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Operator: Ladies and gentlemen, thank you for standing by. Welcome to the NeurAxis, Inc. fourth quarter 2025 financial results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Ben Shamsian, Investor Relations. Please go ahead. Ben Shamsian: Thank you. Good morning, everyone, and thank you for joining us for NeurAxis, Inc.’s fourth quarter and full-year 2025 financial results and corporate update conference call. Joining us on the call today is Brian Carrico, CEO of NeurAxis, Inc., and Timothy Robert Henrichs, CFO of NeurAxis, Inc. At the conclusion of today's prepared remarks, we will open the call to questions. If you are listening through the webcast, please follow the operator's instructions, or you can send me an email at nrxx@listenpartners.com with your question. If you are dialed into the live phone line, you can again follow the operator's instructions. Today's event is being recorded and available through the webcast information provided in the press release. Finally, I would like to call your attention to the customary safe harbor disclosures regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations, and future potential operating results of NeurAxis, Inc. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors, including, but not limited to, the factors set forth by the company's filings with the SEC. NeurAxis, Inc. undertakes no obligation to update or revise any of these forward-looking statements. With that said, I will now turn the call over to Brian Carrico, Chief Executive Officer of NeurAxis, Inc. Brian, please proceed. Brian Carrico: Good morning, and thank you for attending our fourth quarter and full-year 2025 earnings call. During today's call, I will highlight the continued execution of our commercialization strategy for IV Stem, our neuromodulation technology for both the pediatric and adult patient populations. The continued execution has set the stage for the growth we expect in 2026. Today, we will recap Q4 and quickly turn to the first quarter, which I believe is most important and what everyone is looking to hear. To recap Q4 in a nutshell, we continued our commercial scaling strategy, we picked up 45 million covered lives for our proprietary PNFS technology, and were granted a federal FSS contract with IV Stem as our first listed product to allow our teams to sell within the VA. Following my remarks, Timothy Robert Henrichs, our CFO, will review our financial results for 2025. Let us first talk about the commercial execution of reimbursement progress. As we have mentioned in the past, the years leading up to January 1 focused on achieving two critical milestones: securing a Category I CPT code and obtaining written insurance policy coverage to enable widespread, sustainable growth. Once it became clear that the Category I CPT code would become effective on January 1, 2026, we implemented a more focused commercial strategy, and that strategy remained unchanged through the first quarter. The objective for the first quarter was straightforward: deploy the strategy, gather real-world data, and learn as much as possible about what drives adoption and what gaps remain. With the knowledge gained during Q1 to date, we now have a much clearer and more actionable growth roadmap. For the first time, the story has become significantly easier to understand. With a Category I CPT code in place, more than 100 million covered lives, our focus has shifted from access creation to execution, identifying what remains missing and closing those gaps to unlock maximum growth. Today, I will outline what we have successfully put in place, what we have learned, and where our execution efforts are focused going forward. Overall, I am extremely pleased with the first quarter performance across all fronts, including revenue progressions, stronger-than-expected operational fundamentals, and, importantly, the clarity gained around the remaining drivers of growth, which allow us to now begin deploying a more comprehensive commercial strategy. We will provide detailed KPIs and financial metrics on our next earnings call when we will have a full quarter of operating data. From an adoption standpoint, we are seeing excellent performance from accounts that have a Category I CPT code, strong medical policy coverage, a physician champion, and dedicated IV Stem clinic time each week. Conversely, institutions with only partial or limited policy coverage are submitting fewer patients, as physicians still perceive that a meaningful portion of patients lack reimbursement certainty. In line with our plan and expectations, overall patient submissions have increased significantly following the implementation of the Category I CPT code. While a small number of hospitals with strong policy coverage have not yet reached expected utilization levels, these cases are not representative of broader trends. As anticipated, expansion of our commercial footprint remains essential, and we will now begin to scale these capabilities alongside growing reimbursement access. Importantly, the most important piece of knowledge I set out to understand in Q1 was whether insurance companies without PNFS written policy coverage would cover IV Stem with the Cat I code, or if we would indeed need written policy coverage to see patients covered. We have confirmed that payers do not provide coverage based solely on the CPT code, and therefore, medical policy coverage remains essential. While I will not discuss specific payer negotiations today, we are very confident in our positioning with the remaining key payers. The potential impact is significant, particularly when considering the current submission growth is being driven by only approximately 10% of children's hospitals nationwide. Our strategy, therefore, remains laser-focused on expanding medical policy coverage while simultaneously increasing the commercial footprint. Securing additional payer coverage remains our highest priority. At the same time, our internal prior authorization team continues to expand, helping hospitals reduce administrative burden, improve reimbursement confidence, and ultimately increase patient access—a critical step toward broad national adoption. We continue to make meaningful progress with the nation's largest payers and remain in active dialogue as multiple payers approach scheduled medical policy review cycles through 2026. In late December, we announced policy coverage from a major national health insurer, spanning multiple states and representing about 45 million health plan members. Our advocacy efforts center around the urgent need for pediatric coverage and the clinical risks of the off-label drugs with FDA black box warnings. Based on external expert opinion, we believe we have the most comprehensive payer engagement effort in our industry. Discussions with payers have been constructive, and we are confident this multichannel approach will drive favorable policy consideration. That said, we expect policy changes and prior authorization improvements to unfold gradually, not overnight. I now want to focus on and highlight the catalyst for what we expect to be continued revenue growth in the coming quarters. Two elements remain key to IV Stem's success. First, the insurance coverage for access, which I just discussed in detail. Second, commercial footprint expansion in several areas. Now that we have 100 million covered lives and continue to see positive payer momentum supported by the clinical practice guidelines, commercial readiness for 2026 is paramount. In addition to the insurance element just mentioned, the commercial execution is equally important and the primary focus of our commercial team. As the new CPT code takes effect and coverage becomes more available, it is paramount for children's hospitals to have enough dedicated time slots each week to treat patients in need. Our commercial organization is fully aligned for the 2026 transition. We have prioritized target accounts based on their utilization potential and launched comprehensive education and outreach, including direct engagement with 75 children's hospitals who previously ordered IV Stem, which does not include new accounts in Q1; division chief meetings with detailed RVU and financial modeling, which will become more and more important; comprehensive partnership with NASBIG, beginning with the CME-accredited presentation—we did one in November and will do another one this spring; integrated marketing, which highlights the positive reimbursement shift, which appears as strong or better than we expected; field programs focused on the clinical and economic value of the new CPT code; and we are working closely with all stakeholders to ensure there are dedicated weekly time slots available for patient treatment with IV Stem. These coordinated efforts are cultivating awareness, positioning IV Stem for broad adoption now that the new CPT code has taken effect. Most importantly, these efforts require people, so we are in the process