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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.
Operator: Hello, and welcome to the Amrize Q4 2025 Earnings Conference Call. [Operator Instructions] Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now turn the call over to Aroon Amarnani, Vice President of Investor Relations. Aroon Amarnani: Great. Thank you so much, and good morning, everyone. Welcome to Amrize's Fourth Quarter 2025 Earnings Conference Call. We released our fourth quarter and full year financial results yesterday after the market closed. You can find both our earnings release and presentation for today's call in the Investor Relations section of our website at investors.amrize.com. On the call with me today are Jan Jenisch, our Chairman and CEO; and Ian Johnston, our CFO. Jan will open today's call with highlights from the full year and the fourth quarter as well as the growth investments we're making in our business. Ian will then review our financial performance for the quarter before turning the call back to Jan to discuss our outlook for 2026. We will then take your questions. Before we begin, during the call and in our slide presentation, we reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures to U.S. GAAP in our earnings release and slide presentation. 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 the future results and performance, plans and expectations and objections -- objectives are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those presented during the call to various factors, including, but not limited to, those discussed in our Form 10 filings and in other reports filed with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statements. With that, I will now turn the call over to Jan. Jan Jenisch: Thank you, Aroon, and thanks to everyone for joining us today. 2025 was a very important year for Amrize as we did our successful spin-off and launch in June of the company. I have focused my time at our operations and projects across North America to see our work in action, meet with customers and hear from our people. What I see is the market-leading footprint and a performance-driven change. Together, we are delivering for our customers as the partner of choice for their most important building projects. For the full year 2025, we increased revenues by 0.9% to $11.8 billion, with $3 billion in adjusted EBITDA. We generated a strong cash flow of $1.5 billion, and our cash conversion rate was 49%. Overall, we completed the year with a net leverage ratio of 1.1x. Our strong cash conversion and balance sheet [ for right ] flexibility and firepower to fuel our growth and return cash to our shareholders. Increased our investments to $788 million during 2025 to expand production, improve efficiencies and best serve our customers in the most attractive markets. Last month, we were excited to announce our agreement to acquire PB Materials, the aggregates leader in West Texas, significantly expanding our position in this high-growth region. Delivering shareholder return. The Board has approved a $1 billion share repurchase program and is proposing a special onetime dividend of $0.44 per share payable following the Annual General Meeting. The Board is also proposing an annual ordinary dividend of $0.44 per share to be paid in further reinstallments. These dividends will be paid out of legal capital reserves from tax capital contributions, and are not subject to Swiss withholding tax. The dividend and share program are subject to customary shareholder approvals at our AGM in April. Looking to the future, we are well positioned in our $200 billion addressable market, and we have set our 2026 guidance, reflecting accelerating customer demand and profitable growth. This includes 4% to 6% growth in revenues and 8% to 11% growth in adjusted EBITDA. Let us look at some of the highlights of the fourth quarter. We saw growth -- continued growth in Building Materials. The segment's revenues grew 3.9%, and more important, we expanded our adjusted EBITDA margins by 60 basis points. Both cement and aggregates volumes were up, and we have strong aggregates pricing growth, in addition to production efficiency gains and first savings from our ASPIRE program. Within our Building Envelope business, our results were affected by soft residential roofing volumes, and we expect residential demand to gradually return in this year. Our commercial roofing margins were up, driven by resilient [indiscernible] and refurbishment. At the total company level, revenues were slightly lower, 0.4% in the fourth quarter. Let us look at some of the market trends at Amrize. We see continued infrastructure demand and an improving commercial landscape. In the commercial market, which makes up half of our business, demand is improving led by new data centers. Data construction has been and continues to be a significant bright spot as hyperscalers rapidly build out the infrastructure that will power the AI economy. This is the largest infrastructure expansion in recent history, and the United States is at the center. In fact, over 40% of global data center infrastructure investment is expected to be spent in the United States through 2030. Speed, efficiency, innovation and reliability are key in this market, making it a space where Amrize building solutions and unparalleled footprint offers strong competitive advantages. In 2025 alone, we supported and supplied more than 30 data center projects, and we will see that work accelerating into this year. For us, you have just as much opportunity to supply the data centers as we do to support the infrastructure surrounding them. In 2026, we expect the commercial market to pick up as interest rates continue to move lower, and as customers accelerate the investments in advanced manufacturing, warehousing and logistics. In infrastructure, demand continues to be steady, with federal, state and local authorities privatizing modernization projects. We see increasingly domestic focused agendas of our customers in both the United States and Canada. Each country is prioritizing national investments to build strong futures. Within residential, new construction remains soft. We expect demand to gradually return later this year as the U.S. continues to have a significant housing shortage that will drive longer-term growth. As interest rates continue to decline, we expect pent-up demand to unwind and construction activity to accelerate across all sectors. If we turn to Slide 7, you can see our strong pipeline of key projects into 2026, which are directly aligned to these growth trends. We are supplying advanced building materials, the new data center campuses like in Louisiana, we're supplying water infrastructure projects like in Dallas, airport modernizations like Colorado and a new Amazon distribution facility in New York City. We are seeing increasing demand for our high-performance Elevate MAX PVC roofing systems and are supporting a new industrial warehouse in Ontario and a significant data center project in North Dakota. We see increasing data center demand for the MAX PVC roofing system going forward. These are just a few of our project highlights, and they reflect the megatrends underpinning long-term growth in the North American market. As we move into 2026, we have a big pipe of projects, and new ones are kicking off every month. We move to Slide 8. You can see some of our important expansion projects. Our -- we completed our Ste. Gen plant expansion to support growing demand and increase our efficiency. In December, we commissioned the production expansion of our flagship cement plant in Missouri, adding 660,000 tons of production capacity per year, increasing the plant's total capacity to 5.5 million tons annually. Our Ste. Gen plant is North America's largest market-leading plant, setting the standard for high performance. If you turn to Slide 9, you can see that we are on track with key organic growth projects for this year and beyond. We're building on the success of our Ste. Gen plant expansion, we are on track with key growth projects for 2026 and beyond. To serve the booming Texas region, we are investing in our Midlothian cement plant to expand production capacity by 100,000 tons, modernize logistics and increase operational efficiency at the same time. In Alberta, Canada, we are investing in our Exshaw cement plant to add 50,000 tons of cement production capacity, supporting the growing Calgary market. In Quebec, we are investing to expand our St. Constant cement plant by 300,000 tons, and further strengthening our position in Canada and increasing efficiency of these specialties. If we turn to Slide 10 now, we see more growth projects. In Virginia, we are progressing with our new Fly Ash facility to enable the use of recycled landfill as a high-quality supplementary material. We are progressing our Greenfield Aggregates quarry in Oklahoma, adding about 200 million tons of reserves to serve the fast-growing Dallas-Fort Worth market. On the Building Envelope side, we are progressing with our new state-of-the-art Malarkey Shingles plant to expand our market share to the attractive Midwest and Eastern markets. We expect this plan to be commissioned at the end of 2026, putting us in a strong position to deliver more volumes for when residential demand picks up. If you move to Slide 11, let me talk about our latest acquisition, PB Materials, which strengthens our aggregates footprint in West Texas. We announced the acquisition earlier this year. This will strengthen our aggregates business at over $180 million in annual revenue, adding 50 years of aggregates reserves and 26 operational sites in West Texas to serve long-term demand as infrastructure, data centers and commercial investments drive construction growth. This acquisition will be EPS and cash accretive already this year. We just received antitrust clearance from the Federal Trade Commission, and now expect this acquisition to close in the first quarter of 2026. Looking beyond PB Materials, we have a strong M&A pipeline and plan to continue making smart deals to accelerate our profitable growth. Now let's move to Slide 12, our ASPIRE program, which is on track to drive value through scale and focus. We made good progress here in the fourth quarter. We have now onboarded over 450 new logistics and service providers to optimize third-party spend, and we launched more than 400 projects to leverage our scale and drive synergies across raw materials, services, logistics and equipment. We started realizing savings in the fourth quarter last year, and we are now targeting a 70 basis points of margin expansion in 2026 and $250 million of full surgeries by 2028. Let us talk about allocating capital. On Slide 13, you see our priorities, increasing investments and returning cash to shareholders. We are committed to a capital allocation strategy that invests for growth and delivers value to our shareholders. We raised our CapEx investments last year by 23%. And this year, we plan to increase our investments further to $900 million. We are on track with our M&A strategy, and we have a strong pipeline of targets, led by aggregates and with additional opportunities in [indiscernible]. Our strong cash conversion and balance sheet allows us to also return cash to our shareholders. The Board has just approved a $1 billion share repurchase and is proposing a special onetime dividend of $0.44 per share, payable following the AGM in April. The Board also proposing an annual ordinary dividend of $0.44 per share to be paid in quarterly in stores. Both dividends will be paid out of legal capital reserves and are not subject to Swiss withholding tax. I'm very pleased to have established a strong balance sheet and platform for growth that enables us to return value to our shareholders while further increasing our growth investments through CapEx and M&A. Before discussing our guidance for this year in more detail, I turn over to Ian, and he gives us more details on our financial results. Ian Johnston: Thank you, Jan. I'll begin on Slide 15 with our results by segment, starting with Building Materials. For strong volume and revenue performance in Q3, we saw continued momentum and margin expansion in our Building Materials segment during the fourth quarter as new infrastructure and data centers and [ commercial ] projects program. Revenues were approximately $2.2 billion in the quarter, an increase of 3.9%, driven primarily by higher volumes across both our cement and aggregates businesses, compliance with continued aggregates pricing growth. Cement volumes increased 3.6% and aggregates grew 3%. We continue to see steady support on federal, state and local infrastructure spending as well as growth in select commercial markets, particularly in data centers and warehousing and logistics, which we expect to continue in 2026. Net pricing for the quarter was down 0.8%, while full year 2025 was up 30 basis points on a constant currency basis. As we mentioned last quarter, we have announced price increases in 2026 [indiscernible] in our markets, driven by the positive volume trend we have seen across our cement business over the last 2 quarters and into the new year. Pricing has been phasing in since the start of the year, with full run rate in place assumed by April 1. As a reminder, our markets are driven by local demand, varying by geographic region. That said, we continue to see favorable pricing dynamics across our network, supported by our inland positions and higher growth in proactive markets. Meanwhile, aggregates pricing on a freight adjusted constant currency basis increased 3.8% in the quarter. Including freight, pricing was up 7.3%. We continue to see how the aggregates pricing, supported by strong local market fundamentals and ongoing infrastructure demand. Building Materials adjusted EBITDA was $705 million in the fourth quarter, up 4.9% compared to the prior year, while adjusted EBITDA margin was 32.6%, 60 basis points. The increase in adjusted EBITDA was primarily due to volume growth, aggregates pricing, production efficiency and early ASPIRE sales. Moving forward, we expect cement pricing to be up low single digits and aggregates pricing to be up mid-single digits on a freight-adjusted basis in 2026. Given the positive customer demand we see across these businesses, we expect volumes for both cement and aggregates to be positive this year. Before we move to Building Envelope results, it's worth noting that the first quarter is typically a seasonally slower quarter for Building Materials as we perform annual maintenance and build inventory ahead of the peak selling season. Moving to Slide 16. Turning to the Building Envelope. Fourth quarter results were $678 million, a decrease of 11.8% compared to the prior year. The decline was largely driven by softer residential roofing demands. That said, when we look across our business, commercial regrouping activity remained strong with revenues up during the quarter, as this type of spend is often nondiscretionary on discretionary for our customers. In commercial new construction, we continue to see robust data center demand. As Jan mentioned earlier, our MAX PVC product line and Elevate is addressing the higher performance specifications that many of our data center customers require. So far, we've been pleased with the traction, and expect this product will continue driving growth for us in the future. Meanwhile, we have also started to see a recovery in warehousing, distribution and logistics end markets. As interest rates and the cost of capital move lower, we expect further improvements from commercial new construction. Building Envelope adjusted EBITDA was down year-over-year, largely due to softer residential roofing demand and an $8 million increase in warranty provisions to reflect claims activity in our residential roofing business. We continue to see pressure on residential demand from higher interest rates and affordability concerns. These headwinds were partially offset by an increase in commercial roofing margins driven by resilient repair and refurbishment demand. Moving into 2026, we are focused on what we can control. We launched ASPIRE to improve our third-party cost base, a significant progress, and expect additional savings to materialize in 2026. While residential demand remains soft, we expect strong demand in commercial R&R, to continue and lower interest rates to support a broader recovery across new commercial roofing [indiscernible]. As a result, we expect low single-digit volume growth in commercial roofing. In residential, we expect flat volumes for the year, the second half being better than the first half. So far, Q1 customer demand has improved compared to Q4. Looking out further, we continue to see a long tailwind of growth in commercial R&R activity, driven by an aging commercial roofing stock that needs to be replaced. We are also encouraged by recent policy developments that aim to address affordability, which can support new construction and help bridge the housing. And as I mentioned earlier, our focus is on operations and efficiently running the business through different economic environments. We continue to see a path towards best-in-class EBITDA margins. Moving to Slide 17. We had a strong cash flow performance during the year. We generated approximately $1.5 billion, representing a 49% cash conversion rate on adjusted EBITDA. This is in line with our historical average cap conversion of approximately 50%. 2025 free cash flow was lower due to net income and increased organic CapEx growth. Cash flow is a key performance indicator for all of the P&L leaders across our business. Our free cash flow performance in 2025 demonstrates the strength of our working capital management and resilient underlying cash generation of our business. Turning to Slide 18. We are very pleased with the progress we made post-spin to further strengthen our financial position during our first year as Amrize. At the end of the year, our net leverage ratio was 1.1x, delivering on our commitment of less than 1.5x on a year. Net debt at the end of the year was approximately $3.3 billion, down over $1.5 billion from the end of the third quarter as we generated strong cash flow at the end of the year. Turning to Slide 19. In 2025, we established a solid foundation to deliver growth and return capital to shareholders in 2026. As of December 31, we had $5.3 billion in senior notes, nearly $6 billion of available liquidity and a low leverage ratio, providing us with ample firepower to accelerate growth this year. We are also effectively managing our interest expense and expect run rate to come down in 2026 compared to 2025 as we continue to optimize our capital structure. We expect our effective tax rate to stabilize in the range of 21% to 23% in 2026. Corporate costs are expected to be approximately $200 million this year, a modest step down from 2025. This sufficient capital structure and operating model allows us to continue generating significant cash in 2026 and drive profitability. This model also lays the foundation for our capital allocation strategy, putting us in an excellent position to announce our shareholder return plan while continuing to invest in organic growth projects and value and pursue value-accretive M&A. This speaks to our financial power, firepower and our business and flexibility of our balance sheet. With that said, I will pass it back to Jan to cover our 2026 outlook. Jan Jenisch: Thank you, Ian. When we look at the guidance of 2026, I'm confident that this will be the year of accelerating demand from our customers. The commercial market will continue its improving trends as lower interest rates support new products, adding to already strong demand for data centers, but also for other projects in logistics and manufacturing facilities where we have a lot of sideline projects. We have a good demand here, which will unfold throughout this year. In infrastructure, the demand will continue to be strong as governments prioritize modernization. Only in the residential market we will remain soft, with improvements rather towards the end of the year. We expect pricing and volumes in Building Materials to be key growth contributors in 2026. Cement pricing is expected to increase low single-digit percentage range, while aggregates pricing is expected to increase mid-single-digit percentage range. The market trends and increasing customer demand will drive volume growth both cement and aggregates. Building Envelope, we expect low single-digit growth in commercial roofing volumes, while we see flat volumes in residential roofing, with demand improving in the second half of the year. Very important for us, the ASPIRE program is a key priority and will deliver significant results in 2026. We are now targeting a margin expansion of 70 basis points and are on track with our goal of $250 million in synergies through 2028. Based on this momentum from our customers to all the programs under our control, we have set our 2026 guidelines or guidance with 4% to 6% revenue growth and 8% to 11% EBITDA growth. Both numbers include the contribution from our recent PB Materials acquisition. With that, I'll now pass back to Aroon and to open up our question-and-answer session. Aroon Amarnani: Thank you, Jan. Operator, we're now ready to begin the question-and-answer session. Operator: [Operator Instructions] Our first question is from Adrian Huerta from JPMorgan. Adrian Huerta: Can you hear me? Unknown Executive: We can hear you. Adrian Huerta: Ian, Jan and Aroon, congrats on the results. My question has to do with the cement prices. I want to understand a little bit better why this confidence on getting a low single-digit price increase for the year? I mean just from comments from other companies, it seems like a traction on price increases at the beginning of the year is not going as expected. What are you seeing on your own markets and where you see better pricing traction? And where do you think it might be a bit more difficult to get the increases that you're looking for? Jan Jenisch: Look, we are confident and we're going to see a price increase for our Amrize products this year. I think we made good progress in this. And we have -- I have nothing negative really to report here. Adrian Huerta: And if I may ask just a follow-up question. On the ASPIRE program, good to see a larger target on savings this year than the run rate of 50 basis points, now with a target of 70 basis points. Any more color on where are these savings, which should be somewhere around $100 million between SG&A or by segment within Envelope or Materials? Where most of the savings coming? Jan Jenisch: No. Great. Good question. Look, I mean, I'm very excited. As you know, we have over $7 billion of cost to third party, and we haven't done really the synergies. So we have doubled the company just in the past few years from $6 billion to $12 billion, and we have not really run that synergy program. So very exciting now to have savings. Of course, we have it in logistics. We have it in raw materials. And we have a lot of services, which are provided to us for maintenance, for equipment and other things. So we made great progress. You can see already in the fourth quarter results in Building Materials that we had quite a significant impact from the ASPIRE program. And this is just the start. So we are very confident to see a significant contribution this year from ASPIRE, and that's why I also guide this to be fully margin accretive. Operator: Our next question is from Anthony Pettinari from Citigroup. Unknown Analyst: This is [ Asher Stone ] on for Anthony. And just in terms of compare and contrasting the way you're looking at 2026 versus maybe how you're thinking 3 months ago, what are you seeing in terms of project backlog, cancellations, et cetera? And then on top of that, your positive volume growth outlook for '26, how does that break out between your different end markets between commercial, infrastructure and residential? Jan Jenisch: Look, I'm very happy how things are accelerating with all our customers. You have to see that the strongest market segment in last year was infrastructure, where we have this program is running and we are very happy to supply a lot of those projects. However, at Amrize, we do 50% of sales. We do have our commercial customers, and that's really key, and that market has really picked up from mid last year. And then you can see it from some indexes like [indiscernible], where we have increasing -- the number of standing projects, and we can literally see it with our customers. They have a backlog of projects, not only for data centers but for logistics, for infrastructure, around logistics centers for manufacturing facilities, and this will unfold. We have no canceled projects, a lot sideline and -- slowed down. And now we see that coming. The 2 cuts in interest rates has helped a lot. Many people -- most people always speak about the mortgage rates and the interest cuts. But actually, for us, the interest rate is more important for our commercial customers. And this is why I'm very excited for this year, and I -- we will see an accelerating demand and number of projects from our commercial customers. Operator: Our next question is from Trey Grooms from Stephens. [Operator Instructions] Trey Grooms: Got it. Can you hear me now? Operator: Please go ahead. Trey Grooms: Okay. Sorry for that. Just on the acquisition, maybe if we could touch on that. PB Materials, aggregates-led business with some ready mix. It's included -- I believe it's included in the full year guide. It's doing $180 million in annual revenue. Any other details maybe you could give us there around PB? The -- I understand it's in West Texas and geographically where it stands. But anything around the -- maybe the production or tonnage or how much it's adding to the overall volume being positive this year in aggregate? Any other details that maybe you could give us? Jan Jenisch: No, no, thank you. Great question. And look, we have a great slide on Slide 11. And I think what's key here for me is, first of all, the size of the acquisition, over $180 million. We're going to close that very soon now in Q1. So very excited now when the season really starts that we have this business with us. It's already a very well margin product business which has now significant synergies. I like that -- we bought a little map there where you can see how well that fits with our footprint in Texas, especially also our cement terminals and our [indiscernible] service all those sites. We have about 26 sites -- operating sites and 13 are quarries and another 13 are ready-mix sites. So it's a well-balanced business, and the other market leader around 30% of market share. So I'm very happy we can onboard now then with our very successful business in Texas. Operator: Our next question is from Bryan Blair from Oppenheimer. Bryan Blair: Ian, you had offered pretty good color on the visibility in commercial and infrastructure project outlook. I was hoping we could drill down a little bit on the residential side. And we know that there's weakness anticipated and [ understandably ]. So over the near term, looking to the back half, there's some degree of recovery against relatively weak comps. If we look at the low versus high end of your guidance, are you willing to quantify what is baked in specific to residential market activity through the back [indiscernible]? Jan Jenisch: No, I wish I could share with you, but I think what's exciting about residential, while it's only around 20% of our business, 50% of that is repair and refurbishment. And this gives us this resilient demand from the residential customers. And that was slowed down last year. We had much less storm impacts like we had in years before, but this has really slowed us down, especially in Q4, but we believe this will normalize this year again. So to the question, I'm quite confident that within refurbishment, we will see significant growth for us in 2026. New residential, that needs to be seen if that sees a recovery towards the end of the year or let's say, a start of recovery. But in our numbers, we are not planning for any growth in new construction residential. But very confident about repair and refurbishment. Operator: Our next question comes from Pujarini Ghosh from Bernstein. Pujarini Ghosh: One follow-up on the guidance. Please, can you confirm that you have not baked in any future potential acquisitions in the revenue and EBITDA growth guidance for 2026? And could you give some color around the CapEx spend that you are going to do in 2026? And how much new capacity addition in terms of the overall portfolio does these new projects bring in? Jan Jenisch: Thank you for the question. So the guidance of 4% to 6% revenue growth and 8% to 11% EBITDA growth is organic, including the PB Materials acquisition. We are very confident about these numbers. You have to see we have now this accelerating demand from our customers and our order books, which are on a good level. And then we have a lot of self-help. So -- and we see the pricing this year. We have the ASPIRE program, and we have the first impact from our new growth CapEx programs. So very excited to start to run our flagship cement plant in St. Louis at higher volumes and then the other CapEx will come. I think at this point, we don't give a break, which is maintenance CapEx and growth CapEx. But you can see, as we come somewhere from below $600 million to $900 million this year, you see already that we are more than doubling our growth CapEx. And this is a good thing. We have a lot of low-hanging fruits to debottleneck, to expand in new markets. This is a new plan of Malarkey to enter the Eastern markets or is it new terminals to distribute our cement and aggregates. And of course, we are excited to debottleneck some of our best-performing cement plants to increase the volumes, but also to further improve the efficiencies. Operator: Our next question is from Yassine Touahri from On Field Research. Yassine Touahri: Just one question regarding your Building Envelope business. We see that QXO has acquired Beacon and is aiming to substantially increase its margin and also double its EBITDA. And I think one of the lever is to work on changing the relationship with roofing product suppliers, including MIs. Could you give us some color on what has happened over the past year in terms of your relationship? And what has been the impact of these developments so far on your commercial strategy and potentially even your overall strategy as a group? Jan Jenisch: Look, we are partnering with the distributors in roofing, and they are very good companies. A company you mentioned, there are another 2 big nationwide, the roofing distributors. And then there are many local business in roofing distribution. I think what is important for us is that we are not focusing on a distributor itself. We are focusing on the end customer. So we have the ambition to build the best roofs. So all what we do is we focus on innovation, providing the best systems brand, everything. We are offering the training for the roofing contractor, we're offering the warranty, we're offering the roofing inspection. So when you look at our business, the distributor has an important function to make sure our product is on time on the construction side. But beyond that, we just focus on the best roof, the best service, the best warranty for the end customer. And we do -- I think we do about 30% of the roofing business is direct, about 70% goes through distribution. So I have nothing to report here. I know -- there are some distributors they like to talk a lot about their future. But I can just tell you, we partner with all of them. And we make decisions who is our partner in certain geographic markets. So I think we're in a very good spot here to further increase our market share and expand our systems for roofing. Operator: Our next question is from Arnaud Lehmann from Bank of America. Arnaud Lehmann: My question is regarding your Q4 free cash flow generation, very impressive, around $1.7 billion, I believe. Is it the normal inflow, in your view, considering seasonality? Or was there any specific effect related to the merger or to accounting that we need to consider? Jan Jenisch: No, I think it's nothing special, Arnaud. I think we have -- I mean our cash flow conversion from EBITDA is around 50%. This is what we're also targeting for the future. So I'm very happy. In this first year of Amrize, we just started the company in June last year. So we're very happy to -- that we were able to deliver, also considering our significant increase in CapEx spend, very happy to, nevertheless, deliver such strong cash flow so you, I think, should expect from us that this will continue in the years to come. Operator: Our next question is from Julian Radlinger from UBS. Julian Radlinger: Jan, Ian, Aroon, any color you can give investors on building Envelope earnings in 2026? I know you're guiding to overall positive volumes, commercial up a little bit; resi, more flat. But what about margins? If resi roofing volumes are as you expect in commercial as well, should we expect Building Envelope EBITDA to be up as well in 2026? Jan Jenisch: Yes. I mean, look, when you look at our guidance that we want to grow the EBITDA, 8% to 11% this year, you can imagine that this is true for both segments, for Building Materials and for Building Envelope. And we have strong programs in place, also with ASPIRE to increase our efficiencies in Building Envelope as well. We have pricing in place. And our target is to increase price over cost in Building Envelope in 2026. Operator: Our next question is from Tom Zhang from Barclays. Tom Zhang: Yes. Could you maybe just elaborate a little bit on the volume and materials? I think you said volume will be a growth contributor for the Materials business, both cement and aggregates. Is that a sort of low single-digit, mid-single-digit number? And is that predominantly driven by the self-help and organic growth that you have as you ramp Ste. Gen? Or do you think that's more a sort of market growth number? And I guess maybe just you link to that, can you talk a little bit about how you plan to approach the Ste. Gen ramp up? Obviously, it sounds like commercial and infra demand is okay, resi a little bit weaker, but it's still a decent amount of capacity to try and bring to the market. If you can just talk about the strategy of how you'll introduce those volumes? Jan Jenisch: I think it's important if you run Amrize and you guide the year and you give the targets to your sales force, to all the people responsible. I very much like to focus on ourselves. I don't make a big market prediction. So like the Ste. Gen expansion is based on our customers demanding the product. And this is how we work. And this is why we come up that we believe our volumes will increase in '26. And this is all I can say at this point. We make this all for the customers and we have good order books and again, nothing negative to report here. Operator: [Operator Instructions] Our next question is from Carlos Caburrasi from Kepler Cheuvreux. Carlos Caburrasi: Just wondering on CapEx, if you could give us some color regarding the expected investments during the rest of decade? I'm just wondering if we should expect a further acceleration from the $900 million in 2026? Or is it going to be kind of flat or a front-loaded performance that will normalize as we get closer to 2030? Jan Jenisch: I'm very happy to invest in the business. So I was happy that we have the opportunity. There are a lot of low-hanging fruits on the CapEx side, and we are doing all the good projects. So that adds up to around $900 million CapEx spend this year. I think this is already a significant increase, especially when you focus on the growth CapEx, this means we more than double the growth CapEx this year. And I think this is in a good spot. And then we will take it from here. Those projects we also introduced here, I think we have 2 slides on like 6 of the most important projects for us. And that also keeps us busy because you not only have to execute this and commission the plan or whatever the CapEx is about, you also have to commercialize the volumes into the market. So I think we are on a great track to fully support our growth ambition for 2026, and then we will see later this year what the CapEx is for the years to come. But I think $900 million is a good number for us. Operator: Our next question is from Keith Hughes from Truist. Keith Hughes: Can you hear me now? Operator: We've got you. Keith Hughes: There we go. A question on pricing on the roofing markets. Can you talk about in the fourth quarter, what pricing was like in residential and commercial and what you're expecting in your guidance for calendar '26 on pricing? Jan Jenisch: And for us in roofing is a bid to an aggregate cement, we like to talk straightforward about price. In roofing, it's a bit different. We like to talk about price of cost and as we shared a bit in the presentation, we were very satisfied with the commercial roofing margins. They increased. So we had a positive price over cost in commercial roofing. And we had quite a disruption in the residential market, which I think will be fully stabilized already in the first month of this year. But nevertheless, there was quite a big disruption you saw in the fourth quarter and also maybe a bit softer pricing. I think that pricing even will come back now fast already this year. So for the full year, I mentioned this before, we are targeting a positive price over cost growth in the Building Envelope side. Operator: We have no further questions at this time. I will now turn the call back over to Aroon Amarnani for closing remarks. Aroon Amarnani: Thank you, operator. Thank you all for joining us for our fourth quarter and full year '25 earnings call. We look forward to speaking with you after we report our first quarter '26 results in the coming months. Thanks, everybody. Operator: This concludes the Amrize Q4 2025 earnings conference call. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to The Andersons 2025 Fourth Quarter Earnings Conference Call. My name is Dave, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for playback purposes. I will now hand the presentation to your host for today, Mr. Mike Hoelter, Vice President, Corporate Controller and Investor Relations. Please proceed. Michael Hoelter: Good morning, everyone, and thank you for joining us for The Andersons Fourth Quarter Earnings Call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation via the webcast, the slides and commentary will be in sync. This webcast is being recorded, and the recording and the supporting slides will be made available on the Investors page of our website shortly. Please direct your attention to the disclosure statement on Slide 2 as well as the disclaimers in the press release related to forward-looking statements. Certain information discussed today constitutes forward-looking statements that reflect the company's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Actual results could differ materially as a result of many factors, which are described in the company's reports on file with the SEC. We encourage you to review these factors. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of the non-GAAP to GAAP measures are included within the appendix of this presentation. On the call with me today are Bill Krueger, President and Chief Executive Officer; and Brian Valentine, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Bill. William Krueger: Thanks, Mike, and good morning, everyone. Thank you for joining the call today to discuss our fourth quarter results and initial outlook for 2026. I would like to start off by thanking the entire Andy team for their hard work and strategic focus over the past several quarters. This effort allowed us to deliver a record fourth quarter EPS, confirming our portfolio's versatility and resilience in various market conditions. The fall harvest produced larger-than-expected volumes of grain in the Western Grain Belt and we were able to accumulate significant corn and sorghum at favorable basis values. This increased production added to space income at our assets, but limited our merchandising opportunities. Exports for wheat and sorghum from our Western assets saw sizable increases in the fourth quarter compared to the first 3 quarters of the year. In the Eastern Grain Belt, harvest results were more variable. Our team focused on sourcing corn for a record export program and strong ethanol demand, achieving higher seasonal elevation margins. Production at our ethanol plants resulted in another year of record volume and above-average yields. Ethanol exports again reached a record level, which helped to support improved ethanol board crush. However, our eastern ethanol plants were also impacted by higher corn basis and natural gas costs. Our plants continue to run well. In the fourth quarter, we continued to execute our stated strategy. Although our capital allocation may vary from year-to-year, we are committed to profitable growth in both Agribusiness and renewables. In renewables, after acquiring full ownership of our 4 ethanol plants last year, we recently announced an additional investment in our Clymers Indiana facility, which is expected to add 30 million gallons of incremental annual production in 2027. In the first quarter, we plan to begin operations at a renewable feedstock storage and blending facility in Ulysses, Kansas, where we will add capacity for low CI feedstocks to supply the bio-based diesel and feed markets. Agribusiness growth initiatives include continued improvements in our Skyland asset footprint, and we are pleased with their improved performance this quarter. Work continues with the Port of Houston expansion project, we expect completion of our upgrades to the grain elevator in Q2 of 2026. And the soybean meal export capacity should be online in late Q3 of 2026. After completing the first phase of the mineral processing facility in Carlsbad, New Mexico, we are adding processing capabilities in a second phase, scheduled to be complete in the second quarter. We continue the buildout of our corn and wheat light processing capabilities strategically located within our asset footprint to support key CPG customers. I'm now going to turn things over to Brian to cover some key financial data. When he's finished, I'll be back to discuss our early outlook for 2026. Brian Valentine: Thanks, Bill, and good morning, everyone. We're now turning to our fourth quarter results on Slide #5. In the fourth quarter of 2025, the company reported net income attributable to The Andersons of $67 million or $1.97 per diluted share and adjusted net income of $70 million or $2.04 per diluted share. This compares to adjusted net income of $47 million or $1.36 per diluted share in the fourth quarter of 2024. Overall, fourth quarter gross profit of $231 million increased 8% year-over-year, primarily due to higher volume and margins in renewables, as well as the addition of Skyland Grain in November of 2024. For the full year, gross profit of $714 million increased 3%, primarily due to the Skyland investment. Adjusted EBITDA for the fourth quarter was $137 million compared to $117 million in 2024 with an increase in renewables, partially offset by a year-over-year decline in the agribusiness. Full year adjusted EBITDA was $337 million compared to $363 million in 2024. Our effective tax rate for the fourth quarter was 19%. And for the full year, it was 16%. Our effective tax rate varies each quarter based on the amount of income attributable to noncontrolling interests as well as the recognition of nontaxable biofuels credits. Now let's move to Slide 6 to review our cash flows and liquidity. We generated fourth quarter cash flow from operations before changes in working capital of $110 million in 2025 compared to $100 million in 2024. Full year cash flow was $278 million compared to $323 million in 2024 with the reduction due to challenging ag market conditions in the first half of the year. This strong cash flow generation shows consistency and stability throughout the ag cycle, supporting our ability to fund growth projects and reinvest in our asset footprint. Our year-end cash balance is down and short-term debt reflects a modest increase, both of which are a result of the acquisition of our partner share of the ethanol plants completed in the third quarter of 2025. Next, let's turn to Slide 7 to review capital spending and long-term debt. We continue to take a disciplined and practical approach to capital spending and investments. but intentionally increased our level of strategic investment in 2025. This includes the handful of larger growth projects in both segments that Bill mentioned earlier, together with the full year impact of Skyland capital spending. Long-term debt to EBITDA at year-end was 1.8x, which remains well below our stated target of less than 2.5x. We continue to evaluate various acquisitions and internal growth projects and have a strong balance sheet that will support investments that meet our strategic and financial criteria. Now we'll move on to a review of each of our segments, beginning with Agribusiness on Slide 8. Agribusiness reported fourth quarter pretax income of $46 million and adjusted pretax income attributable of $45 million compared to $56 million in 2024. The large harvest provided significant quantities for our assets to handle particularly in our Western footprint, where we were able to acquire grain at favorable values and realize good basis appreciation. We also made considerable sorghum export sales in December, supporting our Skyland and Port of Houston assets. Our Eastern grain assets also had a solid fourth quarter with strong elevation margins and a significant portion of the corn acquired moving into the export markets. Our merchandising portfolio remained challenged as grain markets were well supplied at relatively low prices. Our premium ingredients business had solid results, and our Skyland investment also saw improved results in the quarter. Agribusiness had adjusted EBITDA for the fourth quarter of $80 million compared to $88 million in 2024. Adjusted EBITDA for the full year was $187 million compared to $218 million in 2024. Moving to Slide 9. Renewables generated fourth quarter pretax income attributable to the company of $54 million, a significant increase when compared to $17 million in 2024. This increase reflects the full ownership of the 4 ethanol plants following the acquisition of our partner share in the third quarter of 2025. Strong operations in our ethanol plants resulted in another quarter of record production. Ethanol board crush margins were up $0.15 per gallon year-over-year. However, this was partially offset by higher natural gas costs and firmer Eastern Corn basis. The impact of 45Z tax incentives was $15 million for the quarter and $35 million for the full year. These credits reflect our full ownership since August and relative share of the gallons produced for the first 7 months of 2025. Renewables had EBITDA of $69 million in the fourth quarter of 2025 compared to $41 million in the fourth quarter of 2024. For the full year, renewables generated adjusted EBITDA of $203 million compared to $189 million in 2024. We -- and with that, I'll turn things back over to Bill for some comments about our early 2026 outlook. William Krueger: Our 2025 results once again proved the resilience of our business model and creates optimism for 2026. Although we had external factors challenging our Agribusiness during the year, our team stayed committed and finished the year with a solid fourth quarter. Conversely, there were several favorable external market factors that the renewables team quickly identified diligently researched and then executed to drive bottom line results. We expect that 2026 will bring better financial results in Agribusiness with more certainty in our global grain markets, while we believe demand for ethanol and related products will remain strong. We are focused on continuous improvement in our safety culture and in our enterprise business support organization. Our agribusiness outlook remains focused on connecting supply to end users and export demand. With the large fall harvest, our Western footprint should see basis appreciation into 2026 and sorghum exports have continued into the new year. Our Eastern assets should benefit from higher elevation margins on corn export programs that may not see the same basis appreciation as our Western footprint. The current farm- gate environment is faced with challenging economics. Domestic demand for production is critical to the U.S. farmer. The passage of year-round E15 and finalization of increased RVOs as proposed, would provide significant support for ongoing domestic demand. as a significant amount of grain remains stored on farm and will need to be marketed, we are ready to act as a conduit to finding consumptive demand and supporting our farmers with disciplined risk management tools. While off prior year highs, we are forecasting higher-than-normal planted acres in 2026. This combined with higher acres during the 2025 harvest would necessitate additional nutrient applications, primarily nitrogen. These factors should benefit our fertilizer business but volumes are dependent on farmer decisions and could be challenged by their current economics. We believe that we are well positioned to serve our customers with crop inputs during spring applications and with our specialty liquid fertilizers during the growing season. I mentioned we expect to have several of our larger capital projects completed in 2026. Finalizing these projects will allow us to operate more efficiently, along with handling increased volumes of products like soybean meal, cleaned corn