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Operator: Greetings, and welcome to the Titan Machinery Inc. fourth quarter fiscal 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, Jeff Sonnek of ICR. Thank you. You may begin. Jeff Sonnek: Thank you. Welcome to the Titan Machinery Inc. fourth quarter fiscal 2026 earnings conference call. On the call today from the company are Bryan J. Knutson, President and Chief Executive Officer, and Bo Larsen, Chief Financial Officer. By now, everyone should have access to the earnings release for the fiscal fourth quarter and full year ended 01/31/2026. If you have not received the release, it is available on the investor relations tab of Titan Machinery Inc.’s website at ir.titanmachinery.com. This call is being webcast, and a replay will be available on the company’s website as well. In addition, we are providing a presentation to accompany today’s prepared remarks, which can be found on Titan Machinery Inc.’s website at ir.titanmachinery.com. The presentation is directly below the webcast information in the middle of the page. We would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in today’s earnings release and presentation, and in the Risk Factors section and other of Titan Machinery Inc.’s reports filed with the SEC. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan Machinery Inc. assumes no obligation to update any forward-looking statements that may be made in today’s release or call. Please note that during today’s call, we may discuss non-GAAP financial measures including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater insight into Titan Machinery Inc.’s ongoing financial performance, particularly when comparing underlying results from period to period. We have included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures in today’s release. At the conclusion of our prepared remarks, we will open the call to take your questions. I will now turn the call over to the company’s President and CEO, Bryan J. Knutson. Please go ahead, Bryan. Bryan J. Knutson: Thank you, Jeff, and good morning to everyone on the call. I will start today with an update on our inventory optimization progress and operational focus areas, and then discuss the current environment across our segments before turning the call over to Bo for his financial review and comments on our fiscal 2027 modeling assumptions. Fiscal 2026 was a year where our team executed at a high level in a difficult environment. For the full fiscal year, we reduced total inventory more than $200 million, surpassing our $100 million target that we announced at the beginning of our fiscal year and our updated $150 million target we revised last quarter. Our inventory peaked in 2025 due to the heavy influx of equipment shipments as some supply chains normalized post-pandemic, and since that time, we have reduced total inventory by $625 million over this eighteen-month period. I am extremely proud of the disciplined work our team has done across all of our locations to make that happen in what continues to be a very challenging demand environment. This progress illustrates our intense focus on creating a more resilient enterprise and positions us well for strong results when market conditions improve. Importantly, the quality of our inventory has improved meaningfully. It is leaner, it is fresher, and it has a better mix of in-demand categories. But we are not done. We still have work to do across certain used equipment categories and some of our slower-moving seasonal new equipment categories. As we head into fiscal 2027, our focus shifts from inventory reduction toward product mix optimization as we look to continue to improve inventory turns through minimizing aged inventory and thus decreasing interest expense. Our customer care initiative remains central to our operating strategy and continues to demonstrate its value while at the bottom of the equipment cycle. Our parts and service businesses are currently generating over half of our gross profit dollars, providing critical stability in these tough times our industry is currently facing. Our customer care initiative keeps us closely engaged with our customers, allowing us to add value to their operations and positioning us well for when equipment demand eventually recovers. With our hard work and dedication to superior customer service, we expect stability in our parts and service business in fiscal 2027 despite another expected decline in equipment industry volume in North America. With that, I will turn to our segments. In domestic ag, the environment continues to be very challenging for our grower customers ahead of the upcoming planting season. Our OEM partners are calling this year the trough of the cycle, and the guidance we are providing today reflects that. Commodity prices remain well below breakeven for most growers, which continues to be the fundamental issue facing the industry. When you add in persistently high interest expense, increased input costs, and limited government support, we expect many growers to remain conservative in 2027 in terms of their equipment purchasing decisions. With respect to potential government support, seeing E15 passed into law is currently our customers’ biggest priority, followed by further adoption of biodiesel and sustainable aviation fuel, or SAF. Allowing E15 usage year-round would help alleviate the ongoing oversupply of corn and assist with energy independence. Furthermore, recent spikes in diesel prices highlight the need for increased production of domestic biodiesel. In construction, infrastructure and data center work continues to provide a solid baseline of activity, but residential demand remains softer. Many of our customers are cautiously optimistic as they look at their schedules for the year ahead. Despite the mixed outlook in the end markets we serve, we remain optimistic about the long-term fundamentals of this business, which is underpinned by ongoing housing shortages, infrastructure spending, and continued data center construction. In Australia, the market conditions have been similar to what we are seeing domestically but exacerbated by elevated input costs for diesel fuel and urea. However, after two years of historically low industry volumes, we are starting to see some more encouraging signs, and recent rainfall has helped improve soil conditions and farmer sentiment after an extended period of dry weather. Overall, our expectations are for modest industry volume growth in fiscal 2027. We continue to like our position in Australia. It is a major agricultural export market with strong fundamentals, and our dual brand strategy with Case IH and New Holland, which is now available in six of our fifteen rooftops, gives us more reach and more ways to serve our customers across our footprint. In Europe, we are pleased to have the majority of our German divestiture behind us, with some remaining wind-down activities carrying into the first quarter. As we head into the spring planting season in our Eastern European markets, we are cautiously optimistic that we will see modest improvement in industry volumes coming off of trough levels but expect them to remain well below historical averages in Romania and Bulgaria. The modest overall industry volume growth should partially offset an expected year-over-year decline given the normalization of our Romanian business, which had an exceptionally strong prior year driven by the EU subvention programs. In closing, I want to express my sincere appreciation to our entire team. We dramatically surpassed our inventory reduction goals and made meaningful improvements to our operations, and we did it while maintaining the exceptional customer service that differentiates us in the market. Our team’s focus and dedication throughout this year is what made our successes possible. We are executing on our initiatives, managing what we can control, and positioning the business to perform well as market conditions improve. With the actions we have taken thus far, we will emerge from this period a stronger company. I will now turn the call over to Bo for his financial review. Bo Larsen: Thanks, Bryan, and good morning, everyone. Starting with our consolidated results for the fiscal 2026 fourth quarter, total revenue was $641,800,000 compared to $759,900,000 in the prior-year period, reflecting a 14.6% decrease in same-store sales driven by weaker demand in our domestic ag, construction, and Europe segments, partially offset by growth in our Australia segment. Gross profit for the fourth quarter was $87,000,000 compared to $51,000,000 in the prior-year period, and gross profit margin was 13.5%, approximately double last year’s rate. The year-over-year improvement primarily reflects the lapsing of inventory impairments and other inventory reduction efforts in the fourth quarter of the prior year that significantly compressed equipment margins. Equipment margins in the fiscal 2026 fourth quarter continued to face pressure from softer retail demand and remaining aged inventory; however, margins have improved as inventory has returned toward healthier levels. This equipment margin improvement is expected to continue in fiscal 2027. Operating expenses were $95,700,000 for the fourth quarter of 2026, down slightly from the prior-year period. Our headcount and discretionary spending continue to be down year over year as a result of disciplined expense management. Floorplan and other interest expense was $9,600,000, representing a decrease of approximately 27% on a year-over-year basis and a decrease of 13% on a sequential basis. This progress reflects the significant reduction in interest-bearing inventory levels over the past year. In the fourth quarter, net loss was $36,200,000 with loss per diluted share of $1.59, which includes the recognition of a $0.78 non-cash valuation allowance that resulted in an increase in income tax expense. Importantly, I would note that this allowance was greater than our initial expectation, which called for a $0.35 to $0.45 headwind that was built into our adjusted EPS guidance on the third quarter call. Big picture, it is non-cash and does not impact our operating performance or our cash flows. However, it is an important variable influencing our reported results versus the expectations we set; hence, my emphasis to ensure the linkage is clear. Adjusted net loss, which excludes charges related to our German divestiture and related wind-down activities but includes recognition of the $17,800,000 non-cash valuation allowance I just mentioned, was $32,500,000, or a loss of $1.43 per diluted share. This compares to last year’s fourth quarter adjusted net loss of $44,900,000, or $1.98 per diluted share. To summarize, our underlying revenue and profitability was in line with what we had expected, as evidenced by looking at our pretax loss, which, in addition to being consistent with our expectations, has improved significantly versus the prior-year period. Now turning to a brief overview of our segment results for the fourth quarter. Our Domestic Agriculture segment realized sales of $406,700,000, reflecting a same-store sales decline of 22.8%, driven by continued softening in equipment demand as a result of weak grower profitability. Segment pretax loss improved to $9,900,000 compared to adjusted pretax loss of $56,300,000 in the fourth quarter of the prior year, reflecting the actions we have taken to accelerate inventory reductions and the resulting improvement that we have achieved over the past twelve months. In our Construction segment, same-store sales decreased 4.6% to $90,200,000, driven by lower equipment sales. Our inventory reduction initiatives have weighed on equipment margins in this segment as well. Adjusted pretax loss was $1,000,000 compared to a $1,100,000 loss in the fourth quarter of the prior year. In our Europe segment, sales increased 5.2% to $68,800,000, which included a $4,300,000 net benefit related to foreign currency fluctuations. On a constant currency basis, revenue was more or less flat year over year, reflecting the normalization of demand following the EU Subvention Fund-driven strength, which ended in the third quarter of this year. Pretax income for the segment was $1,800,000 compared to a pretax loss of $1,800,000 in the fourth quarter of the prior year. Excluding restructuring and impairment charges associated with the Germany divestiture, adjusted pretax income was $5,400,000 in this year’s fourth quarter. In our Australia segment, sales increased 16.7% to $76,100,000 compared to $65,300,000 in the fourth quarter last year, including a negligible foreign currency impact. Pretax income for the fourth quarter of 2026 was $2,500,000 compared to $2,300,000 last year. Now briefly summarizing our full-year fiscal 2026 results, total revenue was $2,400,000,000 for fiscal 2026 compared to $2,700,000,000 for fiscal 2025. Adjusted net loss for fiscal 2026 was $50,600,000, or a $2.22 loss per diluted share, which includes the non-cash valuation allowance but excludes the charges related to the Germany divestiture I discussed earlier. This compares to an adjusted prior-year net loss of $29,700,000, or a $1.31 loss per diluted share. Now on to our balance sheet and inventory position. We had cash of $28,000,000 and an adjusted debt to tangible net worth ratio of 1.7 times as of 01/31/2026, which remains well below our bank covenant of 3.5 times. For the full fiscal year, total equipment inventory decreased by $201,000,000 to $725,000,000. As Bryan described, this more than doubled our $100,000,000 target for the year. It is a meaningful accomplishment in this environment, and it positions us well heading into fiscal 2027. Importantly, as part of that inventory reduction, we saw significant improvement in the amount of aged equipment we have on our lots. Aged equipment, which we consider to be equipment that we have had longer than twelve months, peaked in fiscal 2026 and declined by approximately 45% to $174,000,000 in the second half of this fiscal year. This improvement in the health of our inventories has started to show up in higher equipment margins in the back half of the fiscal year, but we still have work to do on reducing the amount of aged equipment we have, and we are confident we will continue to make progress on that in fiscal 2027. With that, I will finish by sharing our initial outlook for fiscal 2027. Starting with our top-line modeling assumptions across our segments, for the Domestic Agriculture segment, we expect revenue to be down in the range of 15% to 20%, which is consistent with the depressed cash crop industry outlook we have discussed today. Looking ahead, we believe we are back in sync with broader industry dynamics following our aggressive inventory reduction activity over the last year and a half. Our Construction segment is expected to be in the range of flat to up 5%, which aligns to the more favorable industry fundamentals that are benefiting from infrastructure and other sector-specific tailwinds. Our Europe segment is expected to be down in the range of 20% to 25%. This decline reflects our exit from Germany, which contributed approximately $50,000,000 of revenue this past year, and reflects the normalization of sales in Romania following the strong performance of fiscal 2025. As a reminder, this segment grew 45% in fiscal 2026. Excluding this difficult comparison, we expect modest improvements in industry volumes off cyclical lows, but the Eastern European market remains challenged by the same broader ag cycle dynamics as our Domestic Agriculture business. For our Australia segment, we expect revenue to be up in the range of 10% to 15%. This growth includes activity from the acquisition we completed last fall and the modest improvement in industry volumes that Bryan previously mentioned. From a margin perspective, our fiscal 2027 assumptions consider consolidated full-year equipment margin to be approximately 8.4%, which compares to fiscal 2026’s full-year consolidated equipment margin of 7.3%. This margin assumption reflects improved inventory health but still factors in the need to finish driving down aged inventory, and it also reflects broader industry expectations that North America industry volumes will be down 15% to 20%, which implies the lowest level since the 1970s. Given that context, we are happy with how well we are positioned to manage through the trough and confident we will return to normalized equipment margin levels as industry conditions improve. Operating expense dollars are expected to decrease year over year, although we will continue to invest in our customer care strategy, which is supporting stability in our parts and service businesses, and overall operating expenses are expected to be approximately 17% of sales. Floorplan interest expense is expected to decline by approximately 25% following the significant inventory reduction that we achieved last year. In absolute terms, interest expense will continue to decline as we further reduce aged inventory throughout the year. Bringing it all together, we are introducing a fiscal 2027 modeling assumption range of an adjusted loss of $1.25 to $1.75, which compares to the $2.22 adjusted loss we realized in fiscal 2026. It is worth noting that given the U.S. tax valuation allowance that was booked this quarter, we will have a very low tax rate for fiscal 2027, with most of the tax expense and/or benefit being recognized in our international segments. We also thought it would be helpful to provide some specific below-the-line expectations in our press release to help bridge to our adjusted EPS outlook. Further, we have also added adjusted EBITDA to our outlook to help provide a clear view of the operating performance we are achieving today and as we look into the future as the cycle unfolds. So, we are also guiding to adjusted EBITDA in the range of $17,000,000 to $29,000,000, which compares to the $13,900,000 we generated in fiscal 2026. In summary, despite the expectation for historically low industry volumes for our Domestic Agriculture segment, we are positioned to benefit from the aggressive inventory reduction we have taken over the last couple of years. Thematically, this positions us to improve margins this fiscal year and begin building back our earnings power at an accelerated pace as the cycle eventually turns back in our favor. For the time being, we continue to set prudent expectations and look forward to demonstrating our execution in the quarters ahead. This concludes our prepared comments. Operator, we are now ready for the question-and-answer session of our call. Thank you. Operator: 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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment please while we poll for questions. Our first question comes from the line of Liam Burke with B. Riley Securities. Please proceed with your question. Liam Burke: Thank you. Good morning, Bryan. Good morning, Bo. Bryan J. Knutson: Morning. Liam Burke: We are looking—I mean, we were looking at a best case in the corn pricing of about $5. It is inching up there. It is improving directionally. Not at $5 yet, obviously. But is there any movement by the farmer community to start getting interested in loosening the purse strings? Or does it have to be at $5 and above where everybody gets comfortable on the equipment purchase? Bryan J. Knutson: Yes. There has definitely been some upside here in the last week or two in the market, so that has been positive to see. Like you said, for a lot of growers, we are still below breakeven at these levels. And then you just take some of the uncertainty as well. So, you know, possibly somewhere between another $0.50 and a buck on corn here, which, with certain fundamentals coming together, looks like there is a possibility for at this point. So that too looks more optimistic than even a month ago, so we will see where that tracks. And then just consistency as well, just at this point with the long-term fundamentals that are in place, the current supply and demand, and the oversupply we have of corn and soybeans, directionally they are looking at, you know, just a short-term spike does not give them a lot of confidence. But as things progress here, if the conflict continues on and we see increased stability there and, again, prices uptick further, that definitely will help confidence, and that is something that we are monitoring closely. You know, we have also been to D.C. quite a bit in the last year lobbying for our farmers and trying to do what we can for commodity prices. We will be there again next week. Friday, March 27 next week, there is a Celebration of Agriculture Day at the White House that we are looking forward to. And as we get near the end of the month here, there should be some stuff coming out with the RVOs, and we have been really pushing for E15, passing that into law and greater adoption, and all the benefits that could come with that for reducing prices at the pump as well as energy independence, and, again, helping alleviate some of the ongoing oversupply of corn. Liam Burke: Great. Thank you. And understanding that the timing of an upcycle is difficult to predict, but you are comfortable in some future upcycle that you are sized right to maximize the leverage in how the business is run? Obviously, you have been managing for the down cycle, but you are in a position to maximize the upside leverage? Bo Larsen: Yes, absolutely. I mean, as we stand here today, we are excited as we look forward. Just for a little bit of context in terms of the guidance for this year, North America industry volume down 15% to 20%—what does that really mean? Well, calendar year 2025, the year that just ended, industry volume on the major categories that help drive our business was already 10% lower than the trough in calendar years 2015–2016, and so this year, if you assume that down 15% to 20%, you are talking about industry volume 25% lower than the prior trough. So as we stand here as well positioned as we are, obviously, we want the P&L to reflect more, but we are extremely confident in terms of how quick that can turn around and really flexing our muscle on the upside as things improve even modestly in the right direction. So, sure, everything we have been working towards the last two years is not just about managing the downside, but it is about making sure that we are running things ready for when things do turn around. All of our efforts on customer care strategy, driving the parts and service business—how do we support customers well, how do we gain maximum share of wallet by delivering what they need—all of that stuff is coming along, and I can appreciate that it is not necessarily something that you or investors get to see every day. But we just get more and more confidence and more excitement about the team we have, the playbook that we have been executing, and how well positioned we are to really show our strength as ultimately, you know, growers get support in the right direction and they see improved profitability. Liam Burke: Great. Thank you. Operator: Thank you. Our next question comes from the line of Ted Jackson with Northland Securities. Please proceed with your question. Ted Jackson: Thanks very much. I have got a few. I am going to start with the bigger one, then some that are just more around the model. On the larger, you know, in terms of the guidance that you have set, I am curious with regards to what is baked into it rather than just the OEM guides itself. I mean, are you assuming that China comes in and honors its commitments to buy more beans as we roll through 2027? And is there anything baked into it with regards to E15 or the aviation fuel? That is my first question. Bryan J. Knutson: Yes. Thanks, Ted. Yes, so generally speaking, what we do have baked in is that China essentially honors the commitments that have been put out there, not materially any more or less than that. Certainly, if they did come to the table with more, that would help. And then nothing on E15, so certainly that would be a shot in the arm and upside to what we have guided. Ted Jackson: And then just another one kind of at a macro level. With the war we have with Iran, which is, you know, now we are in the several weeks of it, have you noticed any perceived shift in terms of sentiment within your territories with regards to that? I mean, you know, all I get is stuff out of the paper, and I live in a pretty left-leaning local paper environment, so most of what I get is pretty negative with regards to the farmer, but is the farmer feeling anything in terms of impact at this point with regards to higher fertilizer prices, diesel prices? I mean, we are not even in the planting season. I mean, has there been some kind of shift, some kind of additional concern? Just a little color there. Bryan J. Knutson: Yes, certainly a few moving pieces there, and even differences from our U.S. farmers to our Australian farmers. So just looking at some of the routes through the Strait of Hormuz there, and you look at that impacting fertilizer and fuel prices even more for our Australian customers, still able to get it, but certainly a delayed and elevated pricing. And then with similar impacts to Europe and then the U.S. there. So those are some additional increases to input costs that are already high. You look at over the years here, fertilizer has been the input that has generally gone up the most and has the most impact on their P&L. And so with that becoming harder to get here and fertilizer further is also a negative. But overall, actually, as the corn market and other commodities tick up here and kind of follow along with the price of crude, that has an opportunity to be a positive as that expands and maybe potentially here outpaces the increase in inputs, which is certainly a likely scenario. So there is definitely a number of things in play there, Ted, but a scenario where it actually is likely potentially more positive for our growers. Ted Jackson: Would you think it would be neutral and it may be more positive? But it sounds like it seems like in your view at worst, it is a net— Bryan J. Knutson: Yes. I think it depends how long it lingers on and what happens with the commodity markets there. It does start to spread a bit. So as corn goes to—if corn were to go to six, and then it lingered on further and potentially to seven, as an example, it starts to pull away from what the increase in fertilizer prices has been, especially for a lot of our growers here in the U.S. and the Midwest. They prebuy a good chunk of their fertilizer, so it could end up being more of a 2027 calendar impact for them on that. So, again, as weird as it sounds, there is some upside potential there depending on how this plays out for our growers. Ted Jackson: Okay. And then just a couple of model questions, and I will let other people take over. Bo, I was curious what the view was for CapEx for 2027 and then maybe a discussion about tax rate given all the kind of moving parts in there either at a percentage rate or something around a dollar. Bo Larsen: Yes. So first for CapEx, I mean, in this environment, as you would imagine, being prudent and pulling back. So excluding any investment in rental fleet, which kind of comes in and out, we are guiding to about $15,000,000 of CapEx, really just pulling back to prudent levels there a little bit on facility and some vehicles, for example, but smaller than I would say would be typical. From a tax rate perspective, there can certainly— I mean, as a general statement, the tax rate in the U.S. is expected to be near zero. There will be a little bit of noise there with some deferred, but essentially, the valuation allowance is largely wiping that out. And given the significance of the U.S. to the rest of it, it really drags the whole thing down near zero. So in the release, we have guided to a range of $0 to $1,000,000 of total tax expense. From an Australia perspective, no real noise there; you can think about their rate in that 30% range. And then from a Europe perspective, again, their blended rate in the high teens is what I would expect. Balancing all out, a lot of this stuff is netting down close to zero would be our expectation for the year. One more thing on that too, I guess, just to make it clear: the need for a valuation allowance is kind of an established standard that has been out there in terms of a three-year rolling loss. We went through the same thing in the last downturn, put on a valuation allowance, and a couple years later took it off. You know, the cyclicality of our business and especially from a dealer P&L perspective, some could certainly argue that this three-year rule is not necessarily accomplishing what it is trying to. And long story short, all I am trying to say is high degree of confidence that a couple years later, we are going to take that back off, and you are going to see a big positive, which, of course, we will call out as releasing the valuation allowance. Ted Jackson: Okay. Thanks for the answers. I will get out of line. Thank you. Operator: As a reminder, if anyone has any questions, you may press 1 on your telephone keypad to join the queue. Our next question comes from the line of Ted Jackson with Northland Securities. Please proceed with your question. Ted Jackson: Dang. I own you guys. Well, let us talk about some sports stuff. Now other questions for you, Bo, to turn the model. So again, depreciation and amortization, and then the impairment charges. Can you give some kind of color on what you see there rolling through in 2027? And then over on OpEx, when I think about OpEx, you are going to have OpEx down. You are going to have investments, though, and some other things. So I assume the down is on sales commissions given the volumes, but maybe talk a little bit about how, as you think about sales—typically, you kind of thought about your sales portion of your OpEx or your selling commission being about 25% of equipment gross margin, but does that kind of assumption still hold as we think about 2026? Or given the weak volumes, are you going to have to kind of make up a little bit to make sure those guys get a living? Those are my next two questions. Bo Larsen: Yes. So I will break those into pieces. You will have to remind me if I forget one. I will start on the commission side of things. Recently, our commission has been north of that 25% mark. In a healthy environment with normal margins, it is in that 25%. So I would say we are coming down closer to the 25%. We have been elevated above that but kind of normalizing here as our margins are coming up. So that is how I would think about that from a commission perspective. You know, just broadly on OpEx—and, again, this is not just something that changes in a month. We have been at this now over the last couple years as we have looked at where the industry has been going and what we have needed to do. Largely speaking, the rest of our OpEx is people, and it is our people that are helping support our customers. So we have managed headcount down prudently. But back to the question that kind of started all of this—are you guys positioned for when things turn around—and that is the balance that you have to strike. We have got a great team that supports our customers well across our entire footprint and all of our geographies, and just managing prudently down as much as we can but without overdoing it, that is kind of the balance we have struck. So that drives a lot of the decline in OpEx there. So from a 17% perspective, in absolute dollar terms, I feel good about the work we have done. The 17% is more reflective of the pullback we are expecting here in North America ag. Remind me where we started here—you had two others. Ted Jackson: Yes. I asked just about, kind of just picking in 2027, how to think about depreciation and amortization as we are driving through towards our EBITDA numbers. And then, you know, for the last several quarters, a lot of impairment charges rolling through. Are we going to continue to see that through 2027? Or is that going to dial back? Bo Larsen: Yes. Good question. So a good portion of the impairment charges were specifically related to the Germany divestiture and wind-down activities. There is a small amount of Germany activity left here this year. I do not expect it—it will be a negligible P&L impact. And then from other impairments, I would say expecting that to be a little bit lower as well, I mean, south of $2,000,000 in total is kind of the thought process there, just as you are looking at your normal impairment analysis based on where you are at from an industry perspective. So yes, I guess relief in that regard. And then—sorry, there was one other one here. What did you say before that? Ted Jackson: No, I just kind of asked—I had you, and it seems like it is my Q&A. I have just kind of decided I would ask what you thought depreciation, amortization might be. Bo Larsen: Yes. Depreciation and amortization has been kind of in the mid-thirties, $35,000,000-ish. Expecting it to come down slightly, really not changing drastically there. Ted Jackson: Okay. And then the impairment, just to make sure I understand, when I think about 2027 aggregate across the year, you see like a continued amount of small impairment charges of roughly $2,000,000 across the whole— Bo Larsen: Yes, and that is really fairly similar to what this year was ex-Germany activity as well, so not much there. Ted Jackson: Okay. I noticed I am the only guy getting Q&A out before and after the—right—prewriting my questions. So, hey, well, you know, one thing, just taking the opportunity for the broader audience and all of the analysts covering us—across our sales mix by geography: ag down 15% to 20%, CE flat to up 5%, Europe down 20% to 25%, Australia up 10% to 15%. Blended average, wise, midpoint of the guidance implies revenue down 14% to 15%. But I would say, as we have thought about it—and it is certainly not a perfect science quarter to quarter—I am thinking more Q1 down like 20%-ish and Q2, Q3, Q4 somewhere in the down 12%–13% range that gets you to the full year. In other words, Q1 comp down sharper, and just wanted to call that out so people work that into their expectations. If you think about just how the cadence of last year was, first half had about 47% of our revenue, whereas historically, it is about 45%, and that was just the theme of last year and kind of softening as we went through the year, so normalizing that a bit. Just wanted to put that out there. Bo Larsen: Hey, that does bring up one kind of just little tip and tiny question. You know, you typically do have a stronger fourth quarter. You did have one this year. I would assume most of it this year was less about farmers coming in flush and buying and more about Titan Machinery Inc. trying to push off in your efforts to take your working capital to where you want it to be. So, one, am I correct with that? And then, two, as I think about 2027, I mean, we are going to be at a point where I would imagine by the time we exit the year, recovery or not, your inventories are going to be aligned. The trough is well beyond a typical trough of a cycle. Do you see in the fourth quarter of this year—how are you going to have more of an impact with regards to some of the things with big, beautiful build that you would see a little bit more of a flush from the farmer in the fourth quarter 2027? So those are my two. It is kind of a little color maybe on 2026 and how you think about 2027 in the fourth quarter. Bryan J. Knutson: As you pointed out, Ted, in Q4—again, I just give tremendous compliments to our team and the discipline that we did. When we came out at the beginning of the year with our $100,000,000 inventory reduction target, that was an extremely lofty goal, and our team more than doubled that reduction. That was due to our efforts in, you know, really boots on the ground and creative marketing campaigns and pulling growers off the sidelines and getting rid of that excess inventory. So, great execution. And like you said, that was not just farmers coming in in Q4 and looking to purchase. And then as we— that does, again, position us tremendously well. Yes, I think you hear that confidence from us, how good we feel about where our business is positioned right now. We have got a little bit of cleanup yet to do in a select few categories and some certain seasonal new equipment categories. We will work through that here throughout this year, but that is really fine-tuning. Every dealer I have ever seen always has a mix of that in any economy. So we are just going beyond even what we normally would do. We are just getting into an extremely healthy state here. So we are positioned when this does uptick, and we have done many of the things internally—very stringent cost controls and expense reductions, as Bo pointed out. And we will stay lean here, and then, as it recovers, which at some point it will, as we talked about, the replacement demand just continues to grow here and just waiting for that uptick in profitability for our growers, as it depends on the commodity prices and, again, how that ties back to the supply and demand ratios. And then our cattle producers, livestock producers, are still sitting quite well, and we look forward to that continuing. The more years that they do well, the more they will start to spend, so there is certainly potential there. And then the fundamentals in construction—you know, there is a big data center that has been going on here for a while two hours south of our office, and an hour and a half here another one going up right in Fargo that is starting here, a $3,000,000,000 data center, and, again, throughout our Midwest footprint. And then just overall, some of the things with infrastructure and, at some point here, we have got to address the residential housing shortage, so that is also a good long-term fundamental for construction. So there are a lot of good fundamentals in play here. Again, we will see what happens with the commodity prices and with the RVOs here, especially in, potentially, as I mentioned, as soon as March here. E15 is a great opportunity for our country, and it is right there, and it would really help alleviate this oversupply. And if we address some fertilizer constraint and price issues, which, again, through further research and development and some other things could help with, then the table is really set. I mean, the American grower can raise a lot of corn if given the opportunity, and we can supply the world a lot of corn and beans and other commodities. And the way the equipment is advancing and how professional our growers are— the stage is set very well here. As we go into 2027, our company has never been positioned better. Bo Larsen: One more thing real quick just from a Q4 perspective. Q4 is a big presale quarter, and it was last year as well, so a lot of equipment that was being delivered was deals that were being discussed in the summer and early fall. So I would point to the same thing here. This summer and early fall will really set the stage for what the end of the year looks like. Obviously, there can be some incremental buying at end of the year, and there always is, but that is a big one. We set prudent expectations based on where the market is at today. Bryan mentioned several factors; we have talked about several factors today that can move it north of that. We have set expectations based on what has materialized thus far. But, as usual for every year here, as we really get into the summer and we see what that presale looks like, we work with OEMs to really see where the market is—that will set the stage more for what the back end of the year looks like. Ted Jackson: Okay. Thanks for everything. Bryan J. Knutson: Thanks. Ted Jackson: Thank you. Operator: And we have reached the end of the question-and-answer session. Therefore, I will now turn the call back over to management for closing remarks. Bryan J. Knutson: Again, I just want to thank our team for their buy-in, tremendous execution, and discipline to make the hard decisions and put forth all the effort they did to position us where we are today. And I thank everybody on the call for your participation and look forward to updating you next quarter on our results. Operator: Thank you. And this concludes today’s conference, and you may disconnect your line at this time. Thank you for your participation. Have a great day.