of hiring experienced and successful people on several fronts, including medical science liaisons to ensure our data is well known and top of mind; we are hiring market development specialists to ensure the financial stakeholders understand the positive economics behind the IV Stem procedure; a digital marketing expert focused on ensuring we have a presence in front of all patients and physicians; and salespeople to make sure we are covering all aspects. We will hire each position and duplicate those positions that are most successful in the areas where we have the most opportunity. This brings me to our commercial strategy for IV Stem in adults. As many of you know, the Category I code for IV Stem applies equally to adult patients, as it reflects the same physician work using the same device technology. What may be less widely understood, however, is that while IV Stem has FDA clearance for adult use, that clearance was based on extrapolation from adolescent clinical data rather than a large standalone adult randomized study. With that said, it is important to note that several studies using our technology have included young adults in their twenties. And, importantly, the underlying pathophysiology of these conditions is not meaningfully different between adolescents and adults. The FDA recognized this overlap, along with the alignment across Rome diagnostic criteria and the device's favorable safety profile, in supporting broader use. Nonetheless, broad medical policy coverage for adults is not expected in the near term. Based on what we learned during the first quarter, we believe payer coverage in the adult population will likely require completion of a large randomized controlled trial. Importantly, this does not change our execution priorities. Our primary commercial focus will remain within the children's hospitals, where coverage expansion continues to accelerate, as well as within the Veterans Administration system. That said, we are pursuing the adult IV Stem opportunity through two parallel strategic pathways. First, we have executed an agreement with the Cleveland Clinic to conduct a randomized controlled trial evaluating IV Stem specifically in adult patients with functional dyspepsia. This study is designed to generate the clinical evidence required to support future medical policy coverage. Second, as previously highlighted as one of our key fourth quarter milestones, we were awarded a Federal Supply Schedule, or FSS, contract enabling commercial access to the U.S. Department of Veterans Affairs. The VA health care system serves nearly 7 million active patients annually, with functional dyspepsia estimated to affect approximately 3% of this population. Given the typical adoption timelines within the VA, I did not expect Q1 orders. However, we are already seeing multiple facilities placing orders, with a growing number moving through the process. We are actively dedicating commercial resources to this channel to expand our sales footprint as utilization data and clinical adoption continue to develop. Stepping back, the most important point is this: the fundamental barriers that historically limited adoption are now being systematically removed. With the Category I code in place, expanding medical policy coverage, accelerating patient utilization, and a scalable commercial infrastructure now operational, we believe IV Stem has entered the early stages of its true commercialization phase. Execution is now the primary driver of growth. As coverage expands and utilization continues to scale across hospitals, payers, and federal health care systems, we believe the gap between clinical demand and current adoption will continue to close. Our focus remains disciplined, data-driven, and centered on building long-term sustainable value. To summarize what we learned in Q1 to date: children's hospitals that have strong insurance policy coverage, at least one physician champion, and adequate IV Stem clinic time are performing extremely well. The void of any one of these three is a barrier to making sure every child has access. Written insurance coverage is essential to patients being treated through insurance. We learned which gaps need addressed as clinical reinforcement to ensure all physicians are aware of the data, along with keeping IV Stem top of mind. We learned communication is key to understand which barriers or perceived barriers still exist. We learned the economics are very strong for the PNFS procedure in children's hospitals. Delivery of this information to the administrators and financial stakeholders in the children's hospitals will be a strong focus of our team going forward. And finally, revenue has been surprisingly better than I expected in Q1. It has also been heavier at the top than I expected, but that is great in the fact that we now know what a children's hospital with all pieces in place can do, and that is outstanding for our future. Make no mistake. We have work to do and gaps to fill, but the hurdles we face today are nowhere near the hurdles we have overcome to be in this situation. We have never been better positioned operationally, commercially, or strategically than we are today, and we believe the progress underway in 2026 represents the beginning of a multiyear growth cycle for the company. I will now turn the call over to our CFO, Timothy Robert Henrichs, to discuss the financials. Timothy Robert Henrichs: Thank you, Brian. And let me add my welcome to everyone joining us on this call. These financial results were included within our press release, which was issued earlier this morning, and were also provided in more detail within our 10-K. I will provide some additional details in key areas such as our financial results and liquidity position, as well as an outlook on certain areas. The 2025 marked the sixth straight quarter of double-digit revenue growth year over year. 2025 was a year of significant milestones for the company, including FDA indication expansion to functional abdominal pain and functional dyspepsia with associated nausea symptoms in both children and adults; IV Stem label expansion from 11–18 years of age to eight and up, including an increase of devices per patient for a course of treatment to four; the published NASPA and academic society guidelines; the new Category I CPT code and RVUs; the introduction of the RED device; an FSS contract; and, last but not least, medical policy coverage representing approximately 45 million health plan members from a major national health insurer in December. The accomplishments position the company extremely well as we continue to grow revenue with stronger gross margins and operating expense leverage. With that, I will go through the financial highlights in detail. Revenues in Q4 2025 were $968,000, up 27% compared to $761,000 in Q4 2024. Unit deliveries increased 35% compared to the prior year, due to volume growth from patients with full reimbursement health insurance; a market shift from our historical mix of the company's discounted financial assistance program outpacing the growth of higher-margin full reimbursement patients. In fact, 2025 marked the seventh straight quarter of double-digit unit growth. Although our average selling price in Q4 2025 was lower than in 2024, it reached its highest level in 2025, thanks to the mix shift to our more profitable reimbursement channel. As previously mentioned, we picked up our largest insurance payer in Q4, who gave immediate effect of full reimbursement that helped drive the mix shift. Given the Category I CPT code that went effective on January 1, we expect the positive mix shift impact on revenue will continue into the first quarter. Revenues in fiscal year 2025 were $3.6 million, an increase of 33% compared to $2.7 million in fiscal year 2024. Unit deliveries increased 44% due to both patients with full reimbursement health insurance coverage and those participating in our discounted financial assistance program, with the latter slightly outpacing on the growth front for the full year. Gross margin in Q4 2025 was 85.4% compared to 86.4% in Q4 2024. Despite the meaningful mix shift from discounted financial assistance to full reimbursement coverage in the quarter, the primary drivers for the 100-basis-point decrease are reserves established for excess and obsolescence inventory and the growth of the RED device in the quarter, which has a substantially lower gross margin than IV Stem. Gross margin in fiscal year 2025 was 84.2% compared to 86.5% in fiscal year 2024. Despite our increase in revenue, the 230-basis-point gross margin decline was due to higher discounting and growth in our financial assistance programs in particular during the first three quarters, and then excess and obsolete charges on inventory related to our RED device. Despite the decline in our gross margin in the fourth quarter, we expect to reverse that trend in 2026 as the new Category I CPT code became effective on January 1, which will transition currently discounted device sales to full