maybe a single quarter of 2027? Or when do you actually expect the majority of the marketplace to be high-end work? And then I have a follow-up. Micha Kaufman: Morning, Marvin. Thanks for the question. So there is a GMV mix shift. High-value growth will continue to grow and become a bigger portion of total marketplace, and this will lead to GMV inflection. And as we said both in the letter to shareholders and in the opening comments, that change is also going to allow us potentially, over the year, to start giving the market the signals that we are seeing. Right now, the metrics that we are reporting are going to remain intact, but over time, we want to put more emphasis on what is strategic and what we feel is going to drive the sustainable growth of the business over the coming years. We have not guided specifically for that, and we are not talking about percentage. And mathematically, even before it gets to the majority, it will drive GMV growth. But this is the plan, and we expect to see signals over the coming quarters to let us know that the investment there is actually accelerating the growth of that segment. Ronald Josey: Mhmm. Marvin Fong: Got it. Okay. That is great. Thank you for that. And then my second question, I would just like to double click more. I think you mentioned, or we have been talking about go-to-market and distribution channels. And so I would like to talk about both enterprise a little bit more. Is there anything structurally you are doing to either the offering or the way you intake enterprises or approach enterprises that is going to change maybe a more formalized enterprise segment? And then in the shareholder letter, you talked about one of the measurable signs of progress would be at least one AI-native distribution channel contributing to GMV. I just would love to understand, is that a specific partnership you are developing there, or you just kind of expect the growth of those channels for at least one of them, presumably ChatGPT or Gemini, to just naturally become a large distribution channel for you. Micha Kaufman: Thank you. The reason why we did not call out Marvin Fong: specifics was Micha Kaufman: deliberate. Eric Sheridan: But Micha Kaufman: the expectation is based on existing Ofer Katz: proof of concepts Micha Kaufman: that we are having with AI model companies and enterprises, and we believe Ofer Katz: that when Micha Kaufman: the product can deliver their needs at scale, Ofer Katz: this could be Micha Kaufman: a very strong contributor for the growth. And so when we think of it, we think about, in the same aspect, our enterprise. And we have given some Ofer Katz: some qualitative examples Micha Kaufman: again, both in the shareholder letter and in the opening remarks, and I have called out the example of the partnership that we have with an AI model safety company to provide domain experts who help identify vulnerabilities in foundational models. And in another partnership, you know, enabling enterprise to build AI workflow automation through a white-label solution that allows them to deploy AI agents Ofer Katz: quickly and cost effectively. Micha Kaufman: And, again, this is all a part of the fact that AI enables many more businesses to build more and to build more ambitiously. Along with that building, there is a lot of support that they need. There is a lot of calibration and fine-tuning. There are very specific types of expertise that are required to take those products and those solutions and make sure that their integrity is high. They are coming to us with it, and we believe that we can create a meaningful flywheel around these opportunities. Marvin Fong: Got it. Thanks so much. Appreciate it. Ofer Katz: Thank you. Operator: The next question comes from Matthew Condon with Citizens. Please go ahead. Marvin Fong: Yes, Micha and Ofer, you help me understand. I am a little confused. Market. I understand deprioritizing the lower end of the market. Andrew Boone: But I am trying to figure out, is there any products you are not going to actually even be selling? Any services from your service business that you are just not going to sell to them anymore? Because I am trying to understand why you think revenue will get worse as the year progresses. So your revenue declines exceed as you go down as you go forward. I understand investing in might take a little while to turn and to really build the enterprise business further, but I am trying to understand what you are seeing in quarters two, three, and four that make them worse than quarter one on revenue. Micha Kaufman: Morning, Nat. Essentially, we are not killing any of our products. Marvin Fong: It is Andrew Boone: what we are mostly Micha Kaufman: deprioritizing is the continuing Ofer Katz: optimization Micha Kaufman: of these products in favor Ofer Katz: of developing Micha Kaufman: the types of product experiences and the underlying technologies and infrastructure to address the higher-end project. So this in and of itself should not be a driver for decline. And it is not about the types of services or products that we are discontinuing because we are not discontinuing anything. We are just making sure that after the restructure, we have the vast majority of our resources Ofer Katz: to invest Micha Kaufman: in the higher-end and higher-skilled Marvin Fong: types Micha Kaufman: of services for the larger types of customers that are spending more with us and accelerate the growth that we are seeing there even further. Okay. Andrew Boone: I still am a little unclear on, then, what signal you are reading that things are going to decline more in the back half of the year than in the front. Micha Kaufman: So we have seen some decline in simple services across the board. There are areas where we are seeing slightly higher decrease than others. For example, within programming, we are seeing the simple side of programming, like things like simple website building, accelerating the decline as a result of AI code and simplistic types of coding-related solutions. But on the same side, we are seeing areas where we are seeing growth. Ronald Josey: Like digital marketing is one of them. We are seeing nice Micha Kaufman: growth in services. So the idea is not to discontinue anything and, by the way, we have called out these changes over the past few quarters as an example. Writing and translation was heavily impacted by AI, down 20% year over year, and we have seen this for a while. We have seen the same under the vertical music and audio. It is also impacted but slightly less, in the teens range, primarily because voiceover is a meaningful portion of the music and audio vertical. So there are Marvin Fong: anecdotal Micha Kaufman: areas. Again, the decline that we are seeing there is mostly in the very simplistic, low-skill-related types of services. And this is not our focus now. That transformation is going to continue happening, and that is fine. The function that we are focusing on is the one-of-a-kind way for us to deal with high-end, high-value transactions Ofer Katz: utilizing all the data that we have collected over the Micha Kaufman: past sixteen years and the incredible talent bench that we have with us today. Ofer Katz: Thank you. Operator: The next question comes from Joshua K. Chan with UBS. Please go ahead. Josh, you may be muted. Micha Kaufman: Sorry about that. Hey. Good morning, Micha, Ofer. Apologies for that. Eric Sheridan: I guess, maybe following up on the prior question a little, Joshua K. Chan: I guess if you take your full-year guidance, it is less than 4x your Q1 revenue guidance. And so I guess what is the conceptually why does the rest of the year kind of step down from Q1? What are you seeing that is worse? And then my second question is, is there a way for you to frame for us what free cash flow can be in 2026, you know, maybe from a conversion perspective versus EBITDA, something like that? Thank you. Ofer Katz: I think on the first part, think the combination of the trends we are seeing in Q4, together with the confirmation that has been discussed, Joshua K. Chan: are creating Ofer Katz: some uncertainty in terms of 2026, and those circumstances are guiding for