and wheat. We continue to assess internal growth projects and acquisition opportunities that support our growth strategy. We expect that the challenging 2025 market may bring us additional acquisition opportunities to evaluate. In renewables, we expect that ongoing domestic and global demand will continue to support ethanol prices and volume. We also expect to see clarification of biofuels policies such as the Renewable Volume Obligations and small refiners exemption reallocation. We are optimistic that year-round E15 legislation will eventually get congressional support as this would provide great benefits to the domestic ag economy. We recently received the proposed regulations around the 45Z tax credit and are pleased with the clarifications that were provided. As usual, maintenance shutdowns in the industry and summer driving increases could positively influence ethanol demand and crush margins beginning in the second quarter. We continue to invest in our plants and consider our assets to be among the best in the industry. The recently announced investment in additional production at our Clymers plant is the latest example of this commitment. We have additional investments planned to improve efficiency and save operations in our plants and increase both the quality and yield of distillers corn oil. As we mentioned at our Investor Day in December, we expect our 45Z tax credits to increase in 2026 and with the removal of the indirect land use change penalty. The Class 6 well permit for Clymers continues to move through the required review process. We are actively pursuing investments aimed at reducing the carbon intensity of our ethanol production through alternative energy sources and the previously mentioned sequestration. Lastly, we remain interested in the acquisition of additional ethanol production facilities that align with our criteria. In 2025, we demonstrated our capability to generate positive returns and cash flow during the lower range of the ag cycle. We anticipate generating ongoing cash from operations that will support our stated strategy. Our balance sheet is well positioned to support future growth. We will maintain responsible decision-making to benefit our customers and optimize shareholder value. We expect to exit 2026 with run rate EPS, more than our prior target of $4.30 and recently updated our long-range target of $7 as we exit 2028. And now we are happy to take your questions. Operator: [Operator Instructions] Our first question comes from Ben Klieve with [ StoneX ]. Benjamin Klieve: Congratulations on a really great end of the year here. First, I think the biggest surprise to me in the quarter was really the strength of the legacy Skyland business. I'm wondering if you can elaborate on a couple of things. First of all, was that performance something that kind of surprised you guys? Or did that fall in line with your expectations throughout the quarter? And then second, with 1 -- with a full year now of Skyland integrated, can you break down the EBITDA contribution of that business within 2025? William Krueger: Ben, this is Bill. I'll take the first part of it. I do not think that it was surprising when you consider the backdrop of the large fall harvest. Being new to the business, I don't have access to all of their records for volume handled -- but compared to any numbers that we had considered, the fall harvest in Southwest Kansas and the Panhandle of Texas allowed us to acquire more harvest bushels than we were planning on going into the year. Brian Valentine: And Ben, with regard to the EBITDA contribution, I think when we originally talked about that transaction, we said we expected it to be kind of a run rate of $30 million to -- $30 million to $40 million per year. And then last year, we said we thought it would be more about half of that range. It finished the year just shy of $20 million. So it was right in that range. Benjamin Klieve: Okay. Very good. One other one for me. You guys talked about the kind of outlook for fertilizer application this year. I'm wondering, kind of given the kind of big variables that you outlined, how you're positioning that business here going into the spring application season. Has kind of the relative uncertainty here kind of change your kind of inventory build thus far in the season? Or are you really -- is really the strategy in '26 unchanged relative to the historic years despite the relative uncertainty that I think is in this space. William Krueger: Ben, I'll take that question. This is Bill. So let's maybe. Rewind just a little bit and talk about fall applications that will give us a little bit better vantage point looking forward into 2026. So if you start in the Western U.S., we actually saw substantial applications of ammonia, just due to the nearly perfect application season, and obviously, as you know, with ammonia going down and hydrous ammonia going down, that is only going to be used for corn acres. So that's what drives our belief that corn acres will be higher than normal, but less than 2025 acres. As you move to the east, where we had a little less favorable application weather, we believe that we're going to be well poised for stronger-than-normal applications in Q1 and obviously, with the recent bean rally versus the corn futures, there is some concern that we'll have bean acres potentially taking away some corn acres. But at the end of the day, we still believe across even the Eastern Corn Belt, it's getting kind of late to be switching from corn to beans. So we feel like we'll have slightly higher than normal applications for Q1 and early Q2 in the Eastern Corn Belt. Operator: The next question comes from Ben Mayhew with BMO Capital Markets. Benjamin Mayhew: And yes, congrats on a really strong finish to the year here. So my first question is around the agribusiness segment outlook for 2026. And I'm just wondering if you can highlight the biggest potential profit opportunities for the Agribusiness segment and '26 versus '25. And kind of like what needs to fundamentally happen to make these realization? William Krueger: That's a good question, Ben. And I'm going to I'm going to start with the assumption that we'll have a normal growing season. But as we look back and try to compare the first half of '25 to the potential first half of 2026, it feels today like we're going to have more certainty around policy on exports. So with that assumption, we should see trade free up both domestically and for exports. First half of 26 versus first half of '25. That's the #1 area that I think will give us a little bit more stable earnings. As I just commented around fertilizer with the large harvested acres in 2025, we are going to need to apply more nitrogen across the board for the '26 acres that we are expecting. Again, the economic conditions at the farm gate will drive a little bit of that, but we feel that will be pretty consistent on our PN outlook for 2026. And then probably the last area that will should benefit agribusiness is the continued biofuels policy. And as mentioned, with the assumption that we'll see the RVOs come out as proposed. That should give us a little bit of an uplift for the underlying grain and soybean trade domestically. Benjamin Mayhew: Great. And then my next question would be about the strength in the fourth quarter earnings was very apparent. And I'm just wondering about momentum in the first quarter, '26, particularly with the ethanol business. So I was hoping you could just update us on year-to-date kind of where we are with the board crush and with -- before we head into maintenance season, it seems like the inventory levels have maybe picked up a little bit. So if you could just kind of reconcile the ethanol segment and where we're at right now and where you expect to be throughout the year profit-wise. William Krueger: Well, as you know, we don't provide guidance by segment. but we can talk to the transition from Q4 to Q1. I'll talk about the fundamentals and if Brian has anything to add on the financial aspect, I'll let him do that. As we entered Q1, which is traditionally a lower board crush at the time of the year and has been over the last several years. we actually had slightly stronger board crush than I think the industry had expected. There are parts of our area where we did see a little bit higher corn basis and nat gas costs continue to roll into Q1. But the fundamentals of ethanol, both export and domestic continue to feel very strong on Q1. And we don't have any reason as we look into the future to assume there's going to be a drastic change on '26 versus '25 from the fundamentals. We also believe that the opportunity to continue to drive efficiency at our plants exists. And with the current biofuels policy should provide support for those capital investments. With that, I'll let Brian hit on some financials. Brian Valentine: Yes. And then just with regard -- I mean, you know Q1 is always kind of seasonally low, but we should see -- we expect export demand to remain high again this year. We expect the seasonal uplift with summer driving season. And then what I would say is the other 2 things to factor in would be the full year impact of the full plant ownership -- and then we talked about 45Z for the full year of $90 million to $100 million, and that's kind of still the range that we would expect. Operator: Our next question comes from Pooran Sharma with Stephens. Pooran Sharma: Thanks for the question. I will be the third to say, congratulations on the strong results. Wanted to start off with Skylands. I understand you said it finished the year with just shy of $20 million, but it does sound like you're off to a strong start. You did quote you did note of strong basis appreciation opportunity for your Western assets. And so I just wanted to maybe ask about Skylands contribution for 2026. Do you think that this business will be able to achieve the $30 million to $40 million that you had initially targeted just given the stronger start to 2026? William Krueger: This is Bill. I will let Brian address the financial question. The one thing I do think is important to discuss here. When we talk about our Western footprint on assets, there are more assets than just Skyland. We have a nice setup in Nebraska we have continued to have a facility footprint in Idaho and Delhi, Louisiana. So just when we talk towards our western asset footprint, it is larger than just Skyland so that -- to maybe clarify. So then I'll let Brian talk about question -- you're right. I mean we -- what I would say is for 2026, our expectation . For 2026, our expectation is probably somewhere in the $25 million to $35 million range for EBITDA. So we do expect it to normalize into that $30 million to $40 million range that we originally talked about over time, assuming that the conditions get back to kind of a mid-cycle type market. Brian Valentine: Okay. Great. Appreciate the color there and appreciate the clarification as well, Bill. On my follow-up, wanted to understand a little bit about farmer selling dynamics. Now you said on the prepared comments, there's still a lot of crops on -- in storage. And I wanted to get your sense on what do you think drives more selling here? Is it more clarity in the RVO? And do you have a sense as to kind of timing when that occurs, when farmers would be willing to be more commercial. It's a good question. What I would tell you is the easy answer is higher prices. And that's really what the farmer is looking for today. it's pretty widely documented on the economics at the farm gate. And so the farmer is going to hold off as long as they can. The payments that they are receiving this month will help them be able to go longer before generating cash flow. So as we look at it, it's not as important to us when the timing is for most or nearly all farmers, they will have to move a substantial portion prior to next year's harvest. If a farmer has grain in store today and we don't see a sizable rally, they're going to want to make sure that the corn and beans that they're going to plant this spring are in the ground and have a good start to the growing season before we're going to see a substantial amount of selling in our opinion. Again, a large rally in the price similar to what we've seen in soybeans lately can change that forecast. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mike Hoelter for any closing remarks. Michael Hoelter: Thanks, Dave. We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday, May 6, 2026 at 8:30 a.m. Eastern Time when we will review our first quarter results. As always, thank you for your interest in The Andersons, and we look forward to speaking with you again soon. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to the Bel Fuse Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Jean Marie Young with Three-part advisers. Please go ahead, Jean. Jean Young: Thank you, and good morning, everyone. Before we begin, I'd like to remind everybody that during today's conference call, we will make statements relating to our business that will be considered forward-looking statements under federal securities laws, such as statements regarding the company's expected operating and financial performance for future periods, including guidance for future periods in 2026. These statements are based on the company's current expectations and reflects the company's views only as of today and should not be considered representative of the company's views as of any subsequent date. The company disclaims any obligation to update any forward-looking statements or outlook. Actual results for future periods may differ materially from those projected by these forward-looking statements due to a number of risks, uncertainties and other factors. These material risks are summarized in the press release that we issued after market close yesterday. Additional information about the material risks and other important factors that could potentially impact our financial performance and cause actual results to differ materially from our expectations as discussed in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and our quarterly reports and other documents that we have filed or may file with the SEC from time to time. We may also discuss non-GAAP results during this call, and reconciliations of our GAAP results to non-GAAP results have been included in our press release. Our press release and our SEC filings are all available at the IR section of our website. Joining me today on the call is Farouq Tuweiq, President and CEO; and Lynn Hutkin, CFO. With that, I'd like to turn the call over to Farouq. Farouq? Farouq Tuweiq: Thank you, Jean, and good morning, everyone. We appreciate you joining our call today. I want to begin by expressing a big thank you to our global team for making customer service and meeting demand their top priorities and for delivering innovative technologies as a key partner to our customers. As a result, 2025 was a milestone year for Bell, with record revenue and EBITDA. We delivered net sales of $675.5 million for the full year, a 26.3% increase over 2024 and achieved a record GAP and non-GAAP EPS. We Fourth quarter sales reached $175.9 million, up 17.4% year-over-year. Our gross margins expanded to 39.1% for the year, reflecting strong execution and operational discipline. Aerospace and defense, including space, continued to be strong drivers for us in 2025. For the full year, A&D accounted for 38% of our consolidated sales with 28% from defense and 10% from commercial aerospace. Recovery in the networking end market and growth in AI applications also contributed to higher sales in 2025. Order volumes remained strong across multiple end markets throughout the year, resulting in the full year book-to-bill ratio of 1.1. We have seen continued improvement and strength heading into Q1. This sustained momentum in incoming orders highlights a healthy demand environment across our end markets and positions us well as we move into 2026. Our team delivered these record results despite headwinds from material pricing, particularly gold, copper and PCBs and unfavorable FX movements in the peso, renminbi and shekel. We're actively monitoring these factors and have and will continue to take pricing actions to mitigate incremental cost, ensuring continued margin strength. Operationally, we successfully completed the closure of our China facility in Q4, transitioning operations to a third-party supplier without interruption to the business. This move is part of our ongoing efforts to optimize our global footprint and drive cost efficiencies. We also made significant progress in strengthening our balance sheet, paying down our debt by $90 million during 2025. We -- this has created additional capacity and flexibility for future investments and potential acquisitions as we continue to pursue growth opportunities. Looking ahead to 2026, we anticipate continued growth in aerospace, defense, space and AI, the same revenue drivers that have benefited Bell over the past few quarters. Additionally, we have seen positive shift in sales across the networking, consumer premise wiring markets as well as through our distribution channel. The rebound in these areas are expected to continue into 2026. We also foresee increased raw material input costs and a weaker USD, which will require us to proactively manage pricing and pass costs along where appropriate. Our pipeline for M&A activity remains active, and we are excited about several opportunities currently in various stages of evaluation. We anticipate a better backdrop in terms of M&A opportunities as the market noise settles down a bit in 2026. As announced a few weeks ago, we're excited to welcome Tom Smelker to our executive team. Tom joins us from Mercury Systems, bringing valuable experience and a fresh perspective in aerospace and defense. His leadership will help us better align our organization with changing customer needs and industry trends. As we continue to evolve, we are reviewing our segment structures to ensure we're well positioned for future growth. With aerospace and defense now representing a significant portion of our business, we see opportunities to further tailor our leadership and strategy to the unique demands of these markets. Before turning the call over to Lynn here, I would like to take a moment to recognize Pete Bittner, President of our Connectivity Solutions business, who will be retiring in April after 23 years with Bell. Pete has been instrumental in shaping and growing this segment and leaving it in the great conditions as he pursues his next chapter, and we thank him for his many meaningful contributions. We wish you great luck, and you'll be missed, but will surely enjoy his time with his wife and family. I'd also like to take a moment to recognize Dan Bernstein, who transitioned out of the CEO role in May 2025. This last year has been 1 of significant transition for Bell, and I want to sincerely thank Dan for making it a seamless one. Our business transformation, which began years ago under Dan's leadership, laid a strong foundation for the company's continued success. His vision and commitment to Bell's growth have positioned us well for the future, and we're grateful for the guidance and dedication. On behalf of the entire organization, thank you, Dan, for your outstanding contributions and for setting Bel up for success. With that, I'll turn the call over to Lynn to run through the financial highlights from the quarter and provide color on the outlook for Q1 2026. Lynn? Lynn Hutkin: Thank you, Farouqu. From a financial standpoint, we had another strong quarter and year with continued margin expansion and solid sales growth across all segments. Fourth quarter 2025 sales were $175.9 million, up 17.4% from the same quarter last year. Full year 2025 sales totaled $675.5 million. a 26.3% increase over 2024. On an organic basis, sales grew by $41.5 million or 7.8% over 2024. All 3 product segments delivered organic growth for the quarter, demonstrating the strength of our diversified portfolio. Profitability improved alongside sales with gross margin rising to 39.4% and Q4 25, up from 37.5% in Q4 '24. I -- for the full year 2025, gross margin was 39.1% compared to 37.8% in 2024. This margin expansion was driven by improved absorption of fixed costs in our factories due to higher sales volumes and by strong execution within each segment, maintaining discipline around SKU level profitability. These results highlight our ability to drive value through operational efficiency and strategic focus. Now turning to our product groups. Power Solutions and Protection delivered another exceptional quarter with sales reaching $92.5 million in Q4 '25, an increase of 18.5% compared to the fourth quarter of last year. The sales growth in the Power Solutions segment was driven by several key end markets, including a $1.5 million increase in sales of our front-end power products, serving the network networking end market and Q4 '25 compared to Q4 last year. Fourth quarter sales into AI-specific customers reached $4 million in Q4 25 up from the $3.3 million in Q4 '24. Fuse product sales were up by $1.4 million in Q4 '25, a 31% increase from Q4 '24. Sales into consumer applications increased by $1.8 million in the current quarter, up 32% from Q4 '24. And just to note, in our Power segment, this is also where we had the acquisition last year. So there was some organic growth on the defense side as well. These areas of growth were partially offset by a decrease in sales of our rail products by $4 million and e-mobility sales were down $1.1 million as compared to Q4 '24. The gross margin for the Power segment was 44.5% for the fourth quarter of 2025, representing a 390 basis point improvement from Q4 '24. This improvement was primarily driven by higher power sales into the aerospace and defense end markets, a favorable shift in product mix and better absorption of fixed costs at our factories. Our Connectivity Solutions group achieved sales growth of 15.1% during the fourth quarter of 2025 as it reached $60.5 million compared to Q4 '24. This improvement was due to the continued strong performance in commercial aerospace applications, where sales totaled $18.2 million, an increase of $3.8 million or 26% year-over-year. Sales into space applications amounted to $2.6 million in Q4 '25, up 53% from Q4 '24. Connectivity sales through the distribution channel were up $3.8 million or 20% versus Q4 '24, primarily due to shipments into the defense end market through the distribution channel. Profitability within the Connectivity segment continued to improve with gross margin for the group rising to 37.2% in Q4 '25 from 36.6% in Q4 '24. This margin expansion reflects the benefits of operational efficiencies achieved through improved revenue, a more favorable product mix and facility consolidations completed last year. These positive factors were partially offset by minimum wage increases in Mexico. Lastly, our Magnetic Solutions group sales delivered a solid quarter with sales reaching $22.9 million in Q4 '25, a 19.1% increase compared to Q4 '24. This performance was primarily driven by higher shipments to a major networking customer. Gross margin for the group was 27.3% in Q4 '25 and down from 29.1% in Q4 '24. This margin differential was due to minimum wage increases in China, an increase in material costs, primarily in gold and PCBs and unfavorable foreign exchange impacts related to the renminbi. Research and development expenses totaled $8 million in Q4 '25 in representing an increase of $1.1 million compared to Q4 '24. This increase was primarily attributable to the inclusion of Entercom's R&D costs, which amounted to an incremental increase of $1 million during Q4 '25. We anticipate that R&D expenses in future quarters will generally remain consistent with the Q4 '25 level as we continue to invest in new technologies and solutions to support our customers and drive long-term growth. Selling, general and administrative expenses for the fourth quarter of 2025 and were $32.6 million, down $2.2 million from the $34.8 million in Q4 '24. -- primarily driven by lower acquisition-related legal and professional fees in 2025 compared to 2024. Turning to our balance sheet and cash flow. We closed the year with $57.8 million in cash, down $10.5 million from last year, primarily driven by our proactive efforts to strengthen our balance sheet, including paying down $90 million in long-term debt, resulting in $197.5 million of total debt outstanding at December 31, 2025. Additionally, we made $3.5 million in dividend payments and we invested $12 million in capital expenditures to support growth and efficiency initiatives. These outflows were partially offset by $7.8 million in proceeds from property sales, and $1 million from the sale of held to mature securities earlier in the year. During the full year 2025, we generated cash flows from operations of $80.6 million. Taking into account our swap agreements, the weighted average interest rate on our debt balance at December 31, 2025, was 4.4%. Looking ahead to the first quarter of 2026, we continue to see strength across all 3 segments. Historically, our first quarter tends to be our lowest sales quarter of the year, given the impacts of the Lunar New Year holiday in China. In light of this historical trend and based on the information available as of today, we expect Q1 26 sales to be in the range of $165 million to $180 million. Gross margin is expected to be in the range of 37% to 39% and given anticipated headwinds related to higher material costs and the unfavorable FX environment we are in. Overall, our consistent performance strategic investments and operational excellence have positioned Bel for continued success. We remain committed to driving shareholder value, innovating for our customers and capitalizing on growth opportunities across our markets. I'd now like to turn the call back to the operator to open the call for questions. Operator: [Operator Instructions] The first question is from Bobby Brooks from Northland Capital Markets. Robert Brooks: So I wanted to touch on kind of sales initiatives moving forward. So you guys brought in the new head of sales about a year ago, right? And I'd just be curious to hear where he sees the most interesting opportunities for growth. Obviously, for Roop, when you initially joined as CFO a handful of years ago, you had a massive shift in the margin profile of the company, which A lot of that was sort of low. A lot of that was sort of like low-hanging fruit that you targeted. So I'm just curious to hear if that sort of same scenario. If Ooma has seen that sort of same scenario and again, like what he sees as the largest opportunities to go after. Farouq Tuweiq: Yes. Thanks, Bobby, and good to speak with you here. I think that's a pretty nuanced question. As a reminder, we are largely in a medium- to long-term design cycle businesses, right? So as we think about influence, and we think about A&D, I'd probably suggest the largest part of E&D for 2026 is going to be simply receiving orders from the customers as they get funding and deployment. So if we were to think about sitting early on in the year here about new wins and when they get funding, you're at least a year out probably 1 to 2 years before you monetize them. And some of our shorter design cycle businesses on the other end, I would say something like fuses you could probably see a win a couple of quarters out, and that translate into some sales of some of our consumer business. So we are a long-cycle design business. There's no quick claims here. We sell technology. We want to get in with the customer. We want to do the hard stuff. -- and therefore, that does take a while. If we look at the past few quarters on some of the benefits I have in there, that has been a reflection of the work that the team has done at a global level. within the various businesses, right? So I would suggest that the wins and the performance that was probably not much due to sales efforts that happened in Q4, right? This is stuff that probably happened early on in 2026. So we are seeing the benefits of the global team folks in doubling down. When we look across the business, we have new wins across probably all of our end markets, maybe a little bit less so in places like e-mobility or maybe some of our, I'd say, rail is kind of a little bit of a slow year. But I would say more often than not, we always have new wins. And when we think about the funneling process, right, we want to make sure we're going after a robust set of opportunities that are good opportunities and try to convert them to sales. And that process, we started a while back. Now that's not to suggest that we don't have work to do. On the last call, we talked about CRM implementation in Q4. We did 3 -- a little over 3 dozen worth of contracts with our reps in the U.S. to really lean into new opportunities. So we're trying to move the whole system forward from compensation structures to software and data to a shift and it's been happening, right? It's evolutionary. So we've seen the wins. Where is it going to come from? I mean we think probably there's a lot of money going into A&D data centers, AI, a lot of obvious interest going in there. But quite frankly, our consumer business did very good last year. So I think what we like about us is we touch a lot of end markets, and we like the way they're looking today heading in 2026, a little bit more maybe than early '25 or '24. So a long answer to your I just want to caution, we're not a quick turn business, and we're trying to sell more design-in type work or modified solutions versus just purely off-the-shelf stuff. Robert Brooks: Absolutely. Really appreciate that detail color for. And then -- maybe just turn into the 1Q guide, very, very impressive, but just wanted to maybe unpack that a little bit more and maybe hoping to get a little bit more granular on the expectations for growth across the 3 segments? Lynn Hutkin: Sure, Bobby. So as we look to the first quarter, and I guess I'll compare it to this recent Q4 that just ended here. We're seeing a lot of the same areas of strength across all 3 segments. So not seeing much in the way of significant shifts or changes from Q4 to Q1. I think the only variable in there is the Lunar New Year holiday, which impacts primarily magnetics and then to a lesser extent, power. So those are the areas where we may see a little bit of softness from Q4 to Q1. But Other than that factor, everything is pretty similar to the Q4 drivers. Robert Brooks: Got it. I appreciate the color there. Congrats on the great quarter. Operator: The next question is from Christopher Glynn from Oppenheimer & Company. Christopher Glynn: I just want to build on Bobby's question about developing the commercial funnel. So you mentioned focus on designing and modified by modified burs off-shelf is how you're developing the funnel that makes sense. We've heard that. Curious if you're noting any traction in win rates for us historical as you mature this -- these strategies. Farouq Tuweiq: I think we're doing a better job at defining what a win is and how we want it to be at certain levels of margin. The other thing I think we are moving more towards 2026, and we talked about last call, is we want to really try to bring the whole Bel portfolio to our customers. I think historically, we've been really more focused around selling specific products like fuse or a connector power supply. And we do need to do a better job at doing a little bit more systems type sales to our customers. Now this is a little bit of a longer journey. . But the idea there is we want to get more alignment to the customer, solve more of their problems and challenges and really be a little bit more of a solutions address the difficult things for our customers. So it's not just simply about more shots on goal, which we are seeing. We're seeing better shots on goal, but we still want to continue to evolve to higher content on goal. So Yes, we're seeing better also the markets a little bit better place, right, so which creates more opportunity for us. I think the team also remember, we spoke on the last call, where we started creating new internal groups and structures to align to that. So for example, we created a key accounts group, right, which we have not had that most of the time it was kind of sitting inside the BUs, now we want to have a more Bel focused key account groups that bring all of our products to the customers because we do have a lot of SKUs. Same thing on the business development efforts. We're [indiscernible] the teams around end markets as we think about products and directions. So I would also argue customer service is an extremely important part of this as we create an easier user experience for our customers. And we just have a lot of different e-mail addresses to customers in different forms and everything and the like or different pricing list to our distribution partners. So I think calling these things out to not underemphasize that there is a robustness in what we're doing that needs for you a pervasive in our holistic approach to the market. So the short answer is yes, there, Chris, but it's also more than just trying to get more shots on goal. Christopher Glynn: Great. That was great color, for. And then on the AI customer base, you mentioned that as one of the continued drivers of growth next year. You've often described it as being in early stage. I think with single source to well funded more start-ups for us the headline, big 3 or 4. Just curious if any of those customers are potentially positioning for adoption curve to their technology where you can cotail, not necessarily first half of '26, but more conceptually. Farouq Tuweiq: Yes. I think the answer is yes in short. The body language from our customers, I'd say, across the networking side. But specific to your question around AI, yes, and that is obviously reflected based on the bookings that came in towards the end of the year last year, the discussions that are ongoing with our customers and obviously, the ultimate outlook that we put out there in the quarter. So the answer is yes, we're seeing the positive momentum scaling and continuing to move forward. And also, let's not forget, there's a networking set of customers that bundle our product into their solutions that ultimately make it to folks like hyperscalers, right? So when we think about networking, it is obviously AI, and that is not an insignificant number for us, which is nice to see the team's efforts pay off there, but also networking side is just as important because we do touch AI in a couple of different ways, right? Christopher Glynn: Yes. Understood. And then just defense, just wanted to clarify. I get a lot of questions about the mix. I think you're pretty broad-based rotor, fixed wing, munitions, comms, radars, maybe even just curious if all those categories, if that is accurate, where the weightings are. Farouq Tuweiq: Yes, in short. Christopher Glynn: Okay. Okay. Great. Understood. I understand it... Farouq Tuweiq: Yes, I would say we want to be careful with kind of talking about at our side here, right? But all the kind of mean -- we're on all the major programs and some not major programs. So it's a very diversified portfolio anywhere to the things that you called out, munitions, things that fly, right? And we're doing more ground obviously, space is a little bit tangible to that as well. But we cover encryption communication, right? So all the things that you talked about, we probably touch it. Christopher Glynn: Great. And last one, just a housekeeping -- any thoughts on share class consolidation. I think 1 of your holders had generated a headline. Farouq Tuweiq: Yes. I would say I think from the gist of it, the -- our shareholder structure is a little bit more nuanced from the perspective of the economic differential between the 2 shares, right, versus just a vote, no vote. So that's one. I would say, as an appropriate due course, we'll have a company response and views on that at the appropriate time. I don't want to speak on the behalf of the board, but at the appropriate time, we'll address that. And also we -- I think the -- what we're trying to do here, Chris, and we've really been at this for the last handful of years here, is we want to our fiduciary dairies to serve the best interest of all of our shareholders, As and the Bs. And as we build a company that's set up for the future, with good performance and investing in our employees and our customers, ultimately, that's kind of what moves the needle. So I just wonder, we're very aware of the fiduciary duty, but I think the Board at the appropriate time, will have a response. That's a little more formal to this. Operator: The next question is from Theodore O'Neill from Litchfield Hills Research. Theodore O'Neill: Congratulations on the good quarter. . Farouq Tuweiq: Thank you, Theo. Theodore O'Neill: So are you guys seeing any impact from the spike in prices on memory? . Farouq Tuweiq: I was going to say, our customers, I would say, largely are the ones that feel it. We not directly are impacted by that. Obviously, we have our other let's say, spike in prices that we're dealing with, like gold and copper we spoke about. But on the memory specifically, it's more, I'd say our customers are influenced by that. Theodore O'Neill: Okay. And on the gold, copper and print circuit board side and the weaker dollar, do you have the ability to hedge some of those? Or do you pass the pricing on? How do you adjust for that? Farouq Tuweiq: Yes, that's a good point. Today, we hedge our FX exposure from a raw material perspective, we're in the business of providing solutions to our customers and technology. So we want to focus on what we're good at. We're not running a prop desk care trying to hedge everything, right? So I think our approach has been we want to try to do our best to mitigate and offset price increases, but to the ability -- and work with our customers to the extent that we can't. We, unfortunately, have to pass that along, and I think that's not unique to us and really kind of in line with the supply chain behavior. But ultimately, we want to be great partners to the extent we can offset it. Sometimes we will find alternative sources. We want to be a solutions provider really to our partners. But in cases we can't, we need to do the unfortunate decision of passing it along. Theodore O'Neill: Okay. And finally, on the Aerospace side, do you have any exposure to the drone market. Farouq Tuweiq: I would say we generally do, yes, I think the drill market is going through some interesting things, right, where there is, let's call it, more consumer that tends to get retrofitted as we're seeing out in the world in, like Ukraine. That's not really our market. We're more in the military kind of U.S. primes and some of the European and Israeli OEMs, the stuff they manufacture. So we're not in the, let's say, drones that you and I are maybe buying or in the more sophisticated drone game. . Operator: The next question is from Greg Palm from Craig-Hallum Capital Group. Unknown Analyst: This is Dany Egerton for Greg today. Maybe just hitting again on A&D and maybe unpacking how you saw that develop in the quarter maybe between Enercon and Corbel and maybe what you saw in some cross-sell business. And then obviously, we know kind of about the increased spend. But as you look into 2026 here, what gets you excited about the growth in this business? And what kind of visibility do you have here? Lynn Hutkin: Yes. So Danny, I'll take the first part of that question. So the growth that we saw when we talk about defense, it's both in our legacy singe business and through Enercon -- we definitely saw growth in the Enercon business. As we look at the business, I think it's important to also keep in mind what we sell through our distribution channel. So there are direct sales and then there are sales through distribution, which we don't really break out into those end markets today. But we did see, as we mentioned in the commentary, we did see a nice increase in distribution that related to growth in defense for that fine business. So I would say that it was pretty split between the 2. So both Sinch and Enercon had robust growth in defense in Q4. Farouq Tuweiq: One thing we would just add [indiscernible] 6, right? We're seeing the build rates on the plan side continue to increase and head in the right direction. Also a lot of the programs around munitions and given kind of what's going on in the world, these are well-funded programs. So we think there'll be a prioritization to make sure those get to fruition and the finish line. So as we look at the amalgamation of that, we feel pretty good as to where we stand compared to what's funded out there. . Unknown Analyst: Okay. No, that's very helpful. Then maybe if I can just touch on gross margin here, which was pretty strong in the quarter, especially in power. I know you mentioned some of those headwinds with FX and input costs, but any way to quantify those? And then as we kind of have that push-pull between input costs and passing on price in any way to think about potential margin expansion in '26? Lynn Hutkin: Yes. I think as we look at the fourth quarter, I think we thought that we may have had some additional FX headwinds in Q4. But we have had hedging programs in place, as Bruce mentioned. So we're still seeing the benefits of those prior hedging programs come through the current period. So as we look we do foresee some margin pressure there on FX. I mean if you look at the peso rent and chuckle, they're all moving in an unfavorable direction. And we do hedge probably half of that, but that's going to start rolling off -- so we definitely see pressures there. And then even on the material side, that's something that -- it takes time to ultimately come through our numbers, right, as we're buying raw materials today, that's something that will flow through our financials at a later date. So we do think that we will see margin pressures in '26. And this is why we're really being mindful of pricing actions that we may need to take with customers. Farouq Tuweiq: And 1 thing to just kind of flag in the pricing, right? It's a little bit of -- it's not as simple as we wake up and raise our prices, right? There's a little bit of cadence to that. So some of the contemplations are do you reprice the backlog, do you come up with an updated pricing list for distribution, which takes, I think, something like 30 days before it's effective. So there's a little bit of a time issue. The other thing I would say, and we've talked about this in the past, while our margins are great, and we'll always continue to try and push margin expansion, we have pivoted from a margin gain to a growth game. So we need to make sure that we are winning our fair share of business and opportunities out there that we can get in on. And to enable that, there is some potential investment that we've been doing a little bit around the go-to-market, the systems piece of it and the people piece of it. So I just want to make sure -- and I know the margin gets a lot of discussions on the Bell earnings. And obviously, we're very proud of our margins. But we are hitting some headwinds that we've got to make sure that we have in the middle of this kind of growth that's coming that we're positioned appropriately for not picking up too much. Operator: The next question is from Luke Junk from Baird. Luke Junk: Just wanted to double click on what we've been talking about in terms of what you've been doing to realign the sales force really thinking more about how do you attack markets or key customers, but something that you said in the script, kind of caught my attention in -- with oncoming in to head the connectivity business, that there might be some like opportunities even further down in the organization. Am I hearing that right in terms of aligning operations, maybe even from a, let's say, manufacturing footprint to better attack some of these discrete opportunities? Farouq Tuweiq: Thanks for the question there. Look, I would say a couple of things to maybe answer it from the back way of your question here. So on the operational side, we I can't remember 7, 8 facilities. We've done a lot. So what's going to dictate facility moves is the current state of the business and the customer demand, right? We pride ourselves and were our customers. So obviously, for a while, there was a lot of discussion around China and India than that froze. If that kind of starts up for some people at a startup, we were going to move to some of our products to India. So I would say, given the geopolitical world that we live in and the realignment of localization of supply chains, we are in these, let's say, active discussions, right? But in terms of Bel as a stand-alone basis in putting a political supply chains, our facilities are pretty good. So we have to react to the fundamentals of the market. I think our biggest opportunity here is around the go-to-market and sales piece of it. I think maybe just to highlight on moving a facility for us is a big task, and it's not simply is just moving equipment, building some buffer supply, moving equipment from place A to place B., you need to set up a lot of kind of the legal structures. And if you're talking about A&D, there's a lot of regulatory hurdles to jump through. As we're setting up, for example, our Slovakia factory to be more A&D facing to the European markets we're living through the complexity and spider web of getting all the clearances and certifications on defense weaponry control. In addition to that, customers usually always have to want to come up to your facility and do audits and usually there's feedback and that takes a whole issue. So it's not easy. We don't take these decisions on moving facilities lightly. So we need our customer market changing dynamics to force our hand on a facility move. Go-to-market our products today that we have that can be bundled together that can be brought to bear as we talked about, the key accounts group earlier, that is our biggest opportunity at hand. And then operations, there's always things to be done, sure. But I think we've done so many of them that we need to live in growth land. And if we're not going to move a facility unless it's going to help us grow, right? Luke Junk: Yes. That's super helpful. Near term, just curious from a guidance standpoint, New Year, obviously, having a seasonal impact as we've normally seen the business, but it's pretty late this year. I think it's almost as late as it can be just from a calendar standpoint. Would you normally have maybe a little better feel for that seasonal impact in the fiscal year? Is there any conservatism just because of your timing and the guidance? Farouq Tuweiq: I think as you know, Luke, in public land, right, everybody is always trying to figure out the optimal way to guide the Street. Our perspective from guidance is we want to land in a range and we build it to around the midpoint, right? So we're not trying to -- we don't build it to the high end point of our range and hope to guide we go over a range. We build it to the midpoint. -- right, to allow for some room for shifting from quarter-to-quarter. Obviously, we're in A&D, that tends to be kind of sometimes funny business. If we allow for some overordering fuses, yes, given how late we are in the quarter, talking about Q4 right here, we are roughly in the back of February, yes, we have better visibility. But to put your comment on question specifically about Chinese New Year, it's 2 weeks off, right? Everybody can trust down. It's not just us. It's all the CNs, it's all our customers in the Far East, right? So as a result of that, everybody goes pencils down for 2 weeks. And when they come back, it doesn't just turn on a dime. Usually, there's a week of, let's say, tough start time getting back into the groove, getting things going. So you're probably talking is somewhere between 2 to 3 weeks loss on a 3-month period, all right? That's not insignificant. So I wouldn't say conservatism. I would say we wanted to do what we say we're going to do and we're in our best guess. So we're not trying to be conservative on that. Luke Junk: Fair enough. And then I just want to zoom out for my last question. The Power side of networking. Obviously, you've got some exposure there. I mean, the higher levels of power that power these more capable chips really becoming quite apparent in that world right now. And I'm just wondering to what extent you're seeing any pull-through from a design cycle point of view for high-voltage components from either your Tier 1 customers or your direct customers in that world? And especially if there's any IP that might be leverageable either, I think, rail or mobility, both have some high-voltage IP that might be interesting. Farouq Tuweiq: Yes, I would just say -- I think there's a couple of things to unpack there, right? Specifically the AI networking world, it's always going to go to more high power, higher density, less energy right, more efficiency. So that's a constant theme over ever. Now we are seeing, I would say, some new designs coming in relatively maybe in a short period of time, maybe back of the day, it was a 3- to 4-year device cycle, things are coming in a little bit sooner. So we are, for example, selling some products -- but we're already working on the next gen stuff. So that has happened a little bit quicker. I will also say, generally, right, we do have exceptions, but we're not really an IP business, right? We R&D to fix or address a problem. And then what we want to do is we want to -- we do a pretty good job at this inside of each of our business units is how do we leverage what we've developed for somebody to either standardize it or select modifications and then we extend the recap products, whether we do distribution