reimbursement revenue with insurance coverage. Total operating expenses in Q4 2025 were $2.5 million, an increase of 20% compared to $2.1 million in Q4 2024. We measure and manage our operating expenses along three functions: selling, research and development, and general and administrative. As we continue to grow at a double-digit pace, we realize that investors will benefit from a more transparent presentation of our selling and research and development costs, as those are indicators of our future success. As a result, we reclassified $297,000 and $57,000 from general and administrative expenses into selling expenses and research and development costs, respectively, in Q4 2024 to conform to the current period presentation. Selling expenses in Q4 2025 were $518,000, a 31% increase compared to $396,000 in Q4 2024. The increase is due to sales commissions that are directly related to our higher sales volume, a temporary commission structure to facilitate growth and adoption in new states, and higher targeted marketing costs as we prepared for IV Stem's Category I CPT code that became effective on January 1. Research and development expenses in Q4 2025 were $137,000, an increase of 15% compared to $120,000 in Q4 2024. The increase is reflective of higher year-over-year spending on a medical research project. General and administrative expenses of $1.9 million in Q4 2025 were 17% higher than the $1.6 million in Q4 2024. The increase was due to the introduction of a long-term incentive plan in 2025 that did not exist in 2024, and third-party costs incurred to enhance the company's systems and internal control environment, partially offset by the absence of certain one-time, nonrecurring consulting and advisory costs incurred in 2024. Total operating expenses in fiscal year 2025 were $10.8 million, an increase of 14% compared to $9.5 million in 2024. As a note, similar to my comments earlier on the fourth quarter, we reclassified $1.1 million and $228,000 from general and administrative expenses into selling, and research and development costs, respectively, for the full fiscal year 2024 to conform to the current period presentation. The increase in operating expenses year over year was due to higher selling expenses from commissions, headcount, and marketing costs focused on health insurance carriers, and a one-time nonrecurring legal settlement. Our operating loss in Q4 2025 of $1.7 million was 17% higher compared to a $1.5 million loss in Q4 2024, and our net loss in Q4 2025 was $1.7 million, 18% higher compared to $1.4 million in Q4 2024. Our higher gross profit from increased quarterly sales year over year was offset by the higher operating expenses that I just discussed. Our operating loss in fiscal year 2025 of $7.8 million was 9% higher compared to a $7.2 million loss in fiscal year 2024. Our higher gross profit from increased sales year over year was offset by the higher operating expenses. Our net loss in fiscal year 2025 of $7.8 million was 5% lower compared to $8.2 million in fiscal year 2024, primarily due to higher sales and the absence of one-time nonrecurring settlements related to a convertible note dispute and certain pre-IPO Series A preferred stock shareholder claims incurred in 2024, partially offset by higher operating expenses. Cash on hand as of 12/31/2025 was $5 million. Our free cash flow in Q4 2025 was $2.5 million, higher than our core quarterly burn rate of $1.5 million, due to higher marketing expenses as we successfully focused on health care insurers for additional coverage and an inventory build to prepare for the increased demand in Q1 2026 related to the January 1 effective date of IV Stem’s Category I CPT code. Since then, we have improved our current liquidity position here in 2026 by raising an incremental $2.6 million through our at-the-market equity facility and the exercise of warrants. Our current cash balance is over $6 million. Given our current Q1 burn rate, our balance sheet provides us with sufficient capital to execute on our growth plans, with no near-term need for additional financing at this time. We still have approximately $1.2 million remaining in our existing ATM facility, which, if utilized strategically for further growth, would extend our liquidity position further, along with future warrant exercises. With that, I will turn the call back over to Brian. Brian Carrico: Thanks, Tim. To summarize, we are very happy with the way Q1 is coming along. I would just say that revenue, as I said, is better than I expected. Most importantly, we have learned what gaps need to be filled, and we can finally be able to turn this into the commercial strategy and hire the people to have the comprehensive footprint that we need. I will now turn this back to the operator, and I look forward to questions. Operator: Thank you. As a reminder, to ask a question, please press star 11, and to withdraw your question, please press star 11 again. The first question will come from Chase Richard Knickerbocker with Craig-Hallum. Your line is open. Chase Richard Knickerbocker: Good morning. Thanks for taking the questions, and congrats on all the progress here. Lots of things to go through, but maybe first, Brian, in Q1, can you give us a sense for the magnitude of inflection in PA requests and any improvement in PA rates since that Level I code? And then, last on that front, with that large payer win in Q4, can you confirm under that coverage policy that there is not a PA that is being required in the market right now? Thanks. Brian Carrico: Yes, Chase, good to talk to you. Two good questions. Let us first talk about the prior authorization. We do—and this number will change—but in the first quarter, if we did $100 in revenue in Q1, $20 is revenue that comes from accounts that we do the prior authorizations for. So I can only speak for what we see. We are continuing to do prior authorizations for more and more children's hospitals. The submission rate is up close to 10x from what we saw in 2025. That is first, which is outstanding. That does not mean the approval rate is that high. On the Q1 call, I will give more specifics about the exact numbers that we see, and I will also talk about approval percentage that we see. For example, if last year 1% of submissions were approved, and this year it is 2%—now those are just made-up numbers, and they are not even close to accurate—but I will give more information on the approval rate and percentage to give everybody a general idea along with some examples on the Q1 call. Regarding the large payer, that is correct. There is no prior authorization required from the large payer as long as they have the correct diagnosis codes in place. That has been very beneficial. I will go ahead and get ahead of one of these questions coming with that payer. Yes, of course we are seeing a direct effect from a revenue standpoint in certain areas where that payer has significant presence. But at the same time, we have countless children's hospitals that—let us just say their hospital has 20% or 25% of their patients with that payer. That sounds wonderful, but when the other 75% of their patients are not covered, they are still essentially not treating. Maybe one or two of their physicians are, but as a group, they are not treating because they still view this as a health equity issue. If the majority of their patients cannot have access to it, they are not giving access to even that small group. With bigger payers and additional larger payers coming on board, you will not just get the benefit of that new large payer. You will get the benefit of the payers we have plus the new one because they want to see that 50%, 60%, 70% of their patients are covered before they start to offer this across the board with all physicians from a referring standpoint. There are other small barriers that will just take time, and I can give more examples of those around IV Stem clinic time as we get further into the questions. Chase, I hope that answers your question. If not, I will go into more detail. Chase Richard Knickerbocker: No, good color. Maybe along those lines, on the number of accounts since January 1 with all these developments aligning, can you give us a sense for the number of new accounts? And then on your highest adopters—I think some of those have a fair amount of exposure to that payer you won at the end of the year—can you give us a sense for utilization trends there, if you have seen a meaningful inflection in Q1? It certainly sounds like you have, but maybe just some color there. Brian Carrico: Yes, it has been top heavy. I would just say that I have been pleasantly surprised with the children's hospitals that have access to and are heavy with that payer, and had IV Stem clinic time already built in. Those that can adapt to that and have physician champions are doing extremely well. But as I mentioned on the call, if they only have that one payer or they do not have the IV Stem clinic time put in place, I will give you an example. One of the states that is 