Andrew Boone: a wider Marvin Fong: a wider range. Ofer Katz: Yeah. And on Micha Kaufman: the second one, the free cash flow largely follows EBITDA. And we have guided for a midpoint EBITDA of 18%, 20% plus on the core business, and 200 basis point impact from the investment that we are doing in the restructuring. Joshua K. Chan: Okay. Great. Thank you for the color. Operator: The next question comes from Matthew Condon with Citizens. Please go ahead. Micha Kaufman: Thank you so much for taking my questions. My first one is just on, you know, we think you said in the shareholder letter, you are building the marketplace for more recurring work. Can you just talk about the products and functionalities that you need to launch to enable this recurring nature of work? And then I wanted to ask a follow-up on an earlier question is just given where the stock is trading, just can you talk about the prioritization of buybacks versus M&A? Thank you so much. Marvin Fong: Thanks for the question. So, essentially, it is all about Micha Kaufman: putting trust and quality at the forefront. Joshua K. Chan: And we are meaningfully upgrading our data infrastructure, matching algorithm, and product in order to achieve that. And those are the most important Marvin Fong: components Micha Kaufman: of being able Joshua K. Chan: to Micha Kaufman: optimize for recurring work, and also the fact that we are modernizing our platform allows the usage, as I have said, of not just human customers, but also agents within the platform. A lot of it is about how we build this infrastructure and how we ensure Marvin Fong: the quality and the happiness of the Micha Kaufman: entire fulfillment cycle, which has been one of our biggest moats. The fact that the work happens on the platform, is being documented, and being tracked allows us to understand the right path or route in which work is done to be able to actively intervene in cases where it is less than great. All of these are indicators from our data for recurring usage of our platform. The second one was on buyback. We have a continued disciplined and balanced capital allocation, invest in growth while continuing to utilize our buyback authorization to return capital to shareholders. As of December, there is $67.5 million left on our authorization. And as Ofer mentioned earlier, we will continue to be opportunistic on M&A. Thank you very much. Operator: The next question comes from Bradley D. Erickson with RBC. Please go ahead. Hey. Thanks. This is Audrey on for Brad. First, new business formations have been growing pretty solidly, but that does not seem to be lining up with parts of your business. Is that just because there is really no connection there, or what is the disconnect you would say if there is one? And then second, in the new world of changes to the top of funnel, how big should S&M be as a percentage of revenue or marketplace GMV relative to where it has been in the past? Any reasons why it should be structurally higher or lower? Thanks. Micha Kaufman: Thank you for the question. Business formation only impacts a small part of our catalog that is focused on the very early-stage companies, so I would not read too much into that aspect or the correlation between the two. Ofer Katz: I think as regarding the second part, Marvin Fong: we do not anticipate any change. Emily Greenstein: Okay. Thank you. Operator: The next question comes from Rohit Rangnath Kulkarni with ROTH Capital Partners. Please go ahead. Ofer Katz: Hey, thanks. A couple of questions. One is just on this doubling down on high-value things that you will be doing going forward, where do you see the heaviest lift next twelve to eighteen months? Is it you need to attract more supply who is capable of doing these high-value things? Do you think you already have the Rohit Rangnath Kulkarni: supply, or is this a function of building the product and then getting more and more high-value buyers? And then as you do this transition into more high-value and better match, is there a scenario where the services revenue or the attached rate of services to market has a different algorithm given higher value gigs may not need as much ads or there may not be any need for as many subscriptions to sellers who are trying to get signed up for more long-term contracts as such? So how do you feel longer term that that mix between the core marketplace and value-added services could look like versus where we are today? Thanks. Micha Kaufman: Morning, Rohit. Thanks for the questions. So on the first one, it is really very much around the data infrastructure, the matching algorithm that prioritizes quality and trust, and it is really all about the customer satisfaction and retention. In terms of talent, it differs between categories, and it changes over time because we see more and more types of skills coming in demand. In most cases, it is very easy for us, because we have been doing this for sixteen years, to make sure that we have the right talent. We have not seen any pockets of shortage in talent, but in any case, we are always equipped to fill any shortage in a very short amount of time. As to go-to-market, we see that as an opportunity, expanding channels from existing channels into AI-native channels, building the enterprise partnerships as we have talked earlier in the call, in targeted growth loops for specific use cases. As to your second part of the question, services revenue will continue to be a growth driver for us this year. That said, the pace of growth will be more moderated this year because most of the efforts this year will be foundational to improve the marketplace moat and enable the high-end flywheel. Ofer Katz: That said, service revenue has a long Micha Kaufman: long-term growth runway as we enable every aspect of the talent's need, and there are lots of service expansion opportunities down the road. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Micha Kaufman for any closing remarks. Andrew Boone: Thanks, Megan, for moderating the Micha Kaufman: call today and for everyone who has joined us this morning. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Expand Energy Corporation Fourth Quarter 2025 Earnings Conference Call. After the speakers' presentation, there will be a question and answer session. To ask a question, press 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from your queue, press 11 again. As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Mr. Colby Arnold. Sir, please begin. Colby Arnold: Thank you, Howard. Good morning, everyone, and thank you for joining our call today to discuss Expand Energy Corporation’s 2025 fourth quarter and full year financial and operating results. Hopefully, you have had a chance to review our press release and the updated investor presentation that we posted to our website yesterday. During this morning's call, we will be making forward-looking statements which consist of statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs, goals, expectations, forecasts, projections, and future performance and the assumptions underlying such statements. Please note that there are a number of factors that will cause actual results to differ materially from our forward-looking statements, including the factors identified and discussed in our press release yesterday and in other SEC filings. Please recognize that, except as required by applicable law, we undertake no duty to update any forward-looking statements and you should not place undue reliance on such statements. We may also refer to some non-GAAP financial measures, which help facilitate comparisons across periods and with peers. For any non-GAAP measure, we use a reconciliation to the nearest corresponding GAAP measure that can be found on our website. With me on the call today are Mike Wistrich, Joshua J. Viets, Daniel F. Turco, and Brittany Raiford. Mike will give a brief overview of our results, and then we will open up the teleconference to Q&A. So with that, thank you again. I will now turn the teleconference over to Mike. Thanks, Colby, and good morning. I would like to start out by talking about Mike Wistrich: 2025. I think we had a really phenomenal execution year. I