Operator: Hello, and welcome to the Darden Restaurants, Inc. Fiscal Year 2026 Third Quarter Earnings Call. Your lines have been placed on listen-only until the question-and-answer session. This conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Courtney Aquilla. Thank you. You may begin. Courtney Aquilla: Thank you, Kevin. Good morning, everyone, and thank you for participating on today's call. Joining me are Rick Cardenas, Darden Restaurants, Inc.'s President and CEO, and Rajesh Vennam, CFO. As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks are described in the company's press release which was distributed this morning and in its filings with the Securities and Exchange Commission. Supplemental materials containing information shared on today's call are available on the Financials tab in the Investors section of our website at darden.com. Today's discussion includes certain non-GAAP measurements, and reconciliations of these measurements are included in that presentation. Looking ahead, we plan to release fiscal 2026 fourth quarter earnings on Thursday, June 25, before the market opens, followed by a conference call. During today's call, all references to industry results refer to the Black Box Intelligence casual dining benchmark, excluding Darden Restaurants, Inc. During the fiscal third quarter, average same-restaurant sales for the industry decreased 1.2% and average same-restaurant guest count decreased 3%. Additionally, median same-restaurant sales for the industry increased 0.6% and median same-restaurant guest counts decreased 2.9%. This morning, Rick will share some brief remarks on the quarter and Raj will provide details on our third quarter financial performance and share our updated fiscal 2026 financial outlook. I will now turn the call over to Rick. Rick Cardenas: Thank you, Courtney. Good morning, everyone. We had a very strong quarter. We generated $3.3 billion of total sales, 5.9% higher than last year, driven by same-restaurant sales growth of 4.2%. We have been consistently outperforming industry same-restaurant sales and this quarter our gap widened as each of our four largest brands exceeded the industry by more than 400 basis points. All of our segments delivered positive same-restaurant sales as our restaurant teams continue to be brilliant with the basics, once again leading to impressive guest satisfaction scores. Our restaurant teams' ability to consistently deliver exceptional guest experiences is enabled by historically high team member and manager retention levels that we are seeing across our businesses. We began the quarter with very strong holiday sales and several of our brands generated record Valentine's Day sales, reinforcing that guests choose the brands they trust for these special occasions. We also opened 16 new restaurants during the quarter and we remain confident in our ability to deliver our planned openings for the fiscal year. Olive Garden delivered positive same-restaurant sales of 3.2% for the quarter, driven by strong operational execution, even with three fewer weeks of price-pointed promotions than last year. The restaurant teams are focused on ensuring every guest is offered a free refill on breadsticks and soup or salad. This led to new all-time high guest satisfaction scores for service, and matched their all-time high for overall guest satisfaction. In January, Olive Garden completed the rollout of the lighter portion section of their menu, adding seven more dishes under $15. This platform provides their guests with more choice by offering additional smaller portions of popular dishes at a lower price, and is offered in addition to Olive Garden's regular portion sizes. Since these are existing menu items, there is minimal operational complexity and the restaurant teams can execute at a high level. The lighter portion section of the menu is clearly resonating with our guests and their restaurant teams. In February, fan favorites returned with Four-Cheese Manicotti for a limited time starting at $12.99. Olive Garden also reintroduced two past favorites, Ravioli di Portobello and Braised Beef Tortelloni, meeting strong guest affinity for familiar, craveable dishes. Building on last year's successful reintroduction, Olive Garden recently launched Buy One Take One, and is extending the offer for one additional week versus last year. With the same starting-at price point of $14.99, guests can choose one entree for their dine-in experience and then they take a second entree home. To give guests even more reasons to enjoy it, this year's offer features a new Rigatoni alla Vodka entree for a limited time. Olive Garden is supporting Buy One Take One with increased media. At LongHorn Steakhouse, strict adherence to their strategy rooted in quality, simplicity, and culture continues to drive their momentum as they delivered same-restaurant sales growth of 7.2%. The LongHorn team is deeply committed to ensuring every item they serve meets their high quality standards. Already this year, they have recertified every manager on their culinary standards and during the quarter, their directors of operations completed hands-on culinary training in order to expertly assess and coach the behaviors that drive consistent execution. LongHorn people bring the brand to life in their restaurants, and their culture remains a clear differentiator in earning strong team member loyalty, which in turn helps drive guest loyalty. During the quarter, LongHorn was recognized as one of the Best Places to Work by Glassdoor. This award is particularly meaningful as winners are determined solely based on the feedback provided by team members. LongHorn also celebrated five new Grill Master Legends during the quarter. This program is a great example of the intersection of quality and culture, celebrating team members who have each grilled more than 1,000,000 steaks over the course of their career, a milestone that typically takes more than 20 years to reach. Same-restaurant sales for the fine dining segment grew 2.1% for the quarter. All three brands in this segment delivered positive same-restaurant sales, driven by strong private dining sales growth at The Capital Grille and Eddie V’s, and the continued success of the three-course fixed price menu at Ruth's Chris Steak House. Within our other business segment, same-restaurant sales grew 3.9% during the quarter, driven by very strong performance at Yard House and positive same-restaurant sales at Cheddar's Scratch Kitchen and Seasons 52. The Yard House team has done a great job of leveraging their competitive advantage of a socially energized bar and distinctive culinary offerings with broad appeal, to drive strong demand for Yard House as a social gathering space. During the quarter, more than half their restaurants set new daily sales records on Valentine's Day. At Cheddar's, the team remains focused on strengthening their competitive advantages of wow price and speed. During the quarter, they maintained their number-one ranking for affordability among major casual dining brands within Technomic's industry tracking tool. I am proud of our performance this quarter and confident in our ability to build on our sales momentum. We remain focused on executing our proven strategy, enabling us to grow sales, increase market share, and make meaningful investments in our business while returning capital to shareholders. We also continue to work in our pursuit of our shared purpose to nourish and delight everyone we serve. One of the ways we do this for our team members and their families is through our NexCore Scholarship Program. Next month, the Darden Foundation will award more than 90 post-secondary education scholarships worth $3,000 each to the children of Darden team members. This is the fourth year of the program and over that time, we have awarded more than $1,000,000 worth of scholarships, helping them reach their educational goals. Finally, I want to thank our team members for their continued hard work and dedication to creating memorable experiences for our guests every day. On behalf of our leadership team and the Board of Directors, thank you for everything you do. I will now turn it over to Raj. Rajesh Vennam: Thank you, Rick, and good morning, everyone. As Rick mentioned, in the third quarter, we generated $3.3 billion of total sales, 5.9% higher than last year driven by same-restaurant sales growth of 4.2% and the addition of 31 net new restaurants. Our same-restaurant sales exceeded the industry benchmark by 540 basis points during the quarter. Our sales momentum was strong throughout the quarter as we further expanded our positive gap to the industry. Winter weather negatively impacted same-restaurant sales by approximately 100 basis points for the quarter, with more than 40% of our restaurants having to close temporarily in January during winter storm Turn. Underlying strength, sales adjusted for weather, were greater than 5%, a strong performance in what is traditionally a high-volume quarter. Overall, our teams did a great job managing the business through the volatility created by weather. Third quarter earnings were in line with our expectations, delivering mid-single-digit earnings per share growth. Adjusted diluted net earnings per share from continuing operations of $2.95 were 5.4% higher than last year. We generated $579 million of adjusted EBITDA and returned $300 million to our shareholders this quarter by paying $173 million in dividends and repurchasing $127 million in shares. Now looking at our adjusted margin analysis compared to last year, food and beverage expenses were 50 basis points higher, primarily due to elevated beef costs, driving total commodities inflation of approximately 5% for the quarter. Restaurant labor was 20 basis points lower, driven by productivity improvement, as pricing was in line with total labor inflation of 3.3%. Marketing expenses were 10 basis points higher, consistent with our expectations due to incremental marketing activity. Restaurant expenses were 10 basis points lower due to sales leverage. This resulted in restaurant-level EBITDA of 21.0%, 30 basis points lower than last year, as our pricing was 40 basis points below inflation. Adjusted G&A expenses were flat to last year. Leverage from sales growth was offset by 20 basis points of unfavorable mark-to-market expenses on our deferred compensation. Due to the way we hedge mark-to-market expense, this unfavorability is fully offset in taxes. As a result, our adjusted effective tax rate of 12.1% was 130 basis points lower than last year. We generated $341 million in adjusted earnings from continuing operations, which was 10.2% of sales. Looking at our segments, all segments grew sales and segment profit dollars for the quarter driven by positive same-restaurant sales. As Rick mentioned, we continue to make meaningful investments in the business, such as the lighter portion section of the Olive Garden menu. This, along with our measured approach in reacting to elevated beef costs, resulted in headwinds to segment profit margin for the quarter relative to last year. Total sales for Olive Garden increased by 4.7%, driven by strong same-restaurant sales growth as well as the addition of 17 net new restaurants. The sales momentum continued from prior quarters with same-restaurant sales that outperformed the industry benchmark by 440 basis points. Olive Garden delivered a strong segment profit margin of 23.0% for the quarter, which was only 10 basis points below last year. This includes approximately 40 basis points of margin investment related to the addition of the lighter portion section of the menu and the impact of delivery fees. At LongHorn, total sales increased 11.2%, driven by same-restaurant sales growth of 7.2% and the addition of 22 net new restaurants. A sustained sales and traffic outperformance resulted in same-restaurant sales exceeding the industry benchmark by 840 basis points and same-restaurant traffic exceeding by 640 basis points. The LongHorn team remains focused on their strategy, driving strong results and delivering segment profit margin of 18.6%, despite elevated beef costs. Total sales in the fine dining segment increased 4.3%, driven by positive same-restaurant sales of 2.1% and the addition of two net new restaurants. The segment profit margin of 22.0% was 50 basis points lower than last year. The other business segment sales increased 3.2%, with positive same-restaurant sales of 3.9%, partially offset by the permanent closure of Bahama Breeze restaurants. Segment profit margin of 15.6% was flat to last year. Turning to our financial outlook for fiscal 2026, we have updated our guidance to reflect year-to-date results and expectations for the fourth quarter. We now expect total sales growth for the year of approximately 9.5%, same-restaurant sales growth of approximately 4.5%, approximately 70 new restaurant openings, commodities inflation of approximately 4%, an effective tax rate of approximately 12.5%, and adjusted diluted net earnings per share of $10.57 to $10.67, including approximately $0.25 related to the addition of a fifty-third week. For the fourth quarter specifically, our annual outlook implies total sales growth of 13% to 14.5%, which includes the extra fiscal week; same-restaurant sales growth of 3.5% to 5% incorporates the strong trends we have seen through the first three weeks of March; and we expect adjusted diluted net earnings per share between $3.59 and $3.69. As previously announced, we have completed the exploration of strategic alternatives for the Bahama Breeze brand and determined that 14 locations will permanently close and the remaining 14 will be converted to other Darden Restaurants, Inc. brands over the next 12 to 18 months. We believe the commercial locations are great sites that will benefit several of the brands in our portfolio. Our team members remain a priority throughout this process. A majority of team members, including more than 70% of managers who are impacted by the permanent closures, have already been placed in new roles within the Darden Restaurants, Inc. portfolio. Additionally, we intend to keep the restaurant teams from the conversion locations with the new brand or other Darden Restaurants, Inc. brands. We do not expect these actions to have a material impact on our financial results. Now looking forward to fiscal 2027, I would like to provide our thoughts on a few items. First, we expect to open between 75 and 80 new restaurants, in addition to converting 14 Bahama Breeze locations to other Darden Restaurants, Inc. brands. Next, we expect to spend approximately $850 million of capital on the following: approximately $475 million for new restaurants; approximately $25 million for the 14 Bahama Breeze conversions; and approximately $350 million related to ongoing restaurant maintenance, refresh, and technology. Finally, we anticipate an effective tax rate of approximately 13.5% for fiscal 2027 and total interest expense of approximately $200 million. In closing, I want to commend our teams for their efforts in serving our guests. Their dedication is reflected in the strong financial results we deliver and our continued outperformance to the industry. We remain confident in our ability to grow sales, manage costs, and deliver value to our guests and shareholders. We will now open for questions. Operator: Thank you. We will now be conducting a question-and-answer session. Our first question today is coming from Brian Bittner from Oppenheimer. Your line is now live. Brian Bittner: Thank you. Good morning. Just as it relates to your same-store sales guidance, the implied outlook for the fourth quarter is that 3.5% to 5% range, which is very impressive. And that is happening despite much tougher comparisons, I think, of nearly 400 basis points in the fourth quarter. I think investors, in general, have been pretty worried about this multi-quarter stretch of tougher comparisons upcoming. So can you help us understand what you believe is driving the ability to lap these so far at least with such ease, particularly at Olive Garden? Rajesh Vennam: Good morning, Brian. Let me start. As we look at guidance for next year, people are looking at this quarter-to-quarter, tougher comparisons versus last year. But the way we think about it is what are drivers of the business, and how do we continue to build growth over time through the initiatives we have. I think we have shown that over time, we achieve what we commit to. We have been able to show that we can grow. And so as we look specifically with respect to Olive Garden, last year you said it is a tougher compare. But if you think about the drivers of growth last year, they were primarily two. One was Buy One Take One returning for the first time since COVID, and second was the first-party delivery. Well, those two are still in place today. And we are extending our Buy One Take One by an additional week, and Rick mentioned we are also supporting that with additional media. So we build a plan and we build an estimate based on the initiatives we have in place, taking into consideration the macro factor. And I think we feel good about what we are guiding here. And I do not know if you want to add. Brian Bittner: Thanks for that, Raj. And just my quick follow-up is related to the relationship of pricing and inflation. Can you talk about that as we are moving forward into fourth quarter and then into 2027? I know you are not giving exact guidance for next year yet, but you had some pretty meaningful gaps in that dynamic throughout this year, which seem to be narrowing now. So maybe you can just put some color on that for us. Rajesh Vennam: Yes, Brian. Look, I think we have had a pretty big underpricing of inflation through the first three quarters. As we get to Q4, we expect our pricing to catch up to inflation. We expect overall inflation to be in the mid-3s and our pricing to be in the mid-3s. And if you look at our implied guide for Q4, you can see the power of that. When we start getting pricing close to inflation, you see the margins grow meaningfully, and that is what you are seeing in the implied guidance for the fourth quarter. We will share more about next year, but I think the way to think about it is we have given ourselves a lot of flexibility by underpricing inflation over several years. And we feel like we have more power than anybody else in terms of being able to price to cover inflation. It is more of how we choose to run the business, and we have always been focused on long term. To the extent we are achieving our long-term framework of 10% to 15% TSR by not having to price as much, then we do that. But I think you will hear more in the June call. Our framework calls for 10% to 15%, and that is what we aim to deliver. Operator: Thank you. Next question is coming from David Palmer from Evercore ISI. Your line is now live. David Palmer: Thanks. Quick question and a follow-up. How would you generally explain the same-store sales growth gap between LongHorn and Olive Garden? Is that really simply about the energy around protein and perhaps a little bit of the underpricing of beef costs lately? Or do you think there is something else that would explain the gap that we see between those two brands in terms of comps? Rick Cardenas: Yes, David. I will start by saying LongHorn has been on a very long path to continue to improve their business to make sure that the guests get a great quality product every day. You heard that in some of the prepared remarks. They have also significantly underpriced beef costs versus the grocery store over time, so the guests are getting an amazing value when they go to LongHorn to eat. Going back to the quality, they have done an amazing job in cooking their steaks. Guests want to come to a restaurant, and if you cannot cook a great steak, why are you open? And LongHorn cooks a great steak very close to 100% of the time, and when they do not, they take care of the guest. The gap between Olive Garden and LongHorn is going to fluctuate. This quarter, LongHorn had to get a little bit more pricing than Olive Garden did. They had a little bit more traffic growth than Olive Garden did. I am not sure they were impacted quite as much by the weather as Olive Garden was. As you think about all of those things, we do not worry about one brand outperforming another brand. We have a portfolio of great brands. There are going to be quarters that one brand outperforms another one, just like we generally outperform the industry. We are very pleased with both of our brands, both Olive Garden and LongHorn, in the performance they have had. I think those can explain some of the big differences. And if Raj wants to add anything else, Rajesh Vennam: The only thing I will add is, as Rick mentioned, we also manage brand-specific strategies. Some of the things we do are depending on how we look at our performance across the portfolio. There were three fewer weeks of price-point promotion at Olive Garden, and that is a decision we made because of how strong we felt the quarter was going to be. That alone is probably about 100 basis points impact to Olive Garden's comps. David Palmer: Right. That is helpful. Do you see the gap between those two brands growing? Or you just called out a reason why it might narrow, but we see the comparisons getting tougher for Olive Garden. So I know that there is going to be concern that that growth gap will widen against the tougher comparisons. Do you see that gap widening or perhaps narrowing off of some of those artificial hurts that happened in the last quarter? And I will pass it on. Rick Cardenas: Well, David, again, we are not as concerned with the gap widening or narrowing in our brands as long as the brands continue to grow. The important gap widening for us is Olive Garden's gap to the industry, and Olive Garden's gap to the industry widened in our third quarter. LongHorn's gap widened even more. In the long run, though, the law of large numbers suggests Olive Garden and LongHorn will probably converge over time. I cannot say it is going to happen in Q4. I cannot say it is going to happen next year. Over time, as long as we are not doing anything significantly different in promotional cadence or other things, you would expect those gaps to narrow a little bit. Maybe LongHorn will be above Olive Garden for a while. We just cannot tell you exactly when that will converge. Operator: Thank you. Next question today is coming from Lauren Silberman from Deutsche Bank. Your line is now live. Lauren Silberman: Thanks a lot. Congrats on the quarter. I am going to start with the increasing gas prices. It sounds like you really have not seen much of an impact, given the quarter-to-date strength. But any thoughts on whether there could be a delayed reaction from consumers? And any color on what you have seen historically with high gas prices and how that has impacted different brands? Rick Cardenas: Yes, Lauren. As quite a few of you have written, the data does not show a really strong correlation between gas prices and restaurant spending. Historically, higher gas prices have had more of an impact on durable goods and less of an impact on services. I have been through a number of these cycles. When there is a sudden and significant price increase in gas, there can be a brief pullback, but that is usually a few weeks. If you recall, the sudden increase in gas prices was a couple of weeks ago. We still had a pretty darn good quarter. The biggest driver we see in traffic for restaurants is GDP. If gas prices remain high for a long period of time and make a big impact to GDP, there may be some softness. In general, we are not too worried about gas prices and we will be able to react however we need to if they stay really high for a while. Lauren Silberman: Great. Thank you for that. And just a follow-up on the Q4 guide. The 3.5% to 5% is fairly wide. Any color on what you are embedding through the rest of the quarter? I know there are a lot of moving pieces. Just trying to understand high end versus low end versus current trend. Thank you. Rajesh Vennam: Yes, Lauren. We are trying to embed that there is still some uncertainty, and the range is there to capture that level of uncertainty. We feel like we are in a good place quarter-to-date, and that is taken into consideration. We are also taking into consideration the environment out there and making sure that we do not overpromise. We are being thoughtful and taking into consideration all the factors that are out there. Operator: Thank you. Next question is coming from Christine Cho from Goldman Sachs. Your line is now live. Christine Cho: Hi, thank you so much. I would like to discuss beef prices, particularly as we look ahead to FY2027. I think last call you mentioned you are starting to see some green shoots, but it seems spot prices are still trending upwards and news of the strike also seems to be an incremental headwind. Could you share your directional thoughts on beef and your locked-in rates for the next few quarters ahead? Thank you. Rajesh Vennam: Hey, Christine. Let me start by saying as far as fiscal 2027, we want to wait till June to provide more specifics. For Q4, we have 80% to 85% fixed-price coverage. This is really good coverage relative to the recent past. We have not been able to cover that much in the last several years, so that is a good thing. We are starting to see some willingness from suppliers to contract further, so we have started to lock in some things for fiscal 2027, probably well ahead of where we would have been a year ago or the last few years with respect to the next year. I want to wait till June to really share more specifics. Regarding price, there are a lot of dynamics happening on the supply side. We are not expecting things to get significantly better on the supply side. There is still double-digit demand destruction that we are seeing even in February in retail. Ultimately, where it lands will depend on what happens with demand as prices go up. Christine Cho: Thank you so much. I would also like to circle back on the lighter portion menu rollout at Olive Garden. Any color on how the incidence rates trended since the launch? And is the mix impact tracking in line with your expectations? Also, any new learnings on the guests that are choosing these items? Does the uptake appear primarily value-driven or more health surge/GLP-1 motivated? Thank you. Rick Cardenas: Hey, Christine. We finished the launch in January, with the rest of divisions going live, and those divisions are seeing the same trends as the divisions that we launched earlier. The good news is we are seeing increased frequency in the guests that are ordering these lighter portions. We are seeing huge value scores and huge scores for portion size. It is a combination of many things. We know that the Olive Garden menu has abundant portions, and abundant means different things to different people. When you get as much soup or salad as you want and as many breadsticks as you want, a lighter portion may be all you are looking for. Whether it is GLP-1 related or not, I do not think it is just GLP-1s. I think a lot of people want smaller portions if you get all these other things. As I said, portion size ratings have gone up significantly and value ratings have gone up significantly for those items. We have seen increased frequency in the guests that are ordering it. It is a significant increase in frequency. A lot of the preference is happening at the weekend lunch when we do not have a lunch menu, so there is a good reason for this lighter portion menu. Finally, the mix impact is about what we thought it would be. Raj mentioned what the margin impact of the mix was, but the mix impact is about where we thought when we first launched the menu. Operator: Thank you. Next question today is coming from Chris Carroll from KeyBanc Capital Markets. Your line is now live. Chris Carroll: Hi, good morning. So how should we think about marketing expense now in 4Q in the context of the updated guidance you provided this morning? I presume you will wait to provide any detail on marketing expense for fiscal 2027 in June. Any thoughts on how you are thinking about marketing at a higher level here in a potentially more volatile macro backdrop would be helpful. Rajesh Vennam: Yes, Chris. We have been very clear throughout the year that we expect marketing to be within 10 basis points as a percent of sales versus last year. That is how we are looking at it because one of the things we had this year that we mentioned along the calls was we had an RFP for media-wide that translated into meaningful cost saves, actually north of 10 basis points as a percent of sales. That is helping us increase marketing activity. Even in quarters where you do not see growth as a percent of sales, we are actually buying more because we had those savings to help. Chris Carroll: Okay. Got it. Thank you. And then to give Olive Garden a little bit of a break here and change directions, can you comment on the improvement that you saw in the fine dining segment? How are you thinking about the segment going forward? How much of a benefit to the comp in the quarter was from the strong Valentine's Day that you mentioned? Thanks. Rick Cardenas: Yes, Chris. As we mentioned, fine dining— all three fine dining brands were positive same-restaurant sales in the quarter. It was not just driven by Valentine's Day. I do not think that would be a meaningful driver—maybe tens of basis points for the whole quarter for Valentine's Day. We had really good private dining, as we mentioned, for The Capital Grille and Eddie V’s. The three-course price fixe menu for Ruth's Chris is really resonating. We ran it for, I think, five or six weeks this quarter, and it is resonating with guests. We are seeing guests that were lapsed to Ruth's Chris come back and we are seeing guests that have ordered that come back. We think this is a good platform for them. We are pleased that all the brands in fine dining were positive this quarter. It has been a little bit of time since that has happened. We cannot tell you what we think going forward, but everything we have is contemplated in our guide, and our guide is a strong guide. I would think that fine dining would be doing okay in the fourth quarter. Operator: Thank you. Our next question today is coming from Sara Senatore from Bank of America. Your line is now live. Sara Senatore: Quick housekeeping. I think I missed it. Can you run through the price and mix that were in the comp and maybe give a little bit of color? I think you mentioned LongHorn had more price than Olive Garden, but how did the brands compare to the average? Rajesh Vennam: Yes, Sara. At the Darden Restaurants, Inc. level, our comps were 4.2%. Our check growth was 3.5%. Pricing was basically 3.4%, so 10 basis points of positive mix. Looking at Olive Garden, their pricing was 2.8%, but they also had catering help. Catering grew by about 130 basis points, which we do not count as traffic, but for all practical purposes, that is increasing traffic. If you take that into consideration, their traffic was up basically 100 basis points. They had some investment, like we talked about, the investment in lighter portions impacted the check by roughly 60 basis points. Uber fees helped a little bit with about 50. The way we look at it is Olive Garden's comps—while the traffic we print might be negative 0.4%—when you add back the weather and the catering, basically a positive 2% comp on traffic. For LongHorn, the same-restaurant sales of 7.2% included traffic of 3.3% and the check growth of 3.9%. Pricing was 4.4%, so they had a negative mix of 50 basis points. Sara Senatore: Okay. Thank you. That is very helpful. In terms of the decision to run fewer weeks of price-pointed promotions, as you said, maybe 100 basis points, but then this quarter running an extra week of the Buy One Take One and supporting it with more marketing—presumably, all those things were planned well in advance. I just wanted to confirm that because I was not sure if the decision to go from fewer weeks last quarter to one more week this quarter indicated something about the promotional intensity or what the results were versus your expectation. Just trying to reconcile those two decisions or maybe just tougher compares or something else entirely. Curious about that. Rick Cardenas: Yes, Sara. As big as Olive Garden is, we cannot move on a big dime. We had planned both of those things quite a while ago. We had planned running fewer price-pointed weeks in Q3 and planned on adding a week of Buy One Take One in Q4 well early in this fiscal year, maybe even before the fiscal year started. The reason that we moved the three weeks out—we eliminated a promotion in the third quarter—was because we believed that weather would get back to a normal five-year average, and so we would have some weather tailwinds for us this quarter. There were headwinds, so that was something that happened. If—and Raj mentioned what would have happened if there was not that kind of weather headwind—we would have had a 2% comp in traffic. We plan these long time ahead of time. This is not a reaction to promotional intensity anywhere else. If you recall, when we added Never-Ending Pasta, we came back, I think it was seven weeks, maybe eight weeks, and then within a year or two, it was up to twelve. That was a planned decision we made. I cannot tell you the Buy One Take One will get to twelve weeks, but I can tell you that when we launched Buy One Take One last year, we never intended it to be as short as it was. Operator: Next question today is coming from Jon Tower from Citi. Your line is now live. Jon Tower: Hey, thanks for taking the questions. Maybe starting, could you dig into the delivery for Olive Garden during the quarter? I think you have been running about 4% mix last period. Did much change? And going forward, how are you thinking about pulsing it as you are moving into the fourth quarter? Obviously, there is a different macro dynamic happening right now and there is the delivery fees on top of it. I am curious if there is going to be a brighter spotlight on that relative to previous quarters? Rick Cardenas: Yes, Jon, a couple of things. Uber was 4.7% of sales for Q3. We did do some media support. When we took that four-week promotion out—so three weeks less price-pointed—we took that one out in January. We replaced it with just a delivery message that had no offer. It was just, “Hey, Olive Garden delivers.” Then in February, we added an offer to the Olive Garden delivery—free delivery like we did last year. Last year in Q3, we were roughly 0.8% in delivery. Last year in Q4, we were 3.5%. You saw that big jump when we started marketing delivery in Q4. In Q4 this year, I am not going to tell you if we are going to do marketing for delivery, but if we do, it would be a secondary message. I would think the jump in delivery from Q3 this year to Q3 last year will not be the same in Q4 because that is when we had the big spike. We still believe that delivery should be a little bit higher than last year. Jon Tower: Okay. Great. It sounds like the lighter portion menu at Olive Garden is a success early on. As you are looking across the rest of your brands, is that an opportunity to bring to other brands within the portfolio, or are the guests just a little bit different? Rick Cardenas: Yeah. We have said this before. I think LongHorn has done some of this already. LongHorn did this at lunch years ago, and lunch is growing pretty fast with a good lunch platform—smaller items, sandwiches, etc.