80% that payer has submitted to us—just call it 20 patients in the first eight weeks of the year. You would think that 75%–80% of those patients would be from that payer, and it is not the case. Only 25% were. So let us use numbers of five out of 20. Of those patients, five were from that payer. The other 15 were other payers from around the country or other payers we do not have policy with. Although only 25% of their patients are with that payer, they are already booking IV Stems out to September. Now they are fixing that. They are adding more IV Stem clinic time. But when I spoke to the account last week, the director said, “We have to put together a plan. We have to present those to a committee, and that has to go to another committee. This is going to take until May or June.” The point is the good news is they are treating a tremendous amount of patients even though it is only 20% or 25% of their patients that are being approved. It takes time. These children's hospitals take time. The good news is that excellent financial story, which I referenced, and now that we have learned much more about the payments in the last four or five weeks, that becomes a much bigger piece of this story because it allows the children's hospitals to— they are not going to lose money, and in fact, they should be, as a general rule, in a very good financial position with the more patients they treat. So this is a win for the patient, a win for the facility. We need more policy coverage. But it is a long-winded way of saying that children’s hospitals that are heavy with the payer that we had—and look, we have got another 55 million covered lives—and we have seen great growth in some of those accounts where we already had that policy coverage, but the Category I code was missing, and now we are seeing a significant uptick in prior auth submissions. I think the overall message here is that as happy as we are with the accounts that are treating, there are still many treating no one, and that is outstanding news for the big picture. We feel very confident in our position with the larger payers, and that is all I am going to say. I knew for several months before we got the large payer in December that it appeared we were going to get that, and I did not say anything, and I am not going to say anything now about other payers and the position we are in. We feel like this should be the first-line treatment or a first-line option for these kids based on the evidence, and that is our stance. Again, a long-winded way of saying we are very pleased fundamentally when the pieces are in place, and when something is missing, at least now we know what is missing and how to address that, and we are doing so aggressively. Chase Richard Knickerbocker: Got it. I know you are not giving 2026 guidance at this time. I wanted to get some initial thoughts, if you have them. I understand it is very dynamic. Maybe the best way for me to ask it is: as we sit here in Q1—you had about a 20% sequential inflection from Q3 to Q4—with all this commentary, I would expect that materially accelerates. Any goalposts that you could give us for the revenue inflection that you are seeing thus far through Q1? Brian Carrico: No. I think I may have mentioned in Q4 that I thought Q1 had the potential to be light or in line with Q4 just because of the delay in prior authorizations in January and because of IV Stem clinic time getting set up, like the example I just gave. I am only going to say that I am pleasantly surprised. We have five or six weeks until the next call. I will just wait and give detailed KPIs. We are going to give some nice KPIs going forward that are relevant to growth and show the opportunity, and I am going to wait until then to do so. Chase Richard Knickerbocker: Great. Tim, just last one. Right way to think about SG&A growth in 2026 as you are expanding your commercial capabilities? Timothy Robert Henrichs: Yes. When we move into 2026, when you look at our three buckets, we have one large payer. It is not if, but when we get another large payer, we will then invest back into our selling expenses and our commercial team. Brian Carrico: But I— Timothy Robert Henrichs: I do not think that rate would be much different than the rate that we are seeing at our current pace. I do believe our R&D expenses will tick up because we are continuing to enhance the device here in 2026. From a G&A perspective, year over year, remember in 2025, we had a one-time nonrecurring legal settlement. The charge was about $630,000, so that will be a tailwind. That in and of itself would put us ahead of next year, but we have been really focusing on G&A expenses and either taking them down or keeping them flat so that we have the runway to invest in R&D and in selling expenses. I expect increases in selling. I expect increases in R&D. I am not expecting much of an increase per se in G&A, but that can all change for all the right reasons as we pick up additional health insurance coverage and need to invest in the business. I do believe we are going to get operating expense leverage. To your question, Chase, we are not going to add operating expenses anywhere near the pace that revenue is going to grow, and that is going to help us from a cash flow perspective as well. Chase Richard Knickerbocker: Great. Thanks, guys. Congrats again. Operator: Thank you. The next question is going to come from Lindsay Leeds with MicroCap Opportunities. Your line is open. Lindsay Leeds: Thank you, and congratulations on a strong Q4. I wanted to ask about the hospital rollouts. You were talking about a hospital that was scheduling all the way into September. What can you say about what kind of staff the hospital needs to schedule these, and what are the barriers to getting that program rolling? Brian Carrico: Well, those are two very separate questions. First, what staff is required depends on the size of the children's hospital, how many physicians are treating, and how many physicians are referring. We have children's hospitals with champions where there might be 25 or 50 physicians, and there are only one or two specific physicians that are treating IV Stem, and only their patients are treating IV Stem. This goes back to needing more and more IV Stem clinic time so that everyone can refer their patients, and we are working through that. The staff that is needed—you need a nurse practitioner or a physician's assistant or a physician to place the device. So that is important. From a barrier standpoint—and let me back up, Lindsay—if you have two new patients per week every week, then because there are four devices per week, that means you need two new patients per week. After four weeks, you have eight placements, and they continue to roll over. You would need, say, a Tuesday morning from 8:00 to 12:00. You need eight 30-minute slots. You would need to staff that, and this is where the economics come into play. That is our job to make sure that is clear as we meet with these children's hospitals. From a barrier standpoint, I mentioned an example a second ago of a children's hospital where they have known since February they were already booking out March, April, May; now they are into September. Now that they get to these committees, that should come back, and they should have plenty of time beginning in, let us call it, May or June at the latest. But then I expect they will need to expand again. When I look through Q1, we have some outstanding results, but I would argue that only one children's hospital is treating at capacity. Even that hospital—there are three or four or five large payers that they do not have, which means they are not even treating those patients. So no one is at capacity. When you talk about who is treating as many patients—every patient that they see that truly needs this—I would argue that only one children's hospital is doing so. That is very good news. This is very new. Having everything that they need in place is very new, and they still do not have all the payer coverage that they need. The barriers can be many, Lindsay. You are talking about the department. You are talking about the physicians and who is treating and who is referring. You are talking about the chief of the division. You are talking about the chair of pediatrics, the chief revenue officer, the VP of finance, the CFO. Depending on the size of the hospital, there could be many barriers, many committees that prevent this or slow this down regardless of the clinical need and the clinical demand. We are working through that. The good news is, at least at the top, there is no resistance there. It is a matter of process and time. This is where, now that we have the information—I have been very clear in the past about measuring twice and cutting once when it comes to spending money. Making sure you have a revenue source is important, and at least understanding the people that you need to put in place before you just go hire. The great news from Q1 is that it has been very clear to us, and we are aggressively