mean, we have a 15% reduction in our breakevens in the Haynesville. That is very difficult to do. The team should be congratulated on that. It is phenomenal. It does not just help our reinvestment rate. It also helps our inventory. You will notice in the deck, we have moved locations over to the left, getting closer to lower breakevens. I think that is really a tribute to the team. We did the Southwestern merger, we focused on reducing debt, fulfilling that promise this year. We have reduced debt, but we also returned a lot of money to our shareholders. And we continue to think that is a good way for the company to continue. Volatility. Look, we are seeing volatility in gas prices today. You have seen it all quarter. We believe in hedging, and our hedging program has been effective. We have $200,000,000 in gains this year. But, I mean, just look at today's prices, and we are glad we have them. You will see we are very active this quarter. What I like about the 15% breakevens in the Haynesville is you know they are real, and they know they are real because when we talk about 2026, we have reduced our maintenance capital. That absolutely is proof positive that the team is working, and it is working well. In 2026, we will continue to do our buy down of debt. We will also consider shareholder returns as we always have. Big news, of course, is the change that we made last week. That is really a reflection of the changing natural gas business. We believe the world has fundamentally changed in natural gas. We are seeing tremendous growth in demand. We are seeing 35% to 40% in the next five years. This move is absolutely trying to address that reality. Today, our marketing business, while we think about it, is in three buckets. The first bucket that we consider is do we get our gas to premium markets? This has been a goal for the company from the very beginning last year. We started in Chesapeake in 2021, we had our goal of moving these numbers. It was at the time almost all in-basin sales. Today, we are close to 50%. We feel good progress has been made. The second leg of marketing is we need to take care of volatility. We live in a very volatile gas market. We know that. And so by hedging, by doing storage transactions, this helps us capture, helps us in the low-price environments, which we always are concerned about. It is about discipline. Hedging is about that. Our third, which we have not made as much progress in and we are disappointed in, and we expect to do better, is we need to capture and facilitate new demand. We need to get our fair share of this market. Our team has done some good stuff. We saw the LCM deal this year, but we have not done enough. And we are taking that challenge, and that is really some of the fundamental reasons why we are moving to Houston. In order to participate in that market, you can see you have to compete on our trading side of our business, or our marketing side. We are not the only ones who are saying this. I mean, you see wellhead to water. You see wellhead to water. We have to think beyond the wellbore. We have to say, it is not good enough anymore to just drill great wells. We have to compete on the marketing side of our business. What is the size of the prize? I have been asked many times about that. I think the size of the prize we are chasing is $0.20. We are looking for improved realizations across our business. We think that will make us competitive and a better energy company. These changes, as all changes, you have some things that are unfortunate. Obviously, our senior leadership has changed. That does not change our mission. This does not change our strategy, but what you are seeing is a change in tactics and focus. We have a new business. We have to spend time on that business. What is not changing? Our operations have been great. Look at the results. We are not changing our leadership. We are not changing even our location. We plan to stay in Oklahoma City with our operations team. Joshua is still leading that group, and we do not expect to have changes there because, frankly, it works. And so we do not do things that do not work. So when you think about us, our mantra is our foundation is in place. Our strategy is clear. The opportunity set is huge. It is time for us to act and so we are talking about urgency. We are talking about competitiveness. And so all we need to do to be successful is execute. So with that, we would like to turn it over to questions. Operator: Ladies and gentlemen, if you have a question or comment at this time, please press 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press 11 again. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Neil Singhvi Mehta from Goldman Sachs. Your line is open. Neil Singhvi Mehta: Yes. Good morning, Mike. Good morning, team. Thanks for taking the time and Mike, appreciate some of the color that you provided around management change. Maybe you could talk about the characteristics you and the board are looking for in that next CEO and any thoughts on timing, how long you think the search could take? Mike Wistrich: Sure. Thank you for the question. We are looking for a leader who has a bigger view of energy. He will be an energy person, but someone who is going to continue our mission to look beyond the wellhead. That is someone who thinks about the whole value chain and including we need to get closer to customers, not just here in the U.S. We need to get customers, closer customers in Europe. So it is someone who has a bigger view of the energy industry as a whole. How long does it take? Well, we have done the search before for a CEO. It took about six months. This is a bigger, more complicated company. I would not be surprised if it went to nine months. But call it six is the goal. I will tell you, I am committed to find the right person. I will be here until that occurs. Neil Singhvi Mehta: Okay. That is really helpful. And then as you talk about marketing, can you talk about the quantification of the uplift in cash flow or realizations that you think could happen if you optimize the commercial side of the business, and one case study could be FERN. Did you capture all the upside that you think you could have in that event? And if you had a more robust marketing effort, do you feel like you would have done even better? Mike Wistrich: Well, I think all energy companies and gas companies are moving towards more marketing because we can no longer give away margin to the guys in between us, the marketers. So number one, our first goal is premium markets. We are starting to see a little bit of results this year on that. I expect that to be the near-term catalyst for us to increase our realizations across our portfolio. That will move into 2027. I think volatility. I mean, especially when prices are low, storage is phenomenal. Volatility is high. Storage will be very helpful. Moving our gas to premium markets, whether it be Gillis or to Perryville, has been very helpful. Those are the near-term ways to help our margins right away. To go get that $0.20 a little bit longer. Let us call it three to five years. We have to do more LCM deals. I mean, to facilitate demand, generally, that has to do with building something, building a plant, building a facility of some sort. So they take a little bit longer, but that is really the future. We are really fighting for years three to five. Again, the goal is $0.20. A $0.20 improved realization is obviously very material to our margin. And we think we can make it there. Neil Singhvi Mehta: It is about $500,000,000 in EBITDA, right? Mike Wistrich: That is what we are talking about. Neil Singhvi Mehta: Yeah. Yeah. And then, Neil, hey. Just on you asked about Joshua J. Viets: Winter Storm FERN. I mean, I think your question around, what are you going to be able to do with the integration of the operations that we have with the marketing commercial business. And all those things have to work in tandem. But I think just talk about that entire value chain and starting with the operations. Those operations have to hold up when you have these types of weather events. And, of course, it really is going to depend on the type of weather that we