or other similar customers. The other thing we are seeing, which is actually interesting in some of our actual e-mobility products, given the nature of those products, we are starting to see some military folks looking at, let's say, high-end products and services but not quite military grades. So kind of I guess, we're calling semi military being used. So we are seeing that extension of the R&D effort that has gone to e-mobility into other markets. Now we haven't won anything yet, but we're feeling good about potential wins coming if that makes. So that's how we extend our R&D dollars. We're not looking to reinvent the world every time. Operator: The next question is from Jacob Parsons from Needham & Company. Unknown Analyst: I'm just asking a question on behalf of Jim Ricchiuti. So we've been kind of hearing a better tone in the commercial aerospace market. Really, particularly with the leading domestic players in the marketplace. So how are you guys thinking about this area of the business in 2026 and potential for better growth within the Connectivity Solutions area. Farouq Tuweiq: So as it relates to commercial air specifically, right? I mean for better or for worse, we are -- from an OEM perspective are attached to the hit to our largest North American customer. And the way that we're going to make more money and to be clear, we service that customer both our Connectivity and our Power A&D business. So the way we're going to grow revenue is a direct correlation to increase build rates right? And we've lived the ugly side of that when there was kind of the all the union negotiation. If you recall, I think it was Q4 last year, there was a shutdown at kind of threw our business a little out of whack or back in the days of the grounding of the MAX. So we are going to see how that correlates to the build right. So what we always point close to is, I think they're very public about build rates and what's going to get approved and not approved. So take a view on that, and that should have a direct correlation back to us. On the Connectivity business, so not the Power business, there is an element to it, right? So as we think about MRO cycle, I can think about are people on the planes flying being consumed and miles are being put on these planes. And up to every so often, those mine to be kind of retrofitted or MRO, right? So we think flights and when we look at the earnings of the -- some of the flight operators out there, people are flying and planes are moving. So we feel both good on the OEM and MRO side. Unknown Analyst: Yes. That's all super, super helpful. And if I can just kind of get 1 more in. So I'm curious, how's the book-to-bill ratio varied much by market vertical and which areas of the business have you guys seen the biggest changes relative to last quarter? Lynn Hutkin: Yes. So I think on the book-to-bill side, Farouq had mentioned we were at 1.1% for the full year. I think our book-to-bill has strengthened as the year progressed. In Q4, our book-to-bill was 1.3. And I would say that strength was seen across all 3 product segments. So there's not 1 segment that is really high, while someone else is below 1. All 3 are very strong in Q4. Operator: The next question is from Hendi Susanto from Gabelli Funds. Hendi Susanto: I have several questions. Park, can you help unpack more details on your AI opportunities in terms of end products or devices to help us build better ideas. Some products that come to mind are like power modules, network switches, traditional compute, AI surfaces and optical networking. Perhaps you can help us build better ideas of your devices? Farouq Tuweiq: Yes. I would say, Hendi, we want to be a little bit careful here, but our products are going to are more around the power side of the business, and the Bel Power is kind of where it's at. I would say from a direct where we know things are going for AI. Obviously, our magnetics business is also beneficiary from the networking guys and then they're kind of the RJ-45s kind of what we call magnetic solutions, which is really more maybe a potential interconnect product. So that's how we go at it largely. Our connectivity business doesn't do too much into those end markets given that we're really more low volume, medium volume harsh environment applications in that product that coupled with it being more copper based. So that's how we kind of go at the AI piece of it. Generally, we do some stuff with the hyperscalers, but that's not really our focus market. So if you remember, we got in trouble there back in 2020. So we want to make sure we pick slots where technology and service matters versus just a copy product with a race to the bottom on pricing. Hendi Susanto: Yes. And if I may quickly check if there are products that may carry some opportunity for physical AI or humanoid robots? Farouq Tuweiq: I think the humanoid market is still getting settled. Today, it's definitely not a big dollar amount. It's very much R&D-centric. I think there's a question around from a humanoids perspective, is that ultimately a consumer product like auto, or is that going to be a technology play? I still think we're far out from mass production. But today, it has not been a discussion level for us. That's a dominant one. Hendi Susanto: Okay. And then what are your latest view and outlook on pockets of market recovery and inventory rebuild activities among customers? Farouq Tuweiq: I don't think we -- right. I think the inventory rebuild is kind of stacking up the shelf really on the customers. I think given that everybody, I'd say, went through a pretty difficult lesson back in '23 and '24 and overlaid with the tariff geopolitical world we're in, I'd say people are generally ordering more to demand versus building up the shelf. And quite frankly, I think that's probably a good thing in the sense, right? If you want to be able to shelf then you've got to deal with the hangover. So today, we feel largely and I'm sure there's exceptions. Obviously, we touch a lot of markets. But largely, we feel to shift to demand versus ship to put on a shelf and build a buffer stock because obviously, with tariffs, if things move, the things that you put on the shelf all of a sudden really changed pretty quickly. So I think there's a little bit of nervousness around that from our customer perspective. Hendi Susanto: Yes. And then, Lynn, I have a question on seasonality of sales in aerospace and defense. Is there a -- like if I look at Enercon cells, I'm trying to figure out what seasonality we need to model? And then plus considering that you are -- you may also like winning like more design. So what kind of seasonality can we expect in 2026 in aerospace and defense? Farouq Tuweiq: I'd say generally, aerospace and defense is not a seasonal business where we play, right? North America, Israel, Europe, right? I would say it's really more around sometimes they move for a core to the other when things get funding, right? That's kind of where the choppiest comes from. But it's not really a seasonal to seasonal play, I would say, if there was a seasonality I mean not to the Enercom business, obviously, our connector business. But there is some less working days generally in Q4 just with the holidays and Thanksgiving but -- and some of the Jewish holidays in October. But other than that, I would not say it's a seasonal business. Hendi Susanto: Okay. And then I have a question on capital allocation and debt payment, especially following the $90 million of debt payment in 2025. What is your playbook for capital allocation and debt payment? Farouq Tuweiq: Yes, Go ahead, Lynn. . Lynn Hutkin: So I think as we look at capital allocation, Priority #1 is reinvesting in the business through CapEx. We have regular weight dividends that we continue to pay. Barring anything on the M&A front, debt paydown is where it would be. And I think from a dollar perspective, the last couple of quarters, it's -- they've been robust debt paydowns to the tune of, call it, between $20 million and $30 million a quarter. and we would look to continue doing that going forward. Now keep in mind, Q1 tends to be a cash -- heavy cash utilization quarter just with our annual bonus payment, insurance payments, things like that. So I expect Q1 would be on the lower side. But as we look to Q2, 3, 4, that would be around the level of debt paydown, assuming there isn't anything on the M&A front. Operator: The next question is from Bobby Brooks from Northland Capital Markets. Robert Brooks: So just wanted to circle back and ask specifically kind of on Enercon and cross-selling opportunities there. Obviously, obviously, you mentioned this spend more specifically with aerospace and defense, these are long-cycle programs, right? So these aren't happening in 1 quarter and seeing the outcome the next. But just curious to hear if maybe that's still on the back burner just because demand was so robust in 2025 and the segments kind of just had a deal with the demand that they were seeing. So just kind of curious to hear more on that. Farouq Tuweiq: Yes. No back burners here. Yes, we understand we've got to prioritize. But also remember, we have to live in new wins, land, right, because we can't influence when orders come from our customers, right? When the program gets funding, can they sell it, right? What does the military budgets look like? And then you get an order. The thing that we can influence is going after new programs and aligning ourselves to new wins and new design cycles, right? So as we go after these, we are doing a better job at collaborating I think we're doing a better job at ensuring that both the connectivity and the power side of the house understand what they're going after, weekly calls and putting in some incentives along the way, we can do a little bit better job, but that process is in place. . And what's interesting is we're definitely seeing some of this, let's say, go to market. So there was some -- a couple of interesting quotes in Israel, where I was lining to earn from our e-mobility products that there was a need locally in Israel that our team flagged, but they didn't need quite the, let's say, high levelness of the military stuff but they need really complex products, which are e-mobility and Slovakia teams do a great job at. So we're trying to quote those into Israel. So I classify that as kind of a real-time opportunity that we're chasing. And we've seen a few of those as well. Another example of this is there was a cabling need at our let's say, U.S. Enercom business, which our competivity Group can assist with. So they're working on kind of getting all that qualified and approved normally, in this case, Entercom had to go outside and deal with others, but we're able to capture more of this. And so the opportunities are real but in the spirit of greeting is, we'd always love to do more. But I think as we're getting more bids out there now at a joint level, we're seeing some nice traction. Hopefully, we continue to do that and kick that to gear a little bit more. Operator: There are no further questions at this time. I would like to turn the floor back over to Farouq Tuweiq for closing comments. . Farouq Tuweiq: Thank you for that. Again, I could not be more proud of the team for the great year. Again, also thank you for all of you guys joining the call today, taking interest in what we think is a very, very exciting time for Bel. So thank you, and look forward to speaking to you in a couple of months from now. . Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to Ferroglobe's Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the call over to Alex Rotonen, Ferroglobe's Vice President of Investor Relations. You may begin. Alex Rotonen: Good morning, everyone, and thank you for joining Ferroglobe's Fourth Quarter and Full Year 2025 Conference Call. Joining me today are Marco Levi, our Chief Executive Officer; and Beatriz Garcia-Cos, our Chief Financial Officer. Before we get started with some prepared remarks, I'm going to read a brief statement. Please turn to Slide 2 at this time. Statements made by management during this conference call that are forward-looking are based on current expectations. Factors that could cause actual results to differ materially from these forward-looking statements can be found on Ferroglobe's most recent SEC filings and the exhibits to those filings, which are available on our website at ferroglob.com. . In addition, this discussion includes references to EBITDA, adjusted EBITDA, adjusted gross debt, adjusted net debt and adjusted diluted earnings per share, among other non-IFRS measures. Reconciliations of those non-IFRS measures may be found in our most recent SEC filings. We'll be participating in the BMO Metals, Mining and Critical Materials Conference in Hollywood, Florida, on February '23 and '24. We hope to see you there. With that, I'll turn the call over to Marco. Marco Levi: Thank you, Alex, and thank you all for joining us today. We appreciate your continued interest in Ferroglobe. While 2025 presented significant external challenges, including muted demand, tariff uncertainty, delayed trade measures and elevated levels of predatory imports. It was a year in which Ferroglobe made important strategic progress and substantially strengthen its position for future growth. . Most importantly, we achieved significant and impactful trade measures in both the European Union and the United States. In Europe, the European Commission voted to protect the Ferroglobe industry by implementing safeguards targeting a 25% reduction in imports relative to the baseline of average imports by country and product from 2022 through 2024. During those years, on imports of ferrosilicon averaged approximately 450,000 tons and manganese [indiscernible] averaged approximately 900,000 tons. These [indiscernible] create substantial opportunity for domestic producers, including Ferroglobe to gain market share under a more balanced competitive framework while ensuring security of EU supply chains for critical and strategic materials. We are encouraged by the European Commission's advocacy to support and strengthen the long-term sustainability of local industry. To further enhance the new manufacturing base and drive economic growth, the main Europe pledge was signed by more than 1,000 business leaders. This is similar to the Bay American plunge, encouraging increased use of products with domestic content. In the United States, the International Trade Commission rolled in favor of imposing antidumping and countervailing duties on federal silicon imports from Brazil, Kazakhstan and Malaysia after having rolled similarly against Russia in 2024. These decisions meaningfully improve the long-term outlook for the U.S. ferrosilicon market. To capitalize on improving pheroceuticaleconomics, we have converted 3 furnaces from silicon metal to ferrosilicon. one in the U.S. and two in Europe. This highlights the benefits of our diversified global footprint, which enables us to optimize production in response to market dynamics and geopolitical factors. With respect to silicon metal in the U.S. The case was delayed due to the government shutdown. Prior to the shutdown, the preliminary decision in September indicate strong measures against Angola, Australia, Laos, Norway and Thailand. The preliminary combined antidumping and countervailing duties range from 21% for Norway to 334% for [indiscernible]. We now expect the final decision on ongoing as in Thailand later today with Australia and Norway anticipated in June. Operationally, we executed with discipline and focus. Through proactive cost onto measures, including a hiring freeze and reduced discretionary and CapEx spending, we successfully navigated through weaker demand and lower pricing while maintaining a solid balance sheet. After the Safeguard announcement on November 18, [indiscernible] index prices for ferrosilicon and manganese alloys in Europe jumped approximately 20%. While paraceuticals has retreated some in recent weeks. Is still up more than 10% since the safeguard announcement. Our outlook for silicon metal remains more measured due to its exclusion from new safeguards and continued aggressive imports from China and increasingly from Angola. In the U.S., the silicon market is expected to grow modestly according to CRU. We are actively starting longer-term opportunities associated with our idled operations in Venezuela. This site includes 3 large pheroceuticalfurnaces and manganese alloy furnace, originally design into produced silicon metal, which can be converted back to [indiscernible]. In addition, the facility includes a Soderberg based plant that could be used to produce electrodes. While it is too early to determine the timing and conditions of the infrastructure and operations, the asset base represents a potential opportunity for the future. given Venezuela's proximity to the U.S. market, this opportunity could become strategically meaningful over time. We also took important steps to enhance our long-term cost structure and operating flexibility signing a new competitive 10-year French energy agreement effective January 1, 2026. In addition to competitive energy prices, this agreement provides greater flexibility, enabling us to produce up to 12 months a year in France. Combined with implementation of safeguards, this flexibility meaningfully improves the earnings potential of our [indiscernible] business by allowing higher volumes to leverage our fixed operating costs. Beyond our core operations, we continued to invest in long-term opportunities increasing our total investment in [indiscernible] to $10 million in 2025, reflecting strong technological progress in the development of advanced silicon reach EV batteries. In addition to ongoing collaboration with automotive OEMs, Corcel is expected to begin initial shipments to defense and robotics customers in the first quarter of this year. Furthermore, we are in the process of finalizing the multiyear supply agreement with [indiscernible]. For those who are new to the [indiscernible] story, silicon rechannels offer lower-cost batteries with increased capacity, longer driving range, faster charging and maybe most importantly, reduce reliance on graphite of which more than 90% is produced in China. We believe this technology has the potential to become increasingly strategic over time. Alongside these trade developments and operational enhancements, we continue to execute on shareholder-friendly capital allocation. We increased our first quarter 2025 dividend by 8% to [indiscernible] per share. and we are increasing it again by 7% to $0.015 per share starting in the first quarter of 2026. In addition, during the early part of 2025, we selectively executed discretional share repurchases, acquiring 1.2 million shares at an average price of $3.55 per share. Looking forward to 2026. Ferroglobe is well positioned to benefit from the cumulative impact of the trade actions. We expect most of our segments to post considerable growth in 2026 and we anticipate revenues improving to a range of $1.5 billion to $1.7 billion, an increase of 20% at the midpoint over 2025. This expectation is driven primarily by strong volume growth in the [indiscernible] based and manganese-based alloys segment. The implementation of EU [indiscernible] Safeguard in the U.S. ferrosilicon antidumping and anticircumvention rulings give us increased confidence in this outlook. Next slide, please. Our shipments increased by 13% to 165,000 tons on the strength of silicon-based and manganese-based alloys resulting in a 6% increase in quarterly revenue to $329 million. Our adjusted EBITDA declined slightly to $15 million while our free cash flow was negative $19 million. Beatriz will provide more detailed comments in your section. Next slide, please. I'll update on our segments, starting with silicon metal on Slide 5. This may sound like a repeat of last quarter, but the situation remains essentially unchanged. The demand is still weak across our regions. And Europe is still plugged by unabated predatory imports from China, which roughly doubled in 2025. As well as by rising imports from Angola up nearly fourfold, driving prices to unsustainable levels. As a critical and strategic material, the European Commission should ensure sufficient production to meet basic demand. Overall, volumes and revenues declined by approximately 3% due to an 8% decline in U.S. shipments, partially offset by a 5% increase in shipments in the year. It is important to note that the [indiscernible] shipments in the fourth quarter were up from a very weak third quarter. We idled our EU silicon metal plans in the fourth quarter to the extremely low unprofitable prices. Within the silicon metal segment, the [indiscernible] sector is performing better in relative terms, as highlighted by the recent recovery in aluminum prices compared to the weak polysilicon sector. The chemical sector remains weak, also due to imported siloxane and silicones from China into Europe and the U.S. The U.S. index prices rose a modest 2% in the fourth quarter over the third quarter. EU prices declined by 7%, primarily due to imports. For the year, European prices are down by 1/3, while U.S. index is up less than 2%. In the U.S., we expect the volumes to improve in the second half of 2026 as the antidumping and anti-silconvention measures are expected to be finalized in February and June. Next slide, please. The story is quite different in our other product segments. Globally, silicon base allows had a very strong fourth quarter Total volumes increased by 19% to 51,000 tonnes with EU and North America increasing 25% and 14%, respectively. Pricing trends were mixed in the fourth quarter. The EU ferrosilicon index rebounded strongly in the quarter, rising 22% to EUR 1,495 from Q3. driven by the implementation of secrets in November. In the U.S., the ferrosilicon index retreated a modest 4% during the quarter. For the full year, the European index gained 12%. The U.S. index is down less than 2% for the year. Overall, we are optimistic than 2026 will be a stronger year for total silicon base alloy sales for Ferroglobe. We have already booked incremental business for 2026 in Europe and in U.S. An additional catalyst for the second half of the year is expected from enhanced EU steel safeguards with a proposal to reduce import quarters by 50% and double tariffs to 50% for exceeding the quarter. It is anticipated that domestic production will be ramped up as a result. These measures are expected to take place on July 1, 2026. Next slide, please. Our manganese segment reported another strong quarter with a 16% volume increase to 81,000 tonnes, up from 70,000 tons in the third quarter. We benefit from a larger customer base as well as safeguards. EU sales, which accounts for more than 90% of our manganese volumes grew 18%. Manganese alloy index prices improved substantially in the fourth quarter with ferromanganese and silicomanganese increasing 16% and 21%, respectively. The combination of solid demand from our European steel customers, whose business is expected to grow by 3% in 2026 in and EU and [indiscernible] should propel a robust volume increase in 2026. Accordingly, we are optimistic about the European market opportunity for manganese this year. I would now like to turn the call over to Beatriz Garcia-Cos, our Chief Financial Officer, to review the financial results in more detail. Deric? Beatriz García-Cos Muntañola: Thank you, Marco. Please turn to Slide 9 for a review of the fourth quarter income statement. Fourth quarter sales grew 6% over the prior quarter to $329 million. while raw material costs increased 23%, excluding the $40 million impact of [indiscernible] for all power purchase agreements. Fourth quarter raw materials and energy as a percentage of sales increased from 58% to 67%, primarily due to temporary hiding in France, again, excluding PP&A, or purchase price agreements. These PPAs are mark-to-market using fair value, given the long-term nature of our EDF contract which accounts for the majority of the PPA impact. We will continue to strip out PP&A mark-to-market volatility to provide a clearer view of our underlying operational performance. A strong silicon-based alloys and manganese-based alloys volumes drove the increased sales with quarter-over-quarter volumes increasing 19% and 16%, respectively. Silicon metal volumes declined by 3%. Volume improvements were partially offset by a 6% decline in average selling price of silicon-based alloys and Manganese Vazalore, with silicon metal prices essentially flat. Adjusted EBITDA declined 20% from the prior quarter to $15 million versus $18 million. Adjusted EBITDA margin declined to 4% driven by lower prices and elevated costs as result of AI in France. Next slide, please. Moving to Product segment adjusted EBITDA bridges Silicon metal revenue declined 3% sequentially to $96 million in Q4, driven by a 3% decrease in shipments to 33,000 tons. The average selling price was essentially flat at $2,157 per ton. Volumes remain constrained due to soft markets in the U.S. by Chinese and Angolan dumping of silicon metal in the European Union. Silicon metal adjusted EBITDA declined from $12 million to $1 million in Q4. with margins decreasing to 1%. The margin compression was primarily due to Island in France, slightly offset by improved cost in North America. Next slide, please. Silicon-based alloys revenue grew 12% to $104 million, driven by a 19% sequential increase in volumes to 51,000 tons, partially offset by a 6% decline in average selling prices to 2020 per ton. Adjusted EBITDA increased to $60 million in the fourth quarter from $12 million in the third quarter. Margins expanded by 160 basis points to 15%. The improvement in adjusted EBITDA and margins result from lower cost in the Spain partially offset by early aiming in France. Next slide, please. Manganese base alloys revenue increased 10% and to $93 million from $84 million in the prior quarter. Improvement was primarily due to a 16% increase in volumes to 81,000 tons. Fourth quarter average selling price declined 6% to 1,147 mainly due to a lag versus index prices. Adjusted EBITDA in the fourth quarter doubled to $9 million, while adjusted EBITDA margins increased from 5% to 9%. This margin expansion was primarily driven by improved performance in Norway and higher overall volumes. Next slide, please. Adjusted EBITDA for the full year was $28 million, down from $154 million in 2024, and the adjusted EBITDA margin declined to 2%. The price decline driven by weak demand and increased imports to Europe had a significant impact on adjusted EBITDA,; accounting for more than 80% or $104 million of the decline. Reduced volumes account for another 16% of the EBITDA decline. Cost impact on adjusted EBITDA was negligible, while head office and noncore business detract less than $3 million from adjusted EBITDA. Next slide, please. There are lots of details on this slide. So I will just highlight a few of the most important items. For the full year, we generated $51 million in cash from operations, driven by a $48 million improvement in net working capital. We curtailed CapEx by $60 million to $63 million in 2025. For the year, our free cash flow was negative $12 million. During the fourth quarter, we consumed $4 million in operating cash flow due to weak EBITDA and an increase in net working capital of $8 million. For the year, we reduced our net working capital by $48 million, in line with our target of $50 million. Energy rebate was $7 million for the fourth quarter. As we operate under the new contract in France in 2026, we don't expect energy rebates going forward. which will help align our adjusted EBITDA generation more closely with our cash flow. Fourth quarter capital expenditures totaled $14 million representing a $5 million reduction versus the third quarter. Next slide, please. Despite the headwinds in 2025, our balance sheet remains strong. In total, we paid $10.5 million in dividends during the year, and we are again increasing our dividend starting in the first quarter of 2026, our quarterly dividend will increase 7% to $0.15 per share. It will be paid on March 30 to shareholders of record on March 23. While we did not repurchase any shares in the second half, we bought back 1.3 million shares for the first half. Our discretionary share repurchase plan remains in place. Our net debt position increased to 30 million in 2025, and we remain in a solid financial position to support growth in 2026. We reduced our 2025 CapEx by 20% to $63 million. At this time, I will turn the call back to Marco. Marco Levi: Thank you, Beatriz. Before opening the call to Q&A, I'd like to provide key takeaways from today's presentation on Slide 15. 2025 was a year of important progress for Ferroglobe. The trade measures secured in Europe and in the United States represent a clear positive shift in our markets, particularly in Ferroglobe. Europe safeguards and U.S. antidumping and counter-billing duty rulings significantly improved competitive conditions. Support pricing and give us increased confidence in a much stronger market environment in 2026. At the same time, we continue to execute a disciplined shareholder-friendly capital allocation strategy. Despite the challenging macro backdrop, we increased our dividend during 2025, completed selected share repurchases and have announced another dividend increase beginning in the first quarter of 2026. These actions underscore our confidence in the business and our focus on delivering consistent shareholder returns. We have also taken important steps to enhance the economics and flexibility of our operations. The new long-term energy agreement in France, combined with our ability to ship production from silicon metal to ferrosilicon allow us to optimize volumes, better leverage fixed costs and respond efficiently to changing market conditions across our global footprint. At the same time, we managed through a difficult demand and pricing environment in 2025 with discipline and focus. Proactive cost control, strong execution and a solid balance sheet allowed us to navigate near-term headwinds while strengthening the foundation for future growth. Overall, we believe Ferroglobe is exceptionally well positioned for 2026 and beyond. With improving market fundamentals, increased confidence driven by trade actions and more flexible, efficient operating platform, we see a clear path to stronger performance and long-term value creation for our shareholders. Operator, we are ready for questions. Operator: [Operator Instructions] Our first question and the question comes from the line of Martin Englert from Seaport Research Partners. Martin Englert: Hello. Good day, everyone. Wanted to touch on volume expectations across the 3 businesses for 2026. And -- and then also the plan for the EU silicon assets. I know you provided some detail about furnaces converting over to ferrosilicon but what remains vital there? And is it to remain idle for the foreseeable future, but any type of goalpost for volumes on silicon metal in 2026. Silicon-based alloys and manganese-based alloys would be helpful. Marco Levi: Yes. Thank you, Martin. Let me try to address your first question on volumes and then I move to the asset. Starting from Europe, the safeguard, basically on [indiscernible] silicon and paraceutical kind of products free up 25% of imports that were 450,000 tons in 2025. So 25%, about 100,000, 110,000 tons of these products are mainly available for EU '27 producers. Well, [indiscernible], the imports were under [indiscernible] ton. So when you calculate 25% of you end up to 250,000 tons available for EU 27 producers. And of course, all these pie to be shared among the local producers. . Assuming that safeguards are controlled and put in place in a proper way. When you go to the U.S., I think that we are at the end of the period where inventories mainly of Russian products, but also other products have been waiting on volumes and also price recovery. So we expect some gains in Ferro silicon, and we see that already from our customer portfolio in U.S. in the first quarter 2026. On top, talking about trends, still will improve -- is expected to improve in Europe by about 3% across the year, mainly in the second part of the year when the new safeguard measures imposed by would be applied with a further reduction of imports of 50%, an increase of tariffs to 50% for excess of products. Aluminum is expected to grow in Europe by a solid 3% next year. In U.S., aluminum is expected to grow between 8% and 9%. And while steel is expected to start recovering. And actually, we have seen asset utilization in U.S. recovering already in quarter 4 2025. These are the major indicators for volumes in ferroalloys, [indiscernible] in Europe. Going to your second question, yes, we have converted 1 furnace in Beverly to federal silicon or [indiscernible] 2025. We converted as of January 2 furnaces in Europe, 1 in Salon and 1 in Loudon from silicon metal to ferrosilicon. And concerning the utilization of the other silicon metal furnaces in U.S. and Canada were fully utilized well in Europe, we are selectively restarting furnaces based on contracted demand. So some furnaces will stay idle in the first quarter, while some others have been really started to supply on track at volumes already in January. [indiscernible] . Martin Englert: Thank you. I appreciate all the detail and context there. I wanted to inquire about the component of minimum prices with EU safeguards for ferroalloys, do you ultimately expect that domestic prices will gravitate to these levels? Or is there a dynamic within the EU footprint where there's sufficient capacity out there and that there isn't necessarily maybe the case that we see clarity with the minimum price levels embedded in the safeguards. Marco Levi: Yes. Well, the key question is the month which is not until now has not been great or [indiscernible] in Europe and in U.S. So the key question is how much demand is going to ramp up. or the different products. There is definitely enough capacity in the U to cover the safeguards for all products. If you look at what happened until now in Europe in ferrosilicon prices have jumped up by 22% on ferrosilicon immediately after safeguards have been announced. But then due to stocks at traders and others and the price index price has been going back and today is only 10% higher than previous safeguard announcement. Different trend for manganese Manganese, products have jumped up around 20% on average in terms of index price. The price is holding is not improving, but is holding this level. This is why I say that demand is critical. And again, I expect a major improvement of steel demand in Europe in the second half of 2026. Martin Englert: Do you know if you cranes manganese alloys facilities are still producing and supplying just the coming to the region overall? Marco Levi: Yes. they are, but a very small at a very small rate. For reasons that are related to supply chain, but also conditions of the assets. Of course, I do not have too many the insights about the status of the assets, but considering a number of years of work, the location of the assets, I think that even when we signed the favor gets signed, it will take a while before they ramp up to the previous rate. Martin Englert: Understand. Are you able to explain a little bit and provide some context about how the EU carbon credits function, what's covered with your allocated carbon credits for 2026 volumes. And maybe discuss if you have to go back to the carbon credit market. for incremental volume output that you may gain from market shares due to safeguards? Marco Levi: So this is a question that requires about 1 day of explanations, but let me try to be sure. First of all, at the moment, on C-band, we are impacted only for Carbon ferromanganese, not for the other products. And the way that the [indiscernible] works basically looks at the imported products looked at the content of actually the emissions of CO2 per ton required to produce these products, and they apply to this amount, the cost of CO2 in Europe per ton, deducting whatever the supplier has paid in his own country for its CO2 emissions. So the overall game is to tax CO2 exporters to Europe to favor RPL producers who are at lower producing with lower CO2 emissions. Now all of this will be beautiful -- was beautiful. If 1, there was a proper calculation of the CO2 emissions for every kind of producer in the sporting countries. All of these will be beautiful if Yes. If Europe was not anxious to reduce our CO2 credit because trying to implement these measures when you don't have all the data, you end up potentially penalizing more European producers than the exporters. So the -- of course, the commission is aware of that. They are doing their best. So steel is early involved in that. we will see how the situation develops. But again, we are -- our impact at the moment is minor due to the fact that [indiscernible] is applied on this Ticarbonfero manganese. Martin Englert: Okay. I appreciate all the color and detail and good job on the cost performance, given the fundamental volume headwinds. . Marco Levi: Thank you, Martin. Operator: The question comes from Nicholas Giles from B. Riley Securities. Nick Giles: Thanks, operator. Good morning, guys. -- my first question was maybe just back to silicon metals exclusion from EU safeguards and -- just wanted to get your perspective on what the use appetite might be to revisit an inclusion of silicon metal in those safeguards -- and maybe any background you can provide on kind of what prevented them from being included in the first place. Marco Levi: Yes. Well, the -- as you know, we asked for safeguards for silica metal in Europe. The reasons why the official reasons why Europe did not support us on this request are related to the fact that silicon metal is -- has a much stronger energy footprint, meaning it requires much more energy to be produced versus the other products. The other key element from a [indiscernible] perspective, is related to the fact that imports did not increase in absolute terms. They have increased in relative terms for the period considered because the imports gain an 85% market share in EU 27 territory. But in absolute terms, they did not. . These were the main 2 reasons. The third reason was about our point is related to all the silicon metal and ferrosilicon are interchangeable, which is or to dispute because we can convert our furnaces to position metal and pheroceuticalvice versa. And our customers in steel can move from ferrosilicon to civic metal. So -- the fact that they called for no changeability was quite a surprise due to the time and the number of meetings that we spent to explain our business. The top reason was a stronger position of the chemical industry to protect silicon metal and a stronger position of Germany to trade measures. And so there is a combination of -- there was a combination of technical, if you want, and political and legal aspects that excluded silicon metal from the safeguards. This situation doesn't make any sense for 2 reasons. One is that without protecting silicon metal, you basically don't protect pheroceuticals and because is quite easy for [indiscernible] users to replace pheroceuticalth silicon metal when the price difference is not there. silicon metal should be much more expensive because of the energy, which is required to produce it. So alluding safes were pheroceuticaland not protecting silicon metal is like shooting in your food. and this shouldn't be a surprise for the European community. Going to the first part of your question, yes, we are working on new measures for silicon metal in Europe. Actually, the commission has asked us to submit our data. So we have submitted mid-December relative to the last year in Europe. And we are waiting for their reactions to this document. The expectation is that we will go for anti-dumping to against the major dumpers in Europe. China is #1. And then we are still to see how do we address Angola, which is a sort of subsidiary of China with the same pricing policy. The combined volume of the 2 countries, if you calculate also Vietnam, which is pure circumvention of silicon metal from China basically shows that the last year, the volume coming from China or China subsidies doubled. And in a market that has been going down, of course, with pure liquidity, they have been determining price based on the index. And the -- like I reported in the last quarter, the go-to-market with prices 25%, 30% before -- below the cash cost of European producers. So it's clear dumping. The case is clear the difficulty is not the case. It is the fact that, as you know, Europe and the industry in Europe is finally reacting to these situations. And so the commission is the admission table is gene with cases asking for protection for every kind of products. And this causes some delays. So at the moment, the game is all about as politically pushing to get our case of the pile of cases of Therapan Commission. Nick Giles: I really appreciate all that background and your perspective on the situation. I guess my follow-up question to that is ultimately there's plenty of reason for optimism in aero silicon when you look at that segment in a vacuum, but -- do you think that these dynamics within silicon metal could ultimately weigh on pricing volume expectations in Fei? Marco Levi: All depend on -- yes, it all depends on demand and appetite marketing reformulating with critical metals knowing that medium term, it doesn't make sense to have silicon metal at the price of erosion in Europe. At this stage, our order portfolio has started going up already in quarter 4 on peracetic both in U.S. and in Europe. . Nick Giles: Understood. My next question would just be over the past couple of years and especially with the change in the administration in the U.S. I think end market exposure has shifted and then you kind of layer on the conversion of some of your silicon metal capacity to Fez is that kind of rerate things more towards the steel market. So I was just hoping you could kind of zoom out and provide us a high-level breakdown of your ultimate end market exposure. I think about solar as an area that comes to mind that might be less relevant today than it was in the past. So appreciate any color you can provide there. Unknown Executive: Well, today, when you look at our total business, I would say that the 70%, 80% of the business is protected and only 20% is not -- which is basically silicone in Europe. So the other high-level thing is not a surprise that the United States, apart from government shutdown are plenty favorable to protect critical and strategy -- critical and strategic minerals and this is why we are going for antidumping done to your convention and things are going fast, but it's also true that things are changing in Europe, maybe not at the speed that we would like. But in terms of political support I have to assure you that our case is at the top of the agenda of all the states that are involving in federal lays and silicon metal. So the drop has decided to protect industry has decided to protect our industry like the chemical industry or other industries. The problem is that Europe is not united like United States. So there is quite a change of continuous exchange of responsibilities between the center, the commission in the single states. The last case was last week, what Bandel basically told the states were complaining about [indiscernible] in deciding basically pushing back the decision to the states. And this dedicated situation in the ones causing [indiscernible] lower. On the other side, when I talk to politicians in Spain, in Norway and in France, they are pretty aware of what we need to do, which is a combination of protection right, energy price for the industry and make sure that when they think about products, they think about supply chains and about single products. Nick Giles: Very good. Maybe just 1 quick one, if I could, for Beatrice. I want to commend you on really managing the cash balance during this -- during the trough here. I mean you still have a pretty healthy net cash position. So can you just touch on -- anything we should be focused on from a working capital perspective, CapEx was down year-on-year, should we kind of expect CapEx to be more flat this year? Anything on miles out just from a cash flow or capital allocation perspective. Beatriz García-Cos Muntañola: Yes. Thank you. Thank you for the question, Nick. As you have been seen on the date. So the cash position at the end of the year -- it's -- we've been in the year with a strengthened with a strong cash position. Nevertheless, I have to say that this difficult year, the cash is coming mainly from the release of the working capital. So we have been releasing at the end, 48 million of working capital and therefore, a total positive operating cash flow for the year, right? Looking into 2026, I think 1 of the things that we are working and we have already seen the results is the -- will the additional release of the working capital even if the business we are planning to produce more volumes and sell a higher number of tons that this is typically creates consumption of working capital because we have this [indiscernible] in place. We plan to continue to release additional working capital. And as referred to the targets that we put out there, I think, in 2024 when we said that we want to run the company, we have 20% less of working capital, if you remember, Now we are close to the 400 million, and we expect to continue to go down into the release of working capital. So that's 1 angle. On the other side, we are having a net debt position at the end of the year. And we expect to improve slightly, maybe as well this debt position as we go through the year. and, of course, supported by the lease of the working capital and cost reductions as Marco as you mentioned. Nick Giles: And then just CapEx, you would expect CapEx to be pretty similar to 2025 levels? Beatriz García-Cos Muntañola: Yes. So this year, we went to 6 million for CapEx that is already at 20% less versus 2024. And in 2026, we expect a similar or slightly lower levels of CapEx, of course, This is always talking about maintenance CapEx base of the company or sustaining CapEx Yes, maybe around the same date. . Nick Giles: Got it. Got it. Understood. Well, guys, I appreciate the update as always and continued best of luck. Operator: This concludes today's question-and-answer session. I'll now hand back for closing remarks. . Marco Levi: Thank you, Heidi. We are encouraged by our accomplishments and positioning the company for a more robust market environment and much stronger financial performance in 2026. Thank you again for your participation. We look forward to updating you on the next call in May. Have a great day. . Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Fourth Quarter 2025 Earnings Conference Call and Presentation. Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the company's website, www.gencoshipping.com. [Operator Instructions] A webcast replay will also be available via the link provided in today's press release as well as on the company's website. At this time, I will now turn the conference over to the company. Please go ahead. Peter Allen: Good morning. Before we begin our presentation, I note that in this conference call, we'll be making certain forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements use words such as anticipate, budget, estimate, expect, project, intend, plan, believe and other words and terms of similar meaning in connection with the discussion of potential future events, circumstances or future operating or financial performance. These forward-looking statements are based on management's current expectations and observations. For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday, the materials relating to this call posted on the company's website and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K for the year ended December 31, 2024, and the company's reports on Form 10-Q and Form 8-K subsequently filed with the SEC. At this time, I would like to introduce John Wobensmith, Chairman and CEO of Genco Shipping & Trading Limited. John Wobensmith: Good morning, everyone, and welcome to Genco's Fourth Quarter 2025 Conference Call. I will begin today's call by reviewing the progress we've made executing our comprehensive value strategy since its implementation in 2021, and then we'll review our Q4 2025 and year-to-date highlights. We will then provide additional details on our financial results for the quarter as well as provide an update on the industry's current fundamentals before opening the call up for questions. For additional information, please also refer to our earnings presentation posted on our website. Starting on Slide 5, 2025 marked the fifth year since our Board and management team formulated and began implementing our comprehensive value strategy centered around dividends, financial deleveraging and opportunistic fleet growth. When we launched the strategy in April of 2021, we set out to accomplish 3 main objectives: transform Genco into a low leverage, high dividend company, maintain significant flexibility to grow the fleet and pay a sizable quarterly dividend through the cycles based on an established dividend formula. 