hiring to fill these positions to be able to grow and make sure that we are covering 50, 75, 100, 125 children's hospitals. We will do that, and it is going to be a process. But fundamentally, it is better than expected in the places where we have the pieces in place. Lindsay Leeds: Okay. Thank you. Are you able to talk about your Veterans Affairs program? Will you be hiring additional staff in Q2, or do you know how long it will take you to know the trajectory of that rollout? Brian Carrico: Well, a few things about the VA. The response and the reception of this technology and the data behind the technology has been stronger than I expected—better than we expected. As I said on the call, I did not expect orders in Q1. The VAs, by nature, move a little slower, but we have seen several facilities order, and we are seeing reorders, which is excellent. As I see more facilities order and more reorders, we will be a little quicker to hire more people, and we are looking at a bigger-picture commercial rollout where we are considering making the reps that are covering the VA also cover children's hospitals. You start to have a national sales force and national payer landscape. It does not make sense to have—I am in Indiana, so I will use that as an example—it does not make sense to have someone in Indiana calling on the VAs and someone else in Indiana calling on the children's hospitals. We need to be able to scale the commercial operation. As we continue to transition throughout 2026, we will move towards that model. One thing that sticks out to me is there was an article I read two weeks ago about the VA: the FSS contract is just a license to go to the VA and be able to move the technology. I would argue that anytime you have an FDA indication, it is just a license to be able to go to the hospital and sell. This is really no different. Are there some barriers in the VA from a resource standpoint? Of course. There are resource barriers in children's hospitals. There are resource barriers everywhere. This has been no different, but I am pleasantly surprised with the uptick in response and positive feedback and initial adoption in the VA. So yes, as we move into Q2, I expect there will be additional hires. I expect by 2027 that we are beginning to marry the children's hospitals and the VA from a commercial standpoint. We will talk more about that as we get closer. Make no mistake. We have been very lean, and that is because we needed a revenue source in the Category I CPT code and an FSS contract. As lean and calculated as we have been, we are going to be measured and calculated going forward, but we are going to be very aggressive from a commercial standpoint. Lindsay Leeds: Excellent. Do you have any adult data at all that you are able to take with you to the Veterans Affairs hospitals to promote this IV Stem treatment, or are you basing that mainly on the pediatric data? Brian Carrico: There is no large randomized controlled trial yet. But there is absolutely adult data. First off, the fMRI data that was done at the Atlanta VA was done at the Atlanta VA, showing cognitive changes in patients using the technology. Many of our studies have patients in their twenties. From a pathophysiology difference, there should be no difference between a 21-year-old and a 45-year-old. The physicians have understood this, and we have gotten very little pushback on the fact that there is no large randomized controlled trial in adults. As I mentioned, we have begun that trial at the Cleveland Clinic in adults, and we expect that to be very meaningful. We are also expecting a publication in a study with patients up to 35 years of age in the coming months from an institution. On the surface, that might appear as a barrier, but it has not been a barrier to date, and I do not expect it to be a large barrier if you understand the science. Lindsay Leeds: Okay. Perfect. Thank you so much. That is all my questions. Operator: The next question comes from Karen Sterling with Kingswood Capital Partners. Your line is open. Karen Sterling: Thank you. Good morning. Hi, Brian. I would like to pick up where Lindsay left off on the IV Stem trial in adults. Could you give us a little bit more detail on how that trial is laid out and what your expectations are? How do you expect it to benefit the company going forward? Brian Carrico: I expect a large randomized controlled trial at the Cleveland Clinic with a sham arm, in addition to all the data we already have from a mechanistic standpoint. As I mentioned, the other study that is going to be published soon in patients up to 35 should be strong enough to convince the academic society, who in turn can request coverage from payers. I expect this to help gain us insurance policy coverage on the adult side. One thing I have not talked about is the amount of inquiries and requests from adult gastroenterologists to utilize IV Stem. The reality is it would be on a cash basis. There is no patient assistance program due to federal guidelines on the adult side now that there is a Category I CPT code. This is a cash pay, and there is no insurance coverage on the adult side. This is extremely important to us. It is why we are doing such a large study. From a medical device standpoint—look, this is not a pharmaceutical. It is not a drug. It does not have the same risk and side effects, of course, which is one of the many reasons that a pharmaceutical trial is so large. But for a medical device, from a power calculation standpoint, this will be a really strong study at the Cleveland Clinic, and that is the goal of the study. It may take, let us call it, 18 months to do this study. We will know more in the next 90 days about how many patients are being enrolled, and we will be able to have a closer idea and prediction as to when this study will be completed. Then, because we have the data and we already have the indication, we will be able to go directly to the insurance companies. Karen, that is the ultimate goal. This is an extremely large market opportunity. As we talked about earlier, this was the first FDA indicated, approved, or cleared treatment specifically for functional dyspepsia in adults. Right now, the focus is on the VAs, where there is an FSS contract, and we can help people. In the interim, the focus is on this study and ensuring that it is done as quickly and efficiently as possible. Karen Sterling: Got it. Okay. Apart from the approved indications in dyspepsia and IBS, do you have any plans for opening up additional expansion markets? Brian Carrico: Now are you talking about additional countries, or are you talking about additional indications? Karen Sterling: Additional indications. Brian Carrico: We have a few studies in place. We have the randomized controlled trial for cyclic vomiting syndrome, which would also be in children's hospitals—the same call point, pediatric gastroenterology. We have a couple of other studies that are underway. I would point to the cyclic vomiting syndrome study as potentially the most meaningful. Karen Sterling: Okay. Can you give us a timeline on that? Brian Carrico: That is probably also 18 months out, similar to the adult RCT. Karen Sterling: Okay. Perfect. Thank you. And— Brian Carrico: And it is on clinicaltrials.gov. There is another study in post-op pain at UPMC. It is about a 300-patient RCT showing opioid reduction or lack of opioid use—eliminating the use of opioids in open bowel surgery. That should be done this spring. There is a lot to discuss about that before I am going to discuss it publicly. Our focus is on the children's hospital. The opportunity there is incredible, and that is where our focus is. Karen Sterling: Thanks very much. Operator: Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to Brian for closing. Brian Carrico: Thank you. Thank you all very much for being with us today. I look forward to communicating with everyone again soon. If there are follow-up meetings or follow-up calls or additional questions, as most of you know, I look forward to those and am happy to meet. With that, have a great day. We will talk soon. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the DarioHealth Corp. fourth quarter and year-end 2025 results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, 03/19/2026. I would now like to turn the conference over to Zoe Harrison, VP, Accounting and Corporate Development at DarioHealth Corp. Zoe, please go ahead. Zoe Harrison: Thank you, Operator, and good morning, everyone. Thank you for joining us today for a discussion of DarioHealth Corp.’s fourth quarter and year-end 2025 financial results. Leading the call today will be Erez Raphael, Chief Executive Officer of DarioHealth Corp. He will be joined by our President and Chief Commercial Officer, Steven C. Nelson, and Chen Franco-Yehuda, our Chief Financial Officer. An audio recording and webcast replay for today’s call will also be available online as detailed in the press release invite for this call. For the benefit of those who may be listening to the replay or archived webcast, this call is being held on Thursday, 03/19/2026. This morning, we issued a press release announcing our financial results for the fourth quarter and year-end 2025. A copy of the release can be found on the Investor Relations page of DarioHealth Corp.’s website. I would like to remind you that on this call, we will make forward-looking statements within the meaning of the federal securities laws. For example, the company is using forward-looking statements when it is discussing statements regarding the expected timing and contribution of agreements signed in 2025 to revenue in 2026 and 2027, anticipated revenue growth trends and the timing of acceleration during 2026, the size, composition, and potential conversion of the company’s commercial pipeline, expected onboarding, enrollment, ramp, and expansion of employer, health plan, and channel partner relationships, the anticipated benefits of the company’s multi-condition platform AI capabilities, DarioIQ, expectations regarding future operating efficiencies, margins, and operating expense reduction, the company’s expectation that it may reduce the operating loss by 30% in 2026, reach cash flow breakeven by mid-2027, and future strategic opportunities, including a sale, merger, strategic business combination, or continued execution of the company’s stand-alone strategy. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond the company’s control, including the risks described from time to time in its SEC filings. The company’s results may differ materially from those projections. These statements involve material risks and uncertainties that could cause actual results or events to differ materially. Accordingly, you should not place undue reliance on these statements. I encourage you to review the company’s filings with the SEC, including, without limitation, the company’s Annual Report on Form 10-K, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. With that, I will now turn the call over to Erez Raphael, Chief Executive Officer of DarioHealth Corp. Erez Raphael: Good morning, everyone, and thank you for joining us. 2025 was our strongest year on record for new business wins. We signed 85 new agreements against a target of four, more than doubling our goals, with average contract sizes running two to 10 times larger than our historical average. Annual revenue declined due to a single legacy client from the pre-acquisition period that decided not to renew the contract, a one-time situation unrelated to product performance or our value proposition. But the business underneath told a different story. Eighty-five new agreements signed, including wins with Florida Blue, UnitedHealthcare, and Premera Blue Cross, made 2025 our strongest year on record for new business. 2025 returned to sequential revenue growth, the trend we expected. On a year-over-year basis, our core B2B2C business delivered organic revenue growth excluding the revenue headwind related to the single industry client. While we do not provide formal guidance, I want to share how we think about the years ahead. Our existing contracts provide a stable foundation, booking agreements with built-in member growth and expansion opportunities. On top of that are the new clients we signed in 2025, many of which are still ramping enrollment and engagement. That new cohort becomes the growth driver for 2026. The 2025 season, DarioHealth Corp.’s strongest on record, generated $12.9 million in contracted and late-stage ARR, set to contribute revenue in 2026 and 2027. Beyond that, our pipeline of commercial opportunities has expanded to $122 million, establishing both new revenue visibility and a strong foundation for sustained growth. We expect revenue growth to continue in 2026 and build throughout 2026, with the second half of the year expected to show the strongest acceleration. A few years ago, when we defined our growth strategy in an evolving digital health market, we articulated a thesis built on two compounding layers that we believe would become a structural advantage for scale, and we were right. The first layer operates at the client level. Channel partnerships like Solara Health give us access to millions of covered lives through a single commercial relationship, eliminating the account-by-account selling that structurally limits our growth potential and reduces our cost of acquisition. The second layer operates at the member level. Our multi-condition platform means a far greater share of each account’s population qualifies for our solutions. A single-condition solution is relevant only to members with that one condition. Covering five conditions means a materially larger proportion of any account’s population is reachable. More members involved, more revenue generated. Together, one layer multiplies how many accounts we access; the other multiplies how many members we serve within each. That is the compounding. The market is validating this in real time. Employers have moved beyond the point-solution era. They are consolidating vendors and asking for integrated platforms that address multiple conditions with measurable outcomes. Nearly 80% of our pipeline of commercial opportunities now involves multi-condition deployments, and the most common request we receive is to manage diabetes, hypertension, and mental health through a single platform. This is one reason customers increasingly come to us rather than the other way around. The foundation that makes both vectors work is DarioHealth Corp.’s fully vertically integrated platform. In an era of generative and agentic AI, the vertical ownership from the device that generates the data to the AI that acts on it is itself a compounding advantage. The value of AI is driven entirely by the quality of the data it runs on, and DarioHealth Corp. owns this data from the ground up. Our data is generated, continuous, and proprietary. We own the underlying data infrastructure. We do not license it, rent it, or depend on third-party inputs. We believe that this strengthens our competitive position as AI becomes more powerful. DarioIQ, our AI-driven intelligence engine, trained on more than 13 billion real data points, is the product expression of that advantage, purpose-built on data that no competitor can replicate. Our advantage rests on three pillars: proprietary clinical data generated at the point of care, clinical credibility backed by 100-plus peer-reviewed studies, and deep integration with employers and the healthcare ecosystem. Together, they create a position that has the potential to compound with scale. This is precisely the model we built. The digital health market is consolidating around platforms that deliver measurable clinical and financial value. With our integrated technology, expanding distribution network, and rapidly growing client base, we believe that we are well positioned to lead the transition. With that, I will turn the call over to Steven. Steven C. Nelson: Thank you, Erez, and good morning, everyone. Erez described two compounding layers at the heart of our growth strategy. What I want to show you this morning is this thesis in action in the distribution partnerships we are scaling and the multi-condition demand we are seeing from employers and health plans. These are not separate dynamics. They are compounding each other, playing out simultaneously across our commercial book. Before walking through the commercial progress we are seeing across the business, I want to briefly step back and highlight what we believe is an important shift occurring across the digital health market. Employers, health plans, and pharmaceutical companies are all facing the same structural challenge: rising healthcare costs driven by chronic disease, combined with increasing complexity in how care is delivered and managed. As a result, buyers are increasingly moving away from fragmented point solutions and toward integrated digital platforms that can address multiple conditions while delivering measurable clinical and financial outcomes. We believe this transition is defining a new category within digital health: vertically integrated, multi-condition digital care platforms, where providers that can combine clinical engagement, behavioral support, and data-driven outcomes across multiple chronic conditions will increasingly become the preferred partners for employers and health plans. This is exactly what DarioHealth Corp. offers. With that context in mind, there are three areas I would like to cover this morning. First, the structural shift we are seeing in our go-to-market model as distribution increasingly moves toward large payer ecosystems and curated digital health networks. Second, the continued expansion of several of our most important channel partnerships and payer deployments. And third, there are several emerging opportunities we are evaluating that could open additional pathways for growth over time, and I will specifically cover one of these significant opportunities today. Taken together, these