incur. In the Northeast, really across our entire Appalachian region, the operations held up incredibly well and performed incredibly strong through the weather events. In fact, the other thing I would just point out in Northeast Pennsylvania, we were actually peaking out on our production levels as we headed into January. So, again, just thinking about the flexibility of our business there. In the Haynesville, that was a little bit different of a challenge. We had over an inch of ice accumulate on roads and that simply was detrimental to the power infrastructure as well as our ability to manage water across the asset. So definitely a little bit of a different situation there that had some impact on our volumes across that time period, but we absolutely know that in order for us to realize these aspirations, the entire value chain has to work, and that includes our operations. That has to include our marketing commercial business. And then it also implies that we have to gain additional access to infrastructure, further down the value chain. Neil Singhvi Mehta: Thank you. Operator: Our next question or comment comes from the line of Matthew Portillo from TPH. Mr. Portillo, your line is open. Matthew Portillo: Good morning, all. Maybe just to follow up on the marketing front. It feels like, and I know you laid out in the slide deck, but it feels like there has been a pretty significant shift in a constructive way in the supply-demand balances for natural gas on the Gulf Coast. I was curious if you might be able to discuss at a high level how you think the demand dynamics have been changing and if there is any shift in your conversations for contract tenor, but also pricing dynamics for offtake agreements, whether it be LNG players, utilities, or industrial consumers around Louisiana and Texas? Mike Wistrich: Yeah. I will start and let Daniel finish. Really high level, we are definitely seeing the Gulf Coast be very active. It is a unique area. Of course, it is with 50% of our production where it is. We are seeing gas-on-gas demand. We are seeing that end-use customers want to be closer to the wellhead. And so we think that is going to go into our favor. And you could see others talking about this as well. We are not the only ones. In the Northeast, of course, that is a power market. And it is a little different. It is actually having, of course, with Virginia and the data centers built, it is a little bit different market. Generally think that there is more diversity in the Gulf Coast. But, Daniel, you should add additional color. Daniel F. Turco: Thanks, Matt. I think you have nailed it. The Gulf Coast is a place where we are seeing growing demand. If you look at the entire United States, we are seeing about 25,000,000,000 cubic feet a day of gas demand coming online. A lot of that, half of that is coming from LNG, and that sits right in our backyard and right where our Haynesville asset is and right where our pipeline capacity gets down to Gillis. And somebody asked me the other day, how do you feel about this market? And I said, I have been around this for, like, 25 years. And the first time, we are getting tons of inbounds, people looking for that security of supply that you referenced. So the team is out there working all these deals, trying to do something better. As Mike pointed out, this opportunity set is huge, and we are accelerating what we are trying to do here. And grow and further expand down the value chain. Where we are set up, our Haynesville asset, Gillis, and that demand is quite unique for us. Not only the Louisiana side of the border, the Texas side of the border is growing as well. There is a unique aspect going on between Texas and Louisiana. With the amount of demand growth, people talk about the Permian a lot. The Permian will grow into these markets. Of course, Texas is growing substantially as well as Louisiana, and the ability to get from interstate pipelines across the border to meet that demand is also a little bit challenged. So we are set here to go and capture all this demand. Matthew Portillo: Great. And then maybe a question for Joshua. One thing we have noticed on the macro side is the industry has continued to accelerate the rig count in the Haynesville, but more of those rigs are making their way to East Texas. And then in the core of the basin, some of your peers are starting to face degradation in their well results. I guess, Joshua, as we look at your well data and then also the slide you laid out on Page 12, curious how you think about Expand’s productivity trends in the Haynesville over the next few years and how that might contrast to the industry as a whole? Joshua J. Viets: Yeah. Thanks for the question, Matt. I mean, the reality is the inventory that we carry in the Haynesville is just simply unmatched. It is both in terms of depth and quality. You see that show up in a number of different spots. And then you combine that with what is a 15-plus-year history of operating the basin, and so that simply leads to operational excellence. And then at the end of the day, that is going to show up in the breakeven of our inventory. We are just in the one year alone. We have been able to add five years of inventory below $3.50. And so, yes, though we have seen roughly 10 rigs added to the Haynesville, those 10 rigs that are being added by no means can make any comparison to a rig that we might choose to add. In fact, if you reference slide 30, you will see we have characterized there what over a two-year time period of production our rig is able to generate relative to an average rig in the industry. So the things that we are continuing to be on, of course, is operational excellence and continuing to manage the way at which we drill our wells. So that is primarily around how we manage temperature. And then the other differentiator for us is, of course, how we source sand. And not only that is lowering the input cost, but it is simply allowing us to optimize a better economic outcome by increasing proppant intensity and driving our well productivity higher. That is not about IPs. I will just note, that is really about changing the decline parameters of the well, which again translates to value at the end of the day. Operator: Thank you. Just a sec. Our next question or comment comes from the line of Douglas Leggate from Wolfe Research. Mr. Leggate, your line is open. Douglas Leggate: You had me on pause there for a minute. Thanks so much. Good morning, guys. Mike, I wonder if I could ask two quick things to the extent you are able to answer them. There is a lot of focus obviously on your breakeven. When you and I have chatted, it has been almost like you have kind of laser-focused on how you get this breakeven down. Some of your peers have obviously taken different routes on this, whether it be greater liquids mix, introducing midstream, deleveraging. I am wondering to the extent you can share your vision for how Expand gets that breakeven down given the proportion of dry gas you have as my first one. My second one is you have called the 2029 bonds a big nut, obviously. I am wondering if this is defining a different priority for the use of cash in terms of balance sheet over buybacks. I will leave it there. Thank you. Mike Wistrich: Great. Thanks, Doug. A couple things. I do think we focus a lot on breakevens, but we also need to focus on our total financial picture, including earnings per share. Obviously, we are making a big dent in our debt. We think that actually helps. That is one way to do it. But we are also thinking about marketing. It is the top line. We have to have the margin get better. And so I think we are trying to squeeze this number anyway. We are fighting for pennies. We know we are fighting for pennies as an industry. And so you have to use the whole tool chest to get that done. And so between debt reductions, between I think you have noticed this last couple years, we have made pretty good synergy adjustments in G&A and not just our business. And so we hope marketing will be the next leg of that. As far as paying down debt versus buyback shares, of course, we like to do both. We have done both this year. We continue to do