—that has grown over time. They already have different sizes of some steaks. If you think about their filet, they have two different size filets. They have sirloins. They have two different kinds of ribeyes—one is bone-in, one is not. They have different sizes for chicken, different sizes for salmon. They have a lot of that already. They are looking at other things that they can do to bring portions that might not be as big for people that do not want such big portions. The same thing with Ruth’s Chris: if you think about the three-course price fixe menu at Ruth's Chris, it is one of their smaller filets, etc. We have opportunities in all of our brands to look at something like this. It might not be as broad as we do at Olive Garden because most of these menus in other brands have a variety of sizes. Operator: Thank you. The next question today is coming from Brian Harbour from Morgan Stanley. Your line is now live. Brian Harbour: Yes, thanks. Good morning, guys. Maybe I will ask the income cohort question. Anything that you would call out about income bands that may have shifted in the quarter? Also in fine dining, is there any group that you think has come back more? Rajesh Vennam: Hey, Brian. From an income perspective, we are seeing growth across all households with income above $50k, and the biggest growth is coming from households over $150k. That is generally what we are seeing across all brands. In fine dining, we are seeing decent growth as we go above $150k as well, but $200k-plus is where we are seeing the most growth. That is where we see even bigger disparity between the below $75k, below $100k, and then the above $200k or $150k. Brian Harbour: Okay. Got it. Thanks. Raj, directionally, it is still your expectation that food cost pressure continues to diminish a bit into the fourth quarter. Also, is there any reason that with the sales you are doing, there would not be a little bit more leverage on the other restaurant expenses at this point? Rajesh Vennam: I think we would expect to get some. Let me step back. I hate for us to talk about a specific line item in the P&L because there are multiple variables that can play a role in where we land for the end of the quarter. As we look at the business, the guidance that we provided for the fourth quarter implies margin growth, and we are going to get it from probably pretty much every line on the P&L. It does not have to end up that way. Ultimately, we look at what is the bottom line. I think we are going to show EBIT margin growth. Operator: Thank you. Our next question is coming from Jeffrey Bernstein from Barclays. Your line is now live. Jeffrey Bernstein: Great. Thank you very much. First question is on the fiscal 2026 guidance. I know there is only one quarter remaining, but you raised the total revenue growth guidance, you raised the comp and the unit growth guidance. Ex the incremental nickel from the fifty-third week, it seems like the implied fourth quarter EPS guidance is still somewhat in line with the Street. I am wondering how you think about what is preventing the greater EPS upside, especially as total inflation guidance seems to be unchanged. Trying to get a sense for how you think about that going from the top line to the bottom line as we think about the upcoming quarter? Rajesh Vennam: Hey, Jeff. Look, I do not want to explain the Street's model. I am focused on what we built as a plan. If you look at our initial guidance at the beginning of the year, we said our guidance was $10.50 to $10.70. As we got through the year, our inflation was a lot higher than we thought, and we did not price for all of it. We had better comps than we thought in the plan, and so we took up comps to reflect that. Ultimately, we are still delivering on the higher end. If you take the midpoint of it, it is higher than the midpoint of what we initially guided. The delta on the fifty-third week is just a function of— we had approximately $0.20 and now we are saying approximately $0.25. If you think about how the rounding works, a couple of pennies could make it approximately $0.20 versus approximately $0.25. Do not read this as a $0.05 delta. It could be one to two pennies because of how it rounds. That is why we said approximately. I will leave it at that. Jeffrey Bernstein: Got it. So it sounds like greater comp, greater inflation, net-net still a strong earnings year. As I think about that going into next year, I appreciate the color on the unit growth and the CapEx spend. More broadly speaking—and I know it is just directionally at this point—is it fair to assume you think fiscal 2027 growth is in line with your long-term algorithm? It seems like entering fiscal 2027 with comps above the 1.5% to 3.5% long-term target. Maybe you could share the current annual EPS sensitivity to an incremental point of comp. Any color at least directionally on how we should think about fiscal 2027 versus the long term would be great. Rajesh Vennam: Jeff, we will share more about fiscal 2027 later, but we are targeting to stay in that framework, or at least achieve what we said is part of the framework: 1.5% to 3.5% for comps and 3% to 4% for new restaurant growth. As you look at the initial indication for fiscal 2027, excluding the Bahama Breeze impact, we would expect it to be in that range of 3% to 4% for new unit growth contribution. Part of the other framework is EBIT margin flat to positive 20 basis points to get us to that EPS growth plus dividend yield of 10% to 15%. That is what we would plan for. Any given year, it might be a little bit different, but that is what we target long term. At this point, I do not see a reason why we would not be there, but we will give you an update in June. Operator: Our next question today is coming from James Salera from Stephens. Your line is now live. James Salera: Good morning. Thanks for taking our question. Raj, earlier you had talked about double-digit demand destruction at retail for beef. I cannot help but draw a line between the strong results at LongHorn and then that commentary. Are you able to give us any context? Are you seeing consumers who forego buying beef at the grocery store then showing up at LongHorn in a way that is actually a tailwind to your traffic at LongHorn because they are nervous about preparing it, so they show to have you prepare it for them instead? Rick Cardenas: Hey, this is Rick. In times of high beef prices in the grocery, you generally see a little bit more consumer going to a restaurant to get their steak. A consumer has to cook a very expensive steak at home, and if they mess it up, they still have to eat it. When a consumer goes to a restaurant and orders a steak and we mess it up, we eat it, and they still eat a great steak. I think that is part of the reason, but I cannot tell you that we have data to say that a consumer says, “I saw this price in the grocery store. I decided not to do it. I am going to go to LongHorn instead.” We have great data. We have the best data and insights in the space, but we do not ask our guests that question, so we do not know. James Salera: And then maybe one follow-up question. Given the traffic outperformance for Darden Restaurants, Inc. as a whole relative to the industry, how much of that is incremental frequency from existing guests who are satisfied with the menu innovation and some of the portion size offerings versus you winning share from other peers within the group? Rajesh Vennam: We are getting from both. When we look at our frequency, we are seeing frequency increase across the portfolio from the guest. We are also getting new guests. It is a combination. The data we look at probably shows a little bit more from increased frequency—call it 60/40, 65/35 in that range. Operator: Thank you. Our next question today is coming from Andrew Charles from TD Cowen. Your line is now live. Andrew Charles: Great. Thank you. Rick, catering at Olive Garden continues to grow nicely despite lapping several quarters since large growth began. What do you attribute that to? Rick Cardenas: Hey, Andrew. Growth at Olive Garden is about execution. Catering growth. Olive Garden is a great deal, and we do an amazing job at getting it to the guest at the exact time they want it. We have a good digital platform to do it. Catering is a very strong support for us, and it is probably one of the best values at Olive Garden. We have a delivery part of catering that we do ourselves. Delivery is our highest-rated part of anything we do at a la carte. What guests want for catering is they want to make sure they get the food that they ordered, they get it on time, and it is a great value. Olive Garden checks all three boxes every time. Andrew Charles: Gotcha. And then, Raj, is it fair to assume that a good portion of the converted Bahama Breezes will be Olive Gardens, given similar square footage combined as well as Olive Garden being one of your highest ROIC brands for new stores? Rick Cardenas: Yes, Andrew, this is Rick. I would not say it is fair to assume that most of the conversions will be Olive Garden. There are 14 conversions. Olive Garden is pretty much almost everywhere Bahama Breeze is. I would say it is fair to assume that Olive Garden will have a couple maybe, but not a lot of them. Thank you. Operator: Our next question is coming from David Tarantino from Baird. Your line is now live. David Tarantino: Hi, good morning. First a clarification on Raj's comments about next year and the total shareholder return being in line with your normal framework. Are you adjusting for the lapping of the fifty-third week, or maybe you do not need to adjust and still hit that target range? Could you clarify whether we should be making any adjustments to your comment? Rajesh Vennam: Yes, David. We always look at it on a 52-to-52 because that is the right comparison. What is the fifty-third going to look like? You will find out in June. Long term, 52-to-52 is the right comparison. David Tarantino: Great. Thank you. My real question, Raj, is about the commodity cost outlook. I appreciate you do not want to give specifics for next year, but directionally, is the spike in oil prices and hence distribution cost going to have any material impact on the outlook for commodity costs for you and for the industry for that matter? You probably have a competitive advantage with your supply chain, but any thoughts on that topic would be helpful. Rajesh Vennam: David, I do not want to speculate, but if you look at where we are expecting the inflation for commodities for this year to be, which is 4%, our thinking from where we are sitting now for next year—directionally—should be better than that, even with some of the recent news. We will provide an update in June. Operator: Thank you. Our next question is coming from Danilo Gargiulo from Bernstein. Your line is now live. Danilo Gargiulo: Thank you. Rick, I was wondering if you can elaborate more on the turnover rate being particularly low. Is that a function of what you are doing, where you are in the market, or is that something that you are seeing across the board for the industry? Was that the primary driver for the labor productivity improvement that you have seen this quarter? If that is the case, for how long do you expect low turnover to last? Rick Cardenas: Yes, Danilo. Our turnover—our retention—has continued to outpace the industry. Ours is getting better faster than the industry is. I would attribute that to a great employment proposition that we provide. We give our team members opportunities to grow, and that gives them a chance to come into the industry and get life-changing manager jobs and above. Almost all of our brands are at record turnover levels, and the ones that are not are pretty close. The industry data is getting a little bit better. When we think about labor, low turnover helps labor costs because you have more productive employees doing the job. You have less need to hire and train. We still train, but we cross-train them. We spend less money on new hire training. That should help us as long as we keep our turnovers moving in the right direction. Then our labor productivity should get slightly better. We may invest some of that. As we mentioned, we always find ways to invest in the guest. If we get some things that are much better than we would expect, we would probably give some of that back to the consumer in the form of either better service, better pricing, or better food. Danilo Gargiulo: Thank you. From Raj's comments earlier, one could infer that maybe 2027 could be more elevated pricing versus 2026, a little bit above inflation perhaps. Historically, with pricing above inflation, the guest count could be more at risk. What kind of initiatives, even at a high level, do you think you could be deploying in 2027 to perhaps counterbalance this and still have a guest-driven growth for your brands? Thank you. Rajesh Vennam: Danilo, let me start and then maybe Rick can add. I do not want to signal anything specific to 2027 with respect to pricing versus inflation. What we are talking about is we have given ourselves a lot of room since COVID by underpricing the full-service CPI by almost 1,200 basis points, even grocery by 400 basis points. We feel like if we need to take price, we can take it, and we can be smart about it without impacting the guest. Part of the reason being, cumulatively, we are in a much better place. Our relative value position is really strong. We do not necessarily think if there is a year where we take a little more, or actually in line with price, that all of a sudden becomes a headwind to guest count. That is not how we view it. Rick Cardenas: Yes, and Danilo, I would add that even if we price at inflation and we anticipate commodities being a little bit better over time, then it would not be a huge price for next year if we do that. We keep investing in our team, in our product, in what we serve to the guest. Those investments build on themselves over time and guests notice the value that they get. Most of our brands are at record high guest satisfaction, record high affordability, record high value scores for those brands. We have continued operational execution. As we have said, we will continue to look at our media spend and become more effective with that media spend, but still increase slightly—about 10 basis points or so. We will probably do the same thing next year, could be even more depending on how impactful that marketing spend is. We should have some things that help counterbalance anything we do with price. As Raj said, we do not think what we would do with price would be a tremendous drawdown to the guest count. Operator: Thank you. Our next question is coming from Gregory Francfort from Guggenheim Partners. Your line is now live. Gregory Francfort: Hey, Rick. This may be a little bit out of left field, but I am curious your thoughts on some of these AI tools that are coming on, how much you are using them at corporate, what that is unlocking for you from an analytics perspective. Any thoughts on what may be changing inside your business with what is going on? Rick Cardenas: Yes, Greg. Not quite out of left field. I am going to start by saying that at the core, we are and we always will be a hospitality-driven company, which means you need people. We are a people-focused business, so we are going to need them. Our team is doing an incredible job every day. We are using AI and machine learning to give our managers a much better forecast of their business so they can schedule better. We are using tools to help them write better schedules. They can order food better. The best thing you can do as a manager is to have a great forecast so you can staff your restaurant right and have the right amount of food. We are doing things here in the support center to improve on tasks that are repetitive, using AI to start projects faster and get things done faster. We have yet to take any jobs out because of AI. We have 200,000 employees in this company and only about a thousand of them work here. The other 200,000 work in the restaurant, and I would say we are probably not going to lose any team members in the restaurant because of AI. We are going to make their jobs better. We are going to make the guest experience better. Ultimately, the approach for AI for us is about amplifying the expertise of our people, not replacing them. It helps us deliver on exceptional service and that is what we will keep doing. We have a great team in IT here, over 200 people strong, and they are using it to write code faster, to get a lot of savings in what they do so that we can have more tools for our teams at a faster pace. Even some things that we have been looking to do for years that we were struggling to get done, AI is getting it done a lot faster. That is where you are going to see the benefit of AI. You probably will not see it specifically because it is not going to be necessarily guest-forward. Gregory Francfort: Thanks for the perspective. Appreciate it. Rick Cardenas: Sure. Operator: Thank you. Our next question is coming from Jeff Farmer from Gordon Haskett. Your line is now live. Jeff Farmer: Thanks. You mentioned that Uber was roughly 4.7% of mix at Olive Garden. I am curious in terms of the concept's total off-premise mix, including to-go and catering. Rajesh Vennam: Yes, Jeff. We are 29%. That is about three points higher than last year. Last year was 26%. Recall, Q3 is typically high off-premise because of catering we talked about earlier, and generally a high off-premise quarter. Jeff Farmer: And then the same question for LongHorn off-premise mix? Rajesh Vennam: I think LongHorn was 15% for the quarter, which was a point higher than last year. Operator: Thank you. Next question is coming from Dennis Geiger from UBS. Your line is now live. Dennis Geiger: Curious if any updated thoughts on tax rebates, stimulus benefits, or any latest expectation you have based on anything you have observed so far to date? Rick Cardenas: Yes, Dennis. It is still early. Most of the refunds are going to happen in March and April, but we did see some of the refunds coming in in February. We know that per recipient, the tax refunds are higher. Everything we know is contemplated in our guidance. Last thing I will say is we do know that when checks drop, we see the impact. We had some of that impact in February, but it was pretty small amounts in February. Dennis Geiger: Great. Thanks, Rick. Then quick on the operational stuff and that speed of service initiative, which I know is longer term in nature. I feel like I have observed it in the Olive Garden. Any update to share there and where the guest and the employee feedback is, if anything to share? Rick Cardenas: I am glad you experienced it at Olive Garden. They really started to make a good push on it in Q3. They are doing some things in different restaurants to test initiatives to get the roadblocks out of the way for speed. At Olive Garden, there are 50,000 servers. How do you convince 50,000 people that they have to change the way they do things, and then help give them the tools to do that? They do not have to be technology tools. How do you get the soup, salad, and breadsticks out faster—the first course out faster? How do you ensure that you give the guest the speed and the pace that they want? Olive Garden is making some moves, and those moves are going to get even bigger in the upcoming quarters, and our other brands are following suit. Olive Garden is moving a little bit earlier, but the other brands are going to get there. Our goal is to get this experience in the time that the guests believe is ideal. Right now, the ideal time is a little bit faster than what all of casual dining is doing, and it is a little bit faster than where we are. We are going to get to the ideal time. It is going to take a while. The guest impact of that will be seen two different ways. In the short term, it is going to be better throughput on the high-volume days. In the long term, it is going to be guests coming to us for occasions they were not coming before. That second one is long term, and it is going to take a while. It is going to take time for the guests to realize, “I have 45 minutes to go to lunch in total, and I need to get in and out of there in 30. Can I do it?” If they do not believe they can do it today, I want them to believe they can do it in a few years. When they can, they are going to come back a lot more often. I just use lunch as an example. It is not just about lunch. Operator: Thank you. The next question is coming from Andrew Strelzik from BMO Capital Markets. Your line is now live. Andrew Strelzik: Hey, thanks for taking the question. Apologies if I missed this, but you lowered the commodity inflation guidance from 4% to 5% down to 4%. What was the driver of that within the basket? Was that more 3Q related or 4Q related? Related to that, keeping the overall inflation at 3.5%, was there anything as an offset to the lower commodity inflation, or is that just rounding? Rajesh Vennam: Yes, Andrew. It is really rounding because we see approximately 3.5%. When you look at commodities specifically, there was some favorability. Most of the favorability versus the prior estimate is in beef. We expected Q4 to be more in the double-digit range, and it ended up being high single-digit. We had some favorable dairy that is helping partially offset. Those are the two drivers in terms of the change. Again, we are talking about tens of basis points of change because we were saying earlier 4% to 4.5%, and we are now approximately 4% for the year. Andrew Strelzik: Okay. And then, with the step up in new units for next year, I know it is only a handful incrementally, but should we assume that most of those are Olive Garden and LongHorn? Or is that more broad-based? Anything to call out there? Thank you. Rajesh Vennam: It is a little bit more. As we look at 75 to 80, I would say 50 to 55 is going to come from those two brands. Yard House, Cheddar's, and Cheddar’s (Cheddar's Scratch Kitchen) will probably all have mid-single-digit unit growth in number of units. The rest will come from fine dining. Rick Cardenas: I would add, over the long term, you should see more of our growth as a percent coming from the smaller brands. Think about Cheddar's, Yard House, and Cheddar’s—they have to be at the higher end of our framework or more. Olive Garden is going to be within that framework somewhere, probably at the lower end. In order to get to that framework and to get a more balanced portfolio, those other brands are going to grow faster over the long term. In the first few years, Olive Garden is going to drive some of the growth. Operator: Thank you. Next question today is coming from John Ivankoe from JPMorgan. Your line is now live. John Ivankoe: Hi. Thank you so much. The question is on operations. Obviously, perfect is impossible in the real world. What percentage of restaurants do you think are operationally excellent today, and the converse of that is the percentage of restaurants where you may have an opportunity to significantly improve your operational performance, especially as the labor market might be more willing for you to do so? Rick Cardenas: Hey, John. I cannot give you an exact number, but let us use the 80/20 rule. I would say 80% of restaurants are operating great and maybe 20% have some room to improve. It is probably less than that. Our dissatisfaction—which we measure as part of guest satisfaction—at our brands is pretty much at all-time lows. I am talking about low single-digit dis-sats in our big brands. That is pretty amazing when you consider where dissatisfaction rates can be in casual dining and any dining. Rajesh Vennam: Or any service. John Ivankoe: Definitely. Some people are not going to be happy with perfect, so low single digits is very good. Separate question in the interest of time. Greg asked about AI at a corporate level. You mentioned having AI-driven forecasts for general managers. Within quick service, a number of companies are talking about assistance for the general manager to help them do their jobs better, even beyond forecasting—labor allocation, food prep, what have you. Does that make sense for casual dining broadly? Does that make sense for Darden Restaurants, Inc.? Is that something you might be on and see as an opportunity? Rick Cardenas: Absolutely, John. I did mention forecasting, but it is also about food prep and labor management and other things. I probably did not put it all in there, but it is all part of that. Whatever we can do to make the general manager and the restaurant manager's job easier, to get them out of the office and with our guests and with our team members, is what AI can help do. What I did say is we will not have it to our guests who are actually seeing it in their face, but we are using a lot of that already. Operator: Thank you. Our next question is coming from Brian Vaccaro from Raymond James. Your line is now live. Brian Vaccaro: Hi, thanks. Just a quick one for me. It is really a question on the casual dining segment. It is striking how your outperformance gap has widened significantly in recent quarters. Maybe talk about this widening gap between the winners and losers in the segment. Are you starting to see a tick up in closures, or think we might be on the precipice of seeing that? Any other thoughts you have on this widening gap? Rick Cardenas: Hey, Brian. I am really pleased with our gap. That gap keeps widening. There are winners and losers in every industry, especially in categories like ours, which are not super high-growth categories. There are always going to be winners and losers, and we plan to be winners. Are we seeing a lot more closings? I would not say we are seeing more closings. We are seeing some bankruptcies, but that generally happens over time. We have been on the precipice of a big closing for years, and maybe one day it will happen. I just do not know. I do not know what other companies are thinking about in their plans in the future. Restaurants that continue to lose margin and continue to lose traffic eventually cannot pay their rent. Some of those will close. The good brands will pick up the slack and add restaurants. We are going to keep performing the way we have no matter what the situation is out there. If restaurants close, we will be the beneficiaries. Brian Vaccaro: Alright. That is helpful. Last quick one, Raj. Where do you see your G&A shaking out for the year in your updated guidance? Rajesh Vennam: Yes, Brian. We are still looking at approximately $500 million for the full year. Q4 implies higher G&A in Q4 for a couple reasons. One, we have an extra week—call it roughly $10 million. Because of the growth we have, as you look at year-over-year growth on sales and earnings, that leads to higher incentive comp. We have pretty strong growth implied, especially on earnings in Q4. Between those two, Q4 is probably roughly about $30 million higher than Q3. Brian Vaccaro: Thank you. Operator: We have reached the end of our question-and-answer session. I would like to turn the floor back over to Courtney for any further or closing comments. Courtney Aquilla: This concludes our call. I want to remind you that we plan to release fourth quarter results on Thursday, June 25, before the market opens, with a conference call to follow. Thanks for participating. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Good day, and thank you for standing by. Welcome to the Taysha Gene Therapies, Inc.'s full-year 2025 financial results conference call. At this time, participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Hayleigh Collins, Senior Director of Corporate Communications and Investor Relations. Please go ahead. Thank you. Good morning, and welcome to Taysha Gene Therapies, Inc.'s full-year 2025 financial results and corporate update conference call. Earlier today, Taysha Gene Therapies, Inc. issued a press release announcing financial results for the full year ended December 31, 2025. Hayleigh Collins: A copy of this press release is available on the company’s website and through our SEC filings. Joining me on today’s call are Sean Nolan, Taysha Gene Therapies, Inc.'s Chief Executive Officer; Sukumar Nagendran, President and Head of R&D; and Kamran Alam, Chief Financial Officer. We will hold a question-and-answer session following our prepared remarks. On today’s call, we will be making forward-looking statements, including statements concerning the potential of TSHA-102, including the reproducibility and durability of any favorable results initially seen in patients dosed to date in clinical trials, including with respect to functional milestones, to positively impact quality of life and alter the course of disease in the patients we seek to treat; our research, development, and regulatory plans for our product candidates, including the timing of initiating additional trials, reporting data from our clinical trials, and making regulatory communications with the FDA on the regulatory pathway for TSHA-102; the potential for the product candidate to receive regulatory approval from the FDA or equivalent foreign regulatory agencies; our ability to realize the benefits of Breakthrough Therapy designation for TSHA-102; our ability to drive long-term value for stockholders; and the market opportunity for our programs. This call may also contain forward-looking statements relating to Taysha Gene Therapies, Inc.'s growth, forecast cash runway and future operating results, discovery and development of product candidates, strategic alliances, and intellectual property, as well as matters that are not historical facts or information. Various risks may cause Taysha Gene Therapies, Inc.'s actual results to differ materially from those stated or implied in such forward-looking statements. For a list and description of the risks and uncertainties that we face, please see the reports we have filed with the SEC, including in our Annual Report on Form 10-K for the full year ended December 31, 2025, that we filed today. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 19, 2026. Taysha Gene Therapies, Inc. undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by applicable securities laws. With that, I would now like to turn the call over to our CEO, Sean Nolan. Sean Nolan: Thank you, Hayleigh. On to our full-year 2025 financial results and corporate update conference call. On today’s call, we will begin with a brief update on recent clinical, regulatory, and commercial readiness activities. Then Dr. Sukumar Nagendran, our President and Head of R&D, will provide a clinical update on the TSHA-102 program. Kamran Alam, our Chief Financial Officer, will follow up with a financial update, and I will provide closing remarks and then open the call up for questions. 