developments reinforce what we believe is an important inflection point for the company. Let me start by revisiting the theme we introduced during our last few earnings calls: the growing role of one-to-many distribution channels in our business. Historically, much of the digital health market operated through direct employer sales and individual point-solution deployments. What we are seeing now is a shift towards payer ecosystems and curated digital health networks that allow health plans and large employers to deploy integrated platforms across much larger member populations. The commercial model we are building allows DarioHealth Corp. to move from selling individual programs one employer at a time to becoming embedded within payer ecosystems that distribute digital health solutions across entire populations. During our last call, we discussed several examples of this strategy beginning to take hold, including our launch on UnitedHealthcare’s digital marketplace, our deployments through Solara Health supporting plans such as Premera Blue Cross, and our growing partnerships with Amwell supporting payer-sponsored digital health programs. Through these partnerships, DarioHealth Corp. now has access to more than 160 million covered lives through our distribution ecosystem. As these distribution ecosystems expand, each new payer or partner deployment has the potential to bring DarioHealth Corp.’s platform to significantly larger populations without requiring proportional increases in commercial infrastructure. These relationships dramatically expand our reach. A single distribution partner can unlock access to millions of covered lives and significantly accelerate our ability to scale. Importantly, we are also seeing continued commitment from our existing health plan partners. We are currently finalizing a three-year contract extension with Aetna and a four-year contract extension with Centene, reinforcing the long-term value these organizations see in the outcomes delivered through DarioHealth Corp.’s fully vertically integrated platform. What we are seeing now is the next phase of this strategy, where these distribution ecosystems begin to activate across additional health plans. For example, through our partnership with Amwell, Florida Blue selected DarioHealth Corp. as a part of its digital health ecosystem. The program is currently in migration and implementation phases, and we expect revenue from the partnership to begin contributing in 2026 as enrollment ramps, with broader expansion anticipated into the 2027 plan year. Florida Blue represents one of the largest and most influential Blue Cross Blue Shield organizations in the United States, and their selection reinforces the growing demand among major payers for a fully vertically integrated platform that can deliver measurable clinical and financial outcomes. In addition, our channel partner, Solara Health, recently announced that HCSC, the second-largest Blue Cross Blue Shield organization in the United States with approximately 25 million members, will be launching new digital health capabilities through its network beginning in January 2027. DarioHealth Corp. has been selected as a preferred in-network partner within Solara’s curated digital ecosystem supporting that rollout. We are also pleased to share that Amwell is preparing to launch another Blue Cross Blue Shield health plan relationship in July 2026, and DarioHealth Corp. has already been selected to be the preferred partner. We will share additional details as the program moves closer to launch. Finally, we are currently in the final stages of contracting with another distribution partner that we expect will become an important addition to our channel ecosystem. Through that relationship, we anticipate launching what would represent the largest fully insured client in DarioHealth Corp.’s history. Another area where we are seeing encouraging traction is within government-sponsored healthcare programs, particularly through the federal rural health transformation initiatives, a $50 billion program rolling out $10 billion in spending over five years. This program represents a major effort designed to improve healthcare access and outcomes in underserved rural communities across the United States. Today, DarioHealth Corp. is engaged in direct discussions with approximately 10 state offices that are evaluating digital health infrastructure as a part of rural health transformation planning. In parallel, we are working closely with one specific channel partner to ensure DarioHealth Corp.’s platform has exposure within broader proposals supporting these initiatives across the remaining 40 states. Turning now to our employer pipeline of commercial opportunities, demand for integrated digital health solutions continues to strengthen as employers seek measurable outcomes and simplified vendor ecosystems. In 2025, we added 85 new employer accounts, many of which have been onboarding and ramping throughout the first half of this year, providing an expanded base of recurring revenue entering the second half. For the 2026 benefit cycle, we are currently tracking 44 employer opportunities representing roughly $35 million in pipeline value. Looking further ahead to the 2027 cycle, we are already engaged in 58 additional employer opportunities representing approximately $19 million in pipeline value. Taken together, our total employer pipeline represents 102 opportunities totaling approximately $54 million in value. Importantly, the average size of these opportunities entering our employer pipeline today is materially larger than the accounts we have historically pursued—two to 10 times larger. In addition to employer demand, we are also seeing strong momentum across our health plan pipeline of commercial opportunities. Today, our health plan pipeline includes approximately 70 active opportunities representing roughly $33 million in pipeline value across national and regional payer organizations. Looking ahead to the 2027 planning cycle, we are also engaged in 11 additional early-stage health plan opportunities representing approximately $27 million in potential value. Taken together, our health plan pipeline now represents 81 opportunities totaling approximately $60 million in value. As we expand our presence within payer ecosystems, we believe that the scale of these health plan opportunities has the potential to continue to grow. Another area we are beginning to explore is within our pharma services segment. Historically, pharmaceutical companies have focused primarily on direct-to-consumer engagement or provider-based education models. What we are starting to see now is early interest from select pharmaceutical companies in exploring employer-based engagement strategies. Digital health platforms may help support patient identification, therapy adherence, and outcomes measurement. Today, we are in discussions with three pharmaceutical organizations evaluating whether employer-based engagement supported by digital health infrastructure could represent a viable commercial approach. At this stage, we view pharma as an emerging opportunity that we are actively evaluating rather than a core revenue driver today. Stepping back, what we believe is important for investors to understand is that DarioHealth Corp.’s commercial expansion today is being primarily driven by two core growth engines. Layer one, client scale, through channel partnerships that give us ecosystem-level access to millions of covered lives without proportional increases in our commercial infrastructure and related expenses. Layer two, member scale, through our multi-condition platform, which means a far greater share of each account’s population qualifies for DarioHealth Corp., generating more revenue from the same client base without acquiring a single new contract. These two layers compound together exactly as Erez described. One multiplies how many accounts we reach; the other multiplies how many members we serve within each. That compounding is already visible in our fourth-quarter numbers, and it will become increasingly visible as 2026 progresses. As these payer ecosystems activate and employer demand continues to expand, we believe the commercial foundation we have built positions DarioHealth Corp. to scale across significantly larger populations in the years ahead. I will now turn the call over to Chen. Chen Franco-Yehuda: Thank you, Steven, and good morning, everyone. In 2025, we delivered sequential revenue growth to $5.2 million in Q4 and posted our lowest operating expense run rate on both GAAP and non-GAAP bases since the Twill acquisition. That combination—growing revenue and declining cost—is the inflection we have been building towards. Revenue for the twelve months ended 12/31/2025 was $22.4 million, compared to $27.0 million in 2024. As Erez explained, this was driven entirely by a single legacy client non-renewal from the Twill acquisition, partially offset by organic growth. GAAP gross margin expanded from 49% in 2024 to 