both. But we are in a very volatile commodity business. And with that, having a nonnegotiable of a fantastic balance sheet comes first. And so that is why you are seeing our priority to pay down debt. I think we will lean into that. We would like to be a little bit less prescriptive on our buybacks. I think it is a terrible policy to tell the market exactly when we are buying back shares and when not. We want to be smart about it. But first deal is balance sheet first. And so that is why you will see us focus on that. And I think that is also, again, great for EPS, which is important. Mike, if I could just add a quick follow-up there? I wonder, does M&A come in Douglas Leggate: the picture here in terms of resetting that breakeven, again midstream and liquids is kind of what I am driving at here. What would you say to that? Mike Wistrich: Well, I would say we are very actively looking at every potential party in the basins that we operate, and some of those have liquids. But the more important part of that question is you have to have discipline. This year, we looked at a lot of transactions, we passed on a lot because it starts with our nonnegotiables. Our nonnegotiables are balance sheet and accretion. And sometimes, this year, gas price was pretty high, and so those deals were not that attractive. But if you are asking about liquids and helping margin, is that a possible answer? It is. Douglas Leggate: It is. Great. Appreciate the comments. Thanks so much. Operator: Our next question or comment comes from the line of Kevin Moreland MacCurdy from Pickering Energy Partners. Mr. MacCurdy, your line is now open. Kevin Moreland MacCurdy: Sorry about that. Good morning, and thank you for taking my question. I wanted to ask about your maintenance CapEx and specifically slide six. It looks like there were some improvements to your maintenance capital compared to last quarter, although the guidance did not change, if I am reading that correctly. And I also noticed that there are three production levels bolded on the left-hand side there, 7.25 Bcf to 7.75 Bcf, a range a little bit wider than your 2026 guidance. Is there anything to read into that as well? Joshua J. Viets: Yes, Kevin. I mean, I think the first thing is to reemphasize the improvement that we have seen in our maintenance CapEx. I mean, if you were to go back to a year ago and look at this slide, it would have been $225,000,000 higher to deliver the 7.5 Bcf a day. So first, I think just acknowledging that the business has gotten stronger, and that is reflected here. So you will see that our program does have the ability to still be incredibly efficient from a free cash flow generation standpoint up to 7.75 Bcf a day. But one of the things that I just think is incredibly important to recall and really what is underwriting this slide is a view on mid-cycle price. And that view on mid-cycle price remains unchanged from $3.50 to $4. $0.50 for us is a pretty big range. And so one of the things we really want to continue to be focused on is maintaining a level of flexibility in the business and, therefore, how much we produce in any given month or across a given year based upon how we see those prices trend. And so in certain instances, that might cause us to push volumes a little bit higher. But if we see the market maybe turn a little bit bearish, whether that is shorter term or even longer term, we want to have the ability to flex those volumes. Kevin Moreland MacCurdy: And for my second question, your budget outlines $75,000,000 for the Western Haynesville this year. Can you talk a little bit about how that program progressed, when you will be drilling, and what you are looking for in results? Joshua J. Viets: Yeah. Kevin, this is Joshua again. On that, we have roughly two and a half wells scheduled. There is a little bit of carry-in and carry-out capital that will take place across the year. We have just finished drilling the first well. That was a horizontal well. Those operations went incredibly well. In fact, when we benchmark our performance both in terms of days and cost, we are at the very low end of what we have seen from some of the bigger competitors in the Western Haynesville, so we feel really good about that. That well is being completed as we speak, and we expect first production sometime in late Q1, early Q2. Really there, we are going to be interested in longer-term decline parameters. We know the reservoir is there. We know it is highly saturated with overpressure gas. But understanding those decline characteristics will be really important. For the rest of the year, we have, again, roughly two additional wells that we plan to drill, and those are really going to be centered around helping us appraise the full extent to the acreage position that we put together there. Operator: Thanks, Joshua. Brittany Raiford: Thank you. Operator: Our next question or comment comes from the line of Scott Michael Hanold from RBC Capital Markets. Mr. Hanold, your line is open. Scott Michael Hanold: Yes, thanks. I would like to maybe key off something, Mike, you had said in your overview. And one of the things you mentioned is that you want to look to, you know, just cannot give away margin to the middleman. And as you step back and think about that, would that also contemplate looking at more of an integrated operation, such as going out and actually owning midstream to be more integrated? Does that help the effort? Is that a possible avenue you would be willing to look at? Mike Wistrich: Yeah. I think, generally speaking, we are focused more on partnerships with midstream companies. We are looking at stuff like Momentum that we have done in the past. We are looking, and we actually, an LCM deal has a Momentum component on it. So I imagine this is more partnerships. We have to get our gas to premium markets. It is unrealistic to think we are not going to have to deal with some sort of midstream to get there. We would like to be part of that equation. So I think it is that more than just going out and buying gathering systems. I am not sure that would be really helpful for us. We have to get to end-use customers. So yes, integrated, but maybe think about that in a partnership way. Scott Michael Hanold: Okay. Understood. Appreciate the context. And then if I could ask on cash taxes, surprised at the minimal cash tax that you are looking at this year. Can you give us a sense of what drove that? Is that part of the OBDD from last year? And do you have any visibility over the next couple of years where that cash tax rate might go? Brittany Raiford: Yes, Scott. This is Brittany. So you are absolutely right. It is the benefit of the OBDD, and we saw that last year and are seeing the benefit of it this year. So we do expect to be a full cash taxpayer probably in the back part of the decade, and so I would expect us to stair-step our cash tax increases throughout the next couple of years to be a full cash taxpayer probably later, closer to 2030. Thank you. Operator: Thank you. Our next question or comment comes from the line of Benjamin Zachary Parham from JPMorgan. Mr. Parham, your line is open. Benjamin Zachary Parham: I wanted to follow up on Matt's question earlier. In the slide deck, you highlighted an increase in your first-year cumes that you expect from the Haynesville in 2026. Can you talk about that a little bit? What drove that expected increase? And if you see that as sustainable going forward? Joshua J. Viets: Yeah. Good morning, Zach. Yeah. Is it sustainable? Absolutely. Again, to tie back to my earlier comments. We have really been able to reset the economics of the Haynesville with improvements in drilling efficiency, self-sourcing our own sand. And we have been able to drive in this higher productivity largely through enhancing the completion designs. On the call during the third quarter, I talked about, at the merger onset, we came together. We put together what we have referred to as our Gen 1 completion design. We are already now progressing to what is considered our Gen 3 design and seeing really improved results from that. And so we expect that this type of trend that you are seeing continues forward. And, again, I