5 years later, we are pleased to have made notable success executing against each of these objectives. Among our accomplishments, we fortified our balance sheet to effectively operate in diverse rate environments, provided shareholders with sizable returns and invested in our fleet to further expand our earnings power and dividend capacity. Specifically, over this time, we have invested $347 million in high-quality modern vessels, distributed $270 million in dividends to shareholders and paid down $249 million of debt. Moving to Slide 6. We continue to advance our value strategy in the fourth quarter, ending the year with strong momentum going into the first quarter. We declared our 26th consecutive dividend, representing an annualized yield of 9% on our current share price. Our highest dividend level since Q4 2022 and the longest period of uninterrupted dividends in our dry bulk peer group. Heading into the fourth quarter, we took important steps to maximize fleet-wide utilization in a strong freight rate environment with the completion of 90% of our 2025 dry docking schedule and delivery of a high-quality modern Capesize vessel early in the quarter. During the fourth quarter, these proactive measures enabled us to generate the highest levels of both EBITDA and TCE for the year at $42 million and $20,064 per day, respectively. Additionally, in November, we agreed to purchase 2 2020-built high-quality premium earning Newcastlemax vessels that we expect to take delivery of in March. Importantly, these well-timed investments further increase our operating leverage and expand our presence in a key sector with compelling supply and demand fundamentals. We also ended the fourth quarter with an industry low net loan-to-value of 12%. As depicted on Slide 7, we achieved multiyear highs across key metrics in Q4 and have significant momentum going into Q1 2026, building on our success generating TCE and EBITDA levels that were the highest in 3 years, estimated Q1 TCE of approximately $18,000 per day for 80% of the quarter represents a strong start to the year in what is typically a seasonally slower period. Notably, estimated Q1 2026 TCE is our highest Q1 level since 2024 and over 50% above Q1 2025 levels. Based on our firm fixtures to date and the continued execution of our value strategy, we expect a higher dividend in Q1 on a year-over-year basis. Turning to Slide 8. Genco has one of the lowest cash flow breakeven rates in our peer group. This key differentiator is directly related to our industry low net loan-to-value as well as not having mandatory debt amortization, which further reduces our cash flow breakeven rate compared to peers. As our TCE increased from approximately $12,000 per day in Q1 2025 to $20,000 per day in Q4, our overall profitability and dividend capacity increased as well. As can be seen from the chart, our estimated Q1 TCE also compares favorably to our low breakeven rate on a cash basis. Turning to Slide 9. Through the execution of our value strategy, Genco has paid compelling quarterly dividends to shareholders across cycles. Notably, we have paid 26 consecutive quarterly dividends to shareholders in diverse rate environments, having distributed between $0.15 and $0.50 a quarter over the past 3 years. In addition to the Q4 dividend being the highest since Q4 2022, it also represents a 233% increase over the Q3 2025 dividend. Supporting our dividend and complementing our low breakeven rate is our balanced approach to fleet composition, which we present on Slide 10. In addition to the 2 Newcastlemax vessels we agreed to acquire, we own a fleet of 17 Capesize vessels as well as 15 Ultramax and 11 Supramax vessels. We continue to balance the high beta and upside potential of the Capesize sector along with steadier earnings stream of our minor bulk ships. On a vessel ownership basis, our splits are 40% Capes and 60% Ultra Supras. However, when viewed on a net revenue basis over the last 2 years, we are 50% weighted towards Capesize vessels. With just 20% of our overall fleet fixed for the year, Genco is uniquely positioned relative to some in the peer group to benefit from a strengthening freight rate environment, providing us with meaningful upside exposure to the current strong spot market. Our high operating leverage is balanced against our low financial leverage, which is shown on Slide 11. This provides Genco with significant financial flexibility in various freight market conditions. In strong markets, Genco generates meaningful cash flow with its industry low breakeven rate and scalable fleet. In market downturns, Genco's low financial leverage and undrawn revolver availability allow the company to take advantage of countercyclical growth opportunities. Specifically, as demonstrated on Slide 12, Genco has taken advantage of our strong liquidity position for opportunistic acquisitions of modern, high-specification premium earning vessels at attractive values, including 6 Capesize and Newcastlemax vessels since 2023. I emphasize the positioning of the fleet today is not an artifact of history or chance. It is the result of the steady execution of our plan to optimize the fleet, which began in 2023. At that time, the management team and the Board formed a specific strategy focused on the compelling supply and demand fundamentals of the Capesize sector, which had the lowest order book among the major dry bulk sectors with long-haul ton-mile expansion on the horizon. Since 2023, our strategy has been built upon this thesis and over this time, Capesize vessels have been the best-performing dry bulk class from an earnings and an asset value appreciation perspective. Notably, our Capesize vessels have increased in value by nearly $40 million despite several years of age depreciation. Furthermore, we have generated an IRR of over 30% on these ships, since acquisition. In 2025 alone, we agreed to purchase 3 2020-built Capesize and Newcastlemax vessels, growing our pro forma fleet by 20% on an asset value basis and significantly increasing our earnings and dividend capacity in 2026 and beyond while reducing the average age of our fleet. On Slide 13, both Genco's pro forma 45 vessel fleet and Cape fleet provides significant operating leverage for shareholders. Every $1,000 fleet-wide increase in TCE equates to $16 million of incremental annualized EBITDA or $0.37 per share. Furthermore, our 19 Newcastlemax and Capesize vessels, every $5,000 increase equates to $34 million or $0.77 per share of incremental earnings and dividend capacity. Our fleet strategy has been very successful since we implemented it in 2023. And as you see in these figures, has well positioned the company to continue creating shareholder value going forward. Lastly, turning to Slide 14. Genco continues to prioritize strong corporate governance, which is another key differentiator for the company relative to the peer group. Specifically, Genco is the largest U.S. headquartered dry bulk shipping company, and we are also a U.S. public company subject to robust SEC and New York Stock Exchange disclosure regimes. We are also the only listed dry bulk shipping company with no related party transactions. We have a diverse and independent Board of Directors and observe U.S. public company governance best practices such as having a lead independent director. We provide detailed disclosures on company performance and initiatives while striving to provide a clear and thoughtful strategy to shareholders as we execute our disciplined approach to capital allocation. We are also consistently ranked in the top quartile on corporate governance among public shipping companies by Webber Research. Our corporate governance is a core part of Genco's identity and reflects our Board's commitment to upholding the highest standards of fiduciary duty and governance excellence. I will now turn the call over to Peter Allen, our Chief Financial Officer. Peter Allen: Thank you, John. On Slide 16 through 18, we highlight our fourth quarter financial results. Genco recorded net income of $15.4 million or $0.35 basic and diluted net earnings per share. Adjusted net income is $17.3 million or $0.40 and $0.39 basic and diluted earnings per share, excluding other operating expense of $1.9 million for shareholder-related expenses. Adjusted EBITDA for Q4 totaled $42 million, an increase of 94% as compared to Q3 and bringing the full year 2025 total to $85.9 million. Our cash and debt positions as of December 31, 2025, were $55.5 million and $200 million, respectively. Our undrawn revolver availability at year-end was $400 million. During March of 2026, we expect to take delivery of 2 2020-built Newcastlemax vessels. We have approximately $131 million of remaining CapEx for these acquisitions, which we expect to fund primarily through proceeds from our revolver. As part of our existing $600 million credit facility, we plan to utilize the accordion feature for $80 million and pledge these 2 vessels as collateral. This would increase our pro forma borrowing capacity to $680 million in total with expected post-acquisition debt outstanding of $330 million and undrawn borrowing capacity of $350 million. Our lenders participating in this revolving credit facility upsizing include Nordea, DNB, ING and SEB. With our full revolving credit facility structure, we will continue to actively manage our cash and debt positions to reduce interest expense while maintaining access to capital to quickly act on growth opportunities as we have demonstrated in recent years. Moving to Slide 19, we highlight the sequential increases in our quarterly EBITDA throughout the year, culminating in a strong fourth quarter performance and an EBITDA increase of 94% from Q3 2025 and also the highest quarterly level since 2022. As outlined on Slide 20, we believe that Genco is in a highly advantageous position. With the current fleet of 43 high-quality modern dry bulk vessels, our significant operating leverage, combined with low financial leverage, a sub-$10,000 cash flow breakeven rate and $400 million of undrawn revolver availability collectively provide a compelling risk-reward balance for shareholders. Furthermore, we continue to reward shareholders through our quarterly dividend policy, which targets a distribution based on 100% of operating cash flow less a voluntary reserve as described on Slide 21. For Q4, our Board of Directors declared a $0.50 per share dividend based on operating cash flow of $41 million and a voluntary quarterly reserve of $19.5 million, marking our highest payout in 3 years. Looking ahead to Q1 2026, we currently have 80% of owned available days fixed at approximately $18,000 per day as compared to our anticipated cash flow breakeven rate, excluding dry docking related CapEx of approximately $9,715 per vessel per day. Importantly, Q1 2026 TCE is on pace to increase over 50% year-over-year. On the expense side, we anticipate vessel operating expense to marginally increase in Q1 compared to Q4 levels due to the timing of crew-related expenses. However, we expect vessel OpEx to revert to levels similar to Q4 moving forward during the year. I will now turn the call over to Michael Orr, our dry bulk market analyst, to discuss the current industry landscape. Michael Orr: Thank you, Peter. Beginning on Slide 23, the dry bulk freight rate environment meaningfully improved in the second half of 2025, reaching its height in Q4, led by the Capesize sector. The Baltic Capesize Index averaged nearly $29,000 per day in Q4 and approached $45,000 per day in early December, driven by all-time high Brazilian iron ore shipments. Supramax rates were also firm, supported by augmented coal shipments to China as well as firm grain exports. Turning to Slide 24. China reported strong levels of iron ore imports in recent months, led by increased seaborne supplies together with the restocking of iron ore inventories. Specifically, the country's iron ore imports in Q4 rose by 7% year-over-year. And for the second half of the year, China's iron ore imports rose by 12% as compared to first half levels. On the seaborne supply side, we saw Brazilian iron ore shipments rise by 26% second half over first half. Turning to Slide 25, we highlight the long-haul iron ore and bauxite trade growth expected from Brazil and West Africa in the coming years. Given the scale of the projects, these volumes could absorb potentially over 200 Capesize vessels, which is more than the current Capesize newbuilding order book. Supply constraints in Capesize newbuilding activity combined with added long-haul trading distances are 2 key catalysts for the sector. We expect West African iron ore flows to ramp up in 2026 after first shipments were made in 2025. In terms of the grain trade, as detailed on Slide 26, China has reportedly fulfilled their 12 million tonne quota from the U.S. as part of the October agreement. However, further reports highlight additional purchases of up to 8 million tons of U.S. soybeans in the coming months. With the onset of South American grain season at the end of Q1, attention is likely to shift to Brazilian soybean volumes. Regarding the supply side outlined on Slide 27, net fleet growth in 2025 was 3%, split between 1.5% net fleet growth for Capesizes and 4% to 5% net fleet growth for Panamaxes down to Handysize. Importantly, 2025 marked the fourth straight year of sub-3% net fleet growth for Capes, which is the first time on record this lower level hasn't materialized for this long. Additionally, as scrapping has remained low in recent years, the age of the global fleet has risen to nearly 13 years old, the highest average age of the global dry bulk fleet since 2010. This has increased the pool of potential scrapping candidates at 11% of the on-the-water fleet is 20 years or older, which is nearly identical to the global dry bulk order book as a percentage of the fleet of 12%. This implies net replacement of tonnage over time as opposed to any material net fleet growth. While we expect volatility in the freight market to persist, the foundation of a low supply growth picture provides a solid basis for our positive view of the dry bulk market going forward. I'll now turn the call back over to John to conclude the call. John Wobensmith: Thank you, Michael. Turning to Slide 29. We have made outstanding progress executing our comprehensive value strategy, providing shareholders with sizable returns and investing in our fleet to further expand Genco's earnings power. With our high-quality and modern fleet, leading commercial operating platform, strong balance sheet and significant operating leverage, we remain well positioned to create meaningful value for shareholders in 2026 and beyond. As we progress through the year, our unrelenting focus will be on continued capital return for shareholders, further growing our high-specification premium earning fleet as well as maintaining our industry-leading leverage profile and strong corporate governance standards. Before we turn the call over to Q&A, I'd like to briefly address our announcements from last month regarding a nonbinding indicative proposal we received to acquire all outstanding shares of Genco. As detailed in our previous press releases, our Board thoroughly reviewed the proposal with the assistance of external advisers and determined the proposal significantly undervalued Genco. As part of its review, our Board did determine that a differently structured transaction, one organized as an acquisition by Genco would create value for all shareholders. We sought to engage privately on an alternative structure, but our offer to engage was turned down. Our management and Board are focused solely on delivering maximum value for shareholders. With that said, the purpose of today's call is to discuss our fourth quarter and full year 2025 results and the opportunities ahead for Genco. The company is performing very well today, and we are very excited and confident in the future. We ask that you please keep your questions focused on results, performance and industry trends. Thank you for that in advance. This concludes our presentation, and we would now be happy to take your questions. Operator: [Operator Instructions] Your first question comes from the line of Omar Nokta with Clarksons (sic) [ Jefferies ]. Omar Nokta: Solid quarter. Obviously, John, yes, the dry bulk market ended '25 on a pretty strong note and as shown in your results, obviously. And so far this year, things are progressing quite nicely. You've upsized your facility by the $80 million, and you're going to take delivery of those 2 Newcastlemaxes next month. Obviously, you have plenty of flexibility. Asset values look like they're on the rise and -- or at least have risen a good amount here over the past few months. Where does that leave Genco kind of strategically? I know you touched on this a bit at the end of your comments, John, but how are you thinking about Genco strategically, capital allocation as we look ahead here for the rest of '26? John Wobensmith: Look, in terms of the capital allocation, dividends and the value strategy is top of the list. We will endeavor to continue to cycle out some of the older vessels and redeploy those funds more modern fuel-efficient ships such as we've done or such as we did last year. So I don't think much has changed, but you're correct. Values continue to move up. We're actually in a situation where they're moving up almost weekly at this point, which is obviously very positive basis the timing of the acquisitions that we did last year. But it -- look, it makes newer tonnage more expensive, but it also makes our older tonnage more firm in what we can get. So dividends and value strategy is the first. And as part of that value strategy, we have a fleet replacement and growth element. Omar Nokta: And maybe just as a follow-up then, as we referenced asset values having risen. I wanted to ask sort of how are you thinking about the term charter markets? Or what are you seeing there? As we kind of think about it from, say, the crude tankers just as what we've seen there, VLCC values have risen and there's been a lot of charter interest. Are you seeing something similar in the Cape market? And how do you feel about deploying ships on term charter today? John Wobensmith: I think -- well, there has not been as much liquidity in the dry bulk TC market, as you just mentioned, in the tanker sector. I think a lot of that has to do with the optimism as we look at the supply side and demand growth for the rest of 2026, but then certainly going into 2027 as West African iron ore really starts to ramp up. So I think it's more of a function of, I believe, owners not wanting to lock in currently because of the optimism, again, low supply demand growth coming. Having said that, there have definitely been some 1-, 3-year deals done. I think there was a 3-year deal done on a new -- at least 1, maybe 2 Newcastlemaxes from an iron ore major excess $30,000 a day. Those are firm rates. And clearly, the market is indicating a bullish stance and positive sentiment. You know that we, from time to time, have taken exposure off the table, particularly in the Capesize sector. We really do look at it as a portfolio approach. But we spend a lot of time and analysis looking at whether we want to lock in. And there could easily come a time this year where maybe we take some exposure off the table. But for the time being, we're going to continue to trade spot. And I think it's one of the unique things about Genco. We really only have 20% of this year fixed. So with a rising market, we are fully exposed -- 80% exposed to that positive market and sentiment. Operator: Your next question comes from the line of Liam Burke with B. Riley Securities. Liam Burke: John, in the past discussions on asset acquisitions, you always like the flexibility of the Capes versus the Newcastlemaxes. Has there anything changed in trading patterns that makes you favor more of the Ultramaxes vis-a-vis a Cape? John Wobensmith: I'm sorry, the Ultramaxes or the Newcastlemaxes? Liam Burke: Newcastlemaxes, excuse me. John Wobensmith: Yes. No. Okay. That's -- yes. No, I wouldn't say anything has drastically changed, though, certainly, on the Brazilian trade, those Newcastlemaxes have always been filled up to their capacity. Over the last several years, that may have not been true with Australia loadings, but that's really changed. And we certainly have seen the bauxite trade develop as well out of West Africa. So that bauxite can go on Newcastlemaxes. So we like the nucs we bought. We like our Capesize fleet. The Newcastlemaxes that we bought are no doubt premium earning assets with very high specifications and low fuel consumption. I think Bulkers 2020 did a fantastic job ordering and kitting out those ships. So we're very happy to be taking delivery of those. But we're going to continue to look at Capes and Newcastlemaxes. And that's where I think you'll see growth for us. And we'll stay steady with our Ultra Supramax fleet, probably do a little bit of fleet renewal on the Supras. Liam Burke: Okay. Just as a follow-on, you just mentioned the Supras. Is there any opportunity or is there any interest in adding to that part of the fleet when you're discussing renewal? Or is it just sell the older vessels on elevated asset values? John Wobensmith: Well, it certainly would be selling older vessels. Again, we're focused on the larger ships in terms of redeploying capital, though I'm not going to rule out that we wouldn't buy an Ultramax. I mean that market is doing pretty well. As you know, these are all correlated. It's just that Capes have certainly more upside potential based on higher beta and volatility. And if you look at, again, the supply side on the Capes is the most favorable in the dry bulk sector and demand growth that is coming is Newcastlemax and Capesize oriented. Operator: Your next question comes from the line of Chris Robertson with Deutsche Bank Securities, Inc. Christopher Robertson: John, just on the back of Omar and Liam's questions around the S&P market, I just wanted to touch on -- last year, it was reported that a large number of Chinese buyers of dry bulk vessels were active in the market. I was wondering if you could comment, is that trend still continuing? And where do you see kind of the activity being driven in the S&P market for potential asset sales? John Wobensmith: Yes. I think the Chinese continue to be very active. I would put them as the #1 buyer right now, particularly of older assets, not on the -- not necessarily on the modern eco side, but the older assets, they they're very active on. China is the largest importer of dry bulk commodities, right? So seeing the Chinese go long tonnage, I think that's a positive or a vote of confidence in the market going forward. And you've seen it across the board. I mean, they certainly have been active in older Capes, but they've also been buying some of the older Supramaxes as well. And I'm sure they see the same thing that we see. Again, the low supply growth on the Capes, the age of the fleet. And I think most importantly, there are additional cargo volumes that are going to be coming both on the bauxite side, but more importantly, on the iron ore front out of West Africa. Christopher Robertson: Got it. Makes sense. My second question is just related to kind of reevaluating the geopolitical environment and the disruptions that we've seen across various shipping segments over the last few years. Where do things stand in terms of the disruption levels related to dry bulk? And let's say, if there was a reversal, whether it's the Red Sea or Russia, Ukraine, et cetera, where do you see kind of puts and takes around some of those themes? John Wobensmith: Well, I mean, let's take the Russian-Ukraine situation. If there is a conclusion to that and the Black Sea reopens fully, clearly, that's potential for more grains and to a smaller degree, iron ore. So that would be a net positive for dry bulk shipping. In terms of the Red Sea, we're well aware that there are some container companies that have started operating through Suez and the Red Sea. We're still cautious and we're still not putting our ships through that area. But having said that, it's maybe 1% to 2% max in terms of number of ships that would actually go through the Red Sea. So deviating around Africa is -- it's not a big factor in dry bulk. It certainly is in containers, but it's not for dry bulk. Operator: Your next question comes from the line of Sherif Elmaghrabi with BTIG. Sherif Elmaghrabi: A couple of questions on operating costs here. It looks like the cost of charter hire in Q4 roughly doubled sequentially. So I'm wondering, does the current strength in spot rates change how you think about augmenting your fleet with outside tonnage? John Wobensmith: Well, in terms of -- again, in terms of growth, we're definitely focused on the larger ships. And hopefully, this is going to be answering your question. If it's not, please feel free to clarify. But when you look at where rates have really moved up, it is in the larger ships, which, again, that's been our strategy of growing that fleet since 2023. And you can definitely see that in the revenue side. It's driven quite a bit of the upside in revenues. Did that answer your question? Sherif Elmaghrabi: I was asking about the chartered-in fleet. John Wobensmith: Okay. Peter Allen: Yes. Sherif. Yes, in terms of the charter-in fleet, that is a very opportunistic part of the business. A lot of the times, the guys will take forward cargoes. And if it makes more sense in the moment to charter in a vessel to create an arbitrage, they'll do that. And that's something that the guys are -- have been really good over the years of assessing whether they can make, whether it's $100,000 plus on a particular cargo. A lot of the times in the first quarter, you'll see that because we'll book forward cargoes. The market will come off relative to Q4, and we'll be able to get that arb. But it's a very opportunistic play. Some quarters, you'll see higher than others. But certainly, in a strengthening market, being on the longer side and having the spot focus that we have is certainly where you want to be right now. John Wobensmith: What you're not going to see us do is speculative long-term time charter-ins. It will either be short term backed up by a piece of cargo, as Pete said, but we're not going to just go naked on chartering at Capesize or an Ultramax for that matter, long term into the company. That's not part of the strategy. Sherif Elmaghrabi: Okay. Yes, that's very clear. And then just looking back at the presentation, Slide 8 highlights your remarkably stable cash breakeven, which has remained below $10,000 a day for a few years now. Is there anything you're doing, obviously, besides keeping leverage low to manage breakeven costs while some other owners have seen operating cost inflation? John Wobensmith: Look, we've seen operating cost inflation. There's no doubt, particularly on the crew side and when you look at spares and stores just from an inflationary standpoint. We certainly manage to a budget that we set every year, though I want to emphasize, particularly with the larger ships, the bar keeps getting raised calling Australia. So we need to make sure that we are keeping our ships well maintained so that we do not have any issues trading anywhere in the world. So there is a little bit of inflation. We certainly manage and pay very close attention to OpEx, but we're not going to be penny-wise pound foolish. Operator: As there are no further questions at this time, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good day, everyone. Welcome to the Moody's Corporation Fourth Quarter and Full Year 2025 Earnings Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for question and answers. The call is scheduled to last approximately one hour. I will now turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead. Thank you. Good morning, and thank you for joining us today. I'm Shivani Kak, Head of Investor Relations. Shivani Kak: This morning, Moody's Corporation released its results for the fourth quarter and full year of 2025 as well as our guidance for 2026. The earnings press release and the presentation to accompany this teleconference are both available on our website at ir.moodys.com. During this call, we will also be presenting non-GAAP or adjusted figures. Please refer to the tables at the end of our earnings press release filed this morning for reconciliations between all adjusted measures referenced during this call and U.S. GAAP. I call your attention to the Safe Harbor language which can be found towards the end of our earnings release. Today's remarks may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In accordance with the act, I also direct your attention to the Management's Discussion and Analysis section and the Risk Factors discussed in our Annual Report on Form 10-K for the year ended 12/31/2024, and in other SEC filings made by the company, which are available on our website and on the SEC website. These, together with the Safe Harbor statement, set forth important factors that could cause actual results to differ materially from those contained in any such forward-looking statements. I'd also like to point out that members of the media may be on the call this morning in a listen-only mode. Over to you, Robert Scott Fauber. Robert Scott Fauber: Thanks, Shivani, and thanks everybody for joining today's call. I'm going to start with the highlights. And 2025 was a record year for Moody's Corporation. It was driven by consistent execution against the long-term demand trends that we have discussed over the last several years. And we finished the year with strong fourth quarter performance across both ratings and analytics, and delivered robust growth and meaningful capital returns to shareholders. Now we are scaling decision-grade contextual intelligence embedded directly into customer workflows. Across our platforms, third-party systems, AI-enabled interfaces. So that we are present where critical decisions get made. As technology and the ways of working continue to evolve, we enter 2026 well positioned and confident in the opportunities ahead. Now we had strong top line performance across the company in 2025. Total revenue exceeded $7,700,000,000. That was up 9% year over year. And 9% in both ratings and analytics. We expanded adjusted operating margin to 51.1%. That was up 300 basis points as we drive further operating leverage into the business. And these results are being driven by sustained customer demand for our decision-grade data, analytics, and insights, amidst very large funding needs, greater market complexity, heightened risk and resilience needs, and compliance requirements. Now adjusted EPS—sorry. Adjusted diluted EPS reached a record $14.94. That was up 20% year over year. And that represents a 70% earnings growth over the past three years. It is something like a 20% CAGR since 2022. Now let me turn to ratings. And issuance and investment cycles came together very powerfully in the fourth quarter. It resulted in the busiest fourth quarter in our history. And the investments that we have made over several years have really positioned us to capitalize on this activity and that drove record revenue this past year. In 2025, we rated $6,600,000,000,000 of debt. That was an all-time high supporting investment across infrastructure, AI-driven data centers, energy finance, energy transition finance, and private credit. And in the fourth quarter alone, we rated more than $70,000,000,000 of issuance for companies including Alphabet, Amazon, and Meta, in part related to their AI investment programs. Moody's Corporation was named Best Credit Rating Agency in the U.S. by Xcel again. That is for the fourteenth consecutive year. And that really reflects our role at the forefront of global debt markets. In December, we issued a request for comment on a cross-sector stablecoin rating methodology. And as the use of tokenized cash continues to accelerate, the total value of issued stablecoins is forecasted to reach $400,000,000,000 by 2026, and $2,000,000,000,000 by 2028. And our methodology, which is the first such framework from a credit rating agency, will position Moody's Corporation to play an important role in the digital finance ecosystem. Now in private credit, demand for ratings continues to accelerate. Private credit revenue increased 60% in 2025. Reflecting both market growth and our expanding role in the sector. And we developed new methodologies and deepened our analytical and commercial engagement to capture rising demand for transparent, independent credit assessment. And that momentum is translating into tangible wins. Last year, we were the sole rating agency on the largest private credit CLO of the year, a $1,500,000,000 issuance by Blackstone. Now pivoting to Moody's Analytics. We finished 2025 on a strong note there as well. We delivered net growth that outpaced 2024. And this performance included meaningful contributions from our highest priority growth areas. That includes our lending and credit decisioning solutions, as well as decision-grade KYC data. We also closed the year with strong momentum in AI-related sales, ranging from specialized workflow agents to AI-ready datasets I am going to talk about that in just a few minutes. Operator: Importantly, Robert Scott Fauber: our strongest growth came from our largest strategic customers. These customers contributed over 30% of the total MA net growth in the fourth quarter and for the full year grew at twice the rate of the rest of the MA customer base. So this is durable, high quality growth with clear evidence of customer adoption. And I want to emphasize durable because the nature of MA's revenue growth is increasingly recurring and scalable. So recurring revenue grew 11% and represented 97% of fourth quarter revenue. So this, combined with some real execution discipline, enabled us to deliver 190 basis points of margin expansion and an adjusted margin of almost 36% in the fourth quarter. We set our focus on scaling MA's recurring revenue base a few years ago, and now we are making further proactive adjustments to our portfolio to reinforce that strategy. So in December, we closed on the sale of our Learning Solutions business. That was primarily reported as transactional revenue. And it really was no longer core to our strategy. We also announced the sale of our Regulatory Reporting business, which served customers with relatively limited cross-sell opportunities across other banking offerings. And underpinning all of this is our commitment to delivering best-in-class solutions. And that commitment was reinforced by our recognition as the number one provider in the Chartis RiskTech100 for the fourth consecutive year, and that reflects the trust that customers place in Moody's Corporation to support workflows and decisions that matter most. And we see that market recognition reflecting a broader truth that as AI becomes a new interface for decision making, the need for trusted context increases, not decreases. AI systems require verifiable, permissioned, domain-specific data and analytics to produce outputs that are accurate, explainable, and defensible. That is exactly what Moody's Corporation provides and it gives us the opportunity to become even more deeply embedded in customer workflows. So we see this clearly in recent customer behavior. Customers who have purchased or upgraded into at least one standalone GenAI or AgenTix solution are retained at a rate of 97% and are growing at roughly twice the rate of the rest of the customer base. So this is not experimental usage. AI adoption is driving greater consumption of our proprietary data, expanding our share of wallet, and reinforcing long-term customer economics, particularly amongst our largest strategic accounts. And a key reason for adoption is that it is accelerating as customers consume our intelligence. So Moody's Corporation’s solutions are delivered through our own applications. And increasingly, they are embedded directly into customers' existing technology stack and third-party workflow platforms. That includes systems like Salesforce, ServiceNow, Coupa, Intapp, Shivani Kak: Databricks, Robert Scott Fauber: and we have made our content available through smart APIs and MCPs and spec agents for consumption through our customers' own AI platforms and going forward through AI portals like Claude and OpenAI. Operator: And Robert Scott Fauber: this is enabling us to serve our customers on a different level and in different ways than ever before. So for our banking customers, AI-enabled workflows such as automated credit memos and early warning systems are delivering some material efficiency gains. Reducing cycle times while improving consistency and regulatory compliance. And our flagship lending solution that we call CreditLens remains the fastest growing product in the banking portfolio, with growth approaching 20% in 2025. And I have to tell you, our new packaging is working. Roughly two-thirds of eligible renewals converted to our AI-enabled lending suite in 2025. With an average uplift of about 67%. In the fourth quarter, we also sold a large globally systemic important bank our GenAI-ready data and smart APIs to embed into their digital credit platform in order to automate financial analysis and accelerate wholesale lending decisions. A tier one U.S. bank has deployed Moody's AgenTix solutions to automate credit memo creation. They have told us that it can generate roughly 35% to 40% of each memo. And saves analysts hundreds and hundreds and thousands of hours of time equating, in some cases, to millions of dollars saved. And that work is expanding. Into enabling real-time commercial real estate risk monitoring, API-based screening, and KYC, where we displaced a competitor in the fourth quarter. And the same holds true around the world. In the fourth quarter, we signed banks in APAC and the Middle East to embed our AI-enabled spreading and memo generation solutions into their loan origination platforms. And we heard back from them they are reducing decision times in some cases by as much as 80%. And cutting loan processing cycles in some cases, by as much as 15 times. So some real efficiency. And KYC continues to deliver mid-teens growth driven by customers' trust in the quality, the governance, and the global coverage of our data. So a great example is our partnership with one of the world's largest e-commerce and technology companies, where we have grown that relationship more than 20-fold over the last three years. And today, our data is integrated across KYC, supplier risk, credit risk, transfer pricing, and sales workflows and covers more than 15,000 suppliers across automated entity resolution, screening, and early warning signals. Similarly, in the fourth quarter, and there is a pattern here, one of the world's largest global payment platforms signed a multiyear, multimillion-dollar agreement to embed Orbis via API into their new customer onboarding processes. And they are threading two critical requirements. They are creating a smooth customer experience through pre-populated applications while addressing enhanced KYC due diligence requirements from their regulators. And just to bring it up another notch, Moody's Corporation’s data is being used at the highest levels of the intelligence spectrum. In the fourth quarter, Interpol announced they are leveraging our ownership and firmographic data to support their operations targeting illicit finance. With a recent operation resulting in 83 arrests across six countries. And it is in environments like this where accuracy, provenance, and auditability are nonnegotiable. Now our data cannot be synthesized from public sources. It reflects how ownership and control actually work in the real world, cutting through complex multilayered structures across jurisdictions, and reflecting years of proprietary data curation, entity resolution, and relationship mapping. And it is that breadth and depth that makes our data both AI-enabling and AI-resilient. And we see some similar dynamics in insurance as well, where rising climate-related losses are driving demand for more data-intensive, model-driven solutions. In December, we launched our high-definition severe convective storm model that was calibrated on more than $55,000,000,000 of granular claims data. And that was contributed by the industry and available nowhere else. And then we deliver that SCS model through our cloud-based Intelligent Risk Platform. And early adoption has been strong. Reflecting the demand for more precise underwriting as these secondary perils, as they are called, increasingly behave like primary risks. So we believe the common thread here is clear. As AI proliferates, value accrues to providers of trusted context. Decision-grade data and analytics that are embedded, auditable, and difficult to replicate and that is exactly where Moody's Corporation sits. So stepping back, our confidence heading into 2026 is grounded in the durability of the business model that we have built and the discipline with which we allocate capital. And we operate businesses with structurally attractive economics, complementary revenue streams, and deeply embedded customer relationships. And it is these powerful business dynamics that allow us to generate strong cash flow and invest confidently in the areas with the highest long-term returns while continuing to expand margins. So in ratings, we have continued to broaden our methodologies and deepen expertise in areas aligned with the huge global funding needs and market innovation. And that includes infrastructure and AI investment, at the same time, public and private market dynamics, energy transition, and digital finance. We are further investing in our global footprint to ensure we are supporting the markets and issuers that will define the next phase of growth. In analytics, we are advancing a very deliberate strategy to position Moody's Corporation’s data as a trusted context layer for AI. We are accelerating efforts to link our massive data estate, expand network-based insights, and make our content more within customer workflows. And given the traction we are seeing, we have established a dedicated sales team focused on agent-ready data in 2026, and that reflects both customer demand and our conviction in this opportunity. Now from a product standpoint, our innovation engine is highly aligned, with the majority of 2026 growth expected to come from three primary areas. First, in lending and credit decisioning, we are upgrading customers onto more integrated AI-enabled platforms. This includes moving CreditView users to what we call Moody's View, expanding CreditLens into a broader lending suite, and delivering agentic capabilities such as automated credit memos and early warning tools. And we are also expanding and packaging our credit tools specifically for private credit origination and underwriting, where demand continues to grow. Second, in KYC and compliance, we are focused on driving efficiency and scale. For financial institutions, we are delivering productivity gains through workflow partnerships, and piloting screening and diligence agents. For corporates, we are rolling out a simplified modular compliance suite that scales in data and functionality based on a company's size, exposure, and sophistication. All of that will be delivered through the Moody's for Compliance platform. And third, in insurance, we continue to invest across modeling, underwriting, and risk transfer. This includes ongoing migrations to our cloud-based Intelligent Risk Platform, new high-definition model offerings, and enhanced data management capabilities with our new risk data lake. We are leveraging our geospatial artificial intelligence alongside Moody's hazard and risk scores to deliver a holistic property intelligence solution that supports underwriting decisions. We are also expanding into casualty and financial lines by combining Praedicat’s capabilities with Moody's data where we have demonstrated strong signal value and customer interest. And in the capital markets, we see an opportunity in catastrophe bonds as climate risk increasingly migrates into structured finance, an area where Moody's Corporation is uniquely positioned at the intersection of models, ratings, and market infrastructure with the recent launch of our cat bond rating methodology and revamped cat bond modeling platform. Across both analytics and ratings, a critical enabler of this growth is the continued build out of our AI context layer and knowledge graph. And we are capturing large new structured and unstructured data sets and leveraging our global connectivity to enrich how our AI systems and our analysts understand risk, relationships, and exposure. That is not a point solution. It is a foundational capability that compounds the value of everything that we do. And taken together, this is a portfolio designed to perform across market environments. It strengthens our competitive advantages, extends our growth runway where we have a clear right to win, and supports durable value creation for shareholders. And before I hand it over to Noémie Heuland, I want to thank our teams for their exceptional work in 2025. Noémie, over to you. Noémie Heuland: Thanks, Rob, and hello, everyone. The fourth quarter capped off an outstanding year across the board. While we experienced tariff-driven uncertainty that resulted in a market-driven air pocket early in 2025, conditions recovered as the year progressed, Shivani Kak: we finished very close to our initial internal expectations. Let me start with Moody's Analytics. Noémie Heuland: In 2025, we sharpened our focus on our highest conviction growth opportunities while continuing to actively optimize our product portfolio and manage costs with discipline. Shivani Kak: For the full year, MA revenue grew 9%, Noémie Heuland: and adjusted operating margin improved by 240 basis points to 33.1%. This performance builds on our already strong financial profile, delivering consistent growth at scale, Shivani Kak: with a very high concentration in recurring revenue, and retention in the low to mid-90s. Noémie Heuland: ARR reached $3,500,000,000, up 8%, which is in line with organic constant currency recurring revenue growth also at 8%. Now before turning to the drivers of ARR growth, I want to do a quick reminder on the MA revenue disclosures. Reported revenue reflects period results, and that includes FX and M&A. Organic constant currency recurring revenue measures renewable software licenses, decision-grade data, and world-class content and analytics, which collectively represents an incredibly durable core business, and that removes FX and M&A. However, the growth rate can still vary quarter to quarter, due to upfront revenue recognition timing, especially for on-premise licenses. Now ARR is forward-looking, it is normalized for FX and M&A. And it reflects the current position of recurring contracts. As a result, this gives, in our view, the clearest perspective of customer demand and the future revenue base. Using that lens, let me walk through a few highlights. Starting with Decision Solutions, which includes KYC, insurance, and banking, Shivani Kak: and continues to be a key growth engine for MA. These businesses delivered double-digit ARR growth, Noémie Heuland: and represent approximately 45% of total MA ARR, underscoring both their scale and strategic importance. KYC remains the fastest growing component Shivani Kak: with growth consistently in the mid to high teens over the past Noémie Heuland: two years, and 15% ARR growth in 2025. Growth in KYC continues to be driven by both deeper penetration with existing banking customers, especially tier one institutions, as well as expansion beyond our traditional financial services customer profile. Shivani Kak: We are increasingly seeing demand from non-financial customers, Noémie Heuland: for unique solutions to address complex, high-stakes compliance challenges, as you heard Rob talk about. Shivani Kak: With the Interpol example. Noémie Heuland: We delivered very strong net growth in the quarter, supported by both new customer wins and continued cross-selling and expansion with existing relationships. A few recent deals illustrate the power of our solutions here and our ability to deliver trusted outcomes for customers. As Rob referenced earlier, we secured a competitive KYC displacement win at a tier one bank that also leverages a broader set of Moody's solutions. And what this example illustrates is our ability to build and more broadly scale relationships over time. In fact, the relationship grew by more than 20% in 2025, and continues to present meaningful expansion opportunities in 2026. Beyond the payments company customer example Rob mentioned earlier, we won new business with two manufacturing corporates, including a leading global aerospace and defense company, Shivani Kak: facing new U.S. export control requirements. In this case, Noémie Heuland: the customer needed a solution capable of identifying ownership and control structures across complex global entities to comply with the BIS 50% rule and the evolving export restrictions. Shivani Kak: We are uniquely positioned to address this kind of customer challenge, Noémie Heuland: because of our ability to link together billions of ownership structures Robert Scott Fauber: through our extensive network of local registry relationships. Noémie Heuland: Turning to banking, our focus and customer mix here differ quite a bit from KYC. While KYC is anchored in deep relationships with tier one banks and corporate customers, our banking offerings in Decision Solutions are much more significantly Shivani Kak: with tier two and tier three institutions. Noémie Heuland: Where demand is centered on scalable, configurable, Shivani Kak: end-to-end workflow solutions that are ready to deploy. Noémie Heuland: Banking delivered ARR growth of 8%, that is up from 7% in the third quarter. Shivani Kak: And this business includes our lending suite as well as risk, regulatory, and finance solutions. Noémie Heuland: We are actively investing in expanding our end-to-end offerings for lending, including with AI capabilities from the Numerated and Eble AI acquisitions, strengthening decisioning, automation, and customer experience. In this line of business, we have been deliberately reducing transactional revenue over the last several