57% in 2025, primarily reflecting the reduction in technology amortization expenses. Our core B2B2C ARR business has sustained approximately 80% non-GAAP gross margin for two years, which we believe is the most representative measure of the underlying unit economics of our platform. On operating expenses, the improvement is significant and accelerating. For full-year 2025, total operating expenses declined by 31% to $49.3 million compared to 2024, and full-year non-GAAP operating expenses declined by $13.6 million, or 26% year over year, from $52.2 million to $38.6 million. In Q4 alone, GAAP operating expenses declined 28% to $11.4 million, and non-GAAP operating expenses also fell 28% year over year from $12.4 million to $9.0 million. Full-year operating loss improved by $21.0 million, or 37%, on a GAAP basis, and by $9.6 million, or 29%, on a non-GAAP basis. On cash, we ended 2025 with $26.0 million in cash and short-term deposits. Net cash used in operating activities declined from $38.6 million in 2024 to $25.9 million, a 33% reduction driven by the compounding effect of margin expansion, AI utilization, and cost discipline. Based on our contracted and late-stage ARR, growing pipeline of commercial opportunities, and continued OpEx reduction, we expect to narrow our non-GAAP operating loss by approximately 30% in 2026, targeting cash flow breakeven by mid-2027. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statements table included in our earnings press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.” With that, I will turn the call over to Erez for closing remarks. Erez Raphael: Thank you all for joining us today. 2025 demonstrated something important. The work we did to build a differentiated platform is now reflected in the demand we see, commercially and strategically. We entered 2026 with our strongest commercial pipeline ever, a record new business year behind us, and a fully vertically integrated platform whose competitive position deepens with each new member we add and each data point we generate. As a reminder, in September 2025, in response to multiple unsolicited inbound expressions of interest, DarioHealth Corp. engaged Lazard and established a special committee of our Board of Directors to consider a full range of strategic opportunities, including a sale, merger, strategic business combination, or continued execution of our stand-alone strategy. The process remains active, and we will provide updates when there is a material development to share. What is becoming increasingly clear is that DarioHealth Corp. is positioned to succeed in any scenario it chooses to pursue. We believe that the demand we see from the market—from payers, employers, and strategic partners—reflects what we have built: a platform that owns its data, compounds with scale, and delivers outcomes that no point solution can replicate. Before I hand it over to the Operator, I want to take a moment to thank the people who make this possible. To our employees, your dedication to our members and to each other is what drives everything we do. To our partners and channel ecosystem, your trust and collaboration are central to how we scale. And to our shareholders, thank you for your continued support and confidence in our platform and our mission. We look forward to sharing more progress with you on our next call. I will now turn it over to the Operator for the Q&A session. Operator: Thank you. Ladies and gentlemen, we will now open the call for questions. You will hear a prompt that your hand has been raised. Should you wish to withdraw from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Charles Rhyee with TD Cowen. Your line is now open. Charles Rhyee: Yes, thanks for taking the questions, and congrats on the end of the year here. Obviously, pretty exciting in terms of the pipeline opportunities, obviously some big contracts starting to ramp up as you move through the course of the year. I think you had one big one, I think you just mentioned, starting here in January. Can you give us a little sense on how that is progressing, and maybe in broad strokes, how should we think about revenue growth in 2026? You have a sort of consensus number signaling significant growth here and just kind of get a sense of your comfort with that, and how should we think about the cadence of revenue growth as we go through the year? Erez Raphael: Thanks, Charles, for the question. Yes, so as we mentioned on the quarter, we had 85 wins, and we had $12.9 million in contracted and very late-stage opportunities. Obviously, not everything is going to be recognized for the full year. It will take time to implement. What we have already seen in Q1 is that we see growth between Q4 to Q1. Some of the implementation already started, so we are expecting growth. The growth is going to accelerate in the second half of the year. And when I am looking into the consensus of all the analysts that we have today, we feel comfortable with these forecasts that we see out there. We are not providing guidance, but we do think that what exists at the moment is something that the company feels comfortable with. And the way that we are operating is planning, obviously, to at least achieve a little bit above the consensus of the analysts that we have at the moment. Charles Rhyee: Appreciate that. In terms of the target of breakeven, it seems like that has been slowly getting pushed out a little bit. Can you give us a sense for what is kind of driving that? Is that just trying to take advantage of current pipeline opportunities and trying to stay on top of growth overall? Or anything that you can share regarding that? Erez Raphael: Yes, absolutely. It is going to be like 80% of the picture is the growth and 20% is to keep optimizing the OpEx. We did a lot of cost reduction in the last two years, as everyone knows. We think that with the implementation of AI and agentic AI that we are implementing, we will be able to push the cost down by another few percentage points year over year. But the bigger part of why we believe we can get to cash-flow positive is our ability to grow the top line. It is going to be the major part, and with what we have signed so far and what you see in the pipeline, we think that is something that will get us to the cash-flow positive point. The overall top line that we see that will take us there is somewhere in the range of $38 million to $42 million in revenues. That is the point where we think the business is going to be cash-flow positive. Steven, do you want to add something? Steven C. Nelson: Yes. Hi, Charles. Steven here. I just want to add one thing, which is as we have evolved these channel partnerships and brought them on, one-to-many, and as these health plans— you know, they are health plans, so we are dealing with large organizations—how do we weave our way in, and then the platform partners, whether it is Solara, Amwell, or others that we will announce. We have to structurally—and I talked about that in the call—get ourselves organized for that. So there are things that we have to do and prepare—normal ramp-up things, not large expenses, but work. And we need to get focused on what that work is, how we do it in a fluid way, because it needs to be repeatable, and it needs to continue with these channel partners as we move forward. So they have some changes that have altered our business in a good way, definitely noticeable in the contracts that we have won and, therefore, how we implement in an effective manner. But that takes a little bit of a pivot on how we have done it before. Now we are going more one-to-many, and so we are working on that work, being very mindful of OpEx, as the company has historically and as we have shown recently in the results. But we also need to make sure we are making the right investments in that business so those two-, three-, four-year agreements—which is what they come with—are sticky and longitudinal. It is very important that we reflect that as we think about our investment. Charles Rhyee: Great. And maybe one last question for me. As you know, being a preferred partner, and we think about HCSC, for example—obviously, that by itself is a big opportunity. What is the selection process there? Is it each member within HCSC can make a decision, or is it within even each of the Blue Cross Blue Shield plans within HCSC where their employer customers make a decision? Maybe talk us a little bit through how to take advantage of that opportunity. Is it more RFPs within that as well, or is it people can just select off a menu as they are selecting options? And then what is your assumption in terms of what you will be able to capture? Steven C. Nelson: Yes, so I will try to unpack that. I will probably go beginning to the end in terms of the capture rate. But I will start at the beginning first, which is: with our Solara partner—as you can go to Solara and see in their architecture and their website—we are a preferred partner. Just like using a doctor in a normal health network, there is in-