2025 was a year of significant execution for Taysha Gene Therapies, Inc. We announced compelling REVEAL Phase 1/2 data across pediatric, adolescent, and adult patients with Rett syndrome treated with TSHA-102, received FDA Breakthrough Therapy designation for TSHA-102, and secured written FDA alignment on our REVEAL pivotal and ASPIRE trial designs, paving the way for a potentially streamlined path toward BLA submission. This progress has set the stage for what we expect to be a transformative year ahead for Taysha Gene Therapies, Inc. as we focus on completing the pivotal development of TSHA-102 and bolstering our commercial readiness efforts as we advance towards potential registration. We have maintained ongoing, constructive dialogue with the FDA over the past two years, which has enabled alignment on a pathway that we believe reflects the rigorous, systematic data collection and well-controlled study design and endpoints required by the FDA for a robust, data-driven application. In 2025, we finalized alignment with the FDA on our REVEAL pivotal trial protocol and statistical analysis plan in support of our planned BLA submission, and we were pleased to initiate the pivotal trial in 2025 with the dosing of our first patient. Multiple patients have now been dosed in the trial, with enrollment advancing across multiple sites. We remain on track to complete dosing in 2026. Importantly, both high- and low-dose TSHA-102 continue to be generally well tolerated, with no treatment-related serious adverse events or dose-limiting toxicities observed in the patients treated in both the REVEAL Phase 1/2 and REVEAL pivotal trials as of the March 2026 data cutoff. In addition to initiating our REVEAL pivotal trial, we recently received FDA clearance to initiate the safety-focused ASPIRE trial, following written FDA alignment on the ASPIRE trial design and data for inclusion in our BLA submission to support a broad label for TSHA-102 for patients aged two years and older with Rett syndrome. ASPIRE will enroll three females with Rett syndrome aged two to less than four years, evaluating the safety and preliminary efficacy of a single intrathecal administration of the high dose of TSHA-102, 1e15 total vector genomes scaled to account for the lower brain volume in the two to less than four-year-olds. The written alignment we reached with the FDA outlines that our planned BLA submission will include a minimum of three months of ASPIRE safety data, while the efficacy in the two to less than six-year-old population will be extrapolated from the data collected in the REVEAL pivotal trial to support the broad label. We are on track to complete dosing for ASPIRE in 2026. We believe this recent FDA alignment on ASPIRE, together with the alignment on a six-month interim analysis for the REVEAL pivotal trial, potentially streamlines our path toward BLA submission for TSHA-102. In 2026, we attended a Type C meeting with the FDA and reached written alignment on the CMC requirements for our planned BLA submission. Specifically, we further aligned with FDA on our proposed comparability approach between TSHA-102 material derived from the clinical and final commercial manufacturing processes. The FDA agreed that the approach may support pooling data from the REVEAL Phase 1/2 trials with data from the ongoing REVEAL pivotal trial and the ASPIRE trial for the planned BLA submission. Importantly, we believe this creates flexibility and will further strengthen the overall dataset for the BLA package by including longer-term data and enabling a comprehensive assessment of safety and efficacy data that has been generated across the entire development program. Additionally, the FDA endorsed our proposed process performance qualification, or PPQ, campaign strategy to support process validation for the BLA submission. This included the stability data package, the potency assay strategy, and the execution of BLA-enabling PPQ lots using the commercial manufacturing process, which we expect to initiate in 2026. This feedback aligns with the agency’s January 2026 guidance aimed at increasing flexibility on requirements for cell and gene therapies to advance innovation. With this alignment, we are confident that our CMC activities are on track to support our planned BLA submission in step with the pivotal dataset readout. We truly appreciate the consistent, constructive, and collaborative interaction we have had with the FDA to date and believe our regulatory progress highlights the strength of our data-driven approach and further supports our goal to bring TSHA-102 to patients with Rett syndrome as safely and expeditiously as possible. We will continue to engage with the FDA as we prepare for our planned BLA submission. In addition to our clinical and regulatory progress, we have continued to bolster our commercial readiness activities. As a reminder, Rett syndrome is a devastating, rare, and progressive neurodevelopmental disease with high unmet need and a profound lifelong burden for patients and caregivers. It is well-characterized clinically, defined by impairments across multiple clinical domains, including fine and gross motor function, communication, autonomic function, and seizures. While Rett syndrome is a heterogeneous condition that presents with different levels of clinical severity based on each patient’s distinct genetic background, natural history data show that patients follow a common trajectory regarding the achievement of functional developmental skills, with the likelihood of spontaneous gain or regain of developmental milestones falling to approximately zero after six years of age. The multi-domain impairments result in loss of independence, with most individuals requiring 24/7 care and lifelong support for daily activities, such as eating or sitting up, severely impacting quality of life for patients and caregivers. This burden and the limitations of currently approved therapies, which focus on symptom management and do not address the underlying genetic root cause, have created strong urgency for new treatment options capable of delivering functional improvements. We believe this urgency, combined with the estimated 15,000 to 20,000 patients with Rett syndrome across the U.S., EU, and UK, underscores the substantial market opportunity for TSHA-102. Within the U.S. specifically, patient estimates range from 6,000 to 9,000 patients based on claims data and epidemiology data. Because Rett syndrome is a neurodevelopmental condition, and based on the Phase 1/2 data we have reported to date across pediatric, adolescent, and adult patients, we believe that most patients with Rett syndrome can meaningfully benefit from treatment. TSHA-102 is uniquely designed to address the root cause of Rett syndrome and, as such, has the potential to meaningfully alter the natural history of the disease and offer patients the opportunity to achieve functional milestones that would otherwise not be possible according to natural history. Recently completed market research reinforces this opportunity, as it demonstrated high anticipated demand from both clinicians and caregivers in the U.S. and a clear preference for intrathecal administration. The research findings are compelling for two main reasons. First, the research suggests that clinicians anticipate broad adoption of TSHA-102 across pediatric and adult patients with Rett syndrome. Caregivers similarly indicated that they would actively pursue an improved gene therapy with a target product profile consistent with TSHA-102. Caregivers emphasized that improvements in existing function or the achievement of new functional gains would be meaningful for individuals with Rett syndrome, as they translate into greater independence in daily living, such as speaking in phrases, walking with support, or finger feeding, which we have observed in patients treated with TSHA-102 in REVEAL Part A. Second, clinical outcomes will be the ultimate driver; however, market research indicated that clinicians and caregivers strongly prefer intrathecal administration over direct-to-brain CNS delivery, citing its familiarity, accessibility, and scalability, enabling the potential to safely and efficiently treat patients across institutions, from large centers of excellence to regional and local institutions. This facilitates broad patient access. Specifically, intrathecal administration, as it is used to deliver TSHA-102, is a routine, minimally invasive delivery approach that does not require a surgical suite or delivery by a neurosurgery expert. This enables the potential for TSHA-102 to be delivered as an outpatient procedure, which in turn may meaningfully expand the treatment footprint, given that administration in the commercial setting will not be limited only to centers of excellence. We believe this broader footprint would enable us to reach patients where they are already receiving care and support, and this is scalable as adoption and demand grow. Finally, as we advance towards registration, we are continuing to build out our internal commercial infrastructure. To that end, we recently appointed Brad Martin as Senior Vice President of Market Access and Value, further strengthening our commercial leadership team. Brad brings over two decades of leadership experience in market and commercial strategy, pre-commercial and product launch planning, as well as payer and health system engagement within the gene therapy space. He previously held senior roles at Neurotech Pharmaceuticals, Sarepta Therapeutics, and AveXis. At AveXis, he played a crucial role in securing market access for the blockbuster gene therapy Zolgensma, for the treatment of spinal muscular atrophy. We plan to continue to build out commercial capabilities as we prepare for a potential commercialization, and we expect to share additional details on our TSHA-102 commercial strategy in the second half of the year. I would now like to turn the call over to Sukumar to discuss progress on the clinical front in more detail. Suku? Thank you, Sean. Sukumar Nagendran: As Sean mentioned, we believe we have made significant progress on advancing our Phase 1/2 program and the FDA alignment. As a reminder, we presented data from Part A of the REVEAL Phase 1/2 trial last year, demonstrating a 100% response rate from the 10 treated patients in both low- and high-dose cohorts. An 83% response rate was seen at six months post-treatment, with five out of six patients gaining or regaining one or more milestones defined across the six treated high-dose patients. In addition to the 32 developmental milestones, an average of approximately 19 gains per patient as captured by validated clinical assessments. We have observed a consistent pattern of early gains that was sustained, with additional gains over time. We will provide the six-month interim analysis for the REVEAL pivotal trial and efficacy data across all 12 pediatric patients treated in REVEAL Part A in the second quarter of this year, and all patients will average 12-month follow-up time points across multiple clinical outcome measures, as well as continued well-tolerated safety profile. Today, on the trajectory of the gain, loss, and regain of development provided for TSHA-102, the combined likelihood of spontaneous milestone gain or regain drops to 6.3% after age six compared to rates as high as 85% between the ages of one and five years. These findings align with our own analysis, which allows us to generate data across the broader population while significantly mitigating statistical risk by enrolling 15 patients aged six to less than 52 years in the developmentally regressed population of Rett syndrome, the population with the most stable baseline and lowest spontaneous improvement rate. Importantly, this design enables us to test our response rate against the known hypothesis of 6.7% at age six and older. As Sean mentioned, we have dosed multiple patients in our REVEAL pivotal trial. Enrollment continues to advance across multiple clinical trial sites. We expect to complete dosing in the REVEAL and ASPIRE studies in 2026. We believe our ongoing dialogue with the FDA over the last two years supports the potential path to registration. Looking ahead, we remain focused on our clinical trial execution and data generation as we work to complete patient enrollment and advance towards registration. We believe the thoughtful, data-driven approach we have taken in designing and executing our pivotal development strategy positions us to deliver. I would now like to turn the call over to Kamran to discuss financial results. Thank you, Suku. Kamran Alam: Research and development expenses were $86,400,000 for the year ended 12/31/2025 compared to $66,000,000 for the year ended 12/31/2024. The $20,400,000 increase was primarily driven by higher compensation expenses due to increased research and development headcount. Clinical trial and GMP expenses also increased during the year ended 12/31/2025 due to clinical trial activities in the REVEAL studies and BLA-enabling PPQ manufacturing initiatives. General and administrative expenses were $33,900,000 for the year ended 12/31/2025 compared to $29,000,000 for the year ended 12/31/2024. The increase of $4,900,000 was primarily due to higher compensation expenses and higher legal and professional fees, as well as debt issuance costs incurred in connection with the 2025 Trinity term loan that are recorded in general and administrative expense under the fair value option. Net loss for the year ended 12/31/2025 was $109,000,000, or $0.34 per share, compared to a net loss of $89,300,000, or $0.36 per share, for the year ended 12/31/2024. As of 12/31/2025, Taysha Gene Therapies, Inc. had $319,800,000 in cash and cash equivalents. During the fourth quarter, we raised an additional $50,000,000 in gross proceeds by utilizing our at-the-market, or ATM, equity offering program, with proceeds intended to support a potential commercial inventory build in 2027. We expect that our current cash resources will be sufficient to fund planned operating expenses into 2028. I will now turn the call over to Sean for his closing remarks. Hayleigh Collins: Sean? Sean Nolan: Thank you, Kamran. The progress we made in 2025 has set the stage for what we expect to be a transformative year ahead as we advance towards registration, and our confidence in a differentiated TSHA-102 gene therapy candidate continues to strengthen based on the recent developments highlighted today. With a favorable tolerability profile demonstrated to date, continued patient enrollment, and a well-defined regulatory and commercial path, we believe TSHA-102 has the potential to meaningfully address the genetic root cause of this devastating disease and provide meaningful benefit to a broad population of patients with Rett syndrome using a minimally invasive delivery approach. On behalf of the entire Taysha Gene Therapies, Inc. team, we remain committed to bringing a potentially transformative therapy to the Rett syndrome community. I will now ask the operator to begin our Q&A session. Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Kristen Kluska with Cantor Fitzgerald. Your line is now open. Kristen Kluska: Hi, good morning everybody, and congratulations on all the progress. So you had a lot of comments about why the community might favor intrathecal administration. I wanted to first ask if you believe the community has a good understanding of why this route of administration gets to the brain. And then also, you listed several reasons why this might be more favorable. I am curious, both from the clinician standpoint as well as the parent or caregiver, if there is one item on that list that is standing out more than others. Thank you. Sean Nolan: Yeah. Kristen, thanks for the question. You know, I would say that the support for IT, there were manifold reasons why people wanted to go down that route. The most obvious is everyone can relate to a lumbar puncture. Right? I mean, most of the moms out there have undergone that to some extent. People are familiar with it. They know it is not scary. And I think the most interesting thing is people are taking what I think is a very pragmatic approach. They are basically saying, hey, listen. The clinical data are going to be the most important thing, and if the data are, let us say, equal, then I am going to go do the least invasive approach I can for the person that I love, for the very simple reason that it does not involve drilling burr holes and going into the ICU and having a neurosurgeon involved. As they learn more about that, I think they are just like, hey, you know what? If all things are equal here, at a minimum, then I am going to take what I feel is the safest approach and the easiest approach. I think from the clinical perspective, it is the same kind of a logic set where they are saying, listen. Ultimately, it is going to be the clinical data that is going to carry the day. But based on what we know right now, it is easy for us to do this lumbar puncture. And when they start to talk about the practical logistics of the sites, the throughput necessary for intrathecal delivery done in an outpatient is much easier to manage. You do not have to schedule suite time, surgeon time, things like that. So they are saying, in terms of being able to broaden the reach, go to regional and local hospitals, and make sure that, broadly, the Rett community has access to this therapy, it is a much easier route of administration to administer and provide great care to their patients. Hopefully, that helps. Kristen Kluska: Okay. Thanks. And just on that point, they do understand that this route of administration is reaching the brain, right? Sean Nolan: Yes. We did not get into—we did not explain to them the biodistribution. They are basically making the leap that if I administer it that way and the clinical data are good, it is going to where it needs to go. They do not care about biodistribution. They care about the fact that, is my loved one going to get better or not? And they are judging that based on the clinical data, which, you know, the product profile is just the data that we have shown to date. So we feel very—like, we were not surprised by these results at all, frankly. And I think it makes a lot of sense when you take a step back and just digest it all. Kristen Kluska: Thank you, Sean. Sean Nolan: Thanks, Kristen. Thank you. Operator: Our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open. Salveen Richter: Good morning. Thanks for taking my questions. With the appointment of Brad Martin as Head of Market Access and Value, what will the first priorities be in this role? What are the key aspects of market access that Taysha Gene Therapies, Inc. should be focused on initially? And secondly, can you frame expectations for the update on longer-term safety and efficacy data from Part A? How many patients will we see, what kind of duration of follow-up, and what you are looking for in terms of the efficacy profile? Thank you. Sean Nolan: Yeah. Thanks, Salveen. To start with the second part of the question first, what you can expect to see is—to take a step back—last time we reported data, it was 10 patients, and at the high dose, we had six months of data on five of the six patients. So what we are planning to do in the Q2 update, you will see data on all 12 Part A patients, and we will have a minimum of 12 months of data on all patients. The report out will be inclusive of the primary endpoint, which would be milestones. We are also going to give an update on the skills, the improvements. That is the data that we presented at CNS last year. You will see the CGIs. You will see the R-MBA. So you will get a very comprehensive picture of the dataset. And what we hope to show is what we have been able to demonstrate to date, which is that the early improvements are sustained and we continue to see deepening of response over the course of time. If you remember, the first patient we dosed, by the time we report this data, will be about three years post-dose. So we are starting to generate some nice durability data, which is fantastic. As it relates to what the market access team is doing, there are a lot of steps to take, of course. We generally begin by making sure we are mapping out where the patients are. And then, what is the mix of the payers, so how much commercial pay is there? How much Medicaid pay is there? And then what we will do is make sure from a site activation perspective that we are thinking about the right way to roll this out. So as an example, because of our market research and what we have seen on the route of administration, what is going to be really nice is that we are going to be able to essentially get to the regional and local hospitals. We want to make sure, though, that we roll this out in a very thoughtful manner and anyone using TSHA-102 is very educated on how to do this, knows how to manage gene therapy patients, and that we are comfortable with them and their institution doing that. So part of it is mapping all that out so that we have a good sequence to the flow. And then, you know, beginning to work with the payers and talking to them about the market size, talking to them about the clinical data. And the approach that we have taken historically, Salveen, has been get in early with the payers, be very transparent about what type of—what is the volume of patients that they could potentially see, educate them on the disease state, and educate them on your dataset, and really just take them along on the journey. So we look to build relationships with the payers, and that is what the nice thing about Brad is—he has those relationships. He has done this multiple times. And it is never too early to start on this. You really want to get in as early as you can to really pave the road so that there are no surprises on the back end. Operator: Thank you. Our next question comes from the line of Biren Amin with Piper Sandler. Your line is now open. Biren Amin: Yeah. Hi, guys. Thanks for taking my questions. Congrats on all the progress. Sean, I noticed that the company had a successful Type C meeting with FDA this quarter on CMC for TSHA-102. So maybe on the BLA PPQ lots that you are initiating in the second quarter, when would these complete? And if the REVEAL interim data are positive, how soon do you think you can file the BLA after the interim data? Thanks. Sean Nolan: Hey, Biren. Can you repeat the first question? Yeah. So on the BLA-enabling PPQ lots that are initiating in the second quarter of this year, when would these complete? Kamran, do you want to take that? Kamran Alam: Yeah. Sure, Sean. So, Biren, nice to talk to you. Yeah. So the PPQ lots will be completed by end of this year. And in terms of the alignment with FDA, I will turn it over to Sean. Sean Nolan: Yeah. I think, Biren, the plan we have would be we can do the analysis, the interim analysis, once all patients dosed in the pivotal are at six months. That is when the blind would get broken. Obviously, that is going to be dependent on the last patient dosed. Right? So that is going to happen sometime in the second quarter, based on everything that we are tracking to, which looks good. And then we have to adjudicate all that data. We have to make sure it is correct. The next step, we would sit down with the FDA, go through that data with them, and work to align them on what the next steps could potentially be. Right? And so, post that and post getting minutes, we would come back to the market and give you the update. The reason we do not want to say what the data are before we meet with the FDA is that that is only half the story. Right? So we think it is important to meet with the FDA. And I think there are a couple of potential avenues that could happen. Right? I mean, the best-case scenario would be the agency is very pleased with the data and they tell us to proceed to file on the six-month dataset, in which case we would work to do that immediately. So to be clear, what we are doing in the background—we are writing the CMC modules, the preclinical modules. Those will be in the can and done. So if we get the clearance on the clinical, that would be the only piece that we would have to write, and then we could file the BLA and things would move forward relatively quickly. Another scenario could be the agency says, look, we think the data are good. Historically, we have always liked to see 12 months of data. We would like to see 12 months of data. In that instance, we would make the case, well, okay. But then let us start the rolling submission because we have got all this other stuff done. You already know the primary endpoint has been met. You are looking for some additional time. Okay. Now we would have made the case that the durability from Part A we can now pool based on our recent update on CMC would help us with that case upfront, the six-month course of action. But if they want that, I think even in that scenario, again, the only thing that they would have to review would be the clinical module at the end. So that still pulls things up a couple of quarters. And then the last scenario would be they want to do things the traditional way and wait for 12 months. I think even in that scenario, the nice thing about the interim data—and again, we would share this with the market—is that I believe what we would be able to show is that the product works. You have met the endpoint. You have met the statistics of things. Now it is just time and execution, which I think the market would respond very favorably to as well. So the way I look at it is the FDA gave us the option to do the interim analysis. I believe it is based on the data that we showed in the early responses that we showed and the rigor in which the data were collected. So, look, we have got a few good cards to play here, and we are looking forward to it as we step it through 2026. Biren Amin: Perfect. Thanks for taking my questions. Sean Nolan: Thanks, Biren. Operator: Thank you. Our next question comes from the line of Tazeen Ahmad with Bank of America. Your line is now open. Tazeen Ahmad: Hey. Good morning. Thanks for taking my questions. Can you talk about what you think the potential read-through from the recent negative opinion for Daybue from CHMP has for your program and also whether this changes what you think the commercial opportunity in Europe is? And related to that, what is your alignment currently with EU regulators on that? Sean Nolan: Sure, Tazeen. I do not think there is a read-through based on what happened to Acadia. For those of you that have been around since Suku and I joined the management team here, back in the days when everyone talked about CGI and RSBQ, we were on the opposite side of that, if you remember. For gene therapy, you had to be able to demonstrate that the eye could see that truly had impact on the patient and the caregivers and it was unequivocal. And so, we feel the data that we are generating is very unique. And really no one has been able to demonstrate restoration of function in a neurodevelopmental disease before, and we are able to do that in multiple patients and across multiple clinical domains. And we have got natural history that is absolutely stellar. It is unequivocal. I think Jeff Neul’s paper reinforces everything that we have done from a strategic perspective and supports our thesis on things. And then if we are able to demonstrate what is happening with the primary endpoint and people gaining these milestones, but then beyond that, what we are trying to emphasize on the script is when you look at milestone gains outside the primary endpoint, and you look at improvements that people are having, it is almost 20 per patient so far. That is based on what we reported last year. So it is a significant impact that you cannot ignore. And the other thing too I would point to in the natural history data—there is R-MBA data. So we can demonstrate in multiple ways against natural history how we are changing the course of disease and how this is a transformational treatment, which then gives us the power to capture value through price in a very meaningful way and get reimbursed for it. If you take a look at what happened with Sarepta, up until they had some of the unfortunate safety things, their launch was going great. And I would argue that the data that we are generating is quite demonstrable. We are not having to talk about a scale. We are not having to talk about a one- or two-point change in the North Star or a one-point change in the CGI. The payers do not care. The payers want to see functional gains. They want to see concrete improvements. That is what is going to lead to getting you approved. Hope that helps. Tazeen Ahmad: Yeah, Sean. And maybe just a quick follow-up. On Europe again, usually there is a pretty deep discount on price. But, again, just given that there would be a lack of therapies available, do you think that strengthens your position on pricing when it comes time to that? Sean Nolan: Yeah. I mean, I think we are going to be in a very strong position on price because of the data that we have and because of the high unmet need in the disease state. So we feel that—we are—obviously it is early days to get into what the actual price will be. But I think with where we sit and the data that we are capturing, and the fact that it is happening across multiple domains, and no matter what COA we are looking at, all the needles are moving in the right direction in a meaningful way, I think we will be able to capture the appropriate value. Sukumar Nagendran: Thank you. Operator: Our next question comes from the line of Maury Raycroft with Jefferies LLC. Your line is now open. Maury Raycroft: Hi, good morning. Congrats on the progress and thanks for taking my question. For the REVEAL Part A update first half of this year, do you plan to provide a sub-analysis showing the proportion of patients that achieve more than one developmental milestone by 12 months? And are you planning to show any patient-level data with vignettes? And if so, how are you setting expectations for number of patients and milestone gains that you can show in that update? Sean Nolan: Thanks, Maury. Yeah. To take the second part of your question first, we will likely highlight a couple of patient vignettes. And just to give you some perspective on why we show the data like we do, number one, we are going to have 12 patients’ worth of data. This drug is going to get approved or not approved in the aggregate. Right? The aggregate data is what you get approved on. So I think making sure it is clear—and we will share every endpoint that we are effectively capturing—and then the investor will get to judge the data and the probability of success in getting approved. So we think that is the most important thing. We think that is where the emphasis should be. I think highlighting a couple of patient vignettes would be helpful to basically show the early improvement and then the sustainability and the deepening of response over time, getting into more specifics about what is actually happening on a patient basis. So if we say that people are effectively gaining about 19 to 20 skills or milestones and improvements, let us tell you the story of what that looks like. Now if I did that for 12 patients, we would be on the call for five hours. So that is why we do not want to go through all 12 patients. We just want to highlight a couple things. And then, again, based on the aggregate, you can say, hey, I like this data or I do not like this data. But we think that is the right way to portray it. Can you remind me the first part of your question? Maury Raycroft: Yeah. Just some sort of a formal sub-analysis showing the proportion of patients that achieve more than one developmental milestone by 12 months. Sean Nolan: We will take that into consideration. We are still working on the ultimate way to portray things. We have got a few ideas on how to get at—you know, we have gotten some feedback from investors on what they would like to see. So we will take all that into consideration, and we look forward to that update. Maury Raycroft: Got it. Likewise. Okay. Thanks for taking my questions. Sean Nolan: Thanks, Maury. Operator: Thank you. Our next question comes from the line of Gil Blum with Needham & Company. Your line is now open. Gil Blum: Good morning, and allow me also to add my congratulations on the progress. Just a couple ones from us. So as it relates to your recent update on the ASPIRE study, was this in line with prior expectations? Was this faster, or this is just, you know, run of course here? And our second question, it is good to see submissions using your RMAT designation of the CMC materials. This is a known issue in this space. Are you guys going to receive any feedback on what you have already submitted ahead of completing your filing, or is this just going to happen later? Thank you. Sean Nolan: Okay. Let us take the ASPIRE. I would say—and Suku, jump in—I would say we got a pleasant surprise in that initially what we proposed to the FDA was a study of two to less than six-year-olds, and the FDA came back and said, listen, the brain volumes of a five-year-old and a four-year-old are effectively the same as a six-plus, so we feel that that data are already being captured and collected, and therefore they just wanted us to focus on the safety of the two- and three-year-old because they do have less brain volume. And so that was the experiment that they wanted us to run. We did recommend the three-month, and they agreed with that. I do not know, Suku, if there is anything else you found interesting about that whole thing? Sukumar Nagendran: No. I would add to that, Sean, that it is clear that the FDA is pretty comfortable with our safety and efficacy data up to a six-plus age group, and they are willing to let that dataset be used for the less than six. I mean, that two- to three-year-old, as you pointed out, because of the brain volume adjustment that is needed, they felt that was the appropriate age group for us to give them a small sample set on safety. And that could potentially be more than adequate for a complete BLA filing. Sean Nolan: Yep. Yep. And, Gil, your question about the CMC—can you just restate that? Gil Blum: Yeah. Just wondering because you have an RMAT designation, is there any feedback the FDA could provide you on what you have submitted ahead of completing your filing, or is that not part of—thanks. Sean Nolan: So, I mean, we have got—because of Breakthrough, it is an additional way to get access to the FDA. So we do have our first Breakthrough meeting with the agency coming up, and there will be more of those along the way. But we will use that to have a discussion around potential BLA submission scenarios and working to get at your question, which is, you have seen CMC, you have seen our preclinical—just working to gain alignment on the completeness of the packages that we are putting together and what we share with the FDA. So I think we are going to have really good line of sight to where we stand. CMC is a good example. We could not be in a better position right now. So back when we did our first commercial lot, the agency said they deemed that the clinical lot and the commercial lot were analytically comparable. Now that we have done more lots, they are continuing to say that. And now they are saying, if you continue to demonstrate this through PPQ, you can pool your data from Part A and from the pivotal and from ASPIRE because the product is the same. So that is the best you can possibly have right now, and I think that is an example of working closely with the agency. I know that they feel like there is nothing more on the preclinical side that needs to get done. It really is just generating the pivotal data and the ASPIRE data are going to be the last aspects of the submission package. Gil Blum: Excellent. Very helpful. Thank you. Sean Nolan: Thanks, Gil. Operator: Our next question comes from the line of Chris Raymond with Raymond James. Your line is now open. Chris Raymond: Hey, thanks guys and congrats from us on the progress. Just have maybe a competitive two-part question, I guess, and maybe also wanted to drill down a bit on the BLA filing timing question. So Neurogene has made some comments in the past couple weeks to the effect that the six-month time endpoint—from—they have gotten word from FDA that that is not clinically meaningful. And, Sean, I think I have heard you say, you know, the difference here is you guys will have 12-month data from Part A to supplement, and that is kind of the difference maker. But I guess, is that the only difference maker or, you know, is there potentially something else, like maybe the risk-reward of the therapy or other factors? And then the second point is—you got my attention with some of your market research commentary. And I think it is an aspect that could be pretty important. You know, you are talking about intrathecal administration being able to reach patients outside of large centers of excellence, and being able to dose patients at the community center. Do you have any detail around the breakdown of patients between these centers of excellence and out in the community, and from just sort of the setup there commercially, just assuming both therapies are on the market at some point? Sean Nolan: Yeah. I can say that the research we have done to date shows that about 50% of the Rett patients are associated with a center of excellence. That means that over the course of one year, there is one visit to the center of excellence. So that does not necessarily mean that it is the most convenient place for them to get the therapy. And put it another way, there are 50% more patients outside of the COEs. So we think it is very important to make sure that there is a network of care that gets to where the patients are. And so with the data we have, we are able to map where the patients are, and then we are going to take a very thoughtful approach about working through access to care and making sure that the people that are using this are well trained, the facility has the right mechanisms in place to support gene therapy and things of that nature. But what is nice about the intrathecal route is it allows us to broaden that footprint in a relatively straightforward manner. And getting access to patients is the most important thing. Suku, let us tag team the question on the meaningfulness of six months. I mean, I can just say the FDA never said that to us. So every case is unique. I guess the simplistic way I would answer that question is it depends what data you are generating in the first six months. And I think if those data are compelling from a clinical perspective, then the agency is going to take note. Sukumar Nagendran: Yeah. What I would add to that, Sean, is that I have not seen any data from Neurogene’s initial studies that show that they have actual clinical efficacy in the first six months post-dosing. And most of their clinical impact appears to come much later, maybe 10 months post-dosing. Usually, FDA looks at proof of concept before they agree to an earlier analysis. And we have six-month interim analysis from our Part A data that is more than convincing, that allowed them to say, yes, we can evaluate and bring the dataset in for actual review and approval if necessary. And then the second component is they always wind back to the construct because Neurogene’s construct is single-stranded. And single-stranded constructs usually take much longer to come together in the nucleus of the cell of interest and actually become efficacious from a protein production standpoint. So I think that may have played a role in also the six-month interim analysis being given to us while in that case there may have been some pushback. Sean Nolan: Yeah. The other thing too, just to highlight, Chris, Daybue got approved on 12-week data. So I think it is really just what is being demonstrated at a point in time. Right? We—Yep. Hope that helps. Chris Raymond: Yeah. Sure. Operator: Thank you. In the interest of time, we ask that you please limit yourself to one question. Our next question comes from the line of Jack Allen with Baird. Your line is now open. Jack Allen: Congrats on the progress made over the course of 2025. I wanted to ask briefly about how enrollment is going in the pivotal studies and what aspects you are looking to screen these patients on the basis of. Can you talk a little bit about the pre-dosing period in the trial and how you are identifying patients that are really apt for the clinical studies that you are enrolling right now? Sean Nolan: Well, Suku, we can tag team this. I would say, number one, Jack, there is consistency between Part A and Part B in that the severity of the patients is still a CGI-S between four and six. We did—one of the things we did—we have not provided the number—but one of the things we did put in the pivotal protocol is that, of the 28 milestones, there needs to be a certain number of open milestones to get into the study from a screening perspective. So that is probably the most interesting aspect of things that you are looking at. Suku, you want to talk about the enrollment and the progress that we are making? Sukumar Nagendran: Yeah. So, Jack, I mean, we have dosed multiple patients already. Multiple sites are active, and we are—frankly, I would say—we potentially have more patients than we need to actually screen and go forward. And we are well on our timeline when it comes to dosing all 15 patients and actually having results, hopefully, for the six-month interim analysis by the end of this year. I think that is where things are progressing at the present time. Sean Nolan: Yeah. Jack, I think one thing that is really important is that the training at the sites is super important, meaning we have created a standalone DMA. Right? That is the Developmental Milestone Assessment—our name for that—call it a new COA that we developed to standardize the data collection of the milestones. And the FDA—that was really where they spent most of their time with us—was how are you going to systematize and make sure that the data collection are rigorous to make sure that we understand at baseline what a patient could and could not do and then you replicate that in a consistent manner every