will just bring it back to we have an unmatched inventory quality and depth in the Haynesville, and that combined with our history in the basin, there is a good reason why we are delivering these outsized results relative to peers. Benjamin Zachary Parham: Then my follow-up, just on D&C costs in the Haynesville. You have done a lot to bring down costs over the last several years. You have got a slight reduction in your numbers for 2026. But can you talk about your ability to potentially drive that number even lower going forward? Joshua J. Viets: Yeah. You know, my expectation is pretty high for the organization and our ability to do that. We continue to find opportunities to improve tool reliability. The bigger issues you fight in the Haynesville is temperature. And so we continue to partner with some of our service providers to increase tool reliability. In addition, we are seeing some pretty significant advancements with artificial intelligence to help us refine in a more optimal way our well designs, but more importantly, a faster real-time optimization of drilling parameters. And we think those two items there are really going to allow us to unlock further savings from a D&C standpoint. Operator: Our next question or comment comes from the line of Joshua Ian Silverstein from UBS. Mr. Silverstein, your line is now open. Joshua Ian Silverstein: Yep. Hey, good morning, guys. Mike, it felt it was a challenge to get Expand volumes to the demand growth areas. Just talk about what the biggest challenges are in doing so. Is it getting the customer to actually just agree to supply? Is it price? Concerns over inventory duration? I am just curious. Mike Wistrich: Yep. Well, there are two challenges for our team. And one is on us, and one is just the facts of the world. The first is our team needs to be more aggressive to review more transactions or potential transactions. We will build more generators. We will add to the team to be in the room more often. A big part of moving to Houston is to be in that room, and so we have to get out of our own way. The other side is just real, which is you need to get your gas to them physically. And so you always are thinking about transportation, how to get it there, how to service those clients, and that gives advantages to companies, frankly, like Williams who have been connected to them for a generation. We have to compete by having assured production that they do not have. And so that is our competitive advantage, but we definitely have to partner. That is why we want to partner with midstream companies because that is the biggest thing to overcome. Joshua Ian Silverstein: Got it. And then you talked about trying to get an incremental $0.20 of realizations or margins there. What is the cost to get it there? Because you are going to have to start to build out a bit more. Is this going to cost you more upfront to then have benefits later? Some sort of sense of that would be great, sir. Mike Wistrich: Yeah. I think that is a great question. And the first thing is we talk about our culture of discipline. We talk about rate of return. We think of ourselves as how do you grow long-term shareholder value, and that means you have to talk about the cost as well. So, generally speaking, the lowest dollar change will be on just trading to premium markets. Those will turn into commitments at feet. Those are not debt necessarily, but call it commitments. Everything else, if we have to put more capital to work or risk our balance sheet, has to have a higher rate of return, has to have a bigger payout because we are returns-focused. And so do I think we will probably spend some money over the next three to five years? Undoubtedly. Undoubtedly, we have to, but we will put it in the context of our rate of return framework. We have to have a decent ROCE in our program, and so these things will have to have discipline around that. Operator: Our next question or comment comes from the line of John Christopher Freeman from Raymond James. Mr. Freeman, your line is now open. John Christopher Freeman: Good morning. It was nice to see the Haynesville productivity improvement continue, but it does look like the upside on production in the quarter was actually from the Appalachia region. Maybe it looks like, I do not know if it is quicker turning lines, but just any color you could provide on that relative to the guide for the quarter? Joshua J. Viets: Yeah. So, John, this is Joshua. I mean, just to address that. Really, that is about our returning our production from curtailments in the fourth quarter. That was a big piece of it, coming to the end of the year. And, of course, most of those curtailments would have been taking place across Northeast Appalachia. And then, of course, in Q1, we would have had a little bit more weather-related downtime in the Haynesville, as a result of Winter Storm FERN where we saw roughly an inch of ice show up at the end of January. So that had some modest amount of impacts. But across the full course of the year, we do anticipate to be averaging in and around 7.5 Bcf a day. John Christopher Freeman: Got it. Thanks, Joshua. And then Mike, sorry to belabor the marketing topic, but it seems like, and I do not want to put words in your mouth, but you are a lot more focused, it appears, on the LCM type agreements as opposed to maybe long-term LNG supply agreements. Is that a fair characterization? Mike Wistrich: I do not think that is fair. I think we are looking at both. We are looking at both. We are chasing margin. We have to participate in the value chain downstream of us. That is definitely LNG. That is definitely manufacturing. It is power. I think it is all. And so all of the above. I just want to be more aggressive because to get in the room, we have to hustle. It is a competitive space. I mean, it is a super competitive space. We will have to focus. Operator: Thank you. Our next question or comment comes from the line of Neil Dingmann from William Blair. Mr. Dingmann, your line is now open. Neil Dingmann: Morning, Mike. Nice quarter. Mike, my question, you guys talked about a little bit this last night, was on your upstream position. Just looking at your share price, it certainly does not seem to me that you all are getting credit for the massive, what, the 2,000,000-plus acres position on top of your material production. So I am just wondering, is there something you all would consider doing with, I do not know, either monetizing a bit of the inventory or drilling carry to something somebody or something to unlock some of this value given it just seems like, given that size of position, your investors are just not recognizing this. Mike Wistrich: Well, first of all, thank you for saying that we are not getting full credit. We would love to get full credit. We hope you all are paying attention. We think we have a good business. Generally speaking, we are not actively looking to do what you are talking about, but I would say it is always on the table. It has to be. And just to say no for the sake of no is the wrong answer. If we see something that is attractive and part of our portfolio that someone wants to overpay, we are a public company. That could happen any day, and so nothing is off the table. But I do not think we are actively doing that right now. Neil Dingmann: Makes sense. And then just secondly, it looked like on the guide, you are going to run about the same rig count. Do you assume, I am just wondering if you are running, if you continue to have the efficiencies that you have recently seen, would you see yourself potentially, let us say you are running ahead of schedule by, I do not know, second, third quarter. Would you pull back on the rig count and just sort of continue to bank that free cash flow, or would you continue to potentially boost the production a little more than suggested? Joshua J. Viets: Well, I mean, I think, Neil, we would have to take a look at fundamentals and understanding where supply-demand balances sit. We really take great pride in maintaining a high level of flexibility within our business. We have noted today that we see this business being efficient up to that 7.75 Bcf a day number. But