years. Shivani Kak: Primarily by expanding our partner network to serve the lower margin implementation services for our solutions. Noémie Heuland: And you will see in 2025, this trend continued, and was compounded by the recently completed divestiture of the Learning Solutions business which is a further sharpening of our focus within the banking portfolio towards the highest demand and quality revenue. Now turning to insurance, demand for our most sophisticated high-definition models and cloud-based Intelligent Risk Platform drove 7% ARR growth for the year-end 2025, and that is an increase of 21% over the last two years, and looking at this two-year view is important because 2024 was particularly strong, reflecting record levels of customer migrations onto the IRP, combined with large model upgrades, Shivani Kak: and new product adoption. Stepping back, Noémie Heuland: our recent performance underscores the successful integration and execution of growth strategies we laid out for the RMS business, Shivani Kak: following the acquisition. In fact, we completed and slightly exceeded the financial Noémie Heuland: target associated with that transaction, adding $150,000,000 run-rate revenue by 2025. Now achieving that milestone required shifting RMS from flattish growth in 2021 to a high single-digit CAGR, including synergies, over a four-year period. That is a transition that was supported by sustained customer demand Shivani Kak: and meaningful platform-led upsell activity. Noémie Heuland: Next, turning to Research and Insights. We achieved 8% ARR growth in this more mature business, underscoring the durability of demand, continued innovation, and improved customer retention. As Rob shared, Shivani Kak: we are enhancing CreditView with an expanding set of Moody's content, Noémie Heuland: and agentic solutions that improve productivity, Shivani Kak: insight generation, and workflow integration. Noémie Heuland: This reinforces its role as a core decision support platform and is driving continued adoption. Finally, Data and Information delivered 7% ARR growth, supported by strong pricing power and sustained customer demand across two distinct but complementary areas. Ratings data feeds are the primary growth driver within the segment, with ARR growth well above the overall line of business. And that underscores their decision-grade nature, and central role in customers' credit, risk, and investment workflows. In parallel, our decision-grade data estate, which includes company, ownership, people, and news, is increasingly embedded in customer workflows across a wide range of third-party risk use cases. Now growth in this area can vary year to year based on deal mix, including the timing of closure or renewals of large enterprise-wide data agreements, versus sales to smaller institutions. Shivani Kak: And as we have shared, 2025 was Noémie Heuland: impacted by DOS-related cancellations across several U.S. government agencies. Shivani Kak: Excluding these items, underlying demand and customer engagement remained solid. Noémie Heuland: We have had several notable Orbis wins in the fourth quarter, including one with a large global bank for enterprise-wide access and a new partnership with one of the world's largest asset managers, underscoring the breadth Shivani Kak: relevance, and durability of our data estate. Noémie Heuland: Turning to margin, as I mentioned earlier, Moody's Analytics delivered ahead of the target we originally set for 2025. And that is even as we absorbed acquisition-related headwinds, and continued to invest Shivani Kak: in future growth. Noémie Heuland: What differentiates Moody's Analytics is our ability to invest in growth while expanding margin. We expect to be able to sustain this balance for the years to come. Because beyond near-term cost actions, we are making structural changes to how roles are set up and our core processes. Shivani Kak: Let me give you an example. Noémie Heuland: We are building out a single standard GenAI-led product development lifecycle process across MA, which we expect will drive higher productivity, improved quality, and faster delivery for customers. In parallel, we are embedding advanced analytics and GenAI into other core workflows, such as sales account planning, which allows us to scale impact and customer value without Shivani Kak: proportional increases in headcount. Turning to MIS. Noémie Heuland: Fourth quarter revenue was up 17% year over year, and the performance here was driven by activity that was very strong, Shivani Kak: particularly in the investment grade asset class within Corporate Finance, Noémie Heuland: where tight spreads, strong investor demand, and several large jumbo deals from hyperscalers supported record issuance. Project and infrastructure finance also had near-record issuance in the quarter. Private credit across all asset classes grew 40% in Q4, from particularly strong activity in fund finance and securitization. Transactional revenue increased 22% in Q4, supported by 10% issuance growth and a more favorable deal mix, as lower-yield bank loan repricing activity declined versus the prior-year quarter. MIS recurring revenue was particularly strong, up 9% year over year in Q4. Turning to margins, MIS delivered a full-year adjusted operating margin of 63.6%, representing 350 basis points of year-over-year expansion. And that reflects strong operating leverage in the ratings business, driven by continued technology investments, Shivani Kak: and disciplined capital allocation. Looking forward, we expect investment needs will continue to increase, and debt remains an attractive funding source. Accommodative monetary conditions, declining default rates, and healthy investor demand for yield should support access to capital across sectors. For the full year 2026, we expect total issuance to increase at a low single-digit percent pace, followed by ongoing refinancing needs, and 40% to 45% increase in debt-funded M&A issuance. Noémie Heuland: We also expect ongoing growth from private credit, as well as issuance from hyperscalers and AI-driven data centers. Based on our issuance outlook, we expect MIS revenue for 2026 to grow at a high single-digit percent pace. Our forecasts project year-over-year growth across all four quarters, strongest in the first half, and moderating in the second. We are projecting a full-year operating margin of approximately 65%, that is up 150 basis points versus 2025. For Moody's Analytics, reported revenue guidance is at the high end of mid-single-digit growth, Shivani Kak: including a 180 basis point headwind Noémie Heuland: to year-to-year growth from the divestiture of our Learning Solutions business. Adjusting for the effect of this divestiture, Shivani Kak: and uneven foreign exchange rates across the two years, Noémie Heuland: we expect organic constant currency recurring revenue growth to be aligned with ARR, in the high single-digit percent range. From a margin perspective, our 34% to 35% adjusted operating margin outlook reflects approximately 150 basis points Shivani Kak: of improvement at the midpoint. Noémie Heuland: Putting this all together, we expect MCO revenue growth in the high single-digit percent range, and MCO adjusted operating margin likewise expanding by 150 bps to the 50% to 53% range for 2026. Our 2026 adjusted diluted EPS guidance is $16.40 to $17.00, implying approximately 12% growth at the midpoint. We expect the effective tax rate to be in the range of 23% to 25% in 2026, Shivani Kak: a more normalized overall rate, after we realized a sizable M&A-related one-time benefit in 2025. We have also added a new appendix slide with additional detail to provide further insights into the key drivers of our results, Noémie Heuland: and 2026 outlook assumptions. Lastly, we are expecting free cash flow to be in the range of $2,800,000,000 to $3,000,000,000, 13% growth at the midpoint. Now this guide is impacted by a notable $100,000,000 increase in CapEx, for the build-out of our New York headquarters and London office space. We expect to repurchase approximately $2,000,000,000 in shares during the year and announced a 10% increase to our quarterly dividend. Overall, our capital plan calls for a return of at least 90% of our free cash flow to shareholders in 2026. Given the recent market activity in our sector, our strong fundamentals and durable growth outlook, you can expect us to be aggressively buying back shares at these levels. Shivani Kak: In short, Noémie Heuland: both our 2025 results and our outlook for 2026 demonstrate the strength and differentiation of our financial profile and confidence in our ability to continue to deliver long-term value for shareholders. I will now turn the call over to the operator so we can begin the Q&A. We will now open for questions. Operator: Thank you. If you would like to ask a question, please dial 1 on your telephone keypad. If you are on a speakerphone, please pick up your handset and make sure your mute function is turned off so that your signal reaches our equipment. We will ask that you limit yourself to one question. The option to rejoin the queue will be unavailable. Again, that is 1 to ask a question. Our first question comes from Curtis Nagle with Bank of America. Please go ahead. Robert Scott Fauber: Terrific. Thanks so much for taking the question. Maybe Rob, just a quick one from you. Just from a portfolio perspective, Alex Kramm: for MA, it seems like it is in a pretty good place. But I guess, do you feel like at this point, you have the right assets, the highest growth, you know, the ones you are most confident in terms of investment, or, you know, should we expect more more paring, you know, this year? Robert Scott Fauber: Curtis, first of all, welcome to the call. It is great to have you on today. I would say we feel very good about the assets and the capabilities that we have. And you heard me talking about this, Curtis, a bit in my prepared remarks. I mean, I think we all understand that data and trusted data is going to be the fuel for AI. And especially for the big regulated institutions that are, you know, big customers of ours. And so we feel very good about having built out this massive data estate and then as you heard me talk about it, it is about linking that, and it is about the ability to draw insights Shivani Kak: across Robert Scott Fauber: that network of data. So, you know, I think and, again, I think we also understand that proprietary datasets will be at a premium going forward. And wherever we have an opportunity to add, you know, uniquely valuable data into this giant data estate, putting it into our context layer, helping to build out our network graph, I think you are going to see us do that. In terms of the trimming, you know, I think this just, you know, you hear us talking about, you know, where we are making the more concentrated bets. And I talked about lending and credit decisioning, KYC and compliance, and insurance. And those are the places where we think we bring, you know, the strongest set of capabilities, the deepest customer relationships, that give us the strongest right to win. And so we felt there was just an opportunity to look across the portfolio at things that were not as central to that and had an opportunity to, as you said, kind of, you know, prune the portfolio and allow us to focus even more on the areas of the greatest scalable growth opportunities. Alex Kramm: Okay. Thank you. Appreciate it. Operator: Our next question comes from Alex Kramm with UBS Financial. Please go ahead. Alex Kramm: Yes. Good morning, everyone. I want to stay on MA. Thanks Toni Michele Kaplan: to both of you for all the AI detail. A lot of impressive stats. On the flip side, though, it does not sound like it is really translating into ARR revenue yet. Maybe it is. But, obviously, if we look at the guidance and the results, relative to your medium-term outlook, those have, you know, kind of softened a bit. So I guess the question is, when is AI really going to contribute? And if it is already contributing, are there some other issues elsewhere in the business? So maybe an open question there. Thanks. Robert Scott Fauber: Hey, Alex. Thanks. And I think in a way, there is kind of two parts that I want to unpack in that question. The first is kind of your observation around the trajectory of MA. And I would say that our fourth quarter ARR was in line with the third quarter. And, you know, as you would expect, when you have got, I am going to say, kind of a portfolio, you know, we are selling into very different customer bases. There are some puts and takes in terms of what is growing faster and what is growing not as fast. If you look at, you know, kind of the ARR trend across the portfolio in 2025, I think you would see that actually banking, research, and data actually picked up a little bit. And we had some headwinds with insurance and KYC. And as you heard, you know, Noémie mentioned, we have talked about before on the call, some of that with KYC was impacted by DOS. And, you know, you see our guide that is consistent with these growth rates. I talked about the new products and the cross-sell and upgrade pathways that are going to drive that growth. But I think maybe one other point I want to just double click on: everybody wants to understand how much revenue is being generated by AI. And there were two stats that I, again, I want to come back to because I do think they are leading indicators for us. One is the fact that those largest accounts for us are growing at about twice as fast as the rest of the portfolio. That is really important because that is where we have the deepest engagement with the most sophisticated institutions on the planet. And that is where they all want to be able to consume our content and bring it into their own AI workflow orchestration platforms and consume it through AI portals. So there is a lot of AI-oriented engagement with those big institutions. That is what is driving and importantly driving that growth. And then second, you know, we have that stat about the cohort of customers who have bought at least one standalone or packaged or upgraded into an AI solution, that is growing twice as fast. Again, because of the level of engagement. So I think, Alex, you know, I feel good that the most sophisticated institutions are where we have got the most growth and the most engagement around AI. And, you know, our view is that that is going to then trickle through the rest of the customer base over time. Toni Michele Kaplan: Very helpful. Thank you. Operator: Our next question comes from Manav Patnaik with Barclays. Please go ahead. Toni Michele Kaplan: Thank you. Good morning. I was just hoping on the ratings side, you could just Scott Darren Wurtzel: help us with the cadence for the year in terms of how you, you know, assume the issuance trajectory there? Robert Scott Fauber: Yeah. Manav, hey. Great to have you on the call. So I am going to start with issuance, then maybe I will just go into revenue real quickly for you. Because I know that will be helpful. So we are expecting issuance activity, like we typically do, to be more heavily weighted towards the first half of the year. We have very attractive market conditions and, you know, there is a, I would say, relatively strong start to the year as well. Alex Kramm: And Robert Scott Fauber: that is also in line with what we have been hearing from the banks who we have been talking to, who think that the issuance, again, will be a little bit front loaded in the first half of the year. To give you a sense, that is probably mid-50s percent of total issuance is going to be in the first half of the year. At least that is what we are modeling. That was pretty consistent with 2023–2024. 2025 was a little more back-end loaded, I think, as you know. And that is also a pretty consistent pattern that we see with frequent issuers. So to put a finer point on it, Manav, we are expecting issuance to grow in 2026 in the kind of high single-digit range versus the first half of last year and to decline mid-single digit in the second half. And in the first quarter in particular, we think we are going to see kind of high-20s percent of issuance in terms of as a percent of the full year. Now when we go to revenue, it is a little less pronounced in terms of being front-end loaded. So I would say from a revenue perspective, we expect it to be, you know, somewhere in the low to mid-50s percent of revenue in the first half of the year. I think importantly, we do expect revenue growth in each quarter of the year. We think that we are going to be somewhere in the mid-teens for revenue growth in the first half of the year. And somewhere in kind of the low single-digit range for the second half of the year. And for the first quarter, probably somewhere in the mid-20s percent. Scott Darren Wurtzel: Alright. Super helpful. Thank you. Operator: Our next question comes from Toni Michele Kaplan with Morgan Stanley. Please go ahead. Thank you so much. I have been getting an increasing number of questions recently around how much of your data is proprietary, the sources of your data, and which parts and how much of MA is based on proprietary data. I was just hoping that you could dimensionalize this in a way that you think is most helpful for investors. Thank you. Scott Darren Wurtzel: Yeah. Toni, Robert Scott Fauber: rather than me sitting here and trying to convince you of some statistic, Scott Darren Wurtzel: let me Robert Scott Fauber: help you think about it in slightly a different way. And this is about why we think we are well positioned in an AI world. And first, as you said, like, we all understand we have a massive proprietary data estate. And you heard me talk about we are in the process of unifying all of the data, the models, the ratings, the research, the risk assessments into a really a single normalized record for each entity. And that is going to be able to give us the ability to create a very, very powerful knowledge graph. Toni Michele Kaplan: Alright? And then we are going to keep adding to that. Robert Scott Fauber: And that is going to enable Scott Darren Wurtzel: the agents to be able to access a Robert Scott Fauber: comprehensive, interconnected view of any entity. And, as I said, give unique insights and allow for richer decision making. But the second thing, I think this is important, is we are assembling all of that into what we call—and you might have heard me use this term—a trusted context layer. So that context layer sits between the raw data assets and the AI reasoning engines. So it makes the data usable for reasoning. And what that is is a structured, governed representation of, you know, what the data means, how it relates across entities and time and scenarios, when and why the data should be applied, and much, much more. Right? It is a deep contextual understanding of the data. Orbis, obviously, being a very important part of this massive data estate, is a great example. It is not just company data. It is years of entity resolution, ownership mapping, expert judgment, and, of course, a complex ecosystem of licenses and IP rights. And we have built all of that context directly into our analytics, our methodologies, and our models so that then the outputs are accurate. They are explainable. And they are defensible. As you have heard me say, and I love this term, Alex Kramm: they are Robert Scott Fauber: decision grade. So hopefully that gives you a sense. It is all of that together that makes our data, I think, uniquely valuable. Scott Darren Wurtzel: Thank you. Operator: Our next question comes from Ashish Sabadra with RBC. Scott Darren Wurtzel: I wanted to ask a follow-up question on AI. Thanks for highlighting the AI resilience and strong demand for the agentic solution. One of the investor concerns lately have focused on the adoption of white coding and multiplatform LLM offerings such as Claude for financial services, and those potentially impacting vertical software or workflow solutions. Can you talk about the moat around the software or vertical solution within MA? Thanks. Yeah. Ashish, Robert Scott Fauber: hey. Great to have you on the call. Again, I think the way to think about this—and it is interesting if you think about, you know, you heard me talk about CreditLens and our lending solution, and that has an AI-enabled layer to all of it, from the ingestion of financials to credit decisioning and covenant monitoring and much more. You have got different adoption curves with different customer segments. So, you know, you heard me say at the high end, almost all of the banks, the big tier one sophisticated banks want to be able to consume our content in a variety of different ways and it is typically not through software. Alex Kramm: Right? But Robert Scott Fauber: what they want is, you know, we had a bank that is working on AgenTix—I mentioned it in my remarks. They are building an agentic workflow for lending. So while they do not need to adopt CreditLens, what they do want is they want our specialized agents around credit memo generation and early warning that are populated with all of our data. And access to our models. So they are consuming it either through smart APIs and MCPs or specialized agents that are going right into the workflow that they are building. Scott Darren Wurtzel: So Robert Scott Fauber: for me, again, it comes back to, you know, we talk about we are going to be wherever our customers want us to be. If you are a tier three bank, and you want a lending software platform that is enabled with AI, and has access to a lot of our content, we are going to sell that to you. If you want our content through, as I said, different ways to consume the data or specialized agents, we will do that. If you want to consume it in an enterprise software system, we will do that. So in a way, Ashish, I am actually less worried about it because at the end of the day, and we have always talked about this, the software that we have built is simply a delivery chassis for the content. It is not just some business logic that we have sold to a customer. It is a delivery channel for the content. We will deliver it through software. We will deliver it into your AI platform. It does not matter. Operator: Our next question comes from the line of Andrew Steinerman with JPMorgan. Please go ahead. Scott Darren Wurtzel: Hi. I have a simple one. Toni Michele Kaplan: I just want to know how much revenues these two MA divest— Scott Darren Wurtzel: divestitures affect the MA revenue guide for 2026. And then let me just add on to that. I also want to understand how they affect the MA ARR figure—are divestitures included or excluded when you report MA's ARR? Noémie Heuland: Yeah. Andrew, hi. So let me start with the first part of your question in terms of how those affect our guide. Learning Solutions was divested in December. So, obviously, for 2025, there is a very immaterial impact. In terms of our outlook, we expect about a one percentage point of headwind to the MCO revenue growth, and that is reflected in our reported—in our outlook for total revenue. We expect a little under two percentage point headwind to the Shivani Kak: Sorry. 1%—one percentage point headwind to— Noémie Heuland: 2% headwind to MA revenue growth, which is embedded in our guide. And most of it is one-time. That is about 90%. Shivani Kak: Going forward, it should modestly improve the total revenue growth on a pro forma basis as the training revenue was a slower, Noémie Heuland: flattish growth. And when it rolls off, that should improve the profile going forward. This is broadly neutral to MA, about Shivani Kak: 30 Noémie Heuland: to 30 basis points MA margin dilution. And very minimal for the MCO adjusted operating margin guide. Scott Darren Wurtzel: Now Noémie Heuland: for the Regulatory Reporting business, this is not yet reflected in our guide. We expect the transaction to close around 2026, Shivani Kak: we will update our guidance to reflect that impact at the time. Just to give you a sense of the impact when it closes, Noémie Heuland: we expect about two percentage points of headwind to MA reported revenue growth, Shivani Kak: and that is mostly recurring. Noémie Heuland: We expect a 100 basis points tailwind of MCO adjusted expense growth. And about 10 basis points dilution on MCO margin. This will also have a minor $0.05 to $0.10 adjusted EPS impact. It depends on when the timing of the transaction closes. Shivani Kak: As we anticipate to redeploy some of the sales proceeds to additional share buybacks. Noémie Heuland: Just on your last question about ARR, ARR and constant currency organic recurring revenue—this is what ARR is—are adjusted to eliminate the effects of divestitures and acquisitions. And we expect both of those to grow high single digit in 2026. Scott Darren Wurtzel: Thank you, Noémie. Operator: Our next question comes from Owen Lau with Clear Street. Please go ahead. Toni Michele Kaplan: Good morning. Thank you for taking my question. I want to go back to your MIS margin guide, which is better than expected, and I think it is even higher than your medium-term guidance which is around low 60%. Could you please talk about the driver of these strengths, and how should we think about your medium-term guide from here? Thanks a lot. Scott Darren Wurtzel: Yeah. Shivani Kak: So we are guiding Noémie Heuland: adjusted operating margins for Moody's Ratings of about 65%. I think there are two components. Obviously, revenue and transaction revenue growth. But we have also made significant investments, if you recall, over the past couple years or Shivani Kak: three, four years on technology Toni Michele Kaplan: enablement. Alex Kramm: And Noémie Heuland: around our data. And Rob talked a lot about the value of the ratings data feeds and all the data that our analysts produce, all the insights. So we have done a lot of work around that. We have also equipped our ratings analysts with Shivani Kak: pockets of automation tools to be more efficient and spend more time actually on ratings committees, spending time with issuers, and less so on more administrative tasks. Noémie Heuland: And that is really driving increased operating leverage. We are still investing in the ratings while at the same time, you Mike West: improving and getting those margins level. We are investing in analytical staff to support, obviously, the volume, but also areas like private credit. We are looking to also invest in our commercial efforts, as well as methodology groups, technology more broadly. So we are still investing in Moody's Ratings and at the same time expanding margin through those investments in technology. Operator: Our next question comes from Craig Huber with Huber Research Partners. Please go ahead. Robert Scott Fauber: Oh, great. Thank you. Rob, I thought you did a really good job talking about your Craig Huber: AI moats that you have. But, just a little further on that. Within Moody's Analytics, there is obviously concern out there with investors. You can see it in your stock price and all in your peers as well that AI firms or firms that pop up or exist that have AI tools over time could replicate what you guys do in parts of your MA operation. Can you just talk a little bit further about the moats? Where do you think—just to talk on the other side of this—where do you think maybe you are vulnerable to a third-party AI initiative to take some share away from you there on a meaningful basis? Then on the second way to look at this is there is a lot of concern out there, people talking about that AI is going to ravage the white-collar workforces out there in the U.S. and around the world. Talk to us, if you would, about MA, how you price your product here. It is not really on a per-seat basis. But if white-collar headcount out there goes down 25% plus, just say hypothetically, at a lot of your institutions, how will that impact how you get paid, how much you get paid when contracts come up for renewal? Not existing contracts, but when they come up for renewal, how may that impact your discussions there? Thank you. Robert Scott Fauber: Yeah, Craig. Some good stuff there. Thanks for the questions. Let me just talk a little bit. I am going to go back to Orbis for a moment because it is one of our biggest parts of our data estate. And, you know, we get questions about this. And, you know, I would say a few things in terms of what make it very hard to replicate that I do not think are understood. First of all, a lot of the data just simply is not available to the public. We have a, you know, a complex ecosystem of commercial agreements and IP rights. I mean, that has taken us decades to build and we are constantly curating that. Second, you know, there are legal and regulatory issues, you know, privacy laws and export controls and all sorts of things that our customers need to know that we are abiding by, right, if they are going to use the data. There is semantic complexity. This gets into, you know, things in different jurisdictions mean different things. And models have a lot of challenges with semantic drift. So that is where we have been curating all this and our local experts over decades understand what different things mean in different locations, and then they are cleansing and normalizing that data to make it valuable. There is entity resolution and ownership inference. And, by the way, you know, the models are not simply doing entity resolution. That is a really important thing to be able to resolve against the right entity. And we have combined probabilistic models, a human-in-the-loop validation, and proprietary logic. And we have been doing this over years and years and years. Then we have got all this historical depth. Right? So we have a lot of historical depth and in some cases, the data has either been archived or it does not exist in digital forms. It is not easy to get some of that history. And then finally, governance. I have got to tell you, Craig, you know, every bank I talk to tells me good enough is not good enough for our institution. What they want from us—they want to move in many cases to fewer trusted providers. So they want us to be able to meet their needs. And look, I will, you know, I will acknowledge, Craig, that things like, you know, automated data ingest and things like that will be done by AI. But it is those things that I talked about—it is not just Orbis. You could go across a number of other datasets that we have, and the same is true. So hopefully that gives you a sense. Now let me talk about how do we price the product. And we have never had seat-based licenses. That is not the way we have operated. We have always tried to, you know, kind of think about value in our pricing schedules. Scott Darren Wurtzel: But Robert Scott Fauber: look, we are starting to trial in parts of the business different pricing models. Right? And thinking about elements, bringing in elements of consumption-based pricing that I think will be more closely aligned to outcomes. Because at the end of the day, Craig, what you are talking about—if there is a substantial labor replacement—somebody and some companies are going to capture some of that opportunity. Maybe not all of it, but they are going to capture it. Right? And that is going to be, in my opinion, a combination of the model providers and the data providers who are making that efficiency possible. And so we are thinking as we speak and trialing different pricing models to be able to capture some of that—frankly, some of that upside. Scott Darren Wurtzel: Great. Thank you, Rob. Operator: That concludes our question and answer session. I will now turn the call back over to Rob for closing remarks. Robert Scott Fauber: Hey, thanks everybody for joining today. And for my colleagues at Moody's Corporation, Scott Darren Wurtzel: let’s go. Robert Scott Fauber: Talk to you next time. Scott Darren Wurtzel: Bye. Operator: This concludes Moody's Corporation Fourth Quarter and Full Year 2025 earnings call. As a reminder, immediately following this call, the company will post the MIS revenue breakdown under the Investor Resources section of the Moody's IR homepage. Additionally, a replay will be made available after the call on the Moody's IR website. Thank you.
Operator: Greetings, and welcome to the Clean Harbors, Inc. Fourth Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael R. McDonald, General Counsel for Clean Harbors, Inc. Mr. McDonald, you may begin. Michael R. McDonald: Thank you, Christine, and good morning, everyone. With me on today's call are our Co-Chief Executive Officers, Eric W. Gerstenberg and Michael L. Battles, our EVP and Chief Financial Officer, Eric J. Dugas, and our SVP of Investor Relations, Jim Buckley. Slides for today's call are posted on our Investor Relations website and we invite you to follow along. Matters we are discussing today that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Participants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today, 02/18/2026. Information on potential factors and risks that could affect our results is included in our SEC filings. The company undertakes no obligation to revise or publicly release the results of any revision to the statements made today other than through filings made concerning this reporting period. Today's discussion includes references to non-GAAP measures. Clean Harbors, Inc. believes that such information provides an additional measurement and consistent historical comparison of its performance. Reconciliations of these measures to the most directly comparable GAAP measures are available in today's news release on our Investor Relations website and in the appendix of today's presentation. I will now turn the call over to Eric W. Gerstenberg. Eric W. Gerstenberg: Thanks, Michael. Good morning, everyone, and thank you for joining us. Starting off with safety. We concluded a record year of safety in 2025 by delivering a total recordable incident rate of 0.49, which is well below the prior year and industry-leading. Safety underpins everything we do at Clean Harbors, Inc., and I have outlined the many benefits on prior calls, such as reputation, teamwork, employee retention, and cost savings. Most importantly, though, it is about sending our team home safe to their families at the end of each day. To everyone on the team listening today, we appreciate all that you did this year and every day to keep yourself and your colleagues safe. Turning to a summary of our results on slide three. We are pleased to report another outstanding year. In addition to a strong safety record, we also delivered record levels of revenue, adjusted EBITDA, adjusted free cash flow, and saw our adjusted EBITDA margin increase by 40 basis points. We capped off 2025 with a strong Q4, as we exceeded the guidance we provided in late October. Our performance was driven by profitable growth in both of our operating segments, with our Environmental Services segment delivering its fifteenth straight quarter of year-over-year growth in adjusted EBITDA margin. This run of nearly four years of consistent margin expansion against a challenging industrial backdrop reflects the successful delivery of our essential services to customers and execution of our growth strategy, along with disciplined pricing, cost management, workforce productivity, and network efficiency. Turning back to our annual results. In 2025, we topped $6,000,000,000 in revenues for the first time in our history while increasing our adjusted EBITDA by 5%. Our performance was led by our 6% while increasing its segment adjusted EBITDA margin by 60 basis points. Our 2025 results also included a record $509,000,000 in annual adjusted free cash flow. We also achieved several notable operational milestones this past year, including the successful first-year ramp up of our new Kimball incinerator, creation of our Phoenix hub, handling nearly 22,000 emergency response events, the issuance of our PFAS incineration study with the EPA, the reduction of voluntary turnover by 150 basis points to a five-year low. Turning to the segments, beginning with ES on slide four. We grew Q4 revenue by 6%, our largest quarterly increase of the year, based on the strength in demand for disposal and recycling services, project volumes, growth in PFAS services, and emergency response work. Technical Services rose 8%, and Safety-Kleen Environmental revenue grew 7%, driven by pricing and higher volumes within its core offerings, particularly vacuum services. Incineration utilization, excluding the new Kimball incinerator, was 87%, consistent with our expectations. At the same time, landfill volumes increased more than 50% in Q4, largely due to project volumes. For the full year, incineration utilization, excluding Kimball, was 89% versus 88% in 2024. Field Services revenue grew 13% in the quarter, aided by large-scale emergency response projects that generated approximately $30,000,000 in revenue. Overall, despite some stubborn near-term market headwinds, our ES segment delivered strong Q4 results, which underscores the resiliency of our business model, our broad range of service offerings, and the diverse industry verticals we serve. Adjusted EBITDA for the segment was up 8% in the quarter, with Q4 margin up 50 basis points based on disciplined pricing, higher overall volumes, mix of work, and workforce management initiatives. Overall, Q4 was another impressive quarter for our largest operating segment. Turning to slide five. I wanted to take a moment to highlight the considerable momentum we are seeing around PFAS as we head into 2026. The PFAS incineration study we completed in partnership with the EPA, as well as the Department of War, was released in September and is generating inbound discussions with customers and key stakeholders. In November, I had the honor of speaking at a hearing before the U.S. Senate Committee on Environment and Public Works about PFAS, to raise awareness of our capabilities and the need for establishing regulatory thresholds. In December, we announced a three-year $110,000,000 contract related to our ongoing PFAS water filtration work at the Pearl Harbor base that demonstrates the effectiveness of our carbon filtration system that has been in use there since 2022. This was followed by the finalization of the National Defense Authorization Act, which included language requiring the Pentagon to return to Congress within 180 days with recommendations for how the military will address PFAS removal and destruction in more than 700 U.S. military installations. In addition, the EPA is expected to develop and publish a regulatory framework for impacted soil and solids, update their water guidelines, and finalize new manufacturing rules. At the same time, state governments are moving forward to create their own rules and are evaluating take-back programs. All of these developments represent sizable growth opportunities for Clean Harbors, Inc. Even without new rules in place, we are seeing each element of our total PFAS solution grow and our pipeline expand. The guidance that Eric will share with you only assumes a 20% growth rate for our PFAS business in 2026, which is consistent with the past several years. With that, let me turn things over to Michael L. Battles to discuss SKSS and capital allocation. Michael L. Battles: Thanks, Eric. Good morning, everyone. Turning to SKSS on slide six. The base oil pricing environment continued to weaken in Q4 and, as expected, segment revenue was down slightly. In terms of profitability, segment adjusted EBITDA was $30,000,000, a 22% increase from 2024. For the full year, adjusted EBITDA for this segment was $137,000,000. Despite difficult macro conditions, the team continued to execute well on our oil collection services and related pricing, which drove the increase in year-over-year Q4 adjusted EBITDA, a 310 basis point improvement in margins. We increased our charge for oil pricing, or CFO, in Q4, raising rates roughly 50% above our Q3 average. Managing the pricing associated with these oil collection services and substantially lowering our overall waste oil collection costs remain the primary levers to offset continued decline in base oil pricing. Even with higher CFO, we collected 56,000,000 gallons of waste oil to feed our re-refining network and keep our plants running efficiently. In addition, we once again delivered incremental growth in our direct lubricant gallons sold, which further supported our margin improvement. During the quarter, we also continued to grow our Group III production as those gallons carry a premium to our conventional Group II volumes. For SKSS in 2026, we will continue to proactively manage our re-refining spread through providing consistent, reliable, and high-quality collection services at appropriate CFO rates supported by market conditions. We will also prioritize expanding direct blended sales, increasing Group III production, pursuing partnership opportunities. Turning to capital allocation on slide seven. We continue to seek opportunity to generate strong returns for shareholders through all elements of our capital allocation framework. We remain well positioned to do so, supported by the strength of our balance sheet and a robust cash generation profile. On the M&A front, we announced today the signing of a purchase and sale agreement to acquire environmental businesses from Depot Connect International for approximately $130,000,000. These businesses are a carve-out to DCI and will be integrated into our facilities network within Technical Services as well as our Field Services business. This acquisition is expected to generate annual revenue of approximately $40,000,000 with $11,000,000 of annual adjusted EBITDA, or roughly a 12-times multiple. We see a great strategic fit given their five locations in Ohio, Louisiana, and Texas and their fleet of trucks and other equipment. DCI currently offers waste handling, tank cleaning, and railcar cleaning to its customers. Additionally, two of their facilities have wastewater treatment and solidification capabilities. We expect the acquisition to close in the first half of the year, subject to customary closing conditions. We expect to remain active on the acquisition front in 2026, and we plan to continue to make strategic internal investments to accelerate our growth. Today, we announced a $50,000,000 targeted expansion of our vacuum truck fleet aimed at capitalizing on growth opportunities we are seeing through our SK Brand business. Due to the limited availability of these specialized assets, this fleet expansion will occur over the course of 2026 and 2027. This fleet growth program, which we anticipate will generate an incremental adjusted EBITDA of $12,000,000 to $14,000,000 in 2028 when fully ramped, is another element within the $500,000,000 of internal investments we mentioned in our Q3 call. We anticipate that each of these projects will generate attractive returns for our shareholders. We also continue to view share repurchases as an attractive way to generate strong shareholder returns, as evidenced by our $133,000,000 of repurchases executed in Q4. We bought back a record number of shares this year, and we recently received Board approval to expand our existing authorization by $350,000,000, providing a total of $600,000,000 of remaining capacity and giving management significant flexibility to return capital to shareholders going forward. On the debt side, we refinanced a portion of our debt in 2025 on favorable terms with longer maturity. We are pleased to be entering 2026 having taken concrete actions across all elements of our capital allocation strategy. Looking ahead, we enter 2026 with momentum in our large core hazardous collection businesses. We expect our incinerator network to run strong in 2026 and waste projects in PFAS to continue to feed our disposal and recycling network. We expect to deliver growth in revenue and adjusted EBITDA that will culminate in enhanced company margins again this year. Our positive outlook is grounded on modest economic assumptions with additional upside potential. Overall, we expect another strong year of financial performance in 2026. I will now turn it over to our CFO, Eric J. Dugas. Eric J. Dugas: Thank you, Mike, and good morning, everyone. Turning to our Q4 and full year results here on slide nine, our quarterly performance came in ahead of expectations we outlined in October, driven primarily by continued strong growth across both Technical Services and Field Services. It was especially encouraging to see the underlying strength in our core disposal and recycling volumes as we closed out the year and in light of some of the challenges we had experienced in some of our key verticals in 2025. Total Q4 revenue increased 5% to $1,500,000,000. As Eric highlighted, we surpassed $6,000,000,000 in annual revenue for the first time in the company's history and just three years after surpassing the $5,000,000,000 mark in 2022. Q4 adjusted EBITDA increased 8% to $279,000,000 and full year adjusted EBITDA reached approximately $1,170,000,000. Our Q4 revenue and adjusted EBITDA growth rates, the highest we have seen in fiscal 2025, capped off another year in which we demonstrated our ability to continue to grow the business while expanding margins, and this provides us with positive momentum heading into 2026. Our consolidated Q4 adjusted EBITDA margin was 18.6%, representing a 60 basis point improvement from the prior year period. This margin expansion reflected a combination of disciplined pricing initiatives, volume growth, effective cost control, and continued efforts to maximize efficiencies across our network and transportation fleet. For the full year, we improved consolidated adjusted EBITDA margin by 40 basis points, led by strong performance in our Environmental Services segment. SG&A expense as a percentage of revenue in Q4 increased slightly from a year ago to 12.9%, primarily reflecting third-party transaction-related costs and stock-based compensation. For the full year, however, we improved our SG&A as a percentage of revenue to 12.5%, as we continue to tightly manage overhead and limit growth in non-billable headcount. Fourth quarter income from operations was $158,400,000, up 16% from the prior year. Net income in Q4 was up year over year as we delivered EPS of $1.62. For the full year, EPS was $7.28 a share. Turning to the balance sheet on slide 10. We ended the year with cash and short-term marketable securities of more than $950,000,000. Throughout 2025, we maintained a sharp focus on working capital management and cash flow generation, which drove record free cash flow in both Q4 and the full year. Our receivables balances declined by approximately $80,000,000 from September, a testament to the broader team's efforts, as collections meaningfully exceeded our expectations in the quarter. We closed the year with a net debt to EBITDA ratio of approximately 1.8 times, which is our lowest leverage in nearly 15 years. Our debt currently carries a blended interest rate of 5.2%. Given our cash balances and low leverage, we have ample flexibility to execute on our capital allocation strategies. Turning to cash flows on slide 11. Our Q4 cash flow performance was outstanding. Operating cash flow in Q4 grew 17% to a record $355,000,000, and we also delivered a Q4 record adjusted free cash flow of $261,000,000. For the full year, adjusted free cash flow was also a record, reaching $509,000,000, coming in sharply above our guidance, driven in large part by the outstanding collection efforts I just mentioned along with lower cash taxes paid. The $509,000,000 we generated represents nearly 44% of our 2025 adjusted EBITDA and underscores the highly cash generative nature of our business. CapEx, net of disposals, was $115,000,000 in Q4, up from the prior year reflecting our major growth investments. For the full year, our net CapEx spend was down $20,000,000, as 2024 included the completion of Kimball spending and our Baltimore Hub project. For 2026, excluding an expected $85,000,000 of spend on the SDA unit and $25,000,000 related to our strategic fleet investment discussed earlier, we expect net CapEx to be in the range of $340,000,000 to $400,000,000, with a midpoint of $370,000,000. As it relates to share repurchases, we continued to return value to shareholders in Q4 by repurchasing nearly 600,000 shares for $133,000,000. For the full year, as Mike mentioned, we returned a record $250,000,000 to shareholders through the repurchase of more than 1,100,000 shares. With the recent expansion of our authorization, and based on our long-term cash generation and returns profile, we continue to view our shares as attractively valued. Turning to our guidance on slide 12. Based on current market conditions and business performance, we are guiding a 2026 adjusted EBITDA range of $1,200,000,000 to $1,260,000,000, with a midpoint of $1,230,000,000. At the midpoint, the outlook implies growth of approximately 5% versus fiscal year 2025. Looking at our annual guidance from a quarterly perspective, we expect first quarter adjusted EBITDA to grow 4% to 7% year over year in our Environmental Services segment and approximately 1% to 3% on a consolidated basis. In terms of the 2026 capital spend we announced today, we are assuming only a few million dollars of annual adjusted EBITDA contribution from the fleet growth expansion in 2026, as those purchases will be phased in over the course of two years. With respect to the DCI business acquisition, our guidance currently incorporates an estimated $5,000,000 to $6,000,000 of annual adjusted EBITDA, reflecting the uncertainty around the exact timing of the close. Looking at how our annual guidance translates into our reporting segments, at the midpoint of our guidance range, we expect our 2026 adjusted EBITDA in Environmental Services to grow just over 5% for the year, supported by favorable demand trends across our key service pillars