single time you conduct the DMA. So that is really—Suku’s team has done a stellar job in activating the sites and training the sites and getting them up and running. But that really is, in our discussions with the agency, a fundamental aspect that we wanted to make sure we had our hands tightly around. Jack Allen: Great. Congrats on all the progress. Sean Nolan: Thanks, Jack. Operator: Our next question comes from the line of Yanan Zhu with Wells Fargo. Your line is now open. Yanan Zhu: Hi. Thanks for taking our questions. Wanted to follow up on the pooling of data between the Phase 1/2 and the pivotal study, given that that sounds like something—you know, why you did—that is why you did the manufacturing comparability study. So in what form will the data be pooled? Are we talking about a supportive dataset separate from the top primary endpoint analysis, or could the two studies combine into one and give one number in a label? And then I have one additional question. Thanks. Sean Nolan: I would, at a high level, say what the pooling allows you to do is multiple types of analyses looking at the totality of your data. So you can pool for safety. You can pool for efficacy. You can pool for age distribution. You can pool for a lot of different things. And the agency is going to do all those things anyway. The fact that you have got the ability to do that, though, does create the ability for you to support further your package because you have got different and, I would say, additive analytics that you can utilize to support the package that you are making. I do not know what else you would add to that, Suku. Sukumar Nagendran: Well, Sean, I would not add much else other than to say it gives us a comprehensive, large dataset in this rare disease of Rett syndrome that allows us to look at, as you said, multiple analyses, but also duration of efficacy, and impact on multiple milestone achievements over time. So I think it is a pretty comprehensive strategy that we have come up with. And frankly, the FDA agrees with us, given that they agree that, from a technical aspect, the clinical lots and the commercial lots that they are studying are both equitable. So I think it is a huge win for us to move this forward in a rapid manner. Yanan Zhu: Right. Thanks. Congrats for the ability to do that. And my follow-up question is on expectations for the upcoming data update. Now with 12 months of data on the milestones, what is the expectation for patients continuing to gain milestones between six and 12 months? And is there any chance to observe a loss of milestones, or is that captured in the data so that we have a sense of true durability? Thank you. Sean Nolan: Yeah. Yanan, we would expect that there are continuous gains that happen, continuous improvements that occur over the course of time. So that is what we would anticipate seeing in this dataset. I would say, in terms of loss of gains and things like that, it is not what you would anticipate. I can say that, you know, sometimes on the day of assessment, you can see something may not be demonstrated. Like, if one of the girls has the flu or a UTI, it is very possible that they are not feeling well, and they are not going to demonstrate something. It does not mean they lost it. And I can just say in what we have reported on to date, we have never seen a loss of any gain. So we will work to highlight that when we give the update in the first half. Kamran Alam: Thank you. Operator: Our next question comes from the line of Whitney Ijem with Canaccord Genuity. Your line is now open. Whitney Ijem: Hey, guys. I am going to ask one ASPIRE question in two parts. First is just to double check on the language around the extrapolation, is there any nuance there or like math involved, or is it just that the REVEAL efficacy will be assumed for the ASPIRE population? And then the second question is just on dosing in ASPIRE. I think there was mention of a scaling based on brain volume. So any color you can give on that? Sean Nolan: Yeah, Whitney. There is really no math on the extrapolation. It was really just whatever you see in the six-plus, that is going to get extrapolated into the younger age group. So that is where the alignment is with the agency. It is at a macro level. And then on the second part of the question on the scaling, yeah, it is a very consistent mathematical equation that you use from the preclinical to get to your human equivalent dose. And we will be using that same calculation in the two- to three-year-old. So, Suku, I do not know if there is anything more you would add to that. Sukumar Nagendran: All I would add, Sean, is that the calculation for the two- to four-year-olds is essentially equivalent to the 1e15 dose from an efficacy standpoint when we look at our preclinical models. Sean Nolan: Right. So in terms of what they are getting— Sukumar Nagendran: Exactly. Sean Nolan: Yes. Exactly. Sukumar Nagendran: So that makes sense, Whitney. So a two-year-old, even though they are getting less of a dose, it is equal to the 1e15 in a larger person. So they are getting the same therapeutic effect. Sean Nolan: Effect. Right. Whitney Ijem: Yep. Understood. That makes sense. Thanks so much. Sean Nolan: Thank you. Thank you. This concludes the question-and-answer session. I would now like to hand the call back over to Sean Nolan for closing remarks. Sean Nolan: We appreciate everyone taking the time to listen to our 2025 update and corporate update as well, and look forward to making progress throughout the year and providing an update in Q2. Take care, everyone. Operator: This concludes today’s conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Ocean Power Technologies Fourth Quarter and Full Fiscal Year 2025 Earnings Conference Call. A webcast of this call is also available and can be accessed by a link on the company's website at www.oceanpowertechnologies.com. This conference call is being recorded and will be available for replay shortly after its completion. On the call today are Dr. Philipp Stratmann, President and Chief Executive Officer; and Bob Powers, Senior Vice President and Chief Financial Officer. [Operator Instructions] Now I am pleased to introduce Bob Powers. Please go ahead, sir. Robert Powers: Thank you, and good morning. After the market closed yesterday, we issued our earnings press release and filed our annual report on Form 10-K for the period ended April 30, 2025. Our public filings are available on the SEC website and within the Investor Relations section of the OPT website. During this call, we will make forward-looking statements that are within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include financial projections or other statements of the company's plans, objectives, expectations or intentions. These statements are based on assumptions made by management regarding future circumstances over which the company may have little or no control and involve risks, uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. Additional information about these risks and uncertainties can be found in the company's Form 10-K and subsequent filings with the SEC. The company disclaims any obligation or intention to update the forward-looking statements made on this call. Finally, we posted an updated investor presentation on our IR website. Please take a moment to review it as it provides a nice overview of our company and strategy. Now I am pleased to introduce Dr. Philipp Stratmann. Philipp Stratmann: Good morning, and thank you for joining us today. Fiscal 2025 was a transformational year for OPT. We delivered real measurable value in a global market undergoing rapid change, and we entered fiscal year '26 positioned to lead in the sustainable data-driven blue economy. Today, I'll walk you through our most important achievements, the momentum they've created and the opportunities ahead as we execute our strategic growth plan. In fiscal '25, OPT was granted a U.S. Department of Defense Facility Security Clearance at the Secret level, a milestone that significantly expands our eligibility for classified defense work. This clearance not only affirms OPT's compliance with federal security protocols, but also opens the door to high-value multiyear programs where few companies are even allowed to compete. It expands our addressable market and deepens our partnership potential. Let's talk about backlog and visibility. I'm incredibly excited to announce that we entered fiscal '26 with $12.5 million in funded backlog, the highest in our history. This reflects multi-quarter fulfillment of both international defense and commercial contracts and signals strong customer confidence in our solutions and our ability to execute. It is a clear indicator that our strategy is working and that demand is real and growing. Over the past year, we deployed our artificial intelligence capable Merrows and WAM-V platforms across the Middle East, Latin America and the Indo-Pacific, establishing a meaningful global footprint in allied defense and commercial markets. These deployments validate not just demand, but our readiness to deliver. They demonstrate that our autonomous platforms can operate across maritime, surface and subsea domains in some of the world's most demanding environments. That's real-world mission relevance and it sets us apart. We also expanded key partnerships with defense, drone and subsea leaders, including Red Cat, Teledyne Marine and regional integrators in the Middle East and Latin America. These partnerships extend our reach, improve integration and distribution and help reduce customer acquisition costs. They are a force multiplier for OPT, enabling faster scale, broader validation and deeper market access, especially in regions where local partners accelerate our credibility. OPT's WAM-V platforms were selected to participate in the U.S. Navy's Project Overmatch autonomy exercises, one of the Pentagon's most advanced and future-focused initiatives. Our involvement speaks volumes. It reflects a high-trust relationship with the Navy, confirms our alignment with multi-domain interoperable system goals and positions OPT for access to future large-scale defense procurement channels. This year's performance reflects the strength of our disciplined operating model. We're executing with a streamlined team and leaner OpEx structure, yet delivering more for our customers, our partners and our shareholders. By aligning resources with top priorities, we've increased our operating efficiency without compromising our delivery capability or innovation road map. This positions us not only to weather volatility, but to scale with purpose as demand accelerates. We view this phase of lean execution not as a constraint, but as a foundation. With core systems, processes and leadership in place, we are prepared to scale responsibly as opportunities mature. We have retooled our go-to-market engine with purpose and position. Under new leadership, our sales organization has been redesigned to drive mission alignment, speed and scale, not just transactions. We've upskilled the team, deepening their ability to engage on operational needs and procurement realities across defense and maritime domains. At the same time, we've expanded internationally, matching talent to strategic growth corridors in NATO aligned Latin America and Middle Eastern markets. Complementing this internal transformation is a growing network of region-specific resellers, force multipliers who understand local dynamics and are helping us deliver OPT solutions faster and further than ever before. This is not just a strategic investment. It's already delivering results. We're seeing improved customer engagement, higher win rates and increasing traction in markets where we previously had limited presence. This go-to-market evolution is a foundational pillar of our growth strategy, enabling us to solve real-world customer missions at scale. We are taking some important steps to reduce our customer acquisition costs. First, as I just mentioned, we have repositioned our commercial team to place greater emphasis on achieving more scalable, repeatable sales. Second, we are expanding our dedicated demonstration fleet to accelerate customer engagement and close new business in less time and with greater efficiency. Finally, we have realigned our operations and development teams to drive best-in-class customer experience through more innovation and enhanced operational execution. In turn, that empowers us to concentrate more on deepening relationships with existing customers and expanding value-added services like training. Our commitment to continuously strengthen our commercial effectiveness and operational agility underscores our professionalism and readiness as a leading provider in autonomous maritime systems. Becoming an AUVSI Trusted Operator marks an important milestone in this evolution. Additionally, I want to highlight a significant milestone that speaks to the discipline and maturity we're building across OPT. Just 2 weeks ago, we achieved ISO 9001 certification for our quality management system, a globally recognized benchmark for excellence in engineering, manufacturing and service delivery. This is not just a compliance achievement. It is a reflection of OPT's evolution into a scalable, repeatable and process-driven provider of maritime solutions. Whether we are deploying a WAM-V for autonomous ISR missions activating a PowerBuoy for persistent offshore power or integrating Merrows to enhance maritime domain awareness. We are now doing so under a globally standardized framework of quality and continuous improvement. For our customers, ISO 9001 is often a prerequisite for long-term engagement. It is a signal that we're not just innovative but dependable at scale. In fact, we're already seeing this resonate with procurement teams who have told us that certification materially strengthens our position in upcoming opportunities. Internally, this also reinforces our operational foundation as we expand internationally and engage with increasingly complex supply chains and mission profiles. It's about delivering excellence consistently, which is exactly what the market demands from the next generation of maritime intelligence providers. We believe this certification will meaningfully support our growth strategy while deepening the confidence of our partners, investors and customers alike. Finally, fiscal year 2025 brought headwinds, particularly in defense, where election-related uncertainty and the pending administration transition delayed procurement activity. Combined with broader macroeconomic volatility, these factors slowed pipeline conversion, resulting in revenue below expectations and a shortfall against our Q4 calendar '25 profitability target. Still, OPT ended fiscal '25 with strong momentum, record backlog, a growing pipeline and increasing demand across core markets. These results reflect the strength of our positioning and the resilience of our team. We remain confident that fiscal '26 will mark a step function in execution as we advance towards sustained growth, profitability and long-term value creation. In closing, we have turned the corner. OPT is no longer just about wave energy. We provide full-service maritime domain awareness that is persistent and deployed from platforms that enable multi-asset capabilities. We have become a multi-solution platform company, one that's enabling customers to operate further offshore, stay deployed longer and lower costs through intelligent autonomy. Our strategy has been simple but disciplined, diversify, scale and improve margins. We've moved beyond grant-funded R&D into real commercial contracts. We've expanded into defense, energy and international markets, and we're focused on repeatable, scalable services that drive long-term value. We're not pitching potential, we are executing. Every contract validates our pioneering efforts to develop our model. We are well positioned to meet all challenges in our prosperous horizons and capitalize on the heavy lifting completed to date. The technology has proven is continuing to accelerate. The customers are buying. With capital in hand, platforms in the water and a growing global footprint, OPT is no longer proving it's scaling. Thank you for your continued support. I will now turn it over to Bob, who will walk through our financial performance in more detail. Robert Powers: Thanks, Philipp. Let's begin with our financial performance for the year. Fiscal 2025 was a record year for revenue. We generated $5.9 million, a 7% increase over the $5.5 million recognized in the prior year. What makes this growth especially meaningful is that it was achieved alongside a 26% reduction in operating expenses, which I'll cover in more detail shortly. The revenue growth reflects the strength of our strategy, the discipline of our execution and the growing demand for OPT's autonomous and maritime solutions. One of the biggest drivers was our expansion in Latin America, which made a meaningful contribution to both our FY '25 revenue and the $12.5 million in backlog Philipp referenced. This underscores our focus on diversifying revenue across high-growth international markets, and we believe it sets the stage for future expansion. Looking ahead, scaling revenue remains a key priority as we convert backlog into deliveries and expand into new channels. Our focus remains squarely on delivering consistent performance and long-term value for shareholders. Turning to expenses. Operating expenses for fiscal 2025 totaled $23.4 million, down 27% from the $32.2 million in FY '24. This $8.8 million reduction reflects deliberate organization-wide efforts to optimize headcount, reduce third-party costs and tighten expense control across all functions. This level of cost discipline, combined with top line growth shows that we're building a model with meaningful operating leverage, a critical step towards sustainable profitability. As a result, our loss for the year improved by 22% from $27.5 million to $21.5 million. This progress shows we're staying disciplined with spending while still growing the business and meeting our customer commitments. On the balance sheet, as of April 30, 2025, our total cash position, including cash, restricted cash, equivalents and short-term investments stood at $6.7 million compared to $3.2 million for the close of FY '24. Just after year-end, we further strengthened our liquidity by securing a $10 million unsecured debt financing from an institutional investor. This investment represents a clear market endorsement of OPT's platform, technology road map and long-term value creation strategy. Their participation not only bolsters our capital base, it also equips us to execute on our record backlog, scale up international operations and pursue near-term profitability with greater confidence. On cash flow, net cash used in operating activities for the year was $18.6 million, an improvement of over 38% compared to the $29.8 million in FY '24. This reduction reflects the impact of our cost management initiatives, but partially offset by final payouts related to bonuses and earn-outs accrued in the prior fiscal year. That concludes our financial update. We're encouraged by the demand signals we're seeing across defense and commercial markets and energized by the progress we've made. As Philipp noted, new initiatives, particularly our strategic partnerships and international deployments position us to capitalize on momentum, expand our customer base and continue advancing towards scalable recurring growth. As we move into Q1 of FY '26, our focus is on executing backlog deliveries, converting demonstrations into multiyear deals and maintaining tight expense control. Thank you again for your support. Operator: [Operator Instructions] Our first question is coming from Glenn Mattson from Ladenburg Thalmann. Glenn Mattson: Congrats on the strong growth in backlog and pipeline. I'm curious a little bit more about the pipeline. Just can you give us some understanding and background about how you compile that number and just some background around the conversion and how well -- how mature some of that is? So just color on that would be great. Philipp Stratmann: Yes, absolutely. Glenn, thanks for being on. The way -- as you've seen, the way we look at our pipeline, it is everything that is an actual opportunity where we're under discussions with a customer. With the retooling of the commercial team, and you've seen we recently onboarded a new SVP for Commercial, Jason Weed, who's a retired U.S. Navy captain and others that we've brought on. We've really positioned the company to now start increasing and accelerating the conversion rate as we're looking at what is a qualified opportunity or opportunity under negotiation with the customer to then focusing on the delivery portion of the pipeline and then converting that to revenues. With the key appointees in the present administration in place, we feel very confident about seeing an increase in the conversion rates. And equally, as the world starts recognizing that a hybrid fleet and unmanned operations in the ocean are a critical portion of operations, we look forward to participating in that. So I think as we stated, these are qualified opportunities, opportunities under negotiation, and we are increasing -- or we're feeling confident about increasing the conversion rate as we move through the current fiscal year. Glenn Mattson: And then I guess as a follow-up, the -- you've done a great job cutting costs. Can you just talk about your capacity and ability to meet demand should it accelerate faster than you expect or... Philipp Stratmann: Yes, absolutely. We've got -- obviously, we've got the facility in New Jersey, where we got just under 60,000 square feet. We got our smaller prototyping facility in the Bay Area in Northern California. And under the leadership of our operational team, we have redesigned the layout of parts of our facilities so that we can scale up more quickly. But obviously, as you pointed out on the cost cutting, we're doing so in a way that is conscious of working capital. so that we can convert as and when required without front-loading too much into inventory prior to starting the conversion. Operator: Next question is coming from Peter Gastreich from Water Tower Research. Peter Gastreich: Peter from Water Tower. So congratulations to the team on your results and executing on your strategy in 2025. It's really great to see this meaningful momentum in your backlog and also the cost cuts. It looks like you're well positioned starting off in 2026. I just have a couple of questions. One on the backlog and the other is on the gross margin. Just related to the backlog, could you talk -- first of all, so thanks for the previous question on that as well. But could you please talk about the breakdown of the backlog in terms of product type? Any type of color you can give on that would be great. Philipp Stratmann: Thanks for being on, Peter. And it is -- what we are pleased with in the backlog is the fact that it is a very healthy split between buoys, vehicles and associated services. What we're also starting to see, and as I mentioned in my remarks earlier, with becoming an AUVSI Trusted Operator, we're seeing an uptick in service revenues related to training that are sitting in -- starting to sit in backlog and certainly sitting in the pipeline. So we feel good about the fact that this is not based on one single one of our solution, but truly is part of what we set out to do, which is deliver autonomous persistent and resident ocean intelligence, whether that is buoys, vehicles, enabled software that sits at the edge across them or whether it is services that are related to getting these items deployed. Peter Gastreich: Okay. And yes, just a question on the gross margin. So over the last year, your gross margin was on the decline and -- just looking out towards your backlog right now and eventually having that feed through, how should we be thinking about how your gross margin would be evolving sort of broadly going forward? Philipp Stratmann: Yes. I think we're seeing an uptick again where gross margin is going to start heading. Some of that has been related to the fact, as Bob mentioned, we've been working on projects such as Overmatch and others, which have been revenue generating, but more focused on larger scale demonstration efforts. As we transition further into operational use of the systems, we look forward to seeing that corresponding uptick in gross margins, which are driven to some extent by the service revenues that I just mentioned as those, a, they're recurring; and b, they do carry with them a higher gross margin when we start delivering them. Operator: Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Philipp Stratmann: Thank you for being a shareholder and for supporting our ongoing growth and execution of our strategy. We look forward to continuing to deliver for you, our customers and all of our stakeholders. Thank you. 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: Good day. And welcome to the Chicago Atlantic BDC, Inc. 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. Note that this event is being recorded. I would now like to turn the conference over to Tripp Sullivan. Please go ahead. Tripp Sullivan: Thank you. Good morning. Welcome to the Chicago Atlantic BDC, Inc. conference call to review the company’s results. On the call today will be Peter S. Sack, Chief Executive Officer; Thomas Napoleon Geoffroy, Interim Chief Financial Officer; and Dino Colonna, President. Our results were released this morning in our earnings press release, which can be found on the Investor Relations section of our website and in our supplemental earnings presentation filed with the SEC. A live audio webcast of this call is being made available today. For those who listen to the replay of this webcast, we remind you that the remarks made herein are as of today and will not be updated subsequent to this call. Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including statements related to financial guidance, may be deemed forward-looking statements under federal securities laws because such statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risks. Chicago Atlantic BDC, Inc. assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, 03/19/2026. Therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. I will now turn the call over to Peter S. Sack. Please go ahead. Peter S. Sack: Thanks, Tripp. Good morning, everyone. During the fourth quarter and the full year, the results continued to demonstrate that Chicago Atlantic BDC, Inc. is a uniquely positioned BDC investing primarily in direct loans to privately held companies in niche markets with the goal to deliver an attractive return while creating downside protection. We are one of the only public BDCs that is primarily focused on and able to lend to cannabis companies. We also focus on pockets of the lower middle market commonly overlooked by capital providers. We believe that this differentiation provides uncorrelated, distinct credit opportunities. Net investment income for the fourth quarter of 2025 was $0.36 per share and $1.45 for the full year, demonstrating the potential of the business model to generate a yield to book value of 2.7% for the fourth quarter and 11% for the year. During the fourth quarter, we executed on our pipeline, funding $31.7 million across seven new investments, including four new borrowers, effectively utilizing additional capacity on our credit facility. During the fourth quarter, the broader BDC market was impacted by negative sentiment among investors, with many more BDCs trading below net asset value by the end of 2025. Investors placed less reliance on book value as a primary valuation metric and focused more on potential dividend cuts and losses in existing loan books. They were concerned that the fraud in the private credit markets may have led to looser underwriting standards, potentially pressuring portfolio performance and driving higher defaults. Additionally, the drop in the Fed Funds rate in December has caused fears that this will weigh on earnings and dividends. Meanwhile, in global markets, companies operating in the software industry, which were heavily backed by private credit, fell out of favor with the perception that AI would eliminate the need for their services. And now there are developing concerns about the banks that have backed private credit. It is clear to us that Chicago Atlantic BDC, Inc. stock is being influenced by negative sentiment currently surrounding the private credit markets. I think it is important for us to reiterate how differentiated Chicago Atlantic BDC, Inc. is from the rest. Chicago Atlantic BDC, Inc. operates within a unique intersection of credit: the emerging sector of the U.S. cannabis industry and lower middle markets underserved by other capital providers. Our thesis is simple. We apply best-in-class sector expertise, highly developed relationship-based sourcing capabilities, and fundamental credit and investment principles to make debt investments to borrowers with limited sources of debt capital. We take advantage of limited lending competition to structure, first, what we believe to be differentiated downside risk in senior secured positions and, second, a highly outsized return profile relative to broader credit and lending portfolios. Our portfolio has extremely limited overlap with other private credit managers, and the drivers of current private credit market pressure simply are not relevant to us. We have limited exposure to software, receivable factoring, and no exposure to recent examples of fraud in some large syndicated facilities. Our focus areas have not experienced an over-allocation of capital leading to compressed yields that we see across other sectors of private credit. Our strategy is built on a disciplined focus on credit and collateral. We work collaboratively with our borrowers to create value, and our work is executed by a team of originators and underwriters with deep industry and rigorous risk management expertise. The metrics speak for themselves, so I will call out a few. The public BDC industry data points that I am about to mention are taken from Raymond James’ BDC Weekly Insights as of 03/13/2026, and Oppenheimer’s BDC Quarterly report as of 12/16/2025. Our weighted-average yield on debt investments as of 12/31/2025 was 15.8%, compared to 10.8% for the average public BDC. 99.5% of our portfolio is senior secured, compared to other BDCs that have an average of 24.9% exposure to subordinated debt, equity, and JV investments. 73% of the portfolio at par is either fixed rate or floating rate at floor, insulating the company against a drop in interest rates. Only 27% of the portfolio is impacted by a further decline in interest rates. We calculate that a 100 basis point drop in rates only impacts NII of the company by approximately 1%. Only 3% of the portfolio is currently exposed to the software industry. Our unique investment strategy is focused on underserved markets, providing no overlap in investments made by any other public BDC that we are aware of. We conduct full due diligence on new credits ourselves instead of relying on underwriting conducted by bankers or co-investors, and we carefully monitor the performance of each of our portfolio companies ourselves. The portfolio is under-levered with only $25.0 million of debt at quarter end and with a 0.08x debt-to-equity ratio. This compares with the BDC average of 1.2x debt-to-equity. Assuming full utilization of our $100.0 million credit facility during the year, we would still be well below industry averages of leverage. Lastly, we have no nonaccruals compared with an industry average of 3.3% of cost. Today, we announced a $0.34 dividend, marking the sixth consecutive quarter at that rate. Total dividends paid out for the year now total $1.36 per share. The platform is performing well, exceeding returns from the larger BDC market with low downside risk and an expanding opportunity set. Recent M&A in the cannabis market has increased our pipeline for 2026. In addition, in recent months, there has been positive momentum in cannabis policy. At the federal level, there was a meaningful shift in December 2025 with the current administration committed to pursuing the reclassification of cannabis from Schedule I to Schedule III. While this is not federal legalization, rescheduling would represent a significant federal policy change. As I have said before, rescheduling would dramatically increase cash flow after taxes for our borrowers. In the short term, this would translate into higher equity valuations of both public and private cannabis companies. There would likely be increased M&A activity and higher capital expenditures driven by the higher free cash flow of operators, leading to greater opportunity for our platform. In the medium and long term, there is lingering uncertainty that would continue to limit investment until federal regulators put in place a regulatory framework for cannabis as a Schedule III substance. This continued ambiguity will continue to create challenges for U.S. public listings and access to debt markets. We highlighted a slide in this quarter’s supplemental on how this may set the stage for improved industry economics without opening the door for increased lending competition. We believe that Chicago Atlantic BDC, Inc. is well positioned to benefit from these developments, although the success of our strategy is not dependent on these changes. We manage the business assuming the regulatory environment does not change. With this mindset, we will continue to pursue higher yields in niche markets where we believe the risk/reward is attractive, deploying available liquidity, all while continuing to build a portfolio with strong credit metrics and protections. We have carved out a unique strategy with above-market returns, opportunity for growth, and limited competition. We have demonstrated that this strategy delivers positive results. I will now turn the call over to Thomas Napoleon Geoffroy to discuss the numbers in greater detail. Thomas Napoleon Geoffroy: Good morning. Thanks, Peter. I want to highlight the investor presentation that was filed with the SEC this morning that serves as our earnings supplemental. I will start with the investment portfolio. We have 39 portfolio company investments. 25% of the portfolio is invested in non-cannabis companies across multiple sectors. The average credit investment size is approximately 2.4% of our debt portfolio at fair value. 