at this point in time, we feel really good about the program that we have laid out to deliver the 7.5 Bcf a day at the $2,850,000,000 of CapEx. And, until the market fundamentals start to shore up, that is the plan that we expect to execute this year. Operator: Thank you. Our next question or comment comes from the line of Charles Meade from Johnson Rice. Mr. Meade, your line is now open. Charles Meade: Yes. Good morning, Mike, to you and the whole Expand team there. I would like to ask a question about maybe drilling down on one piece of your marketing push, and that is on storage. You guys, in your presentation, say you have 5 Bcf of storage that you own now. Can you talk about the nature of those assets and what the trajectory has been for building that position? And is storage an area that you expect to be, I guess, competitive in acquiring more? Daniel F. Turco: Yeah. Hey, Charles. This is Daniel. I will take that question. This year, we added about 3.5 Bcf of storage in the last quarter here to our 1.5 we already had, so we like this storage, and we like it for many reasons. Right? You go back to our M&C strategy. One of the key components is managing volatility. The market is highly volatile as we have seen over the last few months, not only from time movements, but geography movements. So we are actively using that storage. We like that storage, and we have made money on it already. And we plan on turning that storage a lot more. We would like to grow that storage position, but it is a very competitive market. The total demand of this market has grown substantially, and storage has not caught up. That is why you are seeing a lot of volatility. So it is highly competitive to actually get more capacity. We continue to actively look at it and, back to our disciplined approach here, we are only going to take that capacity we feel is going to make us value and help us manage that volatility and create more margin ultimately. Charles Meade: Got it. Thank you. And then, if I could ask a question about the West Virginia Utica. You guys, also in your presentation, talking about bringing the potential of bringing some Ohio Utica development concepts towards West Virginia and a lot of upside there. Can you elaborate on what that is and how big the upside might be? Joshua J. Viets: Yeah, Charles. I mean, we are pretty excited about our sup-location program. I mean, the reality is there has not been a lot of Utica development as you move across the Ohio River, and I can assure you the geology does not stop at the river. And so we think there is quite a bit of upside with that. It is something that the teams have been working for some time. It is just really about getting into the right environment in which that inventory development makes sense. There will be some infrastructure requirements to be able to process it, but it is something that we think we can take the learnings that we have built up of drilling deeper gas wells in the Haynesville and leverage those learnings in the Utica and expect it to be a highly profitable part of the business going forward. Operator: Next question or comment comes from the line of Mr. Phillip Jungwirth from BMO. Sir, your line is open. Phillip Jungwirth: Yeah. Thanks. Good morning. With the NG3 pipeline now flowing volumes, can you talk through how this will benefit Expand this year also as Golden Pass starts up? And is there a benefit to maintaining ownership in the project long term or at least through a potential expansion? Daniel F. Turco: Yeah. Hi, Phillip. This is Daniel. I will talk about the market dynamics. So, yeah, NG3 came on in October, and that is providing us just, again, more market optionality, and that is bringing our gas to Gillis, which over time is going to be a pretty premium market. At the moment, we are getting about even on where we are, and the capacity payments we get and the uplift we are getting. But over time, back to the structural demand of this market, LNG is growing significantly, and we see Gillis becoming even more premium. So it is providing us two things. It is getting us to a premium wholesale market, it is providing us market optionality where we can move between Gillis and Perryville on any given day. Phillip Jungwirth: Okay. Great. And then besides the capacity going to Gillis, you also have 2 Bcf a day going to Perryville. So it is further away from the LNG corridor. So can you just talk about the advantages of selling gas to this hub? And how would the go-forward marketing strategy be tailored here versus volumes going to Gillis? Daniel F. Turco: Yeah. Perryville is also a great market. There is a strong pull from the utilities down in the Southeast. A lot of that is coming from the dynamics of Gillis, more gas is being redirected to Gillis for the LNG demand. And the historic gas that would come across over to Perryville has been less. There is more demand that is going to be taken away from Perryville. There is, I think, 3 Bcf/d of new pipeline capacity coming online pulling further down to the Southeast. So this market is also a premium. A lot of utilities are looking for that longer-term reliable supply. So our advantage here is actually the ability to go to both markets, not only structurally selling to these markets, but any given day being able to move molecules between the two markets. If we sell down in Gillis and the Perryville market changes, we can buy back that position at Gillis or buy gas into that position and move gas to Perryville. We have been doing this quite a lot, proud of the team and how they are capturing that optionality value, and we are just going to continue doing more of that. Operator: Our next question or comment comes from the line of Betty Jiang from Barclays. Ms. Jiang, your line is open. Betty Jiang: Hello. Good morning. Mike, I am with you on the scale of the marketing opportunity and the need to think bolder. I am just curious on your $0.20 uplift that we talked about. Just how you came up with that target, and do you see that as a reasonably achievable number, or is it more of a stretch goal for the organization? Mike Wistrich: I do not think it is a stretch. Let us just start with that. I think it is something that we will have to be aggressive to do. It is something that we will have to invest time and energy into. I do not think it is a stretch. We will definitely have to pull all three of our levers. Lever one is premium markets. Two, we need to work on our storage. And three, we are going to have to participate in the value chain beyond the wellbore, and that means LNG or industrial. And so I do not think that. I think this will be a big part of our business going forward. And I also think that will help our breakeven. That will help our downside protection. Because those tend to be a bit more fixed, closer to a fixed-fee concept if you think about it. So, I do not think it is a stretch. I sure hope that we make it really quick so that you all can be comfortable, and then I hope to expand that over time. Betty Jiang: Great. No. That makes sense. And definitely a lot of opportunity to fill in the hopper. My follow-up is on M&A. A lot of talk already on the Gulf Coast, but we have also seen rising dealmaking in Appalachia. What is your appetite for M&A in the Northeast? Is there value to having more in-basin exposure in order to capture that growing power opportunity up north? Mike Wistrich: Yeah. I think M&A has been something that we have done a lot of over the past five years. You can see, I think we have done over $15,000,000,000 of transactions. So it is in our DNA to continue to look at everything. And Appalachia, of course, and the liquids concept that you all mentioned earlier, of course. The question is, can you do it disciplined? Can you do it to protect the balance sheet? Can you do it with the nonnegotiables? This year, we were not able to. I mean, some of these deals went for premium prices that we did not think were fair value. So, the answer is we will look at everything in our basins, of course, that is our job. But M&A is a tricky market. You just have to think about your base business first. And we will do that. Operator: Thank you. Our next