as well as continued growth in PFAS and remediation projects. This initial 2026 guidance midpoint assumes that our SKSS segment delivers results similar to 2025, and today we are guiding to approximately $135,000,000 of adjusted EBITDA. Follow me at we have made great strides on our collection costs in 2025, have yet to see any improvement in the base oil market. Within Corporate, at the midpoint of our guidance, we expect negative adjusted EBITDA to increase by approximately 2% to 4% compared to 2025. This modest increase is primarily driven by costs to support business growth, higher wages and benefits, and broad-based insurance cost increases. While we continue to experience some inflationary pressure across Corporate cost categories, we have numerous cost savings and productivity initiatives underway that are expected to offset a meaningful portion of these headwinds. For 2026, we expect adjusted free cash flow in the range of $480,000,000 to $540,000,000, with a midpoint of $510,000,000. That level of generation represents a free cash flow conversion of approximately 41% of our expected adjusted EBITDA for the year. In summary, our Environmental Services segment delivered an exceptional performance in 2025, capped off by a strong Q4. We are well positioned to continue growing the ES business organically and further enhancing its earnings potential. Technical Services, SK Environmental, and our base Field Services business are all expected to generate healthy growth in 2026, with Industrial Services generating modest. In addition, the Environmental Services segment will benefit from the continued ramp up of Kimball Incinerator as it takes on higher volumes and processes more complex waste streams. Overall, we remain encouraged by the company's growth trajectory. We believe our strategic initiatives, combined with current market conditions, should support the profitable growth embedded in our 2026 guidance. We entered the new year as a stronger company than we were a year ago, safer, more profitable, and generating more cash. And we believe that positions us well for 2026 and beyond. With that, Christine, please open the call for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before the star keys. One moment, please, while we poll for questions. Michael L. Battles: Thank you. Operator: Our first question comes from the line of Patrick Tyler Brown with Raymond James. Please proceed with your question. Patrick Tyler Brown: Hey, good morning, guys. Michael L. Battles: Good morning, Patrick. Patrick Tyler Brown: Hey, Eric G. Curious if you could maybe talk about and update us on how the conversations are going on the captive side. I know you talked about that in some prior calls, but do you think there will be any closure developments in 2026 and 2027? And just any broad thoughts on incineration pricing trends into 2026? Michael L. Battles: Sure, Patrick. Thanks. Yeah. The captive market continues to be active. Patrick Tyler Brown: We are pursuing opportunities with a couple of key customers across the board, and we think with some changes that they have on their cost structure as well as utilization that there is a potential clear path here for additional captive closures. As you know, we continue to monitor and work very closely with all the captives across the U.S. and Canada. Today, there continue to be about 40 different sites that have captive incinerators that are also generating waste streams into our network. So we have some very solid relationships and, again, do anticipate that there will be some captives that come offline in the future. When? Still too early to tell, but discussions are active. That being said, we also have a lot of opportunity to continue to drive financial performance around incineration pricing across the board in our network. We expect to continue to outpace inflation and drive price improvement into the mid to upper single digits across our network, incineration being a leading indicator there, and we still will continue to push those levers that we have done in the past. So, very active network overall, Patrick. Michael L. Battles: Okay. Great. Great update. Patrick Tyler Brown: I was a bit curious on the commentary around Industrial Services. So, obviously, we got a better ISM print, so maybe we are going to see some improvements in the industrial complex at some point. But what does give you the confidence there? Is that based on some hard planned turnaround work? And kind of, again, Eric Dugas, what is in the expectation there for 2026? Michael L. Battles: In terms of 2026, Patrick, in the guide, as I said in my comments, fairly modest expectations. I think we have seen some more positive, maybe some more positive leading economic indicators around ISM and PMI and things of that nature, but the guide really kind of has current market conditions built into it at this point. Patrick Tyler Brown: And I would add on to that, Patrick, that when we look at our Industrial business, Q4, we began to see some nice momentum in some of our specialty lines of business within Industrial Services. Our base business has been consistent. As we enter into 2026, we are working with over 400 customers, assessing their turnaround needs for the year. We are seeing some positive indicators, I would say, as we touch base with every single one of them with face-to-face calls. And we are getting ahead of their opportunities. And there appear to be some indications of momentum here. But we are still, when we look at the overall guidance for 2026, as Eric said, we are pretty conservative in our outlook there. Michael L. Battles: Okay. See those coming up. Do see time that it has kind of turned, we think it might have turned the corner. You think about the growth, the revenue growth of the business, you look at kind of Q1, Q2, Q3 into Q4 in IS. If you do the math, it is definitely leveling off. We do see some positive momentum, as Eric G. said, into 2026. Not today. Okay. Okay. Great. And then my last one here real quick, Mike, can you guys talk a little bit more about the vac truck and the field investments? And this is really a broader question about all the internal growth investments that you guys have done and you do see. But is this move really more because the acquisitions have gotten so expensive, and you have got a great market position, you have got buying power, etcetera? That the reality is that building may simply offer better economics than buying through M&A at this point. Michael L. Battles: Yeah. Patrick, I will start. This is Eric G. So when we look at our vac services, our three prominent business units that use vac services, we have our Safety-Kleen Environmental vac, our Field Service vac, and our Industrial vac. And those opportunities, those collections of vac waters drive organic waters, contaminated waters, and solids, sludges into our great facility network. And that business across the board has been growing substantially in the 8%, 10%, 14% range. So we have been adding more trucks. We have kind of been keeping up with that pace. We have rented some trucks to fuel that organic growth, but really, what we want to do is continue that growth path of greater than 10%, build out more trucks internally, acquire more trucks, eliminate the subcontracting, and just keep pace with those growth rates across all the business units. So it has really been a win-win. And as I said, it is fueling a lot of great waters and sludges and solids into our network. Michael L. Battles: I would add to you. To answer your question around, hey, is this just a pivot? Is this kind of a better answer? The answer is that our balance sheet allows us to do all these things. Our cash flow generation has allowed us to do M&A and do capital addition. And we signed the P&S DCI, and there are others out there that we are looking at. So I feel like we can do it all given our cash flow generation. It is really just based on ROI and what is going on in the market. Right. Okay. Alright. Thank you. Appreciate the time. Operator: Our next question comes from the line of Adam Bubes with Goldman Sachs. Please proceed with your question. Michael L. Battles: Hey, good morning. Just picking up on the M&A point, beyond the DCI acquisition, can you just update us on the M&A pipeline in terms of types of opportunities you are looking at and range of outcomes for acquisitions in 2026? Yes. This is Mike, and I will start. We do have a lot of lines in line. And, frankly, we did all through 2025 as well. We were not as successful, but we do see a lot of opportunities there, mostly in the Environmental Services business. Mostly, similar to what we think of DCI that has permanent facilities that have some, you know, we see those types of opportunities coming to market. And we have been very active. Now we have not been as successful in 2025, but we see a lot of good opportunity. And primarily in Environmental Services, but I would say. Noah Duke Kaye: And then I think the 1Q guide implies year-over-year declines in Safety-Kleen EBITDA and then maybe a recovery in the balance of the year finishing flattish. So can you just talk about the drivers of that improvement in the balance of the year? Is that coming from incremental charge for oil actions? Are there any assumptions for base oil prices improving in the guide? Adam, it is Eric. I will take that one. And you are absolutely correct. In the way we see Q1 right now in SKSS is a little bit down year on year. It is almost all driven through kind of the base oil pricing challenges that we see here at the beginning of the year. Obviously, as we did in 2025, we will continue to counteract that with providing great oil collection services at the right price there that the market demands. And so as we move throughout the year, things do get a little bit better. Some of that oil collection pricing modification kicks in. But Q1 is kind of the year-on-year low watermark, if you will. Michael L. Battles: And Adam, we do have base oil pricing going down slightly in the guide over the course of the year. We do have that, not at the same level that happened in 2025, but we do assume a slight decline in base oil pricing. Great. Thanks so much. Operator: Our next question comes from the line of Noah Duke Kaye with Oppenheimer. Please proceed with your question. Noah Duke Kaye: Hey, good morning. Thanks for taking the questions. There was a lot to like, I think, around the capital. I want to get to that in a minute. But just on the core Field Services, you called out the $30,000,000 of emergency response work. It sounds like that basically drove the revenue growth year over year in the quarter. Can you maybe quantify the level of ER work you did total or anything outsized you would call out for 2025? And what you have assumed for ER work for 2026 in the guide. Yes. Noah, I will start there. We had a nice fourth quarter with $30,000,000 in large-scale emergency responses. If you look at the Field Services business over the course of the year, and every year prior to it, we have ups and downs in large emergency response, but throughout the course of the year, drive some large events. Did over 22,000 emergency response events last year. You can really consider that a good baseline business. That continues in that core base FS for utility customers, manufacturing, rail, all those types of things. And then we also see good incremental events that will continue to happen. When in the quarter they will or will not, it is to be determined. But that has been a core part of our Field Services business for the past twenty years. Those things happen. So we have that factored into growth of Field Service year over year of being in that mid-single digits as a baseline. Michael L. Battles: I would say, Noah, that when you look at the 22,000 events that Eric mentioned, I mean, that is up by 5% from last year. So we still see a fair amount of events happening in the country, in North America. We have been there and winning our fair share. And when these large events happen, the company is built for that. It was built on emergency response. That is part of the business model. And because it is such a big business now with the acquisition of HEPACO, it has been a great win. Eric W. Gerstenberg: Noah, just one last point on that. I think when you think about our network, what we build with Field Services branches, last year, we added an additional 18 Field Service branches to our network. And as you know, our strategy is to make sure that we have an operating branch of every business unit in all the key geographies throughout North America. And that presence, when we think about Field Service, that presence allows us to be the first call when emergencies happen and leverage through the rest of the network, people and equipment, to be able to grow with those emergency response events. So it is a core part of what we do. We do it really well. Our sales team, our Field Services operations team, they are out there pounding the streets to make sure that for every customer who needs a facility response plan with an emergency response provider, that we are the number one call when things go wrong, and we have done a good job of that. We will continue to exercise that presence as we grow here throughout 2026. Michael L. Battles: Very helpful. I think just on the 1Q guide, just how much of a headwind will weather be? I mean, last year, it was a $10,000,000 to $12,000,000 EBITDA headwind. We are obviously, between Fern and some other events, have had a rough start to the year. Some other players in the space have talked about it. So just where do you kind of think that ends up for Q1? Noah, it is Eric Dugas here. I think when we think about weather year on year, I mean, we have heard from some other folks that have come out, and we are seeing the same thing. Weather impacts us in these winter months, January, early February here, seemingly kind of every year. And so when we think about our guide here in Q1, I would say weather impact is flattish. We talked about SKSS assumptions in Q1. That is really the lighter side of our guide here in Q1. Look at the ES business, we are still growing 5% to 7% year on year. A lot of the great things that we did throughout 2025 and in Q4 that we just talked about kind of continue into Q1. Yes, we have seen with the nasty weather we have had, we have had some delays, but no plant upsets. No plant upsets, which I think is an important point. Yep. Yep. Noah Duke Kaye: Very good. Alright. You know what? I will turn it back over. Take the rest offline. Thank you. Michael L. Battles: Thanks. Hey. No. Hey, Noah. Operator: Our next question comes from the line of David John Manthey with Baird. Please proceed with your question. Michael L. Battles: My first question, a clarification here. I missed what you said about corporate expense for 2026. What was that growth rate? Two to four, Dave. Two. David John Manthey: Two to four. Okay. So looking at 2025 as a whole, if Clean Harbors, Inc. was able to grow EBITDA by roughly 5% in 2025, and that is in the face of, you know, Field and Industrial being down and a $10,000,000 headwind from SKSS EBITDA, and then in 2026, you are saying that each of those things are going flat or positive, and then you have got Kimball ramping and all these other growth initiatives. I am not being critical here. I am just asking, like, when you look at all of those things, I am wondering what which one or what segment are you seeing that is going to be a drag to 2026 EBITDA growth? Because it feels like everything in 2026 is either the same or better than it was in 2025, and you are guiding for the same level of EBITDA growth. If you could help me understand the bridge there. Michael L. Battles: Yes, Dave, this is Mike. I will start. I think that our goal is to make sure that we provide a balanced view as we go into the year. I mean, there is a lot of, I think to your point, there is a lot of positive momentum. We certainly see some of the Solid Waste guys talking about that momentum, and we see it as well. You know, January, as Eric said, was a rough month from a weather-wise standpoint. We want to see it. Want to see it. And my hope is we come back in a couple months and talk about a great Q1 and a great Q2 and Q3 as well. But we want to be thoughtful as we set expectations for the year. I think that a 5% growth, as Eric laid out in his script, is a reasonable growth, is a good starting point. And certainly, in the face of, you know, what we see, you look at industrial production, we had a great January, but once is not a pattern. And so let us have a few quarters, a few months of this type of growth before we start claiming victories here. So that is kind of our view, and we want to be thoughtful about this. We are hopeful that we come back here in a couple of months and say how great the quarter was and how great Q2 and Q3 are going to be. David John Manthey: Yeah. Got it. And on the first quarter, first quarter EBITDA as a percentage of full year has been about, I do not know, 20.6% for the last three years on average. And this year, you are sort of saying 19.5% based on the guidance midpoint. Did you quantify the weather? Is that the reason that we are down? It is only representing that smaller percentage of the overall? Michael L. Battles: David, it is Eric. I think a couple of things. As I said before, I would think weather impacts kind of flattish year on year. A little bit of year-on-year decline in SKSS. And then just to go back to the beginning, your corporate question of 2% to 4% for the full year, Corporate is a little bit heavier in Q1 the way we have got it laid out. There is some natural inflation, but also a little bit of incentive comp timing. A little bit more incentive comp in our guide for Q1 this year versus last year. We had some backup just because of the performance Q1 last year. So that is probably the piece you are missing. David John Manthey: But you know, the whole year, it calendarizes out pretty similarly. Michael L. Battles: Yeah. It is more of a Q1 Corporate item, I think, Dave, when you look at it. And SKSS is, as you saw, going to be a little soft in Q1, and that is really driven by some CFO pricing we still had at year end still on the balance sheet that kind of ran into Q1. So Q1 was a bit of a rough quarter. So. David John Manthey: Perfect. Thank you. Operator: Our next question comes from the line of Brian Butler with Citi. Please proceed with your question. Brian Butler: Good morning. Thanks for taking the question. Maybe just on Safety-Kleen, the charge for oil opportunity has been pretty compelling and successful. Just curious, you know, to characterize how much sort of room to run there is there. Do you maybe still feel Clean Harbors, Inc. is not getting proper value, or is it maybe mostly about just kind of compounding at these levels now? Michael L. Battles: I think, Brian, I think that our ability to continue to charge for dirty motor oil has been a differentiator. And I believe that we have not really lost a lot of gallons in this process. So I feel like this has been a hugely successful endeavor and really has been able to offset kind of base oil pricing that we see. You know, I feel like we have kind of taken a good step forward and really made some real changes. And I feel like that is going to continue to pay off. We are not, as you saw from Eric Dugas' comments around the year for 2026, we are not assuming that that gets a lot better. But we are hopeful that if oil prices stabilize, even recover, that could be a huge winner for us. Brian Butler: Got it. Got it. Thank you for that. Brian Butler: And then just one follow-up is maybe just on the Group III oil production. Just, you know, again, from like a high level, if you can maybe frame that, sort of size the opportunity for Clean Harbors, Inc. Is there any material contribution to 2026? Yeah. That would be really helpful. Thanks. I will turn it over. Eric J. Dugas: Yeah. Brian, Eric here. So when we look at our run rate of our Group III production, we are in the neighborhood of 4,000,000 to 6,000,000 gallons increasing year over year. And that differentiation between the Group II is at about a buck a gallon more. So it is meaningful. But what also is important here is that when we blend that oil, we also have an opportunity to really offset some of the Group II+ that we have been selling. So it will continue to ramp up year over year. The traction of the products and the blended products that we are making with our Group II/III has been excellent. And we are really excited about that continuing to have a meaningful contribution to EBITDA improvement within our SKSS business in the coming years. Operator: Our next question comes from the line of Jerry Revich with Wells Fargo. Please proceed with your question. James Joseph Schumm: Hi. This is Jake Goyman on for Jerry. Thank you for taking our question. The Technical Services segment saw good acceleration in the fourth quarter. Can you walk us through the key drivers of that acceleration, whether it was project activity, pricing, mix, volume? And how much of that momentum carries into the first quarter? Thank you. Eric W. Gerstenberg: Yes, I will begin. Really was, as we said in the script, it was really a combination of multiple different things. When you look at it. Our TS business had really great volumes across the board. We saw about 8% increase in overall containerized waste volumes. In our Safety-Kleen Environmental business, strong waste collection along with vac services. We highlighted that. When we look at the Field Services business, lots of ERs, large and small, good strong base business. Then finally, our project business was very strong as well, drove some nice volumes into our landfills, into our incinerators. And the momentum in the project business around PFAS. So it was multiple different things that contributed to the success of ES. And that was great fourth quarter. It was a great year with our Environmental Services. We fully anticipate that momentum to continue here into Q1 and 2026 in all those areas that I just spoke about. Michael L. Battles: And, Jake, the great thing about what Eric said is that this does not include any captive closures. It does not include, you know, no large ERs. We are not assuming that there is going to be a large bounce back in the chemical or the refining area, and we are not assuming a base oil recovery. I mean, so, you know, we have a lot of good opportunity there, though. So we feel like this growth that we are talking about this morning is a reasonable assumption, but, you know, those things do turn around, and I think that we will be in incredibly good shape in 2026 and beyond. James Joseph Schumm: Fantastic. Thank you very much. Very helpful. And then just as a follow-up, I know you provided, I was just hoping you could speak on the moving pieces of the Environmental Services 5% growth guide for 2026 and any cadence on the quarters outside of the one that you already provided? Thank you. Eric J. Dugas: Jake, I would say, just to point out a couple of the big drivers in that 2026 growth. And yes, we talked in our script, it is year two of the Kimball incinerator. So I talked about an incremental kind of $10,000,000 to $15,000,000 of EBITDA there across the network by continuing to ramp up that facility. PFAS opportunities and a growing pipeline there, 20% increase into 2026 is in our guide. And so those are probably two meaningfully discrete pieces. You know, continued Field Services growth in some of the new branches and newer agreements we are getting into with existing customers that Eric highlighted a moment ago. And then you really have all those great things that we continue to do in Technical Services and Safety-Kleen branch around growing volumes and pricing strategies and being diligent around those. And that is all wrapped with continuing to provide just great service to all our customers. So I would say those are the big drivers. And yes, in terms of, you know, calendarizing out of the quarters, I would say that, you know, it very much kind of calendarizes out, you know, kind of 5% growth roughly in each quarter year on year. So hopefully, that answers and clarifies your question. With the acquisition done in the back half of the year, that was going to. Operator: Yes. Fantastic. Thank you very much. Our next question comes from the line of Lawrence Scott Solow with CJS Securities. Please proceed with your question. Michael L. Battles: Great. Thank you. Good morning, guys. First, congrats on the cash flow on the quarter and really for the year. I can remember, I do not know, ten years ago when cash flow was a sore thumb, but now it is a real highlight. So I commend you for that. Michael L. Battles: Thanks, Larry. Eric J. Dugas: Thanks, Larry. Good to hear, man. Lawrence Scott Solow: Yeah. Absolutely. Been around for too long. So I guess first question, Eric G., just on the PFAS, lot of good stuff. I like the picture on the slide too. It feels like, you know, operational and regulatory, the momentum is really stronger than it has ever been. Yeah. And it sounds like you can do about one fifty this year, plus or minus. But, you know, are we getting closer to an inflection point where, you know, I do not know where that inflection point takes us, but we could really see an acceleration in revenue growth over the next few years. Michael L. Battles: Excuse me. Eric W. Gerstenberg: Yeah. It is a great point, Larry. I think we do believe that we are getting closer. You know, having the opportunity to go down and talk to the Senate Committee on Public Works was a great opportunity for us to not only share what our total PFAS solutions are, but more so to talk to them about that there is capacity and infrastructure to handle PFAS remediation and cleanup, and that there are existing technologies and capacity to handle the growth and deal with this significant issue. I think the other key point too is that during those discussions, we laid out very clearly, based on our experience of managing cleanups that we have already been doing and the treatment that we have already been doing, we laid out what we thought the regulatory parameters should be. And we have gotten some great feedback on that. Those regulatory parameters, we have been communicating those to the EPA. But more so, we have been communicating those to our customers. And the way we got to the revenue that we are today is by saying to our customers, hey. To limit your risk, to manage it properly, these are some thresholds and parameters that we can help you employ with our total PFAS solutions. Make sure you do not have any long-term liability. So I think all that, put together, I really do think, and I think we all believe that the momentum of getting some really defined thresholds with the EPA is in sight. We are hopeful about that. We continue to drive that. Lawrence Scott Solow: But we all c. Eric W. Gerstenberg: Our customers are acting very disciplined today even without that in place. Michael L. Battles: Alright. And I guess the question, Larry, too, is does not the three-year contract that you signed, does not that almost get you to that 20% growth by itself this year? Lawrence Scott Solow: Kinda busting chops a little bit on that one, but is not that kind of fair, or is that all of that incremental, that one ten? Michael L. Battles: Yeah. Keep in mind that we do some work there today. Lawrence Scott Solow: Over three years? Michael L. Battles: Larry, and so that one ten is the total. It is, you know, it is increasing, you know, $15,000,000 to $30,000,000, I think, in any given year over that three-year period from what we do today. So there is still room to run with none of that. Lawrence Scott Solow: That is fair. And I guess my second question here, just on the margin improvement, again, also really nice. And we do not need to call it the streaks, but, you know, you may not be able to predict the continuing every single quarter, but up to 26% EBITDA margin. As you look out three to five years, could this continue to expand? I mean, could we be talking about a 30% EBITDA margin business? And now when we reach 2030. Michael L. Battles: Yeah, Larry. We think 30% is certainly kind of in the future for us. And, you know, internally, that is the target, the reset target that maybe we have now. But it is 30% and beyond. Now what year we hit that? I mean, we are going to continue to strive to expand margins at a minimum of 30 to 50 basis points a year. That is what we said, and we have been able to kind of overachieve on that. So exactly what year we are going to be above 30%, I cannot tell you, but that is the internal goal. I guess just one thing that I would like to share relative to that is, you know, with our margins in Environmental Services here, you know, just about 26% for the year, we are exceeding those margins that we had assumed in our Vision 2027 a couple of years ago in fiscal 2027. So call it two years ahead. But certainly, you know, we see a lot of runway in margins. Continued growth in margins through volume, pricing initiatives, internalization of costs, greater use of technologies, all those things. Holding on to our people and reducing turnover. That has been a great thing for us the last couple of years. So we are going to keep doing those things, and we will see margins expand. Eric W. Gerstenberg: Yeah. Larry, just to build on that, our aspirational goal is really to get to those 30% margins by 2030, 2032. And when you look at the past four or five years, everything that we have been driving, there is a clear path to get there. We have a number of opportunities that Eric just articulated. We are going to continue to get more efficient. We are going to continue to route our trucks well. We are going to continue to lower turnover. All those things and driving pricing ahead of inflation will drive our margins and expand as we build the platform of the business and leverage what we have with our unparalleled disposal network. Michael L. Battles: Larry. The last thing I would say to that answer is that we have in every single manager's compensation EBITDA margin as part of their target. And I think that has really helped drive behavior. I think we can talk about what year we hit 30%. I do not think that is a, I believe that is a goal. That is just a stopping point. I am of the view that we can continue to expand margins even beyond that 30. I mean, you can pick a date when you want to hit that, but I think I am of the view that that is not a, that is not a goal, that is just a good way to measure ourselves. Lawrence Scott Solow: Sure. No. Okay. Great. I appreciate all the color. Thanks, guys. Michael L. Battles: Thank you. Operator: Our next question comes from the line of James Joseph Schumm with TD Cowen. Please proceed with your question. James Joseph Schumm: Mike, can we just talk about SKSS a little bit? You gave some breadcrumbs, but, like, where are you for leading-edge pricing? Are we, like, $0.50 a gallon, or are you above that? And then just where are you in terms of utilization of your refineries? Any thoughts to closing another refinery? Or, you know, do you feel good about where you are now? And then just any color on the, or update on the Castrol partnership. Michael L. Battles: Sure. Sure, James. I will take care of all of the first of which is that we are north of $0.50 as we get into 2026 here. I think we have done a good job of driving price improvements in our UMO pricing, and I feel like the team has done an excellent job of really changing the marketplace, kind of where we were a year ago to kind of where we are now. It is really unbelievably good, and the team has done a nice job of really holding in line. And the good news is that we have not really seen, we have lost some gallons, we have not lost nearly as many gallons as we thought. And as such, we have not had the need to, as we sit here today, to close any more re-refineries. And I think we have been able to feed our network. And I said in my prepared remarks, we will continue to feed our refineries with the used motor oil we have been able to collect at really good pricing. You know, when I think about the future and our Castrol partnership, it has been successful. We have had some good wins there. It has not been as successful as we thought it would be. Probably needs more work there. But it is a long selling cycle. We understand that. The team at Castrol did a good job of driving that. We have been good partners with them. We have had a couple of good wins, but that has not been as big of a needle mover as we probably thought when we went into this. James Joseph Schumm: Okay. Great. Thanks, Mike. And then just in terms of the pricing, it is kind of hard to get base oil pricing. Or, you know, could you help us understand where your average sales price was or is now? Is there anything, any help you can give there? Michael L. Battles: Yeah. It is. It is hard, you know, we have a lot of different customers and a lot of different price points, but, you know, it has been down. I mean, just to cut to it, there have been a fair amount of base oil pricing declines kind of all through 2025. And I think it has been in the mid-teens range as far as the overall, you know, base oil pricing. But remember, we are managing a spread. And so that really forced us as an organization to drive that UMO pricing up, to manage that spread, to deliver the number that we told you back last February. We told you we are going to deliver the number for SKSS, and we are right there. So something we are really proud of. Right? Eric W. Gerstenberg: And, James, just to build on that, just to build on Mike's comments a little bit further. You know, one of our key goals that we have mentioned multiple times is to really drive our direct blended sales growth, and that is the most stable pricing that we can do. And work with our customers to not only pick up their UMO, but deliver to them really high-quality direct blended oil into their network. And we are successfully beginning to grow that. It is not as fast as we would all like, but that is our true, really true north across our business, is growing that direct blended, getting stabilization on that back-end price while we continue to improve our UMO pricing. In the market today, it really has accepted that UMO is really a hazardous waste, and it needs to be collected, managed, and we do a nice job across our network of customer service and collecting the gallons when their tanks are full, and we will continue to drive those opportunities. James Joseph Schumm: Great. Thank you for that. And just lastly for me, Veolia bought Clean Earth, as you are fully aware. Do you expect to lose a certain amount of volumes or EBITDA with that transaction? Is there any impact to 2026 that you guys are contemplating? Michael L. Battles: Not at all, James. Yeah. They were obviously the successful acquirer of that, but we do not anticipate losing any volumes to what they have going on there. In fact, we, you know, we overall think there are opportunities to continue to grow our services with our customers and we are not concerned about that in the least. James Joseph Schumm: Okay. Great. Thanks, guys. Appreciate it. Operator: As a reminder, if you would like to ask a question, press 1 on your telephone keypad. Our next question comes from the line of Tobey O'Brien Sommer with Truist. Please proceed with your question. Michael L. Battles: Thanks. Tobey O'Brien Sommer: It has been so long since we have had sort of a good industrial economy. Maybe could you remind us what your growth in revenue and EBITDA would look like in a good industrial economy year and maybe contrast that with the guide? Thanks. Michael L. Battles: Yeah, Tobey. I am happy to answer that. It is kind of tough to prove it. We have not had it in such a long time. It is tough to remember. But if you remember some years we were growing ES revenue double digits. There were years when industrial production grew and we were growing, you know, that ES business at really good rates. That kind of began the fifteen straight quarters that Eric mentioned earlier of EBITDA growth. So tough to see what good looks like. I am telling you right now, it is going to be good. But it does have to happen. And so if it does happen, I think it will. In 2026, we start seeing that, certainly in our pipeline. I am hopeful that we have kind of four good quarters of beat and raise and come back to you, say how great it was because of great industrial production. Tobey O'Brien Sommer: Right. And what parts of the business, of the portfolio, do you think would see it first so that, you know, as we work our way through the reported quarters this year, if we start to see improvements in what areas would that lead to greater confidence in the industrial recovery? Thanks. Michael L. Battles: I mean, we see it in Environmental Services. I mean, it is hard to say which. I think you see it in all four parts of the lines of business that would make up Environmental Services, whether it be TS, FS, IS, or SK Brands; you would see all four of those with an increased industrial production. You feel like they would all be the beneficiary of that, maybe TS more so, TS and IS more so. But I see all four of those lines of business which make up the Environmental Services segment improving. Of course, base oil pricing improves, as we talked about earlier, I think we see some real good EBITDA growth in the SKSS business. Last one for me. Tobey O'Brien Sommer: If you dream the dream for PFAS, what is the best catalyst that you could think of in terms of the regulator, perhaps the DOD? What kind of event could transpire that would really catalyze growth there? Eric W. Gerstenberg: Yeah, Tobey. Yeah. I really say, and we point to regulatory framework around thresholds of PFAS contamination, clearly articulating it for industrial waters, soils, solids, and driving remediation of those with those thresholds. And getting there. The market is disciplined. However, you know, we really would like those in place. They would be the greatest catalyst to really put it on steroids, so to speak. Michael L. Battles: Thank you very much. Thank you. Operator: We have no further questions at this time. Mr. Gerstenberg, I would like to turn the floor back over to you for closing comments. Eric W. Gerstenberg: Thanks, Christine, and appreciate everyone joining us today. Our next investor event will be at the Raymond James Conference in Orlando in a few weeks. We hope to see some of you there and at other events. Have a great rest of your week, and please keep it safe out there. Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the MKS Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Paretosh Misra. Please go ahead, sir. Paretosh Misra: Good morning, everyone. I'm Paretosh Misra, Vice President of Investor Relations, and I'm joined this morning by John Lee, President and Chief Executive Officer; and Ram Mayampurath, Executive Vice President and Chief Financial Officer. Yesterday, after market close, we released our financial results for the fourth quarter and full year 2025, which are posted to our investor website at investor.mks.com. As a reminder, various remarks about future expectations, plans and prospects for MKS comprise forward-looking statements. Actual results may differ materially as a result of various important factors, including those discussed in yesterday's press release and in our most recent annual report on Form 10-K and any subsequent quarterly report on Form 10-Q. These statements represent the company's expectations only as of today and should not be relied upon as representing the company's estimates or views as of any date subsequent to today, and the company disclaims any obligation to update these statements. During the call, we will be discussing various non-GAAP financial measures. Unless otherwise noted, all income statement-related financial measures will be non-GAAP other than revenue and gross margin. Please refer to our press release and the presentation materials posted to the Investor Relations section of our website for information regarding our non-GAAP financial results and a reconciliation to of our GAAP measures. Our investor website also provides a detailed breakout of revenues by end market and division. Now I'll turn the call over to John. John Lee: Thanks, Paretosh, and good morning, everyone. 2025 was a year of impressive execution for MKS in a gradually improving demand environment. Year-over-year, we delivered 10% sales growth, 20% EPS growth and over 20% free cash flow growth. We maintained strong gross margins despite trade policy dynamics while staying focused on delivering for our customers, investing in our business and proactively bringing down our leverage. We're proud of our accomplishments in 2025 and grateful for the continued support and collaboration of our customers, suppliers and employees. Our partnerships and engagement have been critical as we work together to deliver the broadest portfolio differentiated solutions that are foundational to advanced electronics in the AI era. As we begin 2026, the demand outlook across our semiconductor and electronics and packaging markets is strengthening and we are already seeing this in the ambitious CapEx plans announced by large chip manufacturers. MKS has a long track record of outperforming WFE in rising spending environments and we are in an excellent position with our broad and deep portfolio of designed in products and are foundational to semiconductor manufacturing and electronics and packaging. I'll highlight some examples as I review our financial and end market performance. Our Q4 revenue, gross margin and earnings per diluted share all came in above the midpoint of the guidance ranges we provided on our Q3 call in November. Revenue was strong across all three of our end markets. In our semiconductor market, revenue was above the high end of our guidance, driven primarily by subsystems serving etch and deposition applications in the DRAM and logic foundry markets. Our plasma and reactive gases business delivered another strong quarter. We also maintained healthy momentum in dissolved gases for advanced logic applications and in back-end applications related to high bandwidth memory. Order activity in both areas remains robust. NAND-related activity remained stable sequentially as expected. I'm also pleased to note that our semiconductor business outperformed estimated WFE growth for the full year 2025, consistent with our track record of outperforming industry spending and improving demand environments. Looking to the first quarter, we expect semiconductor revenue to be up on a sequential basis. We believe this outlook is consistent with market views a steady improvement in industry spending over the course of the year. With our global footprint, broad product portfolio and deep technical expertise, we are ready to respond to demand as it comes with solutions that solve our customers' hardest problems and enable their increasingly complex road maps. On that front, we're excited to be ramping our new supercenter factory in Malaysia in the second half of this year, which will give us added capacity and resiliency to meet our customers' needs. Turning to Electronics & Packaging. Revenue came in near the high end of our guidance. The sequential increase was primarily driven by increased flexible PCB drilling and chemistry equipment sales. The Flex market continues to largely follow seasonal patterns tied to smartphone and PC cycles. And we also saw continued momentum in orders for our chemistry and chemistry equipment solutions for advanced PCBs related to AI applications. AI is driving increasing packaging complexity, and we are uniquely positioned to help our customers with the broadest portfolio of differentiated solutions. Excluding the impact of FX and palladium pass-through, the chemistry sales increased 16% in the fourth quarter and 11% for the full year compared to the same periods in 2024, reflecting another year of healthy growth. When we acquired Atotech in 2022, we saw the importance of advanced packaging for electronic devices, well ahead of many in our industry. With AI now rapidly driving demand for more complex PCBs with rapidly increasing numbers of layers, we are seeing growth despite multiyear softness in smartphones and PCs. Looking ahead to Q1 and the anticipated seasonal impact from the Luna New Year holiday, we expect electronics and packaging revenue to be up slightly sequentially and to increase in the low 20% range year-over-year. Key drivers for our expected performance in Q1 include higher flexible PCB drilling revenue and a continued strong performance in our chemistry equipment business. In our specialty industrial market, revenues came in at the high end of our guidance. We saw sequential improvement in research and defense in certain industrial applications. Looking ahead to Q1, we expect specialty industrial revenue to decline low to mid-single digits, mainly due to the Luna New Year holiday, which impacts our general metal finishing business. Year-over-year, we expect revenue to be up in the mid-single digits, led by the industrial and research and defense markets. Overall, our specialty industrial market continues to deliver steady performance and contribute attractive cash flows. Our fourth quarter performance and outlook for Q1 underscore our strong position across our 2 key end markets. In semi, we continue to strengthen our position in supporting leading-edge foundry and high-bandwidth memory investment through our vacuum and Photonics offerings while also remaining well positioned to capitalize on large scale investment in NAND equipment upgrades expected over the next several years. In Electronics and Packaging, we are demonstrating momentum with equipment and chemistries ideally suited to support a smaller, more complex and more vertical packaging structures for AI and other emerging devices such as foldable phones. We expect this business to grow over time as we realize long-term revenue streams from proprietary chemistries moving through production lines built with our equipment. The secular drivers powering our end markets are fully intact present exciting opportunities for MKS in the years to come. Our business is in a strong position with a resilient global footprint and margins that reflect the value we deliver and strong free cash flows that we are reinvesting into the business and using to pay down debt. Lastly, we are proud to have been honored for the third consecutive year as one of America's most responsible companies by Newsweek and Statista. In honor to reflects our continued focus and commitment to our people, customers and suppliers. Now let me turn it over to Ram to run through the financial results and first quarter guidance in more detail. Ram? Ramakumar Mayampurath: Thank you, John, and good morning, everyone. We ended the year with a very strong fourth quarter. Demand increased across all 3 end markets. We delivered healthy margins, robust free cash flow and made meaningful progress on our deleveraging goals. That progress has continued into the new year with another $100 million voluntary prepayment on our term loan in February as well as further optimization of our capital structure with the recently completed issuance of EUR 1 billion senior unsecured notes as a refinancing and extension of our term loan maturities. I'll cover these topics in detail in my remarks. Let me start with the results for the fourth quarter. MKS reported revenue of $1.03 billion, up 5% sequentially and 10% year-over-year. Fourth quarter semiconductor revenue was $435 million, up 5% sequentially and 9% year-over-year. The result was driven by strengthening demand, especially in DRAM and logic and foundry applications. The sequential increase was led by plasma and reactive gases products. Year-over-year comparisons reflect more broad-based strength across many product categories. providing further evidence of an improving semi demand environment. Fourth quarter Electronics & Packaging revenue was $303 million, an increase of 5% quarter-over-quarter and 19% year-over-year. This sequential improvement reflected higher flexible PCB drilling and chemistry equipment sales. The strong year-over-year comparison reflected healthy underlying growth across chemistry flexible drilling equipment and chemistry equipment. Chemistry sales in the quarter were up 16% year-over-year, excluding the impact of FX and palladium pass-through. Marking another strong year in chemistry revenue. In our specialty industrial market, fourth quarter revenue was $295 million, an increase of 4% sequentially largely due to the improvement in our research and defense markets as well as certain industrial applications. This was partially offset by a decline in automotive. Revenue was up 5% on a year-over-year basis, supported by modest improvement across several of our key market categories. However, automotive segment remain soft. Turning to gross margin. We reported fourth quarter gross margin of 46.4%, which is above the midpoint of our guidance. While margins were down year-over-year, it was a very solid performance given ongoing impact from higher tariffs, higher palladium prices, which are passed through at 0 margins and the effect of higher chemistry equipment in our overall mix. Fourth quarter operating expenses were $263 million, slightly above the guidance range, primarily due to higher variable compensation due to stronger-than-expected results. Fourth quarter operating income was approximately $217 million, yielding an operating margin of 21%, which is above our guidance midpoint. Fourth quarter adjusted EBITDA was $249 million, yielding 24.1% margin and also above the midpoint of our guidance. Net interest expenses was $42 million. Fourth quarter effective tax rate was 1%, which was in line with our guidance. We finished