73% of the debt portfolio is insulated from further rate declines due to either fixed rates or floating-rate floors. The gross weighted-average yield of the company’s debt investment portfolio is approximately 15.8%, which is in line with last quarter’s yield, and none of our loans are on nonaccrual status. As of 12/31/2025, the company had $25.0 million of debt outstanding, all of which was drawn from the revolving line of credit. As of 03/18/2026, the company had approximately $47.5 million of liquidity, comprised of $25.5 million of borrowing capacity under its $100.0 million credit facility, subject to borrowing base and other restrictions, and approximately $22.0 million of cash on the balance sheet. We started 2026 with ample liquidity and lower leverage than other BDCs, providing us the flexibility to deploy additional capital strategically. Financial highlights for the fourth quarter were: gross investment income totaling $14.2 million, compared to $15.1 million for the third quarter. The net decrease in investment income of approximately $0.9 million from the prior quarter was primarily due to one-time fees from unscheduled repayments recognized in the third quarter of approximately $2.0 million, which were partially offset by increases of approximately $0.7 million in amendment and origination fees and an increase of $0.4 million of interest income for the fourth quarter. Net expenses for the quarter were $5.9 million, compared to $5.6 million in the third quarter. Net investment income for the quarter was $8.3 million, or $0.36 per share, compared to $9.5 million, or $0.42 per share, in the third quarter. The decrease again was primarily due to the impact of one-time fees earned in the third quarter. Net assets totaled $303.4 million at quarter end. Net asset value per share was $13.30, compared to $13.27 in the third quarter. At quarter end, there were 22.8 million common shares issued and outstanding on a basic and fully diluted basis. I will now turn it over to Dino to talk about our originations efforts. Dino Colonna: Thanks, Tom. During the fourth quarter, we funded $31.7 million in new debt investments to seven portfolio companies. Four of these investments are new borrowers to the BDC. Of these new debt investments, 100% were senior secured, and 89% are floating-rate loans at their floor at quarter end. During the fourth quarter, we also had loan repayments and amortization totaling approximately $11.0 million, which included paydowns of $8.1 million. As of the end of the fourth quarter, there were approximately $25.0 million in total unfunded commitments for the portfolio. To date in 2026, we have funded $93.9 million in new investments to seven borrowers, of which three were new to the BDC. Included in this was a refinance of $38.3 million to our largest borrower. We are excited to have delivered a bespoke solution to the company that met their needs while maintaining an attractive and well-structured investment for the portfolio. We have had $55.7 million in payoffs from borrowers quarter-to-date, resulting in approximately $40.0 million in net originations thus far in 2026. The pipeline across the Chicago Atlantic platform as of quarter end, which includes cannabis and non-cannabis opportunities, totaled approximately $732.0 million in potential debt transactions. The breakdown of the opportunity set includes approximately $616.0 million in cannabis opportunities and approximately $116.0 million in non-cannabis opportunities. As Tom mentioned, we have approximately $48.0 million of liquidity to grow the portfolio, but as always, we will maintain our disciplined approach to underwriting and structuring investments that deliver above-market risk-adjusted returns. We have had to show patience in the past when the markets around us seemed to underprice risk, and that patience has paid off, because we have the portfolio strength and liquidity to go on offense when many other private credit managers are busy playing defense. Both the cannabis and non-cannabis verticals continue to perform well within the portfolio, while demand for new debt capital within the lower middle markets remains healthy. As Peter mentioned, recent M&A activity in the cannabis industry has been a positive for our pipeline. Our disciplined and thoughtful approach to sourcing and structuring investments has resulted in a portfolio with low correlation to other asset classes and the broader private credit markets. This differentiated portfolio has been intentionally constructed and is a direct result of how we approach creating value for our investors, and that includes investing in underserved market niches, which allows for favorable downside protection with pricing power. We have a limited reliance on sponsor-driven deal flow, so we tend to maintain control over underwriting, structuring, and documentation, and we believe that not chasing the ultra-competitive parts of the market translates to better credit performance in the long run. We perform our own rigorous due diligence on all of our investments, and our strategy remains almost entirely focused on first-lien senior secured loans that are structured with lender-friendly covenants. The underlying strength of the portfolio and structural protections from further interest rate risk have allowed us to continue to generate a stable and durable dividend. The underlying loans in the portfolio also continue to demonstrate significant health overall, with low net leverage, high interest coverage, and no nonaccruals. There is also no overlap with investments made by other public BDCs that we are aware of. And finally, the portfolio is underleveraged compared to industry standards. Periods of macro uncertainty tend to expose underwriting shortcuts and reward discipline. Market anxiety today is real; our consistent, repeatable approach has positioned us well for what we believe is an increasingly attractive deployment environment. We do not compete by chasing large sponsor-driven deals or by stretching on leverage, structure, or pricing. Our focus remains on disciplined sourcing, conservative structuring, and rigorous underwriting. It is how the platform was built, and it is how we intend to grow. We believe this approach has produced and will continue to produce an idiosyncratic credit opportunity that targets above-market returns with a strong emphasis on capital preservation. Thank you for your continued support. We look forward to updating you again next quarter. Operator, we are now ready for questions. Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, you may do so at that time. We will pause momentarily to assemble our roster. The first question today comes from Pablo Zuanic with Zuanic and Associates. Please go ahead. Pablo Zuanic: Thank you, and good morning, everyone. Just a two-part question. First, in terms of housekeeping, when you talk about the $732.0 million pipeline, is that for Chicago Atlantic Group as a platform or for LEND specifically? And then I was looking at the third quarter press release. I do not think a pipeline number was given then, but if you can talk about how much the pipeline grew between November and now, March, that is the first part of my question. The second part is that I know you addressed it in part, but we had this executive order talk about rescheduling. How are discussions playing out with potential borrowers? Has there been a cadence change? Maybe there were a lot of discussions in December and January, but here we are in March, and we still do not have news on rescheduling. Has that changed? If you can talk about the cadence and how the discussions have changed with operators in general. Thank you. Dino Colonna: Thanks, Pablo. On the pipeline, that is across the entire platform, and last quarter we reported approximately $600.0 million of a pipeline, so that is a nice increase to the $700.0 million and change we just mentioned. Peter S. Sack: Thanks. I will start with your last question, Pablo, as it relates to pipeline. Rescheduling, I think, has breathed a new, fresh air of optimism into the industry. We are seeing it from a couple of perspectives. We are seeing greater eagerness to execute on consolidation, as larger players see potentially a short window and execute acquisitions before rescheduling becomes effective. And then on the supply side, we are seeing greater eagerness of operators who have stayed on the sidelines, not pursuing exits in a very low valuation environment, starting to cross the sidelines and consider exiting or selling their businesses. All of that volume and transaction activity is positive for Chicago Atlantic BDC, Inc. because it creates more new opportunities to provide financing. And then, difficult to quantify across the industry, we are seeing a general stronger willingness for operators to invest in their businesses and invest in growth. Pablo Zuanic: And just to follow up on that same point at the state level, given the news flow in Virginia—Pennsylvania is more of a question mark—do you want to highlight any states where you are seeing more activity in terms of potential catalysts at the state level? Peter S. Sack: The thoughts are still early in Pennsylvania, but there is certainly eagerness in Virginia. I think the consolidation tends to be focused on states where the fundamental economics are attractive. We are still seeing lots of consolidation activity in Ohio, Missouri, and Maryland to some extent, and more mature states that have seen stabilization in their markets, including legacy states like Colorado and California. Pablo Zuanic: Thank you. And then, in terms of the credit facility, you gave the numbers for March 18—$100.0 million in total. Is there room to increase that revolver in 2026, or would that be difficult right now? Peter S. Sack: It certainly is possible, and there are other options of financing available to BDCs, including unsecured financing. Pablo Zuanic: But obviously issuing equity would not be an option given the discount to par value, right? Peter S. Sack: Right. Pablo Zuanic: Okay. Thank you. And then, I totally agree with the fresh air and new optimism in the industry, of course. But when I look at some of your new loans in the fourth quarter—about $14.0 million on a new company—there was just one new borrower on the cannabis side and, I think, three on the non-cannabis side. I do not know what that ratio is for the first quarter. I am just trying to say, yes, we have to focus on the par value, so there was more lent to cannabis than to non-cannabis, but in terms of operators, it seems that you are increasing much faster the number of borrowers in terms of operators on the non-cannabis side versus cannabis. Do you want to share some light on that? Or just by definition, loans to smaller to middle-market companies in non-cannabis will be smaller than cannabis loans? Dino Colonna: It is more the latter, and our non-cannabis positions in that portfolio are going to reflect a much more diversified portfolio of positions and issuers than our cannabis positions. Pablo Zuanic: And then you spoke about the first quarter new loans. You mentioned a bespoke solution for one of your operators. Do you want to share more color in terms of what that was specifically, and maybe on the borrower? Peter S. Sack: I am reluctant to provide the borrower’s name because we have not disclosed it in a specific filing. But in this case, this was a first-out/last-out financing in partnership with a large financial institution. We are finding that as the industry matures, partnership with bank partners can provide both attractive return and risk profiles for lenders such as Chicago Atlantic BDC, Inc., while also providing increasingly competitive and sustainable credit facilities for some of the larger, most creditworthy operators in the space. Pablo Zuanic: I am going to have two more questions, and apologies if there is anyone else on the queue. In terms of repayments that we saw in the fourth quarter and the ones we have seen so far in the first quarter, does that come out to be a bit of a surprise? At least in terms of my modeling, it is a lot more than I had expected, and I do not understand what is driving that. Or is it just normal for the course of business? Peter S. Sack: As far as payoffs in Q4, the payoffs have been idiosyncratic across a fairly large number of borrowers with relatively small individual positions. But I do think it is reflective of that broader transaction activity that has accelerated within the market. Broader transaction activity means both more frequent financing opportunities but also more frequent refinancing opportunities of our existing portfolio. With regard to originations and payoffs as a subsequent event, the large origination and the large paydown were connected and were the same borrower. Pablo Zuanic: Okay. That is good. Thank you. That is all for me. Operator: The next question comes from Mitchell Penn with Oppenheimer. Please go ahead. Mitchell Penn: Morning, guys. I am just following up on Pablo’s question. You talked about the states. Is it possible to get disclosures on which states these companies are in? Peter S. Sack: We will explore that for next quarter. Mitchell Penn: A second question: can you remind us, in terms of your valuations—BDCs all employ third-party valuation services, and they use them in different ways—can you walk us through how you use third parties and valuation services for your portfolio? Because it is a little different than most of the BDCs, as you mentioned. Peter S. Sack: We utilize a third-party valuation provider to value every position each quarter. Other BDC managers opt to use third-party advisers, in some cases, for each position only once per year, relying on internal evaluations through the balance of the year. We have opted to provide a more transparent and consistent approach. Mitchell Penn: Got it. Thanks. And my last question: what percent of the portfolio overlaps with REFI? Peter S. Sack: We have not published that number historically. I think we would take it under consideration for next quarter in conjunction with your question on state-by-state exposure. Mitchell Penn: Okay. Thanks. That is all for me. Thanks so much, guys. Peter S. Sack: Thank you, Mitchell. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Good day, everyone, and welcome to the Movado Group, Inc. Fourth Quarter 2026 Earnings Conference Call. As a reminder, today's call is being recorded and may not be reproduced in full or in part without permission from the company. At this time, I would like to turn the conference over to Allison C. Malkin of ICR. Please go ahead. Allison C. Malkin: Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer, and Sallie A. DeMarsilis, Executive Vice President and Chief Financial Officer. Before we get started, I would like to remind you of the company's safe harbor language I am sure you are all familiar with. The statements contained in this conference call which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release. If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure will be provided as supplemental financial information in our press release. I will now turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group, Inc. Efraim Grinberg: Thank you, Allison. Good morning, everyone, and welcome to Movado Group, Inc.'s fourth quarter and full year conference call. Joining me today is Sallie A. DeMarsilis, our Executive Vice President and CFO. After our prepared remarks, we will be glad to take your questions. After a challenging fiscal 2025, we are pleased to return to growth in fiscal 2026. Revenue increased 2.7% to $171,300,000 and adjusted operating income grew 28.7% to $34,800,000, reflecting strong execution across our strategic priorities. These results exceeded our expectations and improved as the year progressed, with fourth quarter sales up 5.6% to $191,600,000, led by our U.S. wholesale and retail business. Adjusted operating income grew by 6.2% for the quarter to $14,400,000. We also generated strong operating cash flow of $57,900,000 and ended the year with $230,000,000 in cash and no debt, which gives us significant flexibility as we move forward. These results were helped by a strong euro, offset somewhat by the impacts of a very strong Swiss franc. During the year, we advanced our strategic priorities, which focused on four key areas. Let me discuss highlights of each. First, putting the customer at the center of everything we do. This focus continues to guide how we operate across all channels. Digitally, we strengthened our engagement with consumers, and we are seeing the benefits of a more connected omnichannel approach. From a category standpoint, we saw continued strength in both the fashion watch and accessible luxury segment in the U.S. Importantly, we are seeing increased participation from younger consumers, along with a strong return of women into the category driven by smaller case sizes and jewelry-inspired designs and fresh styling. In our company stores, we delivered a strong holiday season with sales up 9% for the fourth quarter driven by higher average selling prices, improved merchandising, and better in-store execution. Our teams have done an excellent job elevating the consumer experience at the point of sale. Second, delivering consumer- and brand-focused innovation. Innovation was a major driver of our momentum, particularly in the fourth quarter. Across our portfolio, traditional watches are resonating strongly, especially with younger consumers who are responding to new shapes, sizes, and design expressions. Within the Movado brand, we had an excellent quarter. Wholesale sales grew over 25%, and our e-commerce business increased 18%, reflecting the success of our brand refresh initiatives we began implementing about eighteen months ago. From a product standpoint, we had a number of exciting highlights, including continued strength in our mini bangle collection, which is performing very well with women across multiple shapes; strong demand for our Movado 1917 Heritage Collection, which is resonating with both men and women; ongoing growth in higher price point automatic watches, led by the Museum Classic Automatic; and encouraging traction in jewelry, particularly with our Ono collection. Looking ahead, we are excited about the pipeline of innovation we will bring to consumers. We will be introducing Valeura, a beautiful new women's Museum watch; expanding our Movado Bold offering with Verso S; and launching a new heritage model inspired by the original Movado Kingmatic. We are also expanding our jewelry collections, including our new Curve line for women. Our licensed brands also delivered strong innovation and growth. Coach performed very well, driven by Gen Z engagement and the continued success of the Sami family, along with Caddie and Reese. We are clearly capturing the momentum of the parent brand with Gen Z consumers. Hugo Boss saw strong momentum with Grand Prix and growth in women's with the May collection. Lacoste continued to perform, led by the LC33 and strength in men's jewelry, particularly the Metropole bracelet. In Tommy Hilfiger, we are seeing a strong response to new shapes, smaller case sizes, and trend-right design. In Tommy Hilfiger men's, we have also seen success with Oxford, inspired by the traditional Oxford shirt. In Calvin Klein, we saw a strong reaction to our innovation in watches with the introduction of our new Pulse Mini, our unique circle-in-the-square watch design. We also received a favorable response to our CK Motion for him and believe that men's represents a significant opportunity going forward. Finally, Olivia Burton continued its growth in both the U.K. and the U.S., driven by Mini Grove and Grosvenor, supported by our Mini to the Max campaign. Overall, we are very encouraged by the return of consumers to the fashion watch category, particularly women, and we believe we are well positioned to capitalize on that trend. This brings us to our third strategic priority: connecting with consumers through compelling storytelling across digital and communication platforms. This is an area where we have made meaningful progress. During the holiday season, our Movado campaign featuring brand ambassadors including Ludacris, Christian McCaffrey, Julianne Moore, Jessica Alba, and Tyrese Halliburton performed very well. What made it effective was the authenticity of the storytelling, with each ambassador sharing how they personally connect with our brand. We amplified this across digital channels, social platforms, and through influencers and content creators, allowing us to reach consumers in more relevant and engaging ways. Looking ahead, storytelling will be even more important as we celebrate Movado's 145th anniversary. We are developing a series of campaigns that highlight our Swiss heritage, craftsmanship, and the growing interest in our vintage timepieces, which we believe will further strengthen our emotional connection with consumers. As a company, we will also be amplifying our investments by expanding our consumer insights capabilities, further reinforcing the importance of placing the consumer at the center of each of our brands' universe. And finally, driving profitability and strengthening our gross margins. This remains a key focus for us. Despite external pressures, including tariffs, we were able to maintain stable gross margins while significantly increasing operating income. This reflects the disciplined execution of our teams across pricing, sourcing, product mix, and cost management. As we move forward, our initiatives are clearly focused on improving profitability. This includes continuing to shift our mix towards higher-margin products; driving more full-price sell-through through stronger brand positioning while reducing promotional activity; and improving efficiency across our supply chain and operations. We see a clear path to margin expansion over time as we continue to execute against these priorities. Overall, we are very pleased with the momentum in the business as well as the strong execution and collaboration our teams have demonstrated in advancing our strategic initiatives. The investments we have made over the past several years are delivering results, and we believe we are well positioned for continued growth. At the same time, we remain mindful of the broader environment. The conflict in the Middle East has introduced additional uncertainty in global markets. We are closely monitoring the situation while supporting our teams and partners in that region. I will now turn the call over to Sallie A. DeMarsilis to review our financial results in more detail. Then we will be happy to take your questions. Sallie A. DeMarsilis: Thank you, Efraim, and good morning. For today's call, I will review our financial results for the fourth quarter and fiscal year. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the fourth quarter and full year of fiscal 2026 in our press release issued earlier today, which also includes a table for GAAP and non-GAAP measures. We were very pleased with our overall top-line performance for fiscal 2026, which delivered 2.7% growth over fiscal 2025 and included a year-over-year increase of 5.6% in the fourth quarter. For the fourth quarter of 2026, sales were $191,600,000 as compared to $181,500,000 last year, reflecting growth in our own brands, licensed brands, and in our company stores. In constant dollars, net sales increased 1.8%. By geography, U.S. net sales increased 11.2%. International net sales increased 1% compared to the fourth quarter of last year, with strong performances in certain markets such as Europe and Mexico, offset by a weaker performance in the Middle East, where we are making progress rebuilding this important market. On a constant currency basis, international net sales decreased by 5.9%. We held gross margin nearly flat at 54.1% of sales as compared to 54.2% in the fourth quarter of last year. We absorbed increased U.S. tariffs with favorable channel and product mix, increased leverage of lower fixed costs over higher sales, and the favorable impact of foreign currency exchange rates. Operating expenses were $89,300,000 as compared to $84,800,000 for the same period of last year. The increase was driven by higher performance-based compensation, partially offset by a planned reduction in marketing expenses. Higher sales and gross margin dollars more than offset the increase in operating expenses, resulting in operating income increasing $900,000 to $14,400,000 compared to $13,500,000 in 2025. We recorded approximately $600,000 of other non-operating income in 2026 as compared to $1,400,000 during the same period of last year. Income tax expense was $17,000,000 in 2026 as compared to $3,100,000 in 2025. Net income in the fourth quarter was $13,000,000, or $0.57 per diluted share, as compared to $11,500,000, or $0.51 per diluted share, in the year-ago period. Now turning to our fiscal year results. Sales were $671,300,000, an increase of 2.7% from fiscal 2025. In constant dollars, the increase in net sales was 1%. U.S. net sales increased by 4.3%. International sales increased 1.6% but decreased 1.5% on a constant currency basis. Gross profit was $363,600,000, or 54.2% of sales, as compared to $353,100,000, or 54% of sales, last year. The increase in gross margin rate was due to favorable channel and product mix and increased leverage of lower fixed costs over higher sales, partially offset by increased U.S. tariffs and the unfavorable impact of foreign currency exchange rates. Operating income was $34,800,000, or 5.2% of sales, compared to operating income of $27,100,000, or 4.1% of sales, in fiscal 2025. We recorded approximately $4,500,000 of other non-operating income in fiscal 2026, which was primarily comprised of interest earned on our global cash position, as compared to $6,600,000 during the same period of last year. Net income was $30,400,000, or $1.34 per diluted share, as compared to net income of $25,400,000, or $1.12 per diluted share, in the year-ago period. Now turning to our balance sheet. Cash at the end of the fiscal year was $230,500,000, and we had no outstanding debt. Accounts receivable were $102,000,000 as compared to $93,400,000 at the same period of last year. This increase was driven by timing and the mix of our business. Inventory at the end of the fiscal year, which included $3,100,000 of IEEPA reciprocal tariff, was $158,300,000 as compared to $156,700,000 at the same period of last year. Capital expenditures were $4,500,000, and depreciation and amortization expense was $9,400,000. As it relates to share repurchases, during fiscal 2026, we repurchased approximately 208,000 shares. As of 01/31/2026, we had $46,100,000 remaining under our 12/05/2004 authorized repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase plan to offset dilution in fiscal 2027. Given the current economic and geopolitical uncertainty, including the unpredictable impact of the current Middle East conflict and ongoing tariff developments, the company has elected to not provide a fiscal 2027 outlook at this time. We will now open for questions. Thank you. Operator: 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 speaking. One moment, please, while we poll for questions. Our first question comes from the line of Owen Rickert with Northland Capital. Please proceed with your question. Owen Rickert: Hi, Efraim. Hi, Sallie. Thanks for taking my questions here. First for me, Movado.com grew 18% in 4Q 2026. What is driving that strong performance? Is it traffic, conversion, higher ASPs, or is it a combination of all of that? And maybe how are you thinking about the D2C mix of the business longer term? Efraim Grinberg: Thank you for that question, Owen, and good to talk to you. We see a number of things driving it, and I think you actually touched on all of them. It is a higher level of engagement from consumers and the connection that Movado is making with new innovation and shapes and sizes across our product segments, also driving higher price points with the growth of automatic watches, particularly for men. We are really encouraged. I think D2C will continue to play a significant role in our business, but so will our wholesale business. We saw growth in most of our biggest customers, particularly during the fourth quarter, and a lot of those trends continued into the first quarter. It is exciting to see the engagement across the Movado brand. Owen Rickert: Got it. And secondly for me, U.S. net sales grew about 11.2% in the quarter. Can you break down how much of that growth was volume-driven versus price-driven, and how you expect that mix to evolve throughout fiscal year 2027? Efraim Grinberg: I think it is mostly volume-driven. We passed some very minimal price increases last year, mostly to try to offset tariffs somewhat. We have passed a second price increase in the first half of this year across multiple brands. We are really looking at the consumer returning to the fashion watch category as well as the accessible luxury category, particularly in the United States. As I highlighted in my comments, we see the strength of women in the category, and they are the main shoppers in the marketplace. It is great to have them back after a long period of time where there was probably less interest in watches from women, but to see younger women lead that effort in brands like Coach and Movado is really exciting. Owen Rickert: Great. And then you called out tariffs as a partial offset to gross margins during the quarter and the year. Can you quantify the total tariff drag on gross margin in basis points for fiscal year 2026? And then, if possible, what is embedded in your internal planning assumptions for fiscal year 2027? Sallie A. DeMarsilis: Sure, Owen. I will take that and hopefully get you all the information you are looking for. The IEEPA tariffs this past fiscal year hurt us in our cost of goods sold by about $10,000,000. In basis points for the year, it was 150 basis points. It was a little more than $3,000,000 a quarter toward second, third, and fourth quarter of this year, just based on the timing of it. So the fourth quarter was impacted by about 180 basis points in gross margin. That recaps what happened this past fiscal year. Going forward, we have some information now and are using our current tariff information in our current plans for the next fiscal year, which is closer to about a 10% tariff on top of what is a normal duty. Efraim Grinberg: Correct. Sallie A. DeMarsilis: Hopefully, that answers what you are looking for. Owen Rickert: Absolutely. Thank you. And then lastly for me, you repurchased roughly 208,000 shares in fiscal 2026. Under that current program and given the approximately $46 million remaining and strong cash balance, what would accelerate the pace of buyback activity? Efraim Grinberg: It is a combination of factors. We are always very prudent with our cash balances and want to make sure that the dividend is solid, and it has been and continues to be important for us, and I believe important for our shareholders. Then we try to offset dilution with our share repurchases. I would expect that to occur as we move forward, especially with our significant cash balances. Owen Rickert: Great. Thanks for taking my questions. Efraim Grinberg: Thanks, Owen. Thank you, Owen. Operator: Our next question comes from the line of Hamed Khorsand with BWS Financial. Please proceed with your question. Hamed Khorsand: Good morning. I will start with a follow-up on the tariffs. I know last year you had been highlighting maybe potentially saving because of the revision to the Swiss tariff. Do you think that still exists now, and how much of that would be able to help in this fiscal year? Efraim Grinberg: Good to talk to you today, Hamed. At one point, for about a six-week to two-month period, Swiss tariffs went to 39%. We brought in very little during that period of time with the idea that 39% tariffs would not be long lasting. I do not think we will see a major benefit this year because we did not bring in a lot of inventory at those types of tariff, only on things that we needed to have in a timely manner. If anything, it might have caused our inventories to be a little lower at the end of the year and as we entered this year, particularly in the Movado brand, which is the one that was most impacted by the 39% tariff rates. The new tariff rate the Swiss and the U.S. agreed to was a 15% tariff, but right now, it is a 10% plus about 6% to 8% duty rate on top of that. We do not really know which one will be the permanent tariff rate going forward. As we highlighted in the comments, there is still a lot of volatility around tariffs because there is a statute being used to impose the current 10% rate that is above the current duty rates, whereas the 15% was an all-inclusive rate when the Swiss and the United States negotiated that. Hamed Khorsand: Given the high growth rate out of your wholesale segment, is that because you think your wholesalers and retailers were underinvested in inventory and they are catching up, or was that driven by demand? Efraim Grinberg: It was really driven by demand. It was driven by sell-through, and we still have retailers right now chasing inventory, and that is one of the things that we are focused on because sales were better in Q4 in Movado, particularly in the wholesale channel. We are focused on rebuilding our inventory and accelerating the delivery of those products on our best-selling products in Movado. Hamed Khorsand: And my last question is, given the increase in number of units sold and how much you should be producing, will there be some sort of operational efficiency here? Efraim Grinberg: Ultimately, as volume increases—and we did benefit, I believe, this year a little bit from leveraging our supply chain infrastructure over greater volume—as volume increases, it should help to leverage our gross margin and cost of goods sold. Hamed Khorsand: Are you assuming anything in 2027 right now? Efraim Grinberg: Sallie, I will turn that over to you. Sallie A. DeMarsilis: As Efraim mentioned in his comments, we are focused on improving our profitability, and as part of that, we are looking at the efficiencies that you were just talking about through supply chain or other operations. We do not provide forward-looking outlook, but it is something our teams are focused on, and what you just mentioned is very much a part of it. As demand grows, you can get leverage on your purchases and so forth with increased units. Hamed Khorsand: Okay. Great. Thank you. Operator: We have no further questions at this time. Mr. Grinberg, I would like to turn the floor back to you for closing comments. Efraim Grinberg: Thank you. I would like to thank all of you for joining us today. We are really pleased with how our year turned out and where our brands stand right now. We hope that this conflict is short-lived and that business can return to a somewhat normal basis on a global basis. Thank you again for participating today. Thank you. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Hello, and welcome, everyone, to the Lands' End, Inc. fourth quarter and fiscal year-end 2025 earnings call. Later, you will have the opportunity to ask questions during the question and answer session. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Tom Altholz. Please go ahead. Good morning. Tom Altholz: And thank you for joining us this morning for a discussion of our fourth quarter and fiscal 2025 results, which we released this morning and can be found on our website, landsend.com. I am Tom Altholz, Lands' End, Inc.’s Senior Director of Financial Planning and Analysis, and I am pleased to join you today with Andrew McLean, our Chief Executive Officer, and Bernie McCracken, our Chief Financial Officer. After the prepared remarks, we will conduct a question and answer session. Please also note that the information we are about to discuss includes forward-looking statements. Such statements involve risks and uncertainties. The company's actual results could differ materially from those discussed on this call due to such differences including, but not limited to, those items noted and included in the company's SEC filings, including our Annual Report on Form 10-Ks and Quarterly Reports on Form 10-Q, and our Solicitation/Recommendation Statement filed on Schedule 14D-9 on March 11, 2026. The forward-looking information that is provided by the company on the call represents the company's outlook as of today, and we do not undertake any obligation to update forward-looking statements made by us. Subsequent events and developments may cause the company's outlook to change. During this call, we will be referring to non-GAAP measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings release issued earlier today, a copy of which is posted in the Investor Relations section of our website at landsend.com. With that, I will turn the call over to Andrew. Andrew McLean: Thanks, Tom, and good morning, everyone. The fourth quarter was a turning point for Lands' End, Inc. as we returned to top-line growth driven by our most significant businesses and capped off the year in which we strengthened the foundation for sustainable, profitable, long-term growth. During the quarter, we also announced a transformative transaction with WHP Global, which we are confident builds on that platform and will help deliver compelling value for shareholders. More on that in a moment. We delivered 5% comp growth, driven by strong execution across our owned, licensed, and marketplace businesses. GMV grew by mid-single digits in the fourth quarter, reflecting broad-based momentum and increasing relevance of the Lands' End, Inc. brand. Seeing that momentum show up clearly across the business, our third-party marketplace business grew mid-single digits, led by double-digit growth at Amazon where our iconic Bedford quarter-zip sweater was the number one pullover on Amazon during Black Friday weekend. Our business in Europe delivered high single-digit comps, reversing a multi-quarter trend, as we reenergized our customer file and delivered on our solutions focus. Our school uniform channel sustained double-digit growth, building on another successful back-to-school season. In our U.S. consumer business, our solutions-based products and franchises continue to resonate. Iconic products, including Christmas stockings and canvas pocket totes, were both up double digits year over year, and we saw strength across our weatherproofed assortment as well. Increased investment in digital marketing accelerated customer acquisition, delivering measurable results by year end. We acquired 20% more new-to-brand households in Q4 versus last year, our strongest performance since the pandemic, and ended the year with positive new-to-brand growth overall. And we are not just adding customers, we are leveraging the household. Lands' End, Inc. is increasingly a multigenerational brand serving grandmother, mother, and granddaughter. We also leaned into brand building in new ways, launching our holiday shop earlier and activating experiences like our chaotically customized New York pop-up, which further helped introduce Lands' End, Inc. to new and younger customers, driving awareness and engagement across social platforms. Our product franchises continue to differentiate Lands' End, Inc., and they are driving profitable growth. As noted, we moved quickly to spot and lead the quarter-zip trend that took off on TikTok over the holidays, and it became a number one item across multiple customer touch points. In women’s wear, our “owning the weather” strategy is working. Feather-free outerwear and Drifter sweaters delivered best-ever sales and best-ever margin fourth quarters. Turning to our adjusted EBITDA, as we closed out the year, we made a deliberate choice to prioritize growth and set the stage for long-term value creation. We delivered $102 million in adjusted EBITDA for the full year, up 10% from last year and in line with our expectations. The key takeaway here is that we executed our strategy, delivered significant growth, maintained a disciplined approach to expenses, and strengthened our financial foundation to generate ongoing momentum. We are well positioned heading into 2026, and I could not be more confident about the opportunities ahead for Lands' End, Inc. and the value-creation potential for our investors. That is important perspective in the context of the transaction we announced with WHP Global. It is a partnership we are executing from a position of strength. This partnership with WHP Global, which includes the creation of a joint venture to monetize and build on our IP through licensing, is compelling for our shareholders and other stakeholders. It is designed to do several things at the same time: unlock near- and long-term value, accelerate brand licensing growth, materially strengthen our balance sheet, and expand our strategic flexibility as the same operating company our customers know and love. The WHP Global team, led by Yehuda Shmidman, has a successful track record licensing and growing a number of diverse and well-recognized brands like ours. We expect their deep expertise will further expand Lands' End, Inc. into new categories, channels, and internationally, creating incremental long-term, higher-return growth opportunities for Lands' End, Inc. shareholders. As part of this strategic transaction, Lands' End, Inc. will contribute its intellectual property to the JV and receive $300 million in cash proceeds from WHP for WHP’s controlling 50% stake in the JV. After the transaction closes, we plan to use the majority of the cash proceeds to retire our term loan in full. Let me reiterate, the transaction will leave us with zero term loan debt and markedly reduced interest expense. This immediate balance sheet reset will provide the opportunity to evaluate and execute on potential investments, including investing in our direct-to-consumer and outfitters growth and capital allocation alternatives that drive long-term shareholder value. This is not a sale of the whole company. Under our long-duration license agreement, Lands' End, Inc. will pay royalties to the JV and, in return, receive roughly 50% of both our royalty payment and other royalty payments received by the JV net of JV expenses. Additionally, WHP has launched a tender offer to purchase approximately 2,200,000 shares at $45 per share, a substantial premium to the pre-transaction trading levels. This purchase of Lands' End, Inc. stock represents WHP’s further commitment to the success of Lands' End, Inc. as a whole, validating our belief in the strength of our business. Finally, there is significant upside potential for Lands' End, Inc. shareholders to participate in the WHP monetization event, including an IPO or sale of WHP. Specifically, Lands' End, Inc. may exchange its 50% stake in the joint venture for shares in WHP Global itself at the same valuation multiple as WHP receives as part of its monetization event. This is notable, as IP companies like WHP Global have historically raised capital at valuation multiples in the mid to high teens, higher than typical retail apparel companies. Overall, this partnership validates both the lasting strength and the tremendous opportunity ahead for the Lands' End, Inc. brand. We believe in the company and our shareholders, and we look forward to completing the transaction in the coming weeks and continued growth of our brand thereafter. I will now turn it over to Bernie to discuss our performance in more detail. Bernie McCracken: Thank you, Andrew. For 2025, total revenue was $462,000,000, an increase of 5% compared to 2024. GMV grew mid-single digits driven by strong performance in our Outfitters, third-party marketplace, and U.S. e-commerce businesses. Gross profit increased by 4% compared to last year. Gross margin in the fourth quarter was 45%, a slight decrease of approximately 30 basis points year over year, driven by tariff headwinds partially offset by our solutions-focused go-to-market strategy. When excluding the impact of the unmitigated IEPA tariffs, gross margin increased by approximately 140 basis points to 47% compared to the prior year. Our U.S. e-commerce business grew 5% compared to Q4 2024, with record new-to-brand acquisition up 20% year over year. Third-party marketplace revenue grew 4%, led by Amazon, which was up double digits year over year. Nordstrom also delivered strong outerwear results. We began to see the benefits from the transformation work in our European e-commerce business as sales grew 9% during the fourth quarter. SG&A expenses increased by $12 million year over year. As a percentage of net revenue, SG&A increased approximately 90 basis points, primarily driven by increased marketing spend to drive new customer acquisition and incentive accruals, partially offset by leverage from revenue growth and operational efficiencies. We delivered adjusted EBITDA of $47 million, which represents a 9% increase compared to the prior year. For the fourth quarter, we had adjusted net income of $24 million, or $0.76 per share. As Andrew stated, we capped off a year where we strengthened the foundation for sustainable, profitable growth across the company. For fiscal 2025, we delivered GMV growth in the low single digits, a gross margin increase of approximately 80 basis points to 49%. When excluding the impact of the unmitigated IEPA tariffs, gross margin expanded by approximately 180 basis points to 50%. Adjusted EBITDA increased by 10% to $102 million, with adjusted EBITDA margin increasing by approximately 90 basis points to 8%. The increase was primarily driven by the expansion of our licensing and Outfitters businesses and continued gross margin expansion. Adjusted net income increased by over 100% to $27 million, with adjusted earnings per share increasing by $0.46 to $0.86. Moving to the balance sheet, inventories at the end of the fourth quarter were $269 million compared to $265 million a year ago. When excluding the impact of IEPA tariffs on our inventory position, inventory in the fourth quarter decreased 2%. In terms of our debt, at the end of the fourth quarter, our term loan balance was approximately $234 million, and we had zero borrowings on our ABL. Turning to the pending transaction, we will use the majority of the $300 million in cash proceeds from the WHP transaction to fully repay our term loan, leaving us with no term loan debt, enhanced liquidity, and significantly reduced interest payments. As Andrew noted, this balance sheet transformation will provide more flexibility to the company as we consider and pursue opportunities to enhance shareholder value. In addition to Lands' End, Inc. paying royalties to the JV, excess cash generated by the JV will be distributed quarterly to both Lands' End, Inc. and WHP based on the ownership split, less expenses of the JV. This includes royalty income from Lands' End, Inc. and other licensees of the JV. Finally, as a reminder, we have $9 million remaining on our existing share repurchase program. As outlined in our earnings press release, and as a result of the previously announced joint venture with WHP Global, we are not providing forward financial guidance at this time. With the closing of the transaction anticipated by the end of our first quarter, we expect to provide financial guidance with the release of our first quarter results. With that, I will turn the call back to Andrew. Andrew McLean: Thanks, Bernie. So here is what investors should expect from us in 2026. First, we will maintain our focus on driving profitable customer growth, improving acquisition, retention, and lifetime value through smarter marketing, better personalization, and a stronger digital experience. Second, we will keep raising the bar on product and innovation, leaning into franchises and solution-oriented assortments that are clearly resonating. Third, we will stay disciplined on costs and execution, continuing to fund growth while building operating leverage. And fourth, we will expand the brand’s reach, particularly internationally, through licensing and third-party marketplaces, and with WHP’s platform and global expertise, we can move faster into new categories and geographies. To support that growth agenda, we are also excited to welcome Sarah Sylvester as Chief Marketing Officer. This is a new role for Lands' End, Inc. and reflects our commitment to building brand awareness and accelerating growth. Sarah brings more than two decades of marketing leadership experience, most recently at Victoria’s Secret Pink, and we are confident she will make an immediate impact. As Bernie referenced, we are looking forward to discussing our strategy and outlook in more detail on our first quarter earnings call following the close of the WHP transaction. During that enhanced earnings call, we will walk through our priorities and what we believe is a clear path to long-term shareholder value creation. Let me close with the headline. Lands' End, Inc. is well positioned in 2026 and beyond, as highlighted by our growing operational and financial strength. Our fiscal 2025 performance, together with the opportunity to deliver outstanding value through the partnership with WHP and our strengthened balance sheet, give us great confidence in the future of this iconic company. In addition to established long-term GMV growth, in 2025, we returned to revenue growth and proved the model across channels. We delivered positive performance across the business, including 5% comp growth in the most recent quarter, and we did it with momentum coming from multiple engines: Outfitters, marketplaces, and our own digital businesses. Just as important, we strengthened the health of the business. Customer acquisition accelerated. We acquired 20% more new-to-brand households in Q4, and our product-led, solutions-based approach continued to win across multigenerational customer segments. Now we are entering fiscal 2026 with a clearer financial profile and more strategic flexibility. With the WHP transaction, we will be well positioned to drive real growth while also investing in our future. We are excited to work with the WHP team and take the Lands' End, Inc. brand to new levels. We are confident that this transaction and all that it enables will result in a better company for customers, a better company for partners, and, importantly, a better company for shareholders. As always, we will be guided by a fierce adherence to taking actions that improve our earnings power and delivering outstanding shareholder value. Thank you to our teams and customers. And with that, we will take your questions. Operator: Thank you. And we will take our first question from Marni Shapiro with Retail Tracker. Your line is now open. Marni Shapiro: Hey, guys. Congratulations. This is so exciting. Congratulations on the hire of Sarah. I guess, Andrew, I have a big-picture question. I know you are going to discuss strategy once the deal closes, but the hire of Sarah is a big deal for Lands' End, Inc. From my vantage point, you guys have been very quick on marketing already online, especially, you know, St. Patrick’s Day, you were right there with the green set. It was fantastic. I guess, how should we think about it differently? Is this external reach? Is this influencers, events? Could you talk a little bit about where your head is at with that? And then just one very quick one on the WHP deal. Will you guys be able to work with them closely to make sure that any deals that they sign align with your brand vision for Lands' End, Inc. going forward so that they do not go off and do something that is not within what works for the brand? I am assuming yes, but I just want to ask the question. Andrew McLean: Hey, Marley. How is it going? Hey. It is nice to hear from you. Let us start with the WHP question. It is a great question, and obviously that came into how we selected our partner. We did not want to go with any partner; we wanted to go with a partner that was like-minded and saw the world in the same way as us. So that made that part of the negotiation really easy. You are not going to find the brand distributed through your local car wash kind of thing. So we feel good about it. And actually, the message really is one of amplification. We view the partnership with WHP as being one that can really amplify and grow the licensing business that we had already successfully put in place. Actually, that sort of turns to your next question, which is what Sarah is going to be doing, and that is really about amplification. Lands' End, Inc. has not had a CMO in ten years, and marketing had been split somewhat between creative and performance. Since I have come in, we have been reuniting that and really getting more focused around the customer. We have our solutions; we are ready for life’s every journey, and that puts the customer at the center of everything we do. But underneath Sarah is some great talent. We have brought John Caruso in, and I think you have probably seen the impacts of his work over the last few months as he has joined us. In particular, I can point to the CDK on Instagram that we did where we caught the trend and we went with it. Same with St. Patrick’s Day. And actually, that ripples all the way through our business now where we do not run in silos, we run as a company. So if you think about what we did with the quarter-zip during the fourth quarter and hit that trend head on, you and I talked; you saw that coming through on the homepage, where we converted the homepage overnight to really reflect what was in the market. And for us, as we bring Sarah in, it is about bringing our existing customer along—they are still incredibly important to us—by adding a new and younger customer and really pulling all the strands together. And I have said this from our own licensing business and I will say it again from the WHP transaction: when we are distributed widely, more people are seeing the brand, more people will come and see the website that we run, and I think they will be more impressed. Then, as we continue to amplify what we are doing with WHP, we will amplify what Sarah and her team are doing to really broaden that reach. And I looked at the May catalog yesterday. We were doing sign-off on that. You are going to be blown away by it. Some of the changes that we are already starting to put in place are incredible. So it is traditional media that we have used. It is newer media. It is a broader reach. It is an amplification story. I am really excited about this year. Marni Shapiro: Oh, well, congratulations. I wish you luck, but it looks fantastic. Fantastic. Thanks, guys. Thanks, Bonnie. Operator: Thank you. And we will take our next question from Dana Telsey with Telsey Group. Your line is now open. Dana Telsey: Hi, good morning, everyone. As you think—one of the interesting numbers that you mentioned there, Andrew, was the, I think it was 20% new-to-customer file, that you grew the customer base this year. Who were those customers? Is it a different demographic, the same demographic? And does this mean that your overall customer file grew? And then on just—I know you are not giving guidance, but any general themes of puts and takes on margins as we go through the year? Whether it is tariffs, whether it is what is happening with energy prices, and how you are thinking, given the solutions-based offering, how you are thinking about pricing this year? And just lastly, Europe—big turnaround in Europe—what are you seeing there? And then the Amazon piece up double digits. You mentioned Nord—I think last quarter you mentioned Macy’s. How are those third parties doing? Thank you. Andrew McLean: Okay. I am going to try and hit them all, Dana. I was writing like fury as you were asking those questions. Yes, the customer file started growing again, and I think that has been really important—that we have started to establish a really solid core of customers. And I think as we look at it, we have spent a lot of time segmenting this file and making sure that they get segmented messages and we can increase that reach. There was a point I made in my commentary, and it was that we are approaching the whole household, and that was not a trivial point. That was a really important point where we want to be a broadly distributed brand with real broad reach. And we have product and solutions and franchises to do that. So that notion of hitting grandmother, mother, and granddaughter is absolutely key for us. And we test it out. We are testing it out physically. We are testing it out in our e-commerce strategies. And one of the places that you would have seen it was within our chaotically customized Christmas store—say that fast—in SoHo, where we really were able to welcome, in particular, mothers and daughters. Mother would bring in her tote bag and we would embroider that. Granddaughter would come in and pick up a new tote. And the ability to customize, I think, is one of our secret weapons that we are really able to bring to the fore. As we have been through a process over the last year, I think everyone is aware of that. One of the things that came out of it is that we have a real competitive advantage in our ability to customize. And customization is really the future because it is a form of personalization. So if you look at the dots that we are joining—where we brought Sarah in, we brought John Caruso in, we have upped the intensity of that marketing team, we have been working on our product franchises—and we are putting together a view of a different and a differentiated customer, approaching each segment and giving them more of what they want. You will see that continue across the year. Now this year, we will make a move to Shopify and replace our back end with SAP, and that is going to give us even more opportunity to drive that customization. And then I think the amplification we get with WHP and the distribution we get will further open us up to a broader array of customers. So that customer that is coming in is younger. That customer that is coming in is just as wealthy in their own way, and they have significant opportunity. And we are generating them from all of our businesses. And I hope we would be remiss if we did not mention that many of them come in through our school uniforms. And you saw the school uniforms business was strong. And it is—like, that is a great customer to come to us, and that is a 40. In terms of the year, there are lots of—we will give full guidance on it. I would say the jumping-off point for it is the $102 million that we just reported for the year 2025. We expect that we will be building on that, and I think we will look forward to discussing that in more detail. In terms of how we think about the tariffs and the war that is going on, we are not seeing any impact from the war on the business right now in the U.S. As the notion—and we are seeing this in European media outlets—as the notion of fuel shortages, fuel rationing, airline flights being canceled, starts to take more grip in Europe, we are seeing some agitation from some of our more economically disadvantaged customer groups. We will continue to watch that. We have not seen that in the U.S. It would be, again, remiss of me not to say that we are not watching for it, and we are going to take action around it. But that is certainly a challenge to come. With regard to tariffs, we have been very aggressive with tariffs, and I think that the team has done a wonderful job. We brought in a new Head of Sourcing, Matt Filvecchio. Matt is a very tenured, seasoned executive, joins us from, latterly, J.Crew, and I think he is going to really help us get to grips further with the tariffs so that we can mitigate those in the business. I think you asked me about Amazon being up double digits. I mean, we took a conscious decision to drive Amazon. We see a new customer there. We see a younger customer there. And they are very trend driven. We are going to continue to follow that customer and do that in a profitable way—more excited about where the future can go with Amazon—and continue to believe in opening up to this notion of convenience. And I think if I had to pick out a couple of threads for 2026 overall, clearly, we want to stand for our franchises. Clearly, we want to reach beyond our existing customer cohort and reach a younger customer. And I think the third part of this is we want to deliver on our promise of convenience. I think convenience is going to be incredibly important to the customer and something that they will be willing to pay for and, at the very least, expect. Now I am conscious I might have missed some of your questions, Dana, so I will give you a second to come back to me. Dana Telsey: The only other thing I wanted to know: on the European business—well, you mentioned the European business and the strength there—anything else on any other wholesale customers to mention? And then, Bernie, just obviously debt repayment—anything we should be thinking about on the balance sheet as we go through the year? Thank you. Bernie McCracken: Sure. I think as we have noted, as part of the WHP deal and when it closes, we will be paying off our long-term debt, which will then, of course, create flexibility for us to now pursue other opportunities to drive shareholder value through capital allocation alternatives. So we are pretty excited about the flexibility this will give us going forward. Yes. We would expect to come out of this and be— Andrew McLean: —a growth company, Dana. I think for Lands' End, Inc., sort of unshackled from debt, there is real opportunity for our shareholders out there, and our every intention is to go get it. Thank you. Operator: Thank you. Our next question comes from Eric Beder with SCC Research. Your line is now open. Good morning. Eric Beder: Good morning. Can you talk a little bit about what is driving the turnaround in Europe? I know you changed a lot of things there. And are pieces of that transferable to potentially the U.S. business or other international businesses? Andrew McLean: So, Eric, and good morning. Eric, I have been clear since I came into the business about a couple of things on Europe. One is that I always wanted it to be more elevated than the U.S. to provide cachet. That we are known as a sophisticated European brand, and that carries through to our customers in the U.S. I think the second part is I always wanted to use it to test out concepts and test ideas that can be carried and transferred back to the U.S. And I think back in the fourth quarter, we achieved both of those. We got back to very much a focus on our franchises. And actually, we led that, if you look at the business, with really the reintroduction of our tote bag and the personalization that comes with that to reach wider into the customer cohort. We also reengineered our catalogs and tested out new ideas in those, as well as the notion of a lot more dynamic content around video versus static images that we have tended to use in the U.S. So you will see transfer of that actually come back. On the flip side of that, we do have stronger franchises in the U.S. and continue to want those to grow in Europe. And a lot of our plans really focus around taking some of those franchises and continuing to lean into them. The most obvious one being the one I have just discussed, which is the tote bag, which is so iconic here in America but has not really had the legs internationally for us. That can be incredibly powerful once we start to get behind that. So we were pleased with a get-back-to-basics in Europe, get focused around the customer in Europe, get focused around personalization in Europe, and where we took that. And the results came through really strongly for us. We had three, quite frankly, very difficult quarters followed by a really strong fourth quarter. And I appreciate the forbearance of the team in working through that. I think they did a really nice job. And now it is for us to build on that for this year. And I think, absent more fuel shortages than anything else that is out there, all things being equal, we can take a good run at that. Eric Beder: Great. And in terms of personalization, I know that you have leaned a lot more into Q4—the shops and other pieces. Is that one of the demographics of that customer—does that customer become—is that a younger customer? How should we be thinking about that? Because I know it has definitely continued into spring to push into that beyond just the tote into other apparel categories. Andrew McLean: Well, I will finish up on Q4 because it is definitely not into the spring, but the Christmas stocking sales that we had were absolutely incredible. I mean, to have the Christmas stocking—a nice program for us, but it has not traditionally been a huge, huge program—be a top-five program over holiday was really incredible for us. So that is all about personalization. And in terms of who we are seeing, we are using our marketing to reach wider than we traditionally have. So this is not about just getting them for the grandkids. This is about the grandkids themselves coming in and getting more. And actually, the way we met the younger customer is we have widened the amount of embroidery that we can do. So our one image for the fourth quarter was actually a sausage dog, and I think that was really, really cute for us. I think that there was incredible opportunity for us to just expand beyond where we have been, which was traditionally—you put “Mom,” “Dad,” “Grandpa,” whatever the kid’s name on it. We are now really starting to flex the muscle we have with personalization, and that is a real competitive advantage for us in 2026 to continue to lean into that. And I think you will see more from us, and you will see us understand how we can really bring that to the market. So there is good news in there. Eric, go—just to finish, the tote will be ubiquitous. But if you look at the Christmas shop that we had, we embroidered cashmere. I think there are very few people doing that right now. I think that is a competitive differentiator as well. So another franchise starts to fall into line on that program with value added to be layered on top. Bernie? And then, Eric, to add to that, Bernie McCracken: the infrastructure we have the benefit of is from our school uniform and our business-to-business that built the infrastructure of embroidery capabilities so that the rest of the business now gets the benefit in the U.S. DTC business, and the marketplace businesses eventually will all benefit from having that—on top of having that younger customer in that uniform business that also we can attract through our personalization. Eric Beder: Great. Last one. Cannot not mention Outfitters. That was a great quarter. You picked up share from school uniforms, and obviously, you picked up some larger B2B clients. What is the potential here, and are we just scratching the surface somewhere? Andrew McLean: And thank you. Yes, I have always been a fan of Outfitters. You and I have talked about this quite a lot. I think that Outfitters, once we got it firmly in its lane and behind the franchise where it can excel, the sky has become the limit. Our teams just got back from a sourcing trip in India with one of our major airline partners, and they could not be happier about the breadth that we are able to offer and the opportunity that we are creating for their employees. And, you know, I will say it again because it is worth noting: the amplification that you get from having 100,000 airline employees who are somehow connected to the brand of Lands' End, Inc. is really powerful and widens the reach of where we can go. So I would continue to watch this space. I would continue to look for us to add major partners throughout the year. And you are absolutely right. I think this can power through because, you remember—and it is worth saying because we do not talk about it that much—we sign long-term contracts. So it is very sticky business. The switching costs tend to be quite high, or the barriers to switching tend to be quite high, and so once you lock in, you can have them for many, many years. And I think there is a real power in what is almost a subscription business. Bernie McCracken: I think it is also important to note, Eric, it being a differentiator in any industry is important, and in that industry, we tend to be the only one bringing a brand to the game. So that has proved very successful with our large consumer business and our larger partners as they want to do well for their employees, and they want to bring a brand name to that employee and make them feel proud of what they wear. Eric Beder: Great. Thank you, and good luck for 2026. It will be a fun year. Andrew McLean: Thanks. Take care. Thanks, Eric. Operator: Our final question comes from Steve Silver with Argus Research. Steve Silver: Thanks, operator. Thanks for taking my questions, and congratulations on all the recent events. Guys, you talked about recently the goal of the company to modernize its infrastructure and its software platforms, and suggested that maybe some of those decisions might have been on hold while you were under the strategic review last year. I am just curious as to whether any of those activities have now started since the deal was announced, or if they are just waiting until the deal closes, and really what the timeline for implementation might look like just to really get updated with these systems. Andrew McLean: We will have replaced our existing back-end infrastructure with SAP before we go into peak later this year, and we will have moved our front end of the consumer business onto Shopify. So, again, that is going to happen before peak. During the process that we went through over the last year, we stopped, pending the outcome of that. But we did not stop—well, we stopped across the company; we did not refrain from continuing the desktop work that was key to making sure that we stayed on time. And then as we announced the transaction with WHP, we restarted the heavier lifting to make sure that we could be timely, to be in place before we get to peak. We feel good about where we are at. There is always risk associated with it in these really big projects, but I think they are really important for the company. We are well along, feel good about it. I think the opportunity to further leverage our infrastructure that they provide is not just an SG&A game; it is also a revenue and margin game for us as well. Steve Silver: That is helpful. Great. And one more, if I may—it is probably very little you can say about it at this point—but given the prospect of eliminating the term loan and really giving the company a flexibility that it has not had in quite some time, is there any low-hanging fruit in terms of strategic opportunities for growth? Andrew, you mentioned that you are going to be looking at Lands' End, Inc. now as being more of a growth company. Is there anything, even just category-wise, that you are thinking, just in terms of what some of those opportunities might be to invest in growth? Andrew McLean: I do not blame you for asking, Steve, but we are going to have an extended—we are going to have an extended Q1 call, and we will look forward to sharing with you then. It is the obvious question. You are right to ask it. And we will look forward to our next call. Steve Silver: Fair enough. Thanks again, and congratulations. Andrew McLean: Thank you. Thank you. Operator: This does bring us to the end of our question and answer session, as well as Lands' End, Inc.’s fourth quarter and fiscal year-end 2025 earnings call. We appreciate your time and participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Intuitive Machines, Inc. Fourth Quarter and Full Year 2025 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I will now turn the conference over to Stephen Zhang, Head of Investor Relations. Please go ahead. Stephen Zhang: Good morning. Welcome to the Intuitive Machines, Inc. fourth quarter and full year 2025 earnings call. Chief Executive Officer, Stephen Altemus, and Chief Financial Officer, Peter McGrath, are leading the call today. Before we begin, please note that some of the information discussed during today's call will consist of forward-looking statements, setting forth our current expectations with respect to the future of our business, the economy, and other events. The company's actual results could differ materially from those indicated in any forward-looking statements due to many factors. These factors are described under forward-looking statements in the company's earnings press release and the company's most recent 10-Ks and 10-Qs filed with the SEC. We do not undertake any obligation to update forward-looking statements. We also expect to discuss certain financial measures and information that are non-GAAP measures as defined in the applicable SEC rules and regulations. Reconciliations to the company's GAAP measures are included in the earnings release filed on Form 8-Ks. Finally, we posted an earnings call presentation to our website which provides additional context on our operational and financial performance. You can find this presentation on our investor relations page at intuitivemachines.com/investors. I will now turn the call over to Stephen Altemus. Stephen Altemus: Good morning, everyone. 