question or comment comes from the line of Kalei Akamine from Bank of America. Your line is open. Kalei Akamine: Mike, going back to your comments about marketing, you expressed this desire to be more commercial around your volumes. You look at your portfolio, I am curious how much gas you have to commit to long-term sales agreements. Trying to get a sense of how much flexibility you have in the portfolio to ship gas to higher value markets. And is it fair to think that more flexible molecules in that portfolio is in the Haynesville? Mike Wistrich: I think it is two things. You are right to point out, of course, that we make commitments every day, and some of those commitments would have to be rolled off. I do not think we have a set number in my mind as exact, and Daniel may be able to answer that question. But I do think the Gulf Coast is where we can build. It is where we can grow. We could add volumes there. And so to the extent we get more demand, we can increase production to fulfill that demand. And so I think that is always a great answer. In Appalachia, you have less ability to do that. And we are talking about growing there, but the Gulf Coast is where it is. And we feel it is our competitive advantage. I mean, we have three basins. Everyone else has one. We have a bigger market area. We have to take advantage of it, but the ability to grow and, frankly, shrink the Haynesville gives us a lot of marketing opportunities. Daniel F. Turco: I would just add that we do stage those commitments. And on page 19, we laid out a couple of commitments we just made. And over a five-year time, we have commitments that go up 15 years, but over a five-year time frame is really where we are looking at doing a lot of our sales. We just added a couple sales to premium markets here. So these are not the big deals that we are going to announce, but these are singles and doubles that we are doing every day, adding more sales to end users. And just getting that premium uplift. A sale becomes an asset as well. As I pointed out in the last point here, you make a sale and markets move, you can still fulfill that sale with other gas and move your molecule to higher-priced markets. So there is a double combination here: premium market and capturing the volatility. Kalei Akamine: I appreciate that. This next question is on the LNG exposure. Pre-filed, the desire was for exposure to be somewhere between 15% to 20%. Post-merger, that commentary shifted a bit. What does desired exposure look like today? Is it a quarter of gas? Is it a third? And do you think it is necessary to physically match the molecules at the wellhead to takeaway on the water, or is there some synthetic way that you could go about it? Brittany Raiford: Yeah. Kalei, great question. And I will start, and Daniel can jump in here as well. That commitment that Chesapeake had made prior to close, 15% to 20% on LNG, if you think about it, really the gas markets have changed quite a bit since then. Back then, we probably were not talking near as much about power and industrial demand growth. And so, really, when you think about it, and we have mentioned this several times, we are interested in reaching premium markets. We are agnostic really to exactly what those premium markets are. We think the opportunity set is broad. And so we are going to look for the highest-return way for us to diversify our sales exposure. So we are not going to be overly prescriptive on exactly how much we want to go to LNG. Mike Wistrich: Got it. Okay. Brittany Raiford: Appreciate that, Brittany. Thank you. Operator: Our next question comes from the line of Leo Mariani from Roth. Mr. Mariani, your line is open. Leo Mariani: You guys talk about this a lot, but just on the goal of the $0.20 uplift on gas, is there a rough timeframe for that? And you mentioned trying to get some deals over three to five years, just trying to get a sense if that is a five-year goal. Any other color on that? Mike Wistrich: I would say, yes. It is three to five, and giving five to give us some room. I certainly hope to make that in three, three and a half. And so we want to be aggressive here. Leo Mariani: Okay. And then just following up on the buyback, you guys spoke about this. I do not want to put words in your mouth, but it sounds as if there are really going to be times of dislocation in the stock, and the priority is really going to be just to make this balance sheet even more rock solid here. Mike Wistrich: Agreed. We totally agree with your statement right there. Operator: Thank you. Our next question or comment comes from the line of John Annis from Texas Capital. Mr. Annis, your line is open. John Annis: Good morning, all, and thanks for taking my questions. For my first one, you noted around 20% of the 2025 TILs exceeded 1 Bcf per 1,000 feet, and you expect that to rise above 30% in 2026. I wanted to get a sense of what is different about those top-performing wells. Is it geology, lateral placement, completion intensity, or some combination? And then is there a ceiling on how high that percentage can go given your acreage mix? Joshua J. Viets: Yeah. I mean, it is definitely a mix, John. Completion design is really going to be the biggest driver for us moving forward. But, clearly, where you drill is going to matter as well. So typically, we see the best-performing wells in the southern part of our acreage position within the NFE. And so you are going to be limited in the number of wells you can drill in any one gathering system. You will just simply hit capacity constraints. So, yes, to answer your question, there would be some constraints. But we just see continued upside across the entire acreage position. We have had a lot of success this year drilling three-mile laterals. We are going to continue to get better and see a bigger portion of that showing up going forward. And as I mentioned earlier in the call, I do not think we have reached what we really deem to be optimal from a completion design standpoint. And, again, we continue to reset those economics as a result of having access to a cheaper sand source. John Annis: Makes sense. For my follow-up, you mentioned supplying microgrid solutions in Appalachia with flexible volume contracts. How large is this opportunity today? And how would you compare the attractiveness of these smaller volume deals with some of the larger supply commitments announced in the basin? Daniel F. Turco: Hey, John. Thanks for the question. Yeah. We went live with this microgrid solution. It is relatively small, to be fair, but we are excited about these because a bunch of these small deals adds up, and this actually commands quite a premium by having a reservation fee behind our gathering system where this micro solution can pull volume from us and capture at a higher price. So we are getting a dual effect here of a reservation fee and a higher price. It is small, but these singles are going to add up over time. We are going to do a lot more of these types of deals. Mike Wistrich: Great. Thank everyone for their questions today. We want you to ask tough questions. We want to be responsive, so thank you for them. I would like to close with just a few big picture comments. Number one, our execution has been amazingly solid. That is our foundation. We are not changing it. We expect it to continue, and we continue to expect our teams to perform better in the future. Two, we are definitely thinking beyond the wellbore. Obviously, we have talked a lot about marketing today. That is actually not a strategy change. We have had that strategy. What we are talking about changing today is urgency, attention, discipline. We want to be more aggressive, but always know that we are ready to return and build shareholder value. You have to have that. Third, the opportunity is huge. We see it. We finally feel like gas has got its moment. We want to take advantage of it. The demand is amazing. And now it is just time for us to not talk and execute. And so that is our focus here at the company, and we will continue. So with that, I think that is the end of our call. And I hope you have a good day. Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, standby.