the year strong with fourth quarter net earnings of $168 million or $2.47 per diluted share which is above the midpoint of our guidance. We closed the quarter with approximately $1.4 billion of liquidity comprised of cash and cash equivalents of $675 million and our undrawn revolving credit facility of $675 million. Net debt at year-end was $3.6 billion, That, combined with improving adjusted EBITDA resulted in a net leverage ratio of 3.7x based on full year 2025 adjusted EBITDA of $966 million. Quickly summarizing our full year 2025 results. Revenue was $3.9 billion, up 10% year-over-year. Semiconductor revenue totaled $1.7 billion, up a healthy 13% year-over-year, driven by plasma and reactive gases and racking products. Our service business remained a steady and meaningful growth contributor. Electronics & Packaging revenue was $1.1 billion in 2025, up a strong 20% year-over-year. Total chemistry sales increased 11% year-over-year excluding the impact of foreign exchange and palladium pass-through. Specialty Industrial revenue was $1.1 billion, down 4% year-over-year primarily driven by softness in industrial markets, including automotive. Gross margin was 46.7%, down 90 basis points year-over-year, driven by additional costs related to tariffs and product mix, including record chemistry equipment sales. We moved quickly during the year to mitigate the impact of tariffs. That impact was largely mitigated on a dollar-for-dollar basis by the fourth quarter but will still continue to impact gross margin by about 50 basis points. Full year operating margin was 20.7%, down 60 basis points year-over-year as a result of lower gross margin. However, our operating expenses as a percentage of sales was 26% and improved by 30 basis points year-over-year. Let me now turn to cash flow and balance sheet discussion. For 2025, we generated operating cash flow of $645 million, an improvement of $17 million year-over-year. Even with an uptick in capital expenses, full year free cash flow was $497 million, an increase of 21% year-over-year and reflective of a very healthy conversion rate of our non-GAAP net earnings. In 2025, we made a total of $400 million of ordinary prepayments on our term loan. This month, we made another voluntary prepayment of $100 million. Since February 2024, we have paid down over $1 billion of our debt. We continue to remain focused on deleveraging. We also closed a few key financing transactions in recent weeks. The repricing of our term loan facility reduced credit spreads on our U.S. term loan by 25 basis points and the euro loan by 50 basis points. In connection with this repricing, we increased the size of our revolver to $1 billion. Finally, our successful EUR 1 billion bond offering has allowed us to diversify our capital structure, reduce interest rates on our debt, replace a portion of our secured debt with unsecured debt and extend our maturities. Based on current interest rates, the combined effect of these actions we took in this month will reduce annual interest expenses on a run rate basis by approximately $27 million. In addition, to lowering interest rates. These transactions will provide greater flexibility for the company. Finally, during the quarter, we paid a dividend of $0.22 per share or $15 million. As we announced last week, the Board authorized a 14% increase in the next dividend, which is payable in early March. Let me now turn to first quarter outlook, we expect revenue of $1.04 billion, plus or minus $40 million. By end market, our first quarter outlook is as follows: Revenue from semiconductor market is expected to be $150 million, plus or minus $15 million. Revenue from electronics and packaging market is expected to be $305 million, plus or minus $15 million and revenue from our specialty industrial market is expected to be $285 million, plus or minus $10 million. Based on anticipated revenue levels and product mix, including sequentially lower chemistry sales due to the Lunar New Year, we estimate first quarter gross margin of 4% to 6% plus or minus 100 basis points. We expect first quarter operating expenses of $270 million plus or minus $5 million. Looking to the rest of the year, we will continue to invest in the growth of our business, but we expect operating expenses to grow at a rate lower than revenue. We estimate first quarter adjusted EBITDA of $251 million plus or minus $24 million. We expect capital expenditures to average in the 4% to 5% of revenue through 2026. We expect a tax rate of approximately 21% in the first quarter. For the year, we expect our tax rate to be in the range of 18% to 20%. Based on these assumptions, we expect first quarter net earnings per diluted share of $2 plus or minus $0.28. Propping up, MKS continues to execute at a high level meeting growing customer demand and maintaining strong profitability. We continue to prioritize making the necessary investments in the business and proactive deleveraging. We believe that we are in an excellent position to capitalize on what we expect to be a robust demand environment. With that, operator, please open the call for questions. Operator: [Operator Instructions]. Our first question comes from the line of Steve Barger with KeyBanc Capital Markets. Steve Barger: Thank you. I wanted to start with the 46% gross margin midpoint guide. How much of that is from chemistry equipment mix? And does the lower 1Q sequentially suggests an upward inflection in 2Q from higher chemistry sales volume? Or how do you expect that to play out as the year progresses? Ramakumar Mayampurath: Steve, this is Ram. I'll take that. I'll start with your second question. The answer is yes. It is due to the seasonality from lower chemistry driven by Lunar New Year and we expect the mix to improve in Q2 and further in Q3. So mix is the main reason for the 4% to 6% plus or minus 100 basis points guide. Steve Barger: Got it. And so that should be the low point of the year? Understood. And John, can we just talk about the memory shortage. It seems like that could be both good or bad for you. Can you talk about what you're seeing with NAND tool upgrades and other memory investments that could be coming. And then can you talk about what happens with consumer products just given the increase that you're seeing in the market? John Lee: Yes,Steve. So I think the customers and our customers' customers are putting a lot of the investments in DRAM, obviously, for AI, and that's causing this crunch in terms of availability of memory. I would say this, the industry is moving very fast to try to meet those demands. You see a lot of announcements of fabs going up and whatnot. And then more recently, NAND has become potentially a bottleneck as well in terms of availability. And so you saw one large chip company announced a new NAND factory, brand new greenfield us out a little ways, but that's good because it extends the ramps, as you will. In terms of upgrades, I think our customers are best to answer that. I would say this. We have plenty of capacity to meet those upgrades should they come. And as a reminder, our position in RF power for NAND vertical channel etching allows us to enjoy upgrades almost as much as greenfield. So I think NAND is something that's going to be kind of icing on the cake as that happens throughout the year and the next couple of years. Steve Barger: Got it. And then just any comment on consumer products, what the potential effect could be? John Lee: Yes. I mean I think it's going to depend on how much availability there is. I think you read some analyst reports, people are kind of thinking maybe low single-digit decreases in PCs and phones, but that really is going to be dynamic throughout the year. I think it's really going to be a function of how fast the industry can make those chips for that segment of the market. So I think if we have a little decrease in PCs and smartphones, I think it's going to be more than made up with AI. Operator: Our next question will come from the line of Jim RicchiutI with Needham & Company. James Ricchiuti: Thank you. Yes, I'm wondering if we look at the electronics and packaging business, the 20% plus growth in 2025, John, any sense as to how much of that was a function of capacity additions. And I'm curious how much of a tailwind would you anticipate this being in 2026 in this area of the business? John Lee: Yes, good question, Jim. I think what we said also is that while the electronics and packaging grew 20%, chemistry grew about 11% year-over-year. So that's great growth, too. So chemistry would be more utilization dependent. And then the rest of that growth is capacity additions from chemistry equipment as well as flex drilling equipment. So we've talked about our chemistry equipment. That's a nice leading indicator of future chemistry revenue. We're now into the fifth quarter of strong bookings and revenue for that. I think in the past, we talked about the first half of '26. Our factories are full through then. I think we're not going to guide bookings going forward in equipment, but I would say the difference between 90 days ago is we continue to see strong chemistry. So I think that continues, and that's really just something that, over time, will lead to that high gross margin chemistry revenue that will be on our production equipment. James Ricchiuti: And a follow-up just on -- you highlighted the improving demand in CD drilling equipment. How would you characterize the recovery that you're seeing in this part of the business. versus previous cycles. I know it's been a while since we've seen a decent upturn in this business. John Lee: Yes, I know you've covered ESI for a long time, Jim. I would say there was a super cycle maybe 4 or 5 years ago. This is more like a normal cycle. So probably 2 years now where it's kind of been more normalized. So we're happy to see that. I have to see that our share continues to be very strong. and that some new devices that we talked about full phones are driving more flex demand. So I think I would characterize this as not a super cycle, if you will, for Flex, but more of a normalized cycle that we have expected on a more consistent basis throughout the years. Operator: One moment for our next question. Our next question will come from the line of Melissa Weathers with Deutsche Bank. Melissa Weathers: Thank you for the question. John, I was hoping to ask you to pull out your crystal ball and get your opinion on WFE growth this year. So we've heard some pretty strong outlook from some of your customers and peers on WFE. Any sense of magnitude or how are you guys thinking about like the magnitude of growth the equipment spending could have this year? And then how should we think about that flowing through to your semiconductor system sales? John Lee: Yes. I'll pull out my crystal ball, Melissa, it's cloudy, but I guess it's a positive. A couple of our edge customers are talking about 20% year-over-year WFE growth, a couple of our listometrology customers are talking more in the mid-teens, if you will. So you put it all together, WFE will be a large grower. And I think more importantly, I think everybody is kind of assuming it's more than just a 1-year thing. It's going to be a cycle that maybe lasts longer than that. MKS has always outperformed during the upturn. That's just math. Everything is designed in already in an upturn. People are just ordering things that are already designed in. We have to ship before our customers could ship. At the same time, during a ramp our customers are going to try to build inventory. And so all that leads to outperformance. Even in 2025, when there wasn't really a ramp I believe we will have shown that we outperformed WFE even in a relatively stable 2025. And I would say in my commentary a couple of months ago, the ramp has started. We have started. Supply chain teams are working hard with our suppliers. We're in constant communication with our customers and everybody in the industry is getting ready for this ramp. And MKS, as you know, is supporting 85% of WFE. So we're going to see all of that. And we're really looking forward to meeting that demand. I think we also talked about the Malaysia plant. Which will come online midyear. And that will give us just extra flexibility in the future. But our factories today are ready to meet the demand that we see in the next year or 2. Melissa Weathers: Perfect. And then maybe following up on something you've already touched on, on the call, but the ability for the AI side of things sort of offset the -- any slowness that we could see in consumer electronics. And you talked about like the board complexity and layer counts going up for AI boards. Is there any other way to quantify like what is your revenue opportunity with or 2027 Board versus what you've seen in the past? Just any other way to frame how we should think about that content opportunity and sort of how much that could offset any weakness on the consumer electronics side. John Lee: Yes. Maybe the way to think about it is, let's say, smartphones. The number of layers and the PCBs for smartphones could be in that 10 to 12 layers, give or take, and it's increasing as well. but the HDI type of boards for AI are in that 15% to 20% already. And in addition, AI also needs multilayer boards, which are in the 30 to 40 layers. And then, of course, the substrate -- the package substrate layers. So I would say that PCs and smartphones, the number of layers is consistent. It goes up a couple of layers every cycle. The AI, we're talking about doubling the number of layers. And so we've talked about in the past that our chemistry revenue from AI in 2024 was about 5% of our revenue -- our chemistry revenue in Electronics & Packaging. And now in 2025, it's 10%. And I would say it's a sequential increase quarter-on-quarter-on-quarter in '25. So we expect AI to continue taking a larger percentage of our chemistry revenue even with a slightly muted PC and smartphone market. Operator: And one moment for our next question. Our next question will come from the line of Michael Mani with Bank of America Securities. Michael Mani: To start, I just wanted to ask about your capacity position what this Malaysia facility fully ramping over the next course of next year? How much revenue do you think that could ultimately support for your business? And if there's any way to kind of quantify how much that footprint has expanded for you over the last couple of years to be great. And then as you look out, are there any other areas where you feel like you need to invest in your capacity position? I know there's a Thailand facility that you're ramping up, I believe that's for chemistry, but anywhere else where you anticipate any supply constraints? John Lee: Yes. Thanks, Mike, for the question. I think with Malaysia, it was built as a business economy replan. It wasn't built to anticipate needed more capacity for this particular ramp. So we already have plenty of factory capacity for that. I think Malaysia is kind of think about it as future capacity needs for WFE. We haven't sized it. I would say this, we always build our factories and phases. So we have the shell and then we'll put in a certain amount of lines and product lines beginning middle of this year. And then we'll plan on what makes sense to grow there. But it will give us a lot more capacity than we have currently. I would say we've added a little bit of CapEx here and there, kind of nip and up with our factories in anticipation of this particular cycle. But we had talked about being ready for $125 billion WFE 3 years ago. and we did that. And remember that $125 billion is run rate. We always have 30% surge capacity in addition to that. So I think we're quite comfortable with our capability I think always in ramp constraints or supply chain. Our suppliers are better, they're bigger, they're ready, but the golden school effect will happen. And so that's really where our execution has always been among the best, is finding those issues and then dealing with them and delivering to our customers on time. And we've always done that through every cycle. So I'm very confident we'll have the capacity. We have the team and the supply base to help us deliver to our customers this ramp as well. Michael Mani: Very helpful. And just moving on to electronics and packaging. So as you look out over this next year, is it fair to say that most of the growth this year, if it is sustainable in this kind of double-digit growth area would be -- would largely come from more chemistry revenue now that you've seen significant equipment orders over the last couple of months that are going to be ramping in terms of utilization? And then more broadly, this kind of relates to the previous question. I think in the past, you've said that every $100 million in install equipment translates to $20 million to $40 million in chemistry sales per year for utilization. So I just wanted to ask what are the sensitivities around that? Is the revenue function much higher if it's a substrate versus will be and as your customers are talking about pushing a number of layers to over 100. Like what does that do to that attach rate for revenue? John Lee: Yes. Thanks, Michael. I think in general, our model is still the same, $20 million to $40 million is per $100 million of equipment sales. And it doesn't really change too much between particular types of boards. And it's really a function of utilization. So if that tool is running 100%, then you're getting into that $20 million to $40 million range. And then I think, in general, we're just very happy with the continued shipments of our equipment, as I said in the earlier question, it continues to get better. It continues to be consistently strong even from a quarter ago. So if that's the case, then we will have had potentially 2 good years of record level chemistry equipment shipments. Now I also think we've talked about how long does it take for a piece of equipment to turn into chemistry revenue. We've said 18 to 24 months. That's still the case. So a lot of the chemistry revenue that you saw grow in 2025 was with equipment we shipped in 2021, 2022. And so that's why I think the equipment we're shipping now will be great capacity for future chemistry going forward into -- into '26, '27 and going forward. So I just want to make sure that was clear. The chemistry revenue now is not constrained by the equipment more shipping. That chemistry revenue is growing because of the capacity we've already shipped in terms of equipment a few years ago. Operator: Our next question comes from the line of Shane Brett with Morgan Stanley. Shane Brett: I want to follow up on Mani's question. Just based on the knowledge you currently have, should we be anticipating chemistry revenue to accelerate or decelerate in 2026? And I'm asking this because I want to better figure out just how much of this chemistry revenue is associated with just higher growth AI or should be kind of benefiting from a higher installed base. But how much could be impacted by just weaker consumer electronics sales. John Lee: Yes, Shane, I think, well, there is a seasonality to the chemistry revenue, as Ron pointed out. So Q1 is for the consumer product cycle type of products is lowest. Because of Lunar New Year. And then the Consumer Products chemistry will continue to grow throughout the year. That's the consumer product cycle. To your point, if there's a single-digit decrease, then we'll see that in that chemistry revenue for that market. But at the same time, AI chemistry is really -- we are expecting that to continue to grow. All our customers that are in that AI supply chain are running capacity, they continue to add tools and add -- and bring those tools up. So I think, as I said, that's why I expect that even with a slight decrease in PCs and smartphones the AI part of the chemistry will more than make up for that. Shane Brett: Got it. And for my follow-up, on the E&P tooling side, late last year, you sort of mentioned that your book through the first half of 2026. Just how should I think about this E&P to -- your current capacity for E&P tools relative to the existing demand for these tools. John Lee: Yes. I think we've added some capacity. We didn't need to build a new factory if you -- if that's your question. And we've been able to meet the timing demands of our customers even at these elevated levels. And as I said earlier in the commentary, based on changes from 90 days ago, we continue to see these strong bookings. So I think it's going to be another strong year for equipment. And our capacity to meet the time lines need by our customers right now is sufficient. We're not constraining our customers. Operator: Our next question comes from the line of David Liu with Mizuho. David Liu: Let me ask the question. On for Vijay at Mizuho. Maybe the first one just back on WFE. I think your customers and peers have mentioned second half-weighted strength and acceleration. Do you think like we can see that and revenue hit probably a 5 handle starting in September, December? John Lee: Sorry, David, 5 handle...? David Liu: On semis revenue. John Lee: Semis revenue, I see. It's -- we're guiding 450 years. Well, I would say this, if WFE grows in that same range between 15% to 20% as many of our customers are saying, we're going to have to ship ahead of that. We're going to have to shift to build that revenue for their inventory. I think in the past, we have hit that 5 handle at the last ramp. That wasn't constraints from our factories, that's constrained some supply chain, right? And so I think that -- I think we're better at managing supply chain. I think the supply chain is better. So 5 handle would not be surprising. I just can't predict when it will be. But in order to meet a 20% WFE increase. We have to get to a 5 handle probably as MKS. Otherwise, the industry won't get to that 20%. David Liu: Got it. And then a longer-term question, I think part of the industry is beginning to look at moving to panel for advanced packaging. I'm just wondering what kind of conversations you guys are starting to have there in the advanced packaging side and if there's any sort of outlook or time line that benefits and KSI. John Lee: Yes. I think you're referring to redistribution layers going from wafer shaped to panel rectangular shape. And I think -- many customers are working on that. And of course, when they go to panel, that's MKS. We are participating in the wafer type of packaging. But our strength has always been in panels. And so that is a tailwind for MKS. But as I mentioned in the past, that's kind of 1 or 2 layers of redistribution layers, and that is still relatively small in terms of market growth for us because the HDI and MOB are growing at 10 layers a year or more each. So while it's a tailwind, I think we don't want to miss the bigger picture, which is that the number of layers of MLB and HDI and package substrates are growing much faster. Operator: [Operator Instructions]. Our next question will come from the line of Peter Peng with JPMorgan. Peter Peng: Some of your semi customers are already talking about inventory build. Have you seen that in your -- in the second half of 2025? Or are you starting to see that now in terms of inventory build? John Lee: Yes. Well, you can look at their inventory numbers and you see if it's building. But I would say this, Peter, a lot of the conversations on getting ready happened in that Q4 time frame, and they have continued to accelerate in the Q1 time frame. And so we're ramping our factories in our supply chain. And I think it will take a little while to show up as inventory build in our customers because right now, we're -- as a supply chain, we're all just getting ready to just meet the higher demand. So you'll probably see that build up in their inventory numbers over the next couple of quarters. But we are still shipping to demand at this point just because we're just in the early stages of that ramp. Paretosh Misra: Got it. And then in the lines, there's a lot of, I guess, constraints and greenfield capacities even from your end customers as you kind of engaged, is there any -- I guess, are you seeing any constraints from your customers where they just don't have enough space to move equipment yet. And so maybe you can talk about that dynamic. John Lee: I've not heard that, Peter. I think our customers are well run customers. They have large factories located globally. At the last ramp we all added capacity, got more efficient. So I don't see that as a constraint in terms of not enough space to build the tools, if that was your question. Operator: And one moment for our next question. Our next question comes from the line of Joe Quatrochi with Wells Fargo. Joseph Quatrochi: Maybe just kind of on that line of thinking on the semi business. You're guiding for kind of 3-ish percent sequential growth, and I think some of your main customers are guiding for high single-digit, low double-digit sequential growth through the first quarter. So just kind of curious if you could kind of give us the puts and takes there. John Lee: Yes, Joe, I think we're guiding based on what we -- our best view today. But I think you've been in this industry a long time. When that ramp occurs, it just accelerates fast. This is our best view today. But during a ramp, as you know, things can accelerate rapidly. And so we're going to stick to this guidance. But certainly, we give a range. And even last quarter, we gave a range and we went higher than the upper end of that range. And that's kind of a characteristic of ramps. And so this is what we see today. I would say this, if we could ship more, our customers will probably take it. So we're trying to ramp as fast as we can. Joseph Quatrochi: That's helpful. And then maybe just as we think about the ramp of the course of the year and think about just the puts and takes on gross margin, should we still think about 50% is kind of incremental gross margin leverage just thinking about the tariff dynamic as well? Ramakumar Mayampurath: Joe, this is Ram. I'll take that. The quick answer is yes. We are very pleased with the gross margin for 2025. And if it weren't for tariffs, you would have been to your point or 47%. And if you remember, last 3 quarters, we were focused on mitigating the cost of the tariffs. And by we offset the cost dollar for dollar. And going forward, we'll be focused more on mitigating the impact on the gross margin itself. So yes, the volume and the right mix will certainly get us back to the 4%. Operator: [Operator Instructions]. Our next question will come from the line of James Schneider with Goldman Sachs. James A. Schreiner: Just as a clarification initially, you talked about your semi customers citing a 15% to 20% outlook and your ability to kind of do towards the high end of that, presumably, given the mix of your customers and the mix of your business You'd also just referenced potential constraints in terms of ramping your production. Can you maybe just give us a clarity on whether you see yourselves as constrained in your ability to ship in the next quarters? Do you think you'll be able to catch up to your customers' full demand -- unconstrained demand run rate by the middle of the year at least? John Lee: Yes, I'd say this is Jim. During the beginning of the ramp, we're never the constraint because I think we have a supply chain with inventory as well. And even during the peak ramp and even after many quarters of a ramp, we have never constrained our major customers. And I think it's an industry that's always met demand as an entire semiconductor industry. And companies that don't meet demand and constrain their customers they're not around anymore, right? And so I think we have plant capacity. The challenge is getting the supply chain to ramp up. But even then our biggest customers have always been a priority and we've never disappointed them. James A. Schreiner: Very clear. And then just in terms of how we think about the forward model, you've clearly stated that you expect to grow OpEx slower than revenue, but give us a sense about the leverage you expect there, please? 2:1 or et cetera? Ramakumar Mayampurath: Jim. So if you look at -- so we will be investing. We want our OpEx very carefully, but we will be investing this year to support the growth. But in terms of leverage. That will be a focus to drive our leverage further. If you look at 24% to 25%, our OpEx dollars grew, but our OpEx as a percentage of sales was lower. So we finished around 26% for 25 and 26, we will be lower than that. Operator: Thank you. And I would now like to hand the conference back over to Paretosh Misra for closing remarks. Paretosh Misra: Thank you all for joining us today and for your interest in MKS. Operator, you may close the call, please. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Greetings. Welcome to Similarweb Fourth Quarter Fiscal 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Rami Myerson, Vice President, Investor Relations. Thank you. You may begin. Rami Myerson: Thank you, operator. Welcome, everyone, to our fourth quarter 2025 earnings conference call. Joining me today are our CEO and Co-Founder, Or Offer; our Chief Financial Officer, Ran Vered, who started with us in late December 2025; and Maoz Lakovski, our Chief Business Officer, who is joining us as well. Yesterday, after market close, we released our results for the fourth quarter and published a discussion of our results in a letter to shareholders on our Investor Relations website at ir.similarweb.com. Today's webcast will be accompanied by an earnings presentation, which is new and underscores our commitment to Investor Relations and transparent communication. The webcast can also be accessed from our Investor Relations website. Certain statements made on the call today constitute forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report filed on Form 20-F for more information on the risk factors that could cause actual results to differ from our forward-looking statements. Additionally, certain non-GAAP financial measures will be discussed on the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. Today, Or and Ran will walk through the highlights of the quarter and the full year, review the progress we are making on our profitable growth strategy and provide our initial outlook for 2026. Following our prepared remarks, we will open up the call to questions from sell-side analysts. With that, I'll turn the call over to Or. Or, please go ahead. Or Offer: Thank you, Rami. Welcome, everyone, joining the call today, and a special welcome to Ran, who joined us as our new CFO in December 2025. I will begin with our Q4 and full year 2025 highlights, then cover our strategy and the progress we made in 2025, rolling out our innovative solution and conclude with our 2026 priorities and goals. Now let's look at our Q4 2025 performance on Slide 5. Revenue grew 11% year-over-year to $72.8 million. This was below our guidance, mostly due to the timing of 2 large LLM data training contracts that did not close yet, but remain active in our pipeline. Given the size and complexity of those AI contracts, sales cycles can take longer to complete. That said, once closed, we expect them to represent a very big multiyear revenue opportunities with strong expansion potential. We are working hard to close those deals. In addition, and despite the delay of those deals, we slightly exceeded the midpoint of our non-GAAP operating profit targets for the quarter through disciplined cost management. Despite the low topline performance, we delivered our ninth consecutive quarter of positive free cash flow and achieved our second consecutive year of positive operating profit. We generated approximately $13 million in free cash flow for the year, reinforcing our commitment to profitable and durable growth. Net revenue retention for all clients was 98% and 103% for clients above $100,000. We are focused on driving improvement in these metrics in 2026 by executing our customer expansion playbook. Later on, I will expand on the drivers behind that optimism and the action we are taking. Finally, customer demand for our AI offering continued to expand. AI-related revenue reached 11% of sales in the fourth quarter, up from 8% at the end of the second quarter of 2025, driven by our portfolio rated AI solution which we also will cover later in the presentation. Turning to Slide 6 and our key messages. First, 2025 was a build deal. We build the platform to win in the AI era, while the market was dynamic we lean into the opportunity forming around AI. We accelerated product innovation and launched new offerings such as App Intelligence, which was the fastest-growing product we had in 2025. We introduced an ad intelligence, Gen AI intelligence, AI agent and MCP integrations, which is a new industry standard for AI systems to access our data. Most recently, we launched an AI studio which is an AI-powered chatbot interface that make it easier for more users to access our data and actionable insights and recommendations. These are commercial products already gaining traction. As said, in Q4, 11% of our revenue came from AI-related use case. We see AI as magnificat [indiscernible] tailwind going forward. Second, we demonstrated the strength and durability of our model with AI revenue free ex year-over-year and achieved our second consecutive year of positive operating profit and free cash flow. One important highlights is that 60% of ARR is now multiyear, up from 49% a year ago. This is an important metric as it reflects deeper customer relationship stronger alignment with our value proposition and greater revenue visibility. Most importantly, it shows that our customers are choosing to commit to our data and products for a longer period of time, which is a strong vote of confidence in the value we deliver. In addition, 63% of ARR comes from customers generating over $100,000 annually enforcing how embedded we are in mission-critical use case in the enterprise segment. Third, our data mode matters more than ever. AI models and systems are only as strong as the data behind them. Our proprietary digital data now powers enterprises, LLM and AI agents, the quality of our data has been validated by both third parties and customers. For example, we expanded our integration within the Bloomberg terminal. This positions similar well as a premium alternative data provider for institutional investors and provide another proof point or the quality of the data we provide. And finally, 2026 is transformation here. We are moving from building to scaling as AI become embedded into workflow and trusted digital data become a strategic asset. We believe similar web is well positioned to power the next generation of digital intelligence. Let me walk you through how we are executing our strategy to build an AI-driven data powerhouse on Slide 7. Our strategy is built on 3 pillars: strengthening our data not deepening enterprise relationship and third, scaling AI first integrated solution. So let's start with the first one, durable data mode. We are a leader in the digital market data. For more than a decade, we invest hundreds of millions of dollars in developing and deeping our data mode, building deep expertise in collecting and estimating digital behavior at global scale. We continue to invest in R&D to enhance the quality, accuracy and the breadth of the data sets that power our digital intelligence. We continue to expand coverage, accuracy and freshness across web, app, search ads and now chat-based channels staying at the front wherever digital traffic is shifting. This is a hard to replace assets with compounding advantage and significant long-term commercial potential. AI depends on it. It's not replacing it. Second, we are powering leading enterprise with our trusted digital data. Many of the world's largest and most sophisticated companies are already our customers. We see significant opportunity to scale those relationships by applying our proven expansion playbook. -- increasing multiproduct adoption over time and driving higher no. We already have 2 large tax customers generating over $10 million in ARR, those are broad multiuse case relationship across multiple teams and function. Both have expanded into a data agreement that powered the LLMs, positioning similar as a critical building block within the Reintec. Enterprise expansion will be a key focus area for us in 2026 and beyond. Third, we are doubling down on AI-first integrated solution. And we will continue to expand our AI portfolio to establish ourselves as a winner in the AI transformation. Our data sets are uniquely positioned to power both enterprise users and AI systems, a dual strategy built for people and for agents. Through ecosystem partnerships like [indiscernible] data is embedded directly into AI-native workflows especially for research-driven use case, just as financial data become essential for research platforms, chatbots, we believe that digital market data can play a similar role across all platforms. we expect it become a meaningful commercial growth driver. As we execute on our 3 pillars, we remain fully committed to operational excellence to drive durable, profitable and cash generated growth. As you can see on Slide 8, we made significant steps forward on our strategy in 2025. As we build similar web for the next stage in our journey. Starting with the data note. In 2025, we launched multiple new data sets to further extend our 360-degree visibility across the digital world and establish our leadership in digital data. We significantly expanded our coverage across app data, ad spend data, chatbot activity data and Gen AI visibility. These data sets are very unique -- and we believe we are uniquely positioned to provide a comprehensive view across web, app, search, e-commerce, advertising and emerging AI-driven channels and covering the full digital journey across touch points. Moving to the enterprise pillar. We delivered a solid performance in 2025. Our $100,000 customers grew 12% year-over-year and now represent 53% of ARR. Revenue for multiyear contracts increased significantly to 60% of ARR from 49% in 2024. Lastly, on our AI-first solution. We launched our innovative offering, AI Studio, AI Agent embedded across our business solution to accelerate time to insight, Gen AI intelligence model which help brands measure their visibility and sentiment across generative AI platforms and a new chatbot MCP integration, including partnerships like Manus, which opened an exciting new distribution and monetization channel. Our partnership with Manus extends our data sets into agent-driven workflow, where autonomous AI agents capable of performing complex tax activities execute marketing analysis, competitive assessment and strategic planning. Manus, which was recently acquired by Meta is one of the fastest scaling start-up in history. And this is collaboration offer us revenue opportunities to scale with it. Furthermore, Manus provides access to a much broader set of potential end users beyond our core subscriber space, expanding our term by empowering millions of users with our data. This milestone partnership reinforced our value proposition as a central data layer for the next generation of agenetic tools and serves as a strategic blueprint for more integration to come. Those are some of the steps we took to strengthen our data mode, deepen enterprise relationship and position SimilarWeb to win in the AI era. Slide 9 captures our AI data and product strategy, how we power the ecosystem, build AI First solution and expand its tradition and scale. First, we are powering LLM and AI agents. We are seeing strong traction, licensing our data directly to leading LLM companies for both pre and post training use case. This is a strategic priority for us, and we expect it to become increasingly strong revenue stream for us over time. At the same time, autonomous agents require trusted structured digital intelligence to operate efficiently that's exactly what we provide. Our data is built for both human and agent and we see accelerating demand from both. Second, we are building our own AI native solution. With Gen AI intelligence, we are helping brands to improve their Gan AI visibility and sentiment. We are seeing strong market validation on this front, including the recognition of our leadership by G2Crowd and we have recently launched it in a self-serve with adoption from hundreds of customers. We believe our data provides an important competitive advantage in this new market, and we are on a journey to become a market leader in this category as well. We are also transforming our traditional software into an agent first model launching workflow-specific AI agents across marketing and sales use case. This move customers from insights to action with a faster time to value and stronger ROI. This effort is helping us to get to many more users, grow adoption and [indiscernible]. We are very excited about the potential of our own agentic strategy. Third, we are expanding distribution at scale. Our partnership with leading LLM and agent platform such as Manus and for MCP integration, we embedding similar web directly into AI ecosystem. Our MCP is already available in cloud and will soon be integrated into ChatGPT, enabling AI systems to seamlessly access our data, so users can consume similar web insights directly within the workflows. Those ecosystems partnership unlock new customers, expand our TAM and position our digital data as a critical ingredient for AI-driven research and decision-making. We believe we are well positioned to be an AI winner with multiple commercial opportunities across data products and partnerships, and we are excited about the potential. I would like to spend a moment on the AI Studio on Slide 10 because this is more than just a new product launch. AI Studio represents a huge shift in how users interact with similar web data. Historically, our platform delivered a powerful data-driven insight, but often requires technical expertise to express value. AI Studio changed that with an AI-powered interface, user can ask a business question in plain language and in all languages and [indiscernible] receive actionable insights what used to take time and specialized skill can now happen quickly and easily. This is a major step in the [indiscernible] access to our data across teams and workflows. AI Studio expand the number of users who can average similar web, increases engagement enables faster and more seamless insight generation and unlock new monetization opportunities. The early feedback both from better customers and since launch has been amazing. We see AI Studio as a core part of our product strategy, an important driver of future growth. I encourage you to watch the demo video after the call via the link on the slide to see it in action. Let me close by reflecting back on 2025 and how it's set up for 2026 on Slide 11. 2026 was a pivotal year, we made real progress, as I said, AI revenue grew 3x and now represent 11% of Q4 revenue. That is a meaningful traction and globalization that AI is already contributing to the business. We also strengthened our durability of the model. $100,000 customer grew 12% and [ 60% ] of ARR is now multiyear, up from 49% a year ago. They give us better visibility and enforce the depth of our enterprise relationship. At the same time, we acknowledge that 2025 was not within challenge. Overall, NRR stabilized at 98%, and we are not satisfied with that level. Well, NRR our $100,000 customers was at 103%, we know we can execute better across the border base. We have taken action while sharpening our go-to-market strategy, upgrading talent, refining processes and building scalable playbook to drive cross-sell and expansion. We see a clear opportunity to convert onetime AI evaluation deals into recurring revenues and to accelerate the adoption of our newer solution across the installed base. That's why we have a strong conviction in 2026. We are well positioned to capture long-term AI spend. Our AI First portfolio is scaling, ecosystem [indiscernible] are expanding, and we are targeting high-growth segments like LLM companies, large big tech players and OEM with our own dedicated go-to-market team and focus. With Ran joining as a CFO, will also strengthen our financial discipline and public market execution. So 2025 at this stage, 2026 is of our disciplined execution and acceleration. With that, I will hand it over to Ran. Ran Vered: Thanks all. It's a pleasure to be here with you. I'll provide highlights of our financial performance and guidance for the first quarter and the full year of 2026. But before I do, let me first provide a short overview of my background, why I joined Similarweb and what are my priorities as our CFO. I'm on Slide 13. I'm very excited to join Similarweb at this junction in our journey. Or and the team have built a digital data powerhouse. And as we have discussed today, this unique asset is point to take advantage of emerging opportunities in the AI generative era. Similarweb is my first role as a tech company CFO over 2 decades. Previously, our CFO of 2 U.S. listed tech companies and most recently joined Foncia, a B2B self-intelligence Unicorn. I look forward to leveraging my experience and financial discipline to help execute our clear strategy to accelerate revenue growth to the next level, while doubling down on our commitment to expand profitability and deliver durable free cash flow. This is what I am committed to doing all while ensuring will remain disciplined capital allocators. I look forward to meeting you over the coming weeks and months. Turning to Slide 14 in our quarterly results. We generated $72.8 million of revenue, an 11% increase relative to the fourth quarter of 2024. Revenue was lower than expected due to delayed closing of 2 major LLM related agreements that were anticipated in the fourth quarter, as some noted, we remain in active discussions. Non-GAAP operating profit for the quarter was $3.4 million, reflecting a 5% margin compared to $2.6 million and a 4% margin in 2024. This was within our guidance range, thanks to disciplined cost control. Turning to the full year financials on Slide 15. I will not review each metric but will hit that despite lower revenue. Operating profit came in ahead of our expectations at the beginning of the year due to our sustained focus on disciplined execution. 2025 was our second consecutive year of positive non-GAAP operating profit and free cash flow. We are committed to generating profitable growth going forward. Good cash generation is a strong balance sheet are critical for a business in any stage of the cycle and become even more important in periods of volatility. On Slide 16, you can see that we ended the year with $72 million of cash and cash equivalents and no debt. We also have an available line of credit of $75 million. After 9 consecutive quarters of positive free cash flow. The business has a solid core and the financial flexibility to weather market headwinds, while same focus on our long-term goals to maximize shareholder value. Our capital allocation priorities over the coming years will be: First, we continue to invest in R&D at around 20% of revenues to improve our digital data and deepen our competitive moat; second, is to invest in M&A only when it meets our rigorous financial return criteria and embed our strategic goals to improve our data asset and product portfolio. Over the last 2 years, we completed several bolt-on acquisitions, including [indiscernible] matters, which boosted our app intelligence capabilities and ad metrics, which enhance as intelligence. The current packet volatility is enriching the M&A pipeline. We remain committed to a strong balance sheet that provides us through financial and operational flexibility. Turning to our outlook for 2026 on Slide 17. For the full year 2026, we expect total revenue in the range of $305 million to $315 million, representing 10% year-over-year growth at the midpoint of the range. In Q1 2026, we expect total revenue in the range of $72 million to $74 million, representing 9% year-on-year growth at the base point. On the full year, we expect our non-GAAP operating profit to be between $16 million and $19 million. Non-GAAP operating profit for the first quarter of 2026 is expected to be in the range of $0.5 million to $2.5 million. And I provide guidance for the first time at Similarweb, we are taking a deliberately prudent approach. We are resuming pockets of end market weakness persists, and we are grounding the initial outlook in the high visibility of our core business drivers, while we are encouraged by the strong demand in the pipeline for larger AI deals. After delivering the second year of [indiscernible] revenue growth, non-GAAP operating profit and positive free cash flow, we remain committed to building a more durable franchise in Similarweb. With that, Or and I ready to answer your questions. Following Q&A, Or will share some closing remarks. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question is from Raimo Lenschow with Barclays. Raimo Lenschow: I had like 2 questions. And Ran, welcome to the team and all the best. One for Or, if you think about the large LLM contracts that you're signing there, but then you also look at the large customer NRR actually just came down a little bit. It's just -- do you need to think about that as an additional or somewhat as a replacement that people that said people using more LLMs going forward, that means they need to use less of their own, and that kind of impacts the NRR numbers then? Or are they not correlated? Could you speak to that dynamic going on there? And then I have one follow-up for Ran. Or Offer: Yes. I think there's no correlation between the core business when we sell our regular software when brands buying the web intelligent app intelligence to drive growth traffic online versus our motion of selling data for LLM use case. That is -- it's a different use case specifically to train LLM to be smarter, better about the world. So it's a different -- I don't think it's come on each other. Raimo Lenschow: Yes. Okay. Perfect. Okay. Makes sense. And then the one for you, one, like, obviously, with these larger contracts come through, it kind of as a CFO and as a new CFO, it's kind of difficult to guide them and how do you think about your guidance philosophy in terms of going forward, kind of if those big deals on the pipeline, is it worth maybe taking them out and they become like upside when it come through? Like how do you think about that dynamic? Ran Vered: Thanks for the question. First of all, I'm really happy to be on this call. So when we look on the guidance, we took a reasonable approach and this is one of the reason we widened the range. In prior years, the range we guided to the Street was around $3 million and now the cost of that LLM deals and the big deals, we widened the range to $10 million just because we know -- we see these fills in the pipeline but the timing of them to land is not that clear. As we say in the prepared remarks, this is one of the main reasons we lost Q4. So when I look on it, some of it with percentage is baked already into the guidelines. But when we're going to lend them, of course, this will -- we'll see how we adjust the guidance going forward. Operator: Our next question is from Arjun Bhatia with William Blair. Arjun Bhatia: Yes. Perfect. Or can we maybe just go back to the first question. I understand the 2 demand kind of drivers between LLMs and the core business are not correlated. But I think if I exclude the -- your AI revenue, it seems like the core business is slowing quite a bit. And so I'm curious if you could just help us understand what's happening there, excluding your AI revenue. Is the core NRR obviously is down. What are the challenges there going forward? And how do you sort of remediate that to get that core business back to stronger growth? Or Offer: Yes. Thank you, Arjun, for the question. First of all, I think this quarter numbers, you can see that the core business is not falling, it's still growing because you basically saw an example of a quarter when the big data deals didn't came, they slipped for another quarter and you still see a growth in the revenue. So we do see growth in the core business even without the data for LLM, but the data for LLM are very big bills and there are significant thing that in the regular business, we're selling a deal between $20,000, $30,000 at land and the expansion can be $50,000 to $60,000. Those data for LLM is significant. It's 7 figures still sometimes and then they behave very, very different and hard to predict and forecast as you can understand. And so I think -- I hope this will give you some visibility. I know maybe Maoz, our Chief Strategy Officer maybe you have anything on that topic as well on your mind? Maoz Lakovski: Yes, happy to help. And thanks for the question. We think Gerard and Rennes in very good traction. So we have 60% of the book of business, which the majority of it is still on non-AI under multiyear. So we're seeing good durability of the core local business. We need to work on the expansion [indiscernible] in order to increase NRR. We are now in the -- we are very optimistic about NNR going forward. We feel that some of the LLM onetime deals push have affected the NRR. But going forward, we are working hard to improve it, mostly focusing on the expansion. We have a great product portfolio from app intelligence, which is a very first coin order for us ad intelligence, the [indiscernible] intelligence that we are launching, and we're seeing good success with our clients. So overall, the core business of us is still growing, and we are very good in [indiscernible] run rates are solid, multiyear is their great client feedback, and we are laser focused on expanding it and [indiscernible] NRR. Arjun Bhatia: Okay. I understood. And then one for Ran. Can you -- just going back to the guidance range, I appreciate, and I think it's helpful that at least it's a wider range given some of the uncertainty around end customers and how lumpy it can be. But can you just touch on what you're expecting? What would have to materialize to hit the high end of the range versus the low end? Like what are the different scenarios that are contemplated in that wider guidance range? Ran Vered: Thanks for the question. So I think we need to land the big LLM deals. So probably this is what can drive the difference between the low end and the high end of the range. And because those deals are really big, 7 figures, Or also mentioned, and we see them in the pipeline, and we see also the engagement with the customers. I was actually when I joined, and I'm here talking with the people and see the pipeline. I really encourage by the pipeline and by the fact that we are delivering with these deals to the larger LLM. But again, I think it's mainly in terms of timing when they will end and what will be eventually the size of them. I think this is why the range is in the $10 million range. Operator: Our next question is from Ken Wang with Oppenheimer & Company. Unknown Analyst: I just wanted to check as far as the miss in the quarter, was that $4 million fully from the large AI LLM deals? And then how much of that is baked into the 1Q guide? Or Offer: Yes. So first of all, thank you for the question. So yes, the majority of the mix is because of those 2 deals that were very, very big and been in the pipeline for a long time. And we start in the hope to get them to the finish line. And looking now in the Q1 guidance, we're taking more cautious steps. And we said it's very hard to forecast them. One deal will probably come later in the year. And the other one was splitted into more small amounts and one of them dedicated. So we are confident that some of that will come in Q1, I think. I hope this will answer the question. Unknown Analyst: Got it. And so then when I think about the growth rate assuming some of it is in Q1 that kind of perhaps put your core business or your organic growth at high single digits. Is that the right way to think about it until you guys get the go-to-market motions and the product sorted out for '26? Or Offer: These big deals are taking a lot from our go-to-market as well, I think that even with -- when you have Salesforce salespeople and some of them know that there is those opportunity of very big deals A lot of efforts are going into those directions. So it's part of the organic growth and taking attention or other stuff for their big opportunity. What we did this year in order to be more disciplined around it, we built a dedicated team to go and be focused only on those opportunities to have a better forecast and execution and also try to leverage even more upside as we have only single-digit customer right now in this LLM auction, but there is probably much more customers who can approach and onboard. So I hope this dedicated team will give us better forecast and execution on that. Unknown Analyst: Okay. Fantastic. Operator: Our next question is from Scott Berg with Needham & Company. Unknown Analyst: Lucas Mecca on for Scott Berg. First, you guys made some strong sales investments heading into fiscal 2025. We understand some sales cycles that be ungated but in general, I guess, could you guys just talk about the productivity kind of throughout the year of the new investments? And then what type of additional sales investments does your fiscal 2026 guidance imply? Or Offer: Yes. First of all, thank you for the question, and I think it's a good question. So we were not very happy with the performance and the investment we did, we were hoping to get better yield from the investment that we did in the beginning of the year to try to accelerate growth. And we did see the yield of the sales getting better every quarter. But the good news that we will not need to do any investment going into this year. We took some steps to optimize the go-to-market motion. And once we saw that we're not getting the outcome we were looking for and reduce layers of management and remove some low performance and starting the year with a fully ramping, I would know more investment needed in order to drive the results we're looking into this year. Unknown Analyst: Got it. That's helpful. And then just one other question here, kind of surrounding the net revenue retention compression. -- would you say is that primarily driven by lapping the larger AI contracts from late 2024? Or just any other kind of underlying changes in gross retention or expansion trends that we should be thinking about? Or Offer: Yes, I think it's an excellent question. And the answer is yes, you're right. Because some of those big deals lapped into this year is impacting, of course, the NRR. But also if you think about last year and all these new data for LLM that is including sometimes onetime deals. They have not been reflected in the NRR because there was a onetime and NRR is on the carrying revenue. And this is why it looked like the NRR of the big accounts are dropping. But in reality, we had much more revenue because of the onetime last year. So we expect the NRR metrics to get better going forward. And also as more of those onetime trials data for LLM are maturing to ARR, of course, contribute and get better results over time. Operator: Our next question is from Patrick Walravens with Citizens Bank. Kincaid LaCorte: Great. This is Kincaid on for Patrick. Or I just wanted to know if you could give us a little breakdown of that 11% of revenue coming from AI solutions. What are the components that drive that as well as -- I understand that 2 of these LLM deals slipped from this quarter. Can you give us any info on how many did close this quarter? Or Offer: Yes. So the data for LLM deals, there was, I think, one, I need to look or two last quarter that was not as big as the one we expected that did close, that's much more smaller with new players. But overall, the AI revenue is a bucket that includes you offering, not only the data for LLM, you have the Gen AI model that we sell to brands that including their we have a chatbot partnership at the one in Manus that it's the revenue setting up the partnership and then there is like a usage-based component on top of that. So there's fewer channels inside this 11%, it's not only the data for LLMs. It's a few streams that are kind of new for us that are starting in the past 12 years because of the AI revolution. And we see those offerings and as tailwinds going into this year. Operator: Our next question is from Luke Horton with Northland Securities. Lucas John Horton: Just wanted to touch on some of the what you guys called commercial execution shortfalls. I guess, could you be a little bit more specific of this -- was this around the hiring ramp or pricing in the sales cycle or I guess, what kind of changes have you made to the go-to-market organization to improve these win rates and pipeline conversion in 2026? Or Offer: So in 2025, we increased our sellers all across the board, trying to accelerate the revenue growth. And there was a lot of noise adding a lot of people in short time and took a lot of long time to ramp them up. And we didn't see the yield we were hoping also on the enterprise side and the land and the expansion. So we had to optimize it and we get over the year. And I think as I said before, we -- going into this year, we have the right talent in place. I don't know, maybe, Maoz anything that you have to say around that as well. Maoz Lakovski: I think the key for us is that doubling down on growth opportunities. Or mentioned the team and the go-to-market investments we are making around AI, LLMs OEM, where we see a lot of growth potential. So we're doubling down really finding the go-to-market strategies. We are seeing increase in yield overall, but we're also aware of the market dynamics and uncertainty in the market. So we think we are well set for '26. We're confident in our ability to keep our guidance throughout the year. With same strong pipeline. We are optimistic about the pipeline, some large meaningful deals. We have the onetime we need to convert into the current deals and we are on it. So overall, we think we're in a good position. Lucas John Horton: Got it. And then lastly, just want to go back to the AI Studio as this is a pretty significant product for you guys. But I guess, could you give some clarity around the monetization of this if this is sort of seat-based or consumption-based or like premium tier pricing? Just any sort of information around that would be great. Or Offer: Moaz as you're in charge of pricing, you can take it. Maoz Lakovski: Yes. We're actually super excited about the AI studio. Reason being is that we see this product as a mean to get to many more users within the organization. It can help us cross the chasm and making the data insight much more available. So we are super bullish about this, and we're seeing great demand and initial traction. In terms of monetization, so at this point, we are baking some of it within the [indiscernible], but the model is twofold, it's data access and then data consumption, which means that potentially you need to have access to the specific data you want to add queries on. It could be a country, it could be a data set, but we align it to the customer needs. The second is the consumption. So we give some level of consumption within the package and then the clients can grow. We think it's a very strategic role for us, again, because we see us getting to many more users. With that, in terms of our AI strategy, worth mentioning also the Manus partnership, which we are extremely, extremely optimistic about. You see this is a huge opportunity for us to get to on typical users of Similarweb and monetize it. We're seeing a potential huge distribution into a local [indiscernible] time for us. And so between the AI studio, which is a mean to grow within our client base to the Manus example with unlocking distribution for noncore users. We are very happy that we are able to monetize and get to many more users. I hope it will help you understand. Or Offer: I would add on top of that, some of our big enterprise customers, they have unlimited users package. So we've never been about fee-based approach within about most of data access and consumption. And we hope that, for example, this AI studio in those enterprises that really have big amount of users, we can increase adoption because as we said, you can talk to the studio in any language. So you move the language barrier. You don't need to be expert on our platform and where every one of the dataset is signed. And -- so everybody can easily go ask business pain business question and get immediately the data then based on consumption. So it's very similar to concept pace for business outcome. So you have a question and you get the take for that. So we hope this will drive a good adoption and expense to this year. Lucas John Horton: Awesome. That was super helpful. Operator: [Operator Instructions] Our next question is from Adam Hotchkiss with Goldman Sachs. Adam Hotchkiss: Ran nice to meet you in this forum. I wanted to just dig in on the sales cycle comments or what is it specifically about the sales cycles that have maybe been elongated to the extent you can share? I guess I'm just trying to understand what I think needs to be done from your side to get those over the finish line. Or Offer: Yes. I think that there are some learned that we try to add many sales people in one time. So just taking the disruption of the managers and then start increasing the sales cycle. We're trying to build an outbound motion for enterprise that was very long since [indiscernible] much longer than what we used to. We are very inbound based business every year, we get more than 100 million people visiting our website and hundreds of thousands of people who register to try our solution every month, but it's a big volume. This is usually what's feeding the salespeople. And they used to a specific cell cycle and once we try to do more [indiscernible] enterprise, it was tougher and does not fit with the model that we used to. So -- and during the year, we shift our thing more to land and expand and decided to back off of this outdoor enterprise approach because most of the enterprises already been familiar or using as in the past. And this is much more efficient and much more profitable for us to lend through the inbound and then the expansion, the enterprise expansion player on the current book of business. So all of those together is kind of a little bit changed the sales cycle during last year, all those testing that we were trying to do acceleration. So it's a little bit hurt the sale cycle, and hurting the sales yield in a few quarters. But as we change and adopted, it's got better and better by the end of the year. Adam Hotchkiss: Okay. Great. And then I just want to touch on the I guess, the broader competitive landscape and customer budget landscape. I think there's a lot been made of the GEO/AIO market. And it feels like there's a lot of funding going into that space. It feels like incumbents are spending there. Is that where you're seeing most of customer retention in budgets go, given what's happening on the LLS M side? And I guess, number one, is that true? And number two, how do you feel you're positioned in that space? Or Offer: Yes. I think it's a great question and that we help and maybe also Maoz some thoughts driving strategy, but the GEO/AEO still there's no straight name for this market. Is a new market and of course, it's a red [indiscernible] there's a lot of small players there. I'm happy to say that we launched a really amazing offering in that space that is doing well. We've already been recognized by G2 it's one of the companies like Foster for software that met the market as a leader [indiscernible] the enterprise. It's a new motion. Some of the budgets go -- a lot of attention go there, for sure. I don't know if this market is big. I think it's still small and developing. I think what's more interesting is that basically a lot of attention go there because a lot of brands are losing traffic now because search is declining. So everybody is trying to understand what's going on. If it's going on to ChatGPT, if I need to invest there. But in reality, there's much bigger movement happening. Search is declining. So brands trying to close this gap by investing more on paid channels, then the paid goes up and then they need to bring some of the traffic that went to the ChatGPT. And I think that in this environment, you need a much more holistic solution to help you manage all channels. okay? Because one channel is going down, the AI chatbot a new channel going up and then you have the ad spend that is going out of control. And you need to control all of them as the CMO or the head of digital running a business is trying to win back your traffic. And I think Similarweb is the only solution right now that can give you full visibility and optimization and insights across all channels. And I think with that, our Gen AI offering is great. It's really good. But I will say that you more than only Gen AI solution, you need the ad intelligence solution, you need to [indiscernible] solution and in the benchmarking and competitive solution in all of them together, this is what Similarweb is offering. And I know Maozs maybe have any interesting [indiscernible] to say here. Maoz Lakovski: Yes. I'm fully aligned, and that's what we're hearing from the market. And I think the critical part in is we have the right to win. We are helping leaders to navigate between web and Gen AI, every CMO -- if on a CEO discussion reset e-commerce whatever business model. Everyone has this question, what should they be doing -- how should they be balancing between the traditional kind of web and the new Gen AI. So this is where we come in. So this is one thing that we are unique from any other player in this market, and we think we're going to win. Second, we are a data company. We have a meaningful data mode. Also when it comes to Gen AI visibility, and we are monetizing if we are selling it directly for our dedicated product, and it's picking up super nicely. And second, we are also feeding ecosystem. We also have an OEM play here, and we are bullish about this as well, and it's working very nicely for us. Last we have the clients. So we have the CMOs. We have [indiscernible] digital marketing, they stick with us. It seems like GEO/AEO is more than the traditional SCO. It gets more interest because these are spending much more of their time within these engines. And they are coming to us -- and honestly, there had of market education and for leadership we are playing in this game, and we are very optimistic on our ability to become a very meaningful player. And the G2 recent completion is just kind of another one that shows that we are in the right direction. Operator: This does conclude our question-and-answer session. I would like to turn the conference back over to Or for closing remarks. Or Offer: Before we conclude, I would like to highlight 4 key takeaways on Slide 19. First, 2025 was a build year with our data mode and position the company for the AI area. Second, we delivered solid growth. AI revenue grew 3x year-over-year multiyear ARR increased and we extend our track record of profitability and free cash flow. Third, our leadership in digital data become even more valuable as AI adoption accelerates. And fourth, 2026 is about disciplined execution and scaling what we build, and we have strong belief in the opportunity ahead. AI is a meaningful tailwind for data companies like us and as I like to say, we are just getting started. Thank you, everyone, on the call for your continued support. We look forward to speaking to you again over the coming weeks. Operator: Thank you. This does conclude our conference. You may disconnect at this time, and thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the OGE Energy Corp. 2025 fourth quarter earnings and business update call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Casey Strange, Investor Relations Senior Manager. Please go ahead. Thank you, Lisa, and good morning, everyone, and welcome to our call. With me today, I have Robert Sean Trauschke, our Chairman, President and CEO, and Charles B. Walworth, our CFO. In terms of the call today, we will first hear from Sean, followed by an explanation from Chuck of financial results. Casey Strange: And finally, as always, we will answer your questions. I would like to remind you that this conference is being webcast, and you may follow along at oge.com. In addition, the conference call and accompanying slides will be archived following the call on that same website. Before we begin the presentation, I would like to direct your attention to the safe harbor statement regarding forward-looking statements. This is an SEC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results, but this is our best estimate to date. I will now turn the call over to Sean for his opening remarks. Sean? Thank you, Casey. Robert Sean Trauschke: Good morning, everyone, and thank you for joining us today. It is certainly great to be with you. 2025 was another strong year, and a continuation of the momentum we are building and setting the foundation for a long runway of future growth with generation and transmission opportunities. This morning, we reported consolidated earnings of $2.32 per share for the year, including $2.47 per share at the electric company and a holding company loss of $0.15. This time last year, we talked about how we would deliver in 2025, and we did, including delivering earnings in the top half of guidance, filed for recovery of generation needs to meet growing demand, secured financing for long-term growth, leveraged the strong local economies to drive job growth and investment in our service area, were named an Oklahoma Top Workplace, and we were recognized by the Southeast Electric Exchange for our top-ranked safety performance. We remain committed to our North Star for reliable electricity, some of the lowest cost in the nation. We met our commitments and more, strengthened our financial position, and continued investing in reliability and growth while keeping affordability front and center for our customers, lengthening that runway for continued future growth. Since our last call, we executed a well-subscribed equity offering, filed for generation preapproval of the 300 megawatt Frontier Energy Storage Project, issued two RFPs, and a 2026 draft IRP. And as I look ahead for the remainder of 2026, we will advance our transmission strategy and finalize the opportunities from the SPP ITP, recognizing its critical role in reliability and its growing contribution to long-term investment opportunities, we will secure approval for the Frontier Energy Storage Project in both states, and we will file for generation preapproval in both jurisdictions following the results of the RFP we issued last month. We do plan to file a rate review midyear in Oklahoma, and we will evaluate the timing of an Arkansas rate review later in the year. Building on these strong financial results, we continue to invest in our future and strengthen our commitment to the communities we serve. In line with this momentum, tomorrow we will host a ribbon cutting for our new combustion turbines at Tinker Air Force Base. These new units showcase our ongoing investments and community partnerships to benefit all customers; in this case, provide vital support to our country's national defense. Over the last ten years, we have built and put into service approximately one gigawatt of generation. Tomorrow, we cut the first ribbon on the next 1.3 gigawatts of generation we will build and put into service before the end of the decade. Yesterday, we issued our draft 2026 IRP which outlines our long-term resource strategy. And we are finalizing a one gigawatt contract with one data center customer referenced as Customer X in the IRP. We will also file a large load tier, both of these by midyear. Across these initiatives, our priority remains protecting residential customers, and we have built explicit consumer protection measures into that framework. In addition, we continue to advance our transmission strategy and earlier this month, the SPP determined that several large transmission projects will be considered short-term reliability projects, meaning that OG&E was assigned a significant portion of the Seminole–Shreveport 765 kV line. After we work through the notice to construct process at SPP, we will update our investment timing and financing plans. We are discussing a number of exciting growth opportunities today, and I want to remind you that our sustainable business model's foundation is our low rates. Our relentless commitment to affordability translates to our rates the lowest in the states we operate, lower in our region, among the lowest rates in the country. And from a cost control perspective, our O&M per growth over the last decade is less than 1%. We remain committed to delivering reliable electricity to all those customers at low rates. And finally, before turning the call over to Chuck, I want to recognize our incredible employees whose dedication makes these results possible. Every day, they bring a relentless focus on efficiency and affordability, helping us deliver reliable service while keeping rates among the lowest in the nation for the communities we serve. Next week, OG&E will celebrate its 124th birthday. We are a company innovating for the future with a solid foundation built over time. With that, thank you. And, Chuck, I will turn the call over to you. Thank you, Sean, and thank you, Casey. Good morning, everyone, and thank you for joining us today. We have delivered another strong year in 2025, finishing Charles B. Walworth: at the upper end of our original guidance range, and we are entering 2026 with solid momentum. This morning, I will review our 2025 results, introduce our 2026 outlook, and walk through our long-term growth framework. Starting with full year results, consolidated net income for 2025 was approximately $471 million, or $2.32 per diluted share, compared to $442 million, or $2.19 in 2024, ending the year $0.05 higher than the midpoint is consistent with our message of delivering results in the top half of the guidance range. At the electric company, net income increased to $500 million, or $2.47 per share, up from $470 million, or $2.33 per share, driven by recovery of capital investments and strong load growth. At the holding company, the loss was $29 million, or $0.15 per share, slightly higher year over year due to increased interest expense, partially offset by a one-time legacy midstream benefit. Fourth quarter details are included in the appendix. Our service area continues to perform well. Customer growth was just under 1%, and weather-normalized load grew approximately 7%, reflecting strong local economies and the strength of our sustainable business model—low rates, reliable service, and communities that continue to attract investment. Turning to 2026, we are guiding to consolidated earnings of $2.43 per share, with a range of $2.38 to $2.48. The midpoint represents a 7% increase from the 2025 midpoint. We are also setting our long-term EPS growth target of 5% to 7% off of this higher starting point and continue to expect to deliver in the top half of the range in 2027 and 2028. Since becoming a pure-play electric company, we have consistently delivered at the high end of our guidance. Our track record of setting the bar higher and higher continues to compound into increased future earnings expectations. We reliably deliver results, and over the past ten years, we have achieved roughly 6% earnings per share compound annual growth and nearly 7% over the last five years. From a regulatory perspective, we plan to file a rate review in Oklahoma this summer with new rates in 2027. We are also evaluating a potential filing in Arkansas by year end. Looking at growth drivers, we expect customer count to increase about 1% and weather-normalized load to grow 4% to 6% in 2026. This builds on a strong five-year trend with total retail weather-normalized load up more than 24% since 2021. Turning to financing, we expect to issue approximately $300 million of debt at the electric utility this year, with no long-term debt issuance planned at the holding company. As a reminder, we issued equity last November to support the roughly $1 billion of incremental CapEx we added to our plan through 2030. This transaction, including the forward, satisfies our equity needs through 2030 under the current plan. Our balance sheet remains a key strength. We expect FFO to debt of approximately 17% through 2030. We are targeting a 60% to 70% dividend payout ratio, with a stable and growing dividend. Earnings per share growth is expected to grow faster than dividends to support this goal. As always, we will evaluate our plan each year in light of the company's growing investments. As we look ahead, 2026 includes several important catalysts. Growth in our customer base and policy changes at the Southwest Power Pool are driving increased capacity needs. In January, we issued two draft RFPs, one for bridge capacity between 2027 and 2032, and a second All-Source RFP for accredited capacity available for 2032. We expect bid selection in the third quarter followed by preapproval filings before year end. Supporting that process, we issued a draft IRP identifying approximately 1.9 gigawatts of capacity needs by 2031. About 800 megawatts of that increase is driven by SPP policy changes. This 1.9 gigawatt need is incremental to the 300 megawatts from the Frontier Energy Storage Project and we are seeking preapproval for in Oklahoma and Arkansas. On transmission, SPP has finalized its 2025 ITP portfolio. OG&E was directly assigned a significant portion of the Seminole to Shreveport 765 kV line. We were also allocated several additional transmission and substation projects. Next steps include developing refined project estimates and schedules for all of the 2025 ITP projects. In the second half of the year, we would expect to accept NTCs and add the projects to our investment plan. Taken together, we see a compelling set of long-duration investment opportunities incremental to our plan. We will be prudent by balancing affordability and execution, and we will update you on capital and financing as projects receive approvals. In closing, we remain confident in our financial plan. With disciplined execution and a clear investment roadmap, we are well positioned to deliver results in the top half of our 5% to 7% EPS growth range through 2028 with meaningful upside ahead. It is an exciting path forward, and we are proud to support the customers and communities we serve. With that, we will open the line for your questions. Operator: Thank you. At this time, if you would like to ask a question, please press 11 on your telephone. You will hear the automated message advising your hand is raised. If you would like to remove yourself from the queue, press 11 again. We also ask that you please wait for your name and company to be announced before proceeding with your question. Our first question today will be coming from the line of Whitney Mutalemwa of Wells Fargo. Your line is open. Whitney Mutalemwa: Good morning, team. This is Whitney Mutalemwa on for Shar. Hi. Good morning, Whitney. Thank you. Great quarter. So investors can see the investment plan, and you have been clear you are funding major projects such as Horseshoe Lake, but it is harder to translate that into a rate base trajectory with that more explicit disclosure and timing and recovery mechanics. What is the best way to think about rate base growth versus the investment plan? Is it fair to assume a relatively tight linkage, or are there meaningful timing recovery dynamics that make the conversion lumpy? Charles B. Walworth: Yes. So great question. So we do have a slide towards the end of our packet that has our investment plan laid out, the current plan, and we have a footnote on there that under that plan, that indicates rate base growth of about 9%. So obviously, you know, in our remarks today, we talked about a lot of opportunities that would be incremental to that. But the plan as laid out on that slide equates to 9%. Does that help? Whitney Mutalemwa: Yes. Yes. That totally makes sense. And given that backdrop, your fourth quarter materials and recent Oklahoma discussions have emphasized outsized load growth, and just a deeper large load opportunity set along with the 2026 outlook. What specifically has changed since the last update within the large load panel? Like, how much is contracted, committed versus still in the advanced pipeline stages? Robert Sean Trauschke: Yes. I do not think anything has changed. We still are in active negotiations with six to seven large load customers in various stages. What we did disclose today is the Customer X that has been identified in our IRP plans. We are finalizing those agreements, and we expect to have that filed with the commission along with the large load tariff by midyear. So in terms of what has changed, I think that is nearing the conclusion. Whitney Mutalemwa: Sounds good. Thank you. Robert Sean Trauschke: Thank you. Thank you. One moment for the next question. Operator: And our next question is coming from the line of Brian J. Russo of Jefferies. Your line is open. Brian J. Russo: Hi. Good morning. It is Brian Russo on for Julien. Hey. Good morning, Brian. Hey. Could you just talk about the, looks like moderating of weather-normalized load growth in 2026 of 4% to 6% versus the 7.2% in 2025. I was just wondering if you can maybe break down the key, you know, customer class drivers. I am sure the commercial/crypto class has something to do with it. Charles B. Walworth: Yes, Brian, you know, I think this is really indicative of what we talked about all along, in that these loads are not always, you know, super, super steady, and that there is some ebb and flow to that. So what I think I highlight in my remarks is that when you look over a little broader scale, you know, since 2021, we averaged, you know, about 5%. And, you know, going forward, that is kind of right what we are seeing this year. So, you know, in the grand scheme of things, I see us really, really quite in line with that. Again, you know, you think about it, really abnormally strong trend line relative to history. And then with the catalysts that we have going forward, clearly, that is a good positive sign going forward. Brian J. Russo: Okay. Good. So nothing structurally changed, and it is also excluding large data center customers. Charles B. Walworth: Yes. So definitely, as Sean indicated, much more certainty around Customer X as we prepare to finalize that. Brian J. Russo: Okay. Good. And could you comment on the disclosure, the IRP section of the 10-Ks regarding the Black Kettle energy storage capacity purchase agreement that was terminated due to some sort of event default? And I am just curious, not knowing the details, but does that kind of support, you know, the least cost, least risk scenario of more utility generation ownership in these two pending RFPs? Robert Sean Trauschke: I think it does, Brian. I think we have been a strong proponent of being the owner and the operator of these assets. We are good at it. And we see how they perform in extreme conditions, and we want the ball. And this situation here, I think, to your point, is exactly right. It just further validates that thesis. Okay. Great. And then just lastly, the disclosure on the $7.3 billion basic capital plan, it still Brian J. Russo: seems like you might evaluate capital prioritization, maybe pushing out some transmission and distribution spend, due to kind of create some room for some more generation capacity to manage rates and the whole affordability narrative. Is there any more detail you can provide there? Because you have not done that yet. Robert Sean Trauschke: Yes. I think we have tremendous flexibility in allocating capital. And we are certainly focused on the overall affordability metric because that is really what has been fueling this growth we are seeing in our service territory. So we are balancing all that. What Chuck was talking about, though, is as you look forward, we are going to be looking for additional generation. We are going to be working through this transmission line. When we get those finalized, we will layer those in at that point. So that is probably the data point or the time period where you have to look for, if we were to make any changes, what they would be. Brian J. Russo: Alright. Great. Thank you very much. Robert Sean Trauschke: Thanks, Brian. Operator: Thank you. And one moment for the next question. Next question is coming from the line of Aditya Gandhi of Wolfe Research. Your line is open. Aditya Gandhi: Good morning, Sean, Chuck, and Casey. Thank you for taking my questions. I just wanted to start on the 765 kV transmission line. I believe SPP came out with a $2.4 billion estimate for that particular line. Recognize you are still going through updating the cost estimates and timeline, but can you give us some initial sense of what OGE portion of that project would be relative to AEP? Charles B. Walworth: Yes, Aditya. Good morning. Thanks for the question. So I think, first of all, you laid it out exactly right. We are very early in the stages on that. The SPP just made that designation, which we wholeheartedly supported. So I think we have some work to do to get through those points. But as I mentioned in the remarks, it is that line, and there is some other associated work. So I think at this kind of preliminary stage, I see it as probably something that is on the order of 20% of our current capital plan. But, again, that is a preliminary kind of feel, and we will work with the SPP to fine-tune that and hope to get that buttoned up before the end of the year. Robert Sean Trauschke: Yes, Aditya, this is Sean. Just one other point. You know, the routing is still to be determined, and the direct routing of that line. So this will all get flushed out, and we will certainly disclose that later in the year. Understood. That is helpful. Thank you. And then I also wanted to touch on the data center contract that you are finalizing. Can you just remind us, for this one gigawatt, do you intend to meet Aditya Gandhi: those capacity needs through the RFP process that you are running right now as well as generation that is already in your plan? And then maybe can you just speak to some customer protections that you are building into that large load tariff framework? Charles B. Walworth: Yes, Aditya. Yes. So that contract, that customer, is worked into the IRP numbers that were released today. So we do intend to approach that holistically through the RFP process. In terms of customer protections, we have been very clear on this ever since Customer X has come up, in terms of customer protections that ensure that that large customer pays its fair share, has minimum terms, collateral requirements, all those types of things that you would expect. And we will be happy to share more details around that once that regulatory filing gets made. Aditya Gandhi: Great. Thank you for taking my questions. Operator: Thank you. And one moment for the next question. Our next question is coming from the line of Chris Hark of Mizuho. Your line is open. Chris Hark: Good morning, everybody. This is Chris on for Anthony. How are you? Good morning. Good morning. Morning. My question is pretty similar to the ones, but just want to get a little more insight on the customer class breakdown in that 4% to 6% number, and how much of that is being driven by Customer X and then also the retail class? Charles B. Walworth: So, Chris, we do not have a whole lot of detail broken down in our filing. But what I can tell you is that Customer X really does not come on this year. Right? So that is a little bit further out than this year. So that is not driving the 4% to 6%. Other, you know, the key areas—obviously we look at the residential—is definitely a bellwether class, and we see that as definitely steady as always. So, hopefully, that gives you a little bit of insight there. But Customer X is not in that 4% to 6% for this year. Chris Hark: Okay. Super helpful. And then the next question I have was just more about the election and with Hyatt's term ending this upcoming January next year, what are your thoughts on the turnover in the commission and the elections that are going on in your jurisdictions? Robert Sean Trauschke: Great question. So we certainly have a governor's race, an attorney general's race, and then we certainly have a Corporation Commissioner race. We have been involved and spoken to all the candidates. I think all the candidates for each one of those races would be constructive and we would be comfortable with, and we know them. And so I think essentially those races will be determined, I would expect, in the June primary, and we will probably have a good idea of who the governor and the attorney general and the Corporation Commissioner are going to be in June. Chris Hark: Thank you. That is it for me. Congrats on the year. Robert Sean Trauschke: Hey. Have a great day. Thank you. Chris Hark: You too. Bye. Operator: Thank you. As a reminder, if you would like to ask a question, please press 11 on your telephone. And one moment for the next question. Next question is coming from the line of Nicholas Campanella of Barclays. Your line is open. Michael Brown: This is Michael Brown on for Nicholas Campanella. So the question is, recently, iRunner announced a data center in Alva, Oklahoma. And we also noticed your draft IRP has 1.9 gigawatts of new needs by 2031. Can you confirm that this opportunity in Alva is in your service territory? And how are you framing what else is needed to get to ESAs with the counterparties in your territories, if it is in your territory? Charles B. Walworth: So we have had a lot of discussion since the last IRP about what large customers are in and not. And you recall we had one customer that was not in there, but just, again, trying to give folks flavor of the type of customers we have been having discussions with. So this update of the IRP does not have another customer similar to Customer X in it. Again, we are talking with other counterparties. But, again, just keeping with our prudent, conservative bent, we have not included any of those at this time. So, really, you are looking at that 1.9. Recall that last year, we were solving for 2030 capacity needs. And the way our IRP works is we have a five-year action plan, so we have essentially just shifted that out one year. And when you look at the impact of shifting it out one year, our load is up because of that, the Black Kettle resource that we talked about earlier—moving that out—that was in there before, and then just some kind of general odds and ends on the load forecast. That is what gets you to that number, as well as the SPP policy changes that were enacted this year; that was about 800 megawatts. So a pretty substantial change there too. Michael Brown: Okay. Thank you. Robert Sean Trauschke: My last question. You said you plan to have a DC deal by midway through this year. How are you thinking about current legislation impacting that? And what does this customer need, whether it is permitting or water permitting, to properly move forward with the FFA? Yes. Good question. So in terms of the first part of that, in terms of the legislation that seems to be popping up in every jurisdiction, we are certainly involved in that process, engaged in that dialogue, and we will stay focused on it to make sure that there is adequate protection for the existing customers. In terms of Customer X, what things they need to do to move forward, I think the gating item, quite frankly, is just finalizing our agreement. We are in pretty good shape. Actually, I just have one more. Michael Brown: Okay. With your rate base, Robert Sean Trauschke: I just have one more question, Patrick. I am sorry. Okay. With your base CAGR already at 9% and dilution at roughly 0.75%, and coupled with the upside CapEx, I am curious as to why your growth is better than 6.5%. Yes. I think good question. And so what we have tried to do is make sure that we lay out for you exactly what has been approved through the regulatory arenas with a financing assumption. And so that is the assumption—those are the assumptions—we put forward to you today. What we have highlighted is when we receive the final clarification and the total numbers around the ITP projects at the SPP, we will layer that in and tell you how we are going to finance it. When we receive approval for all of the generation that is coming out of these RFPs, we will show you what that is, the timeline, and how we are going to finance it and the earnings impact. So that is how we are doing that. We will layer these in, and, obviously, that will have an impact on earnings. Michael Brown: Okay. Thank you. I really appreciate that. Charles B. Walworth: Thank you. My question. Operator: Thank you. One moment for the next question. And the next question is coming from the line of Stephen D'Ambrisi of RBC Capital Markets. Your line is open. Stephen D'Ambrisi: Hey, Sean. Hey, Chuck. Thanks for taking my question. Robert Sean Trauschke: Hey, Steve. Good morning. Stephen D'Ambrisi: Good morning. I dialed in as Steve this time, so I did not get a Stephanie. Hi. I noticed that. We were not going to say anything. I figured I would let you know. Yes. So just following up on the same line of questions. Obviously, I understand that you guys are a very conservative management team, but I just want to look—you know, there are people in your service territory, it seems like, who are talking about having power secured. And just so, can you talk about what the timeline is, or what it looks like, when you will go to update the street on potential other customers other than Customer X, for example? Because it just feels like there is load out there that is substantial relative to your peak and that you may have to build for, and, you know, just want to try and understand how we have to feather that in over time. Robert Sean Trauschke: Yes. I mean, to put it in perspective, in our remarks, we said by the end of the decade, we will add 2.3 gigawatts, and then the IRP is calling for another 1.9. So it is pretty substantial. Stephen D'Ambrisi: I Robert Sean Trauschke: think what is going to happen is these large load customers, as they materialize and we have line of sight to the finish line, we are going to announce it, and just like we did with Customer X here to give you some timeline. But, you know, 1.9 gigawatts is a lot to have in by the 2031, 2032. Stephen D'Ambrisi: Yes. Stephen D'Ambrisi: Totally understand. Not saying there is not a lot, but it seems like there is even more. Stephen D'Ambrisi: Oh, I think, you know, and, you know, you have to draw the line somewhere, Steve. Robert Sean Trauschke: And we are out there all the time talking to different people. I rode the elevator this morning with somebody, and they were telling me about another opportunity. So they are out there, and we are working hard to secure them. Stephen D'Ambrisi: Understood. I appreciate it. Thanks, Sean. Robert Sean Trauschke: Thanks, Steve. See you. Chris Hark: Thank you. And that concludes today's Q&A session. I would like to Operator: turn the call back over to Robert Sean Trauschke. Please go ahead. Robert Sean Trauschke: Great. Thank you, and thank you everyone for joining us today, as well as your continued support. Take care, and have a wonderful day. Operator: This concludes today's programming. Thank you so much. You have a great day. You may now disconnect.