2025 was a transformational year for Intuitive Machines, Inc. We began with a focus on execution and growth. As we look back and reflect we completed our second lunar mission, expanded into national security space programs, closed the acquisition of Kinetics Aerospace, and announced the acquisition of Lantaris Space Systems. Looking forward, these acquisitions significantly expand our scale, addressable market, and growth opportunities. As a result, we expect 2026 revenue to approach $1 billion, nearly a 5x increase from 2025. Our combined portfolio has a diversified revenue mix with approximately 40% commercial business, 40% civil space, and 20% national security customers, evolving towards a balanced portfolio across all three customer bases. Today, the United States' strategic importance of the moon continues to intensify with the President's executive order to lead the world in space exploration and return Americans to the moon by 2028. To do so, NASA is currently preparing for Artemis II while reformulating Artemis III. In parallel, the agency has increased the cadence of robotic and human missions going to the moon to compete with China. Our strategy will continue to be moon-first infrastructure, and we are focused on growing the business across all space domains: LEO, GEO, cislunar, and out to Mars and beyond. Through our early missions, we established the technical foundation of the company with a mission-driven model where revenue was tied to a concentrated customer base and mission outcomes were binary, like delivering NASA payloads to the lunar surface. These early delivery missions under CLPS established one of the first commercial pathways to the moon and we believe give us a competitive advantage to future growth in the space domain. Our mission built the operational expertise required for long-duration, persistent, infrastructure systems that will support sustained surface operations. At the same time, Lantaris Space Systems was operating on a larger scale, more established spacecraft platform market, with its 300 series, 500 series, and 1,300 series satellite systems which operate in more mature, expansive markets with consistent and predictable revenue generation. Historically, the Lantaris model was straightforward: build reliable, cost-effective spacecraft to a customer's specifications and hand it over for operational life which should exceed 10 years. Bringing these capabilities together, both Intuitive Machines, Inc. and Lantaris, creates a fundamentally different company. Today, we are focused on taking proven production platforms and applying them to new growth markets as a prime operator. Our operating model is organized around three integrated capabilities. They are to build, to connect, and to operate space infrastructure. Build is where we design, manufacture, and deliver spacecraft, landers, satellites, surface systems, propulsion and avionic systems, for government and commercial customers. This represents our business today. Starting later this year with IM-3 or Mission 3 and our first lunar data relay satellite, our connect capability integrates deployed assets into communications, navigation, command, control, and data relay networks that enable persistent connectivity. Our Near Space Network Services contract, which includes data services, navigation, and timing capabilities, accelerates how quickly we can reach our third capability, which is to operate. This is where we provide mission operations, hosted payload services, and other infrastructure-based offerings like the Lunar Terrain Vehicle services. As we look at these three capabilities—build, connect, operate—each progresses the business towards higher-margin services, anchored by multibillion-dollar recurring revenue programs like LCBS, the TDRS service, Mars Telecom Network service, and Fission Surface Power. With the combined power of Intuitive Machines, Inc. and Lantaris, the company can now pursue opportunities as a prime for defense programs, proliferated network infrastructure, and other infrastructure operations with higher procurement win probabilities, driven by our scale, our technologies, and capabilities. Our current execution is grounded in the work our teams are building today for LEO, GEO, and lunar domains. In low Earth orbit, our team continues to execute under the Space Development Agency's proliferated warfighter space architecture. Deliveries of the final 300 series satellite buses under Tranche 1 Tracking Layer are underway, with launch expected later this year. Work also continues on Tranche 2 and the recently awarded Tranche 3 Tracking Layer programs, which support proliferated constellations designed to detect and track missile launches. The 500 series platform, currently supporting high-resolution Earth observation for Vantor, formerly Maxar Intelligence, is part of a NASA-selected team for the Earth Dynamics Geodetic Explorer mission called EDGE. This award demonstrates how the 500 series spacecraft design can support commercial imaging, science missions, and national security applications. Moving outward to geostationary orbit, the 1,300 series spacecraft is the industry's most proven GEO communications platform. Operating companies rely on these satellites in geostationary orbit as part of a multibillion-dollar communications market. Over the last 40 years, Lantaris has served customers as the world leader in geocommunication satellites, with over 3,000 aggregate years on orbit with 99.99% operational availability. The 1,300 series production line includes EchoStar, DISH Network, and two SiriusXM satellites. EchoStar 25 successfully launched last week. Our team is currently performing the satellite's on-orbit system checks before starting high-power direct-to-home broadcast services across North America. SiriusXM 11 is undergoing final performance and integration testing with shipment expected in the second quarter. Production of SiriusXM 12 continues in parallel. Satellites in this class are designed to operate for more than a decade and support services such as broadband connectivity, media distribution, aviation communications, and enterprise networks on Earth. Based on the 1,300 series, and designed for NASA's Lunar Gateway Station, this first-of-a-kind Power and Propulsion Element is the highest-powered solar electric propulsion spacecraft ever built. NASA has invested over $1 billion in the PPE and the system is nearly complete. In January, the agency announced the PPE successful power-up confirming its ability to provide power, high-rate communications, attitude control, and the ability to maintain and maneuver between orbits. In the second quarter, we will integrate the spacecraft's rollout solar arrays in preparation for final delivery to NASA. We have the ability to leverage the spacecraft design for future applications. At our Texas headquarters, with new expertise provided from Lantaris, we are building our first lunar data relay satellite and expect that satellite to launch with our IM-3 mission, which we believe will start the operational task orders portion of the $4.82 billion Near Space Network Services contract. We expect this first of five satellites to support future lunar missions which are all progressing through testing and integration in preparation for our next two contracted delivery missions. IM-3 is progressing well, as all robotic mechanisms from our Maryland facility delivered in the fourth quarter. Now our team is working on lander assembly, integration, and test for the mission later this year. IM-4 remains on track for 2027, and the mission plan includes flying two additional lunar data relay satellites to open more connect services under the Near Space Network Services contract and recognize higher-margin revenue servicing, specifically NASA's Artemis IV human landing mission. The lunar data relay satellites are our first connected space infrastructure assets. They are connected to Earth by our partners' global ground stations. Collectively, this forms a secure space data network, a communications navigation architecture we intend to offer as a subscription data service with recurring revenue in conjunction with pay-by-the-minute operations. We believe most of the market understands networks being provided for Earth from space, whether it is internet, satellite radio, or broadband. It is important to understand the distinction, however. We are creating a network for space from space—an internet for the solar system. Today, NASA provides that capability through the Deep Space Network. Spacecraft operators request time on that network and pay for access to communicate with their deep space missions. Deep space communications bandwidth, though, is limited and is multiple times oversubscribed. For example, NASA has indicated that live video from Artemis II will likely be transmitted at a low resolution. Intuitive Machines, Inc. is working to solve that challenge. Higher data rates require our relay satellites and additional communications infrastructure operating between the moon and Earth. On Earth, Intuitive Machines, Inc. is expanding its network coverage, adding a new ground station partnership in Australia, and working to upgrade additional partner facilities around the world. The Australian just successfully downlinked data from the James Webb Space Telescope, confirming that it can operate within NASA's existing network and reduce its bandwidth constraints. For space, Intuitive Machines, Inc. continues to evolve globally, signing a strategic agreement with Leonardo and Telespazio to connect our lunar relay systems together and support European exploration missions. The next phase for the company is to operate the built and connected spacecraft as long-term infrastructure. The immediate opportunity for that model is already captured in the Near Space Network Services contract. While the always-on network provides subscription-based data connection, additional value comes from operating hosted payloads and sensors to create new markets for science, reconnaissance, and exploration. The near-term catalyst for higher-margin infrastructure operations is surface mobility. The Lunar Terrain Vehicle program is structured as a long-duration service where the provider builds, delivers, and operates the vehicle on the surface over many years. When selected, the vehicle will become a mobility infrastructure asset on the moon connected to our space data network generating recurring revenue for NASA and commercial customers over time. Moving forward, the company sees growth opportunities from an operator's perspective. These opportunities include tracking and data relay satellite services, Mars Telecom Network Services, and the Missile Defense Shield program, while also adapting the 1,300 series spacecraft class for Space Force for highly maneuverable satellites and evolving our satellite platforms for applications in the burgeoning orbital data center market. To support these growth opportunities, last month we completed a $175 million strategic equity investment to advance communications data processing networks, including extending flight-proven satellite platforms. Intuitive Machines, Inc. intends to invest in expanding its Near Space Network Service and establish a solar system internet. Through investments in the Lantaris platforms, and specifically the 1,300 series, the company believes it can grow market share in geostationary orbit, expand capability around the moon, extend capability to Mars, and support emerging high-power on-orbit data processing and edge computing. I will now turn the call over to Peter McGrath for the financial results. Peter McGrath: Thank you, Steve. Thanks to everyone joining us today. As Steve mentioned, we made strategic moves last year to transform Intuitive Machines, Inc. to become the next-generation space prime, providing delivery, data, and infrastructure services, emphasizing growth in communications, navigation, and space data network for defense, civil, and commercial markets. The decision to acquire Lantaris positions the company for sustainable long-term growth. As a reminder, we closed the Lantaris acquisition on January 13. Therefore, the 2025 financials do not include Lantaris. Q4 financials do include the impact of Kinetics, which was completed on October 1. Before reviewing the quarter, I want to highlight earlier this month we were awarded a multiyear contract as part of the Space Development Agency's Tranche 3 Tracking Layer, which expands our roles supporting the national security space architecture. This award reinforces our diversification and market expansion into national security programs, supporting sustained long-term growth in backlog and revenue. Back to the quarter, Q4 2025 revenue was $44.8 million, driven primarily by CLPS, ALMS, and NSNS execution. While Q4 revenue reflected program timing and government budget delays, we exited the year with strong contract momentum and major awards already announced in early 2026. Since year end, we were awarded the SDA Tranche 3, as referenced, and we expect decisions on large programs, including Lunar Terrain Vehicle services and NASA's CLPS CT-4 mission. O&M revenue was $14.7 million in the quarter. For the year, excluding revenue was up approximately 65% year over year, driven by continued growth across all key programs such as CLPS, the LTV work we were doing, and NSNS. Q4 gross margin came in strong at $8.5 million, which represents a 19% positive gross margin. The gross margin improvement was driven primarily by higher-margin services revenue such as NSNS as well as continued cost reductions across our fixed-price contracts. Q4 was also our first quarter with Kinetics, and as previously discussed, Kinetics historically generates approximately 14% positive EBITDA and even higher gross margins. SG&A was $40.2 million in the quarter, including $10.8 million of acquisition-related transaction costs associated with the Lantaris acquisition. We also increased IRAD investment to align with our long-term growth strategy. Excluding these costs, underlying operating expenses remain consistent with prior quarters as we continued investing in program execution and infrastructure to support growth. Operating loss for the quarter was $33.1 million versus a loss of $13.4 million in 2024, driven primarily by acquisition-related transaction expenses as well as continued investment in program execution and infrastructure to support the company's growth. Adjusted EBITDA was negative $19.1 million in the quarter, compared to negative $11.2 million last year, driven primarily by growth investments I just mentioned. Operating cash used was $7.3 million in the quarter, with capital expenditures of $15.6 million, primarily for our first NSNS satellite, resulting in negative free cash flow of $22.9 million in the quarter. For the year, free cash flow was negative $56 million, an $11.7 million improvement versus 2024. Free cash flow improved year over year despite higher capital investment in the NSNS constellation. This improvement was driven by $43.3 million less operating cash used, partially offset by a $31.5 million increase in capital expenditures. We ended the year with a cash balance of $583 million, which includes $15 million of cash outflow for the acquisition of Kinetics. Since year end, $430 million of the cash was used for the acquisition of Lantaris, along with additional post-close reconciliations that align with the $450 million cash portion of the purchase price. We have a transition service agreement in place that will continue through the third quarter. As Steve mentioned, in February we completed a $175 million capital raise anchored by institutional investors to strengthen the company's balance sheet and provide capital to support the continued execution of our growth strategy. Following this capital raise and outflows related to the Lantaris acquisition, our cash balance as of February was $272 million. As a reminder, this includes additional acquisition-related transaction and integration costs, as well as the start of some investment costs we outlined as part of our recent capital raise. Following the acquisition and our recent capital raise, we believe we have sufficient liquidity to fund current operations while continuing to invest in strategic growth initiatives. Backlog at year end was $213.1 million, compared to $235.9 million in 2025, reflecting the timing of several large program awards that were delayed by the government shutdown and appropriations process. Approximately 60% to 65% of our backlog is expected to be revenue in 2026 and the remaining 35% to 40% in 2027 and beyond. Q4 backlog includes $22 million of new bookings, driven primarily by NSNS, as the fourth quarter is typically where we see the largest re-up in task orders for the following year. As of February month end, our combined company backlog is estimated at $943 million, which includes the recent award SDA Tranche 3 Tracking Layer contract, which was originally expected in Q4, but does not yet include key upcoming awards such as the next CLPS mission, LTV, Golden Dawn, and other commercial satellites. Looking ahead, we expect additional backlog growth for several large multiyear NASA and national security programs currently moving through the government procurement cycle, including NASA's lunar terrain vehicle services, the next CLPS mission, Golden Dawn Initiatives, and the next phase of Fission Surface Power and orbital transfer vehicle programs. We will also continue to bid on large GEO bus via the 1,300 series platform. Historically, these were roughly one to two new satellite buses per year, which provides a solid base for our commercial market. As part of our growth strategy, we are making investments to increase flexibility of the satellite on orbit through the introduction of digital processors, which we believe increases future market share opportunities. This, along with other investments in the 1,300 series satellite, will expand our total addressable market. As of March 11, our total shares outstanding are 216.8 million, with 159.4 million shares of Class A and 57.4 million shares of Class C. This includes the shares issued for both the Lantaris acquisition as well as the $175 million capital raise. Moving on to guidance, 2026 will be a transformational and record year for the company. With the acquisition of Lantaris completed in January, Intuitive Machines, Inc. enters 2026 as a fundamentally stronger, more competitive, and more diversified space infrastructure company. Intuitive Machines, Inc. now operates across all space domains—from lunar services to proliferated national security space architectures and commercial GEO platforms—which, when combined, significantly expands both our addressable market and revenue base. For 2026, we expect revenue in the range of $900 million to $1 billion, representing a transformational step up in scale for the company. Importantly, roughly two-thirds of our expected 2026 revenue is already supported by contracted backlog, giving us strong visibility into our outlook. On the profitability side, we expect continued margin improvement and are targeting a positive adjusted EBITDA for the full year. The primary drivers are scale from the Lantaris acquisition, expected growth in higher-margin service revenue such as NSNS and navigation services, and continued operational efficiencies across our fixed-price contracts. Since closing the Lantaris acquisition on January 13, we continue to finalize the combined company pro forma financial presentation and expect to provide that additional detail shortly. Before we get to Q&A, I want to take a moment to highlight our strong financial performance in 2025. We were able to grow the top line across all our key programs while expanding gross margins, offsetting the impacts of ALMS and the government shutdown. On the cash side, we continue the trend of reducing free cash flow burn year over year while simultaneously investing in growth and CapEx for our NSNS constellation. Adjusted EBITDA profitability and positive free cash flow continues to be in sight, supported by higher-margin service growth. To accelerate that growth, we made very strategic and targeted acquisitions this year. These acquisitions have further diversified the business to more evenly split between civil, defense, and commercial. With the acquisition of Lantaris and strong momentum across national security, civil, and commercial markets, Intuitive Machines, Inc. has entered 2026 as a more competitive and diversified space infrastructure company with size and scale. We believe this positions us to deliver record revenue, achieve positive adjusted EBITDA, and continue scaling our role in the emerging space economy. With that, operator, we are now ready for questions. Operator: Thank you. And a quick reminder before we start the Q&A, please limit yourself to one question only. Use your keypad to raise your hand. And if you would like to withdraw your question or your question has been answered, please press 1 again. We will now open for questions. Our first question comes from Josh Sullivan from JonesTrading. Please go ahead. Josh Sullivan: Hey, good morning. I just wanted to key in on the Lantaris integration. Where are you ahead of schedule? Where are the hurdles, and what has been the customer response? Stephen Altemus: The integration of Lantaris with Intuitive Machines, Inc. is going very well, Josh. The customers are all excited about the opportunities that the business combination creates. We are working on a transition service agreement with Vantor, the parent, to carve out things like the IT, the accounting system, the payroll system, and make sure that those systems are fully up and running so that the business can stand alone and be merged with Intuitive Machines, Inc. All that is going well ahead of schedule. There was a plan for a nine-month period of time for that transition to occur, and, as I said, we are well ahead of schedule. We are really excited about the combination and what the future holds for us. Josh Sullivan: Great. Thank you for the time. Thank you. Operator: Our next question comes from the line of Suji DeSilva from ROTH Capital. Please go ahead. Suji DeSilva: Good morning. You talked about national security growing in the mix and trying to make it sort of a third, third, a third across the company. Can you talk about the key programs, if you have won them or if you have in the pipeline, to help increase the national security in the mix? Stephen Altemus: We talked about the Space Development Agency's Tracking Layer Tranche 1, 2, and 3. Tranche 3 is the latest award with L3Harris for 18 satellites. We just announced that here recently, and there is a potential to upsize those satellites. In addition, we have proposals in for Golden Dome to build 300 series satellites for those programs. In addition, we have another orbital transfer vehicle development undergoing. We have been through Phase 1 and Phase 2, and we are expecting award or advancement to Phase 3. We have been through critical design review, and now we are headed to the next phase to full development of that transfer vehicle. We are very excited about the potential here in national security space and some of the developments we are doing and the proposals we have in the mix. Suji DeSilva: Thanks, Steve. And then on calendar 2026, your revenue guidance there—talk about the linearity perhaps, Pete, first half versus second half, given you have backlog visibility. And what would drive potential 2026 upside in your guide? And just maybe you can touch on LTV and where they are in the program selection process. Peter McGrath: I will start the last one. Our understanding is they are ready to make an award decision on LTV. It is just timing. We are waiting to hear when they actually make that award. In terms of the revenue guidance, I would say it is pretty level throughout the year. Just note that when we talk about integrating Lantaris into our financials, the acquisition was closed on January 13, so we lose about half a month of January in revenue from them. You will have that one anomaly probably in January, but beyond that you will see a pretty steady state through the year. Stephen Altemus: And in terms of upside, Suji, against the guidance there is potential, as the Artemis program reformulation occurs. You have seen the Administrator call for acceleration of some of the Artemis missions. Part of our Near Space Network contract—if they want to restructure that and accelerate that—there might be some upside this year associated with acceleration to support the near-term Artemis missions. Suji DeSilva: Okay. Thanks. Congrats on the progress. Stephen Altemus: Thank you. Operator: Our next question comes from the line of Andres Sheppard from Cantor Fitzgerald. Please go ahead. Andres Sheppard: Hey, everyone. Thanks for taking our questions and congratulations on a great quarter and on the acquisition. I will limit myself to one question just to be respectful of my peers. I will maybe ask a two-part question, if I may. Steve, you touched on this in your prepared remarks a little bit. Maybe for those that are less familiar with Lantaris, at a high level, what are the things that Intuitive Machines, Inc. can do now that maybe it could not do previously? And the second part of the question coming back to the LTV: it looks like we are awaiting an imminent decision. Do we have a sense of how that decision might be determined? In other words, are we expecting perhaps two award winners, or a primary and backup? Just a little more color there on the latest. Thank you. Stephen Altemus: Andres, good morning. Concerning the LTV in particular, Pete mentioned that briefly. I think the Artemis II mission and the reformulation of Artemis III, IV, V, and VI was the priority for the agency, and now you will see—we expect you will see—follow-on procurements at the next level coming out here shortly. We have been waiting. As you know, we believe the decision has been made. There was an opportunity; the bid asked for one and a half awards, which means one primary award and a half of an award to have a hot backup contract, if you will. We will wait and see. There is a potential—the agency likes to have competition—so there is a potential there will be two full awards. We will just have to wait and see. But we feel it is imminent. That is all the words we are getting at this point. We will be standing by and waiting for the good news. Now for the other question—what can I do now with Lantaris? It is very exciting. We think about the series of satellite buses, the production line, the capabilities that that company has, the high reliability that they have with their satellites in orbit. We take that capability and we add it to our data relay constellation. Providing satellites in and around the moon gives us also an opportunity to repackage the Power and Propulsion Element and offer that in different markets, whether it is a comm node around the moon, a data center kind of construct, or nuclear propulsion. There are a lot of different things that can be done—versatility—by putting the innovation that Intuitive Machines, Inc. brings to all the markets with that reliable, production, high-quality satellites. We are very excited to get moving on the growth initiatives across commercial, civil, and national security space. Peter McGrath: I will add we have already submitted two proposals post closing that we probably would not have submitted if we had not had a combined company. Andres Sheppard: I see. Wonderful. Excellent. Well, thank you, Steve. Thank you, Pete. Congrats again on the quarter. We will pass it on. Stephen Altemus: Thank you. Operator: Our next question comes from the line of Austin Moeller from Canaccord Genuity. Please go ahead. Austin Moeller: Hi. Good morning. I was just wondering if you could talk about some of the operational changes that have been made at Lantaris to make the business better positioned to perform on firm fixed-price contracts, given the possibility of cost overruns during production depending on what kind of bus it is? Stephen Altemus: Morning, Austin. Chris Johnson, the President of Lantaris, has done a fantastic job streamlining the business, making it efficient, eliminating terms and conditions in some older contracts that were onerous for the business. They have streamlined production. They have invested in the 300 series, and we have seen that produce programs in national security space. They bid in the appropriate margins and have the right-sized workforce and the right-sized facility complement. I am very proud of the work they have done, and it was an opportunity for Intuitive Machines, Inc. to come in and acquire the business when it was on its feet, strong, and producing. The future is very bright for us as a combined business. Austin Moeller: Great. Thanks for the color. Operator: Our next question comes from the line of Edison Yu from Deutsche Bank. Please go ahead. Edison Yu: Hey, thank you for taking our question. There has been a lot of talk about data centers in space. You just talked a lot about connectivity on the moon, Mars, solar system. How do you think about this type of architecture in terms of what it looks like, and are there certain technical capabilities that Lantaris brings that you can perhaps highlight? Thank you. Stephen Altemus: Good morning, Edison. I think there is a lot of difference of opinion on where the actual customer base will be for on-orbit data centers and what the architecture for on-orbit data centers will be. We are studying that very carefully right now. I think what Lantaris brings to the table is this Power and Propulsion Element—the most powerful power-generating spacecraft ever built—that has the ability to be a node in a data center. If you think about data centers in particular, there is the storage element, the transmission element, and the edge computing element or the high-speed computing. I think edge computing in space and doing decision-making in space is the key to the future of data centers, as opposed to replacing terrestrial-based data centers. I am skeptical about large, extremely large proliferated constellations in low Earth orbit. They have their challenges, both in power generation and in thermal management. Thinking about it with a set of large and small nodes together, maybe up in the GEO belt, is probably a better architecture, and that is where we are aiming at this point. Operator: Our next question comes from the line of Jonathan Siegmann from Stifel. Please go ahead. Jonathan Siegmann: Good morning, Steve, Pete, and Steve. Thanks so much for taking my question, and congratulations on closing the acquisition in a busy couple of months. One more question on LTV. I thought the Artemis restructuring was all positive for your markets, but the actual acceleration of Artemis V, which I understood is the mission that the LTV was supposed to be launched on, and the delay in the award—can you talk about whether there is enough time to complete it when it is awarded? Or is this something that is going to change the structure or the exact mission? Thank you. Stephen Altemus: We expected award in the November timeframe, and so there are several months' delay in the award. In our construct, what we proposed was a delivery on a SpaceX Falcon Heavy with a lander. It is called Supernova. It is our heavy cargo lander, derived from our Nova-C lander, which has been to the South Pole twice. We are in charge of our own destiny flying on Falcon Heavy—non-related to Artemis directly. We are not tied to the sequence of events for Artemis V. We are flying independently per our architecture, and that gives us an edge to move that around and be in more control of the schedule. I do not see any significant delays to what we proposed. Jonathan Siegmann: Fantastic. And I will just slip in another one that we got that I did not have a great answer for. We have seen some second thinking about the transport layer by the SDA and relying on SpaceX constellation. Our understanding is the Tracking Layer, however, is completely independent of that. I was hoping you could confirm that thought and explain a little bit about why the Tracking Layer that you participate on is not really in the threat of being outsourced to an existing constellation. Thank you again. Stephen Altemus: You are correct in that the Tracking Layer is not affected here by this thinking, and all indications from the customer are that it is going to continue and continue to grow and be replenished as we move forward. I do not have any insight into those discussions internally to the government or with SpaceX, so I cannot comment on that in particular. Operator: Our next question comes from the line of Michael Leshaw from KeyBanc Capital Markets. Please go ahead. Michael Leshaw: Hey, good morning. I wanted to ask on the space superiority executive order that was signed in December, and the strong support there for establishing a lunar presence. Did that pull forward any of your longer-term growth initiatives? Obviously, there could be some near-term challenges with the government shutdown, but does the administration's support for a lunar presence accelerate any initiatives or shift your focus at all? Thanks. Stephen Altemus: We are working directly with NASA to look at ways to move efforts forward faster. The agency is coming out with some streamlined acquisition guidelines to be able to let procurements out faster and is asking for commercial companies to figure out ways to bring investment to the table, to add to the federal dollar, to speed up development activities to accelerate our presence in space and accelerate astronauts' boots on the moon. Our efforts are specifically focused on putting in the necessary infrastructure in and around the moon to enable sustained presence at the moon. The executive order that was signed is complementary to our work; our business is complementary to that executive order, and we are aiming to support it as best we can. Operator: Our next question comes from the line of Ronald Epstein from Bank of America. Please go ahead. Smith Styro: Hi. Good morning. This is Smith Styro on for Ron today. I just wanted to ask about how you see the competitive landscape evolving given the reformulation of Artemis, increased interest from SpaceX, Blue Origin, and some other players. Is it more challenging? Do you see opportunities for extended applications? Any color you can give around that. Stephen Altemus: From what I understand about NASA's plans for the lunar economy and space exploration, the Administrator has called for a higher cadence of missions to fly more equipment to the moon to learn about sustained presence on the moon. There will be more rovers, more landers, more satellites in and around the moon as a result of this push for sustained presence on the moon. I think that is excellent news for Intuitive Machines, Inc. The vendor pool from CLPS 1 will persist to CLPS 2.0. All the authorization and appropriations language that we have seen includes the follow-on CLPS, and we have heard from the Administrator that he would like to see a launch a month to the moon in the future. Calling for that kind of cadence of missions and repetitiveness really does improve reliability in our systems and allows us to grow a more sustainable business. We are very excited about it. Operator: Our next question comes from the line of Griffin Boss from B. Riley Securities. Please go ahead. Griffin Boss: Hi, good morning. Thanks for taking my question. I want to dig a little bit deeper into what you just mentioned there, Steve, on CLPS 2.0. I know we are patiently awaiting LTV and other contracts like CT-4 or GX, others, but CLPS 2.0 is a new one on the horizon. Obviously, there was an RFI out earlier this year. I am sure Intuitive responded to that. Do you have any insight where that stands or, more definitively, what the scale and scope could be, acknowledging that CLPS 1.0, I think, was about $2.5 billion? Do you have any insight as to if that scale for CLPS 2.0 will increase given the increased cadence of lunar landing that the Administrator has talked about? Stephen Altemus: I do expect CLPS 2.0 to be larger than CLPS 1. We have introduced ideas in our RFI response to the agency and some white papers—unsolicited—to increase the cadence of missions, and we are seeing that that is what is being called for. We have to think through how to increase production to meet that cadence of missions. We have requested things like block buys where you can buy several missions at a single time, and that would increase production rates and increase supply chain throughput. We have also introduced the concept of heavier cargo because we will be bringing bigger and larger elements to the surface, much like LTV, and so the call for heavier cargo is necessary, and we put that input in also. Larger vehicles. What else is interesting is the move from the Science Mission Directorate—CLPS 1.0 was part of the Science Mission Directorate. We have seen that move over to the Exploration Mission Directorate, and so you will see more engineered systems, surface infrastructure systems being called for in CLPS 2.0. The exact dollar amount—I am not certain what that will be as the agency figures out how it is going to rejigger their budget. But it is all positive from what I am hearing. Griffin Boss: That is great color. Thank you, Steve. Appreciate you taking the question. Operator: Our next question comes from the line of Jeffrey Van Rhee from Craig-Hallum. Please go ahead. Daniel (for Jeffrey Van Rhee): Good morning. This is Daniel on for Jeff. Just on the organic growth profile, I know you said previously Lantaris had been running around $630 million in revenue. I do not know if you have an updated number for full year 2025, but on a combined basis, it looks like maybe it is around teens organic growth for 2026. Maybe just walk in our expectations on organic growth. Peter McGrath: By the way, we have not provided year end yet. We are closing out our performance here, and we should have them out near term. That will give you the 2024–2025 year-end combined. In terms of growth, when we look at our guidance, we are looking at it as a combined company now. There is a lot more integrated capability that we are bringing forward, so it is a little harder to parse it out. Arguably, of it, you are looking at about 66% of the revenue coming out of Lantaris and the other 33% coming out of us. That is a rough magnitude kind of look. We will get more granularity after you see the pro formas and as we move into visibility through the quarters. Operator: Thank you. Operator: Our next question comes from the line of Greg Pendy from Clear Street. Please go ahead. Greg Pendy: Hey, thanks for taking my question. Just a quick one here. I think you had addressed the low-hanging fruit on NSNS given bandwidth constraints at Deep Space Network for the initial launch and also how commercial has only grown. But could you touch on the defense side? Hearing a lot how the moon is the ultimate high ground, and how that demand for NSNS may have changed from where it was a year ago, given what other countries might be doing with their ambitions on the moon. Thanks. Stephen Altemus: As far as international business goes, you heard us announce a strategic partnership with the Italian companies, Leonardo and Telespazio. They have an ESA-funded program called Moonlight to put communications satellites and some navigation satellites around the moon for European business. We struck a partnership to tie our networks together so the networks are larger. We are also working initiatives with JAXA Japan to do a similar thing, to create a standard and to create coverage in a way that supports the Japanese market, the European market, and the U.S. market combined. That is very exciting for us, and we are clearly seen as a leader here, setting the tone for how these networks will evolve and be interconnected and interoperable. On the national security side, space domain awareness is of critical importance, and having assets in and around the moon and lunar space is very important for understanding what the traffic model is around the moon and where things are moving. There has been expressed interest in using our network for those reasons also. Operator: That is very helpful. Thanks a lot. Okay, and that concludes the Q&A portion of this call. I will now turn it back over to Stephen Altemus for any closing remarks. Stephen Altemus: Thank you for your questions today, everyone. You heard our strategy, and at its core, it is about building a business with greater durability and higher value over time. We are executing on our strategy and moving from single mission-based operations towards long-duration infrastructure services. That is the path we are on, and that is how we are thinking about the company's future. The future is bright. Thank you very much today. You will be hearing more from us in the future. Operator: The meeting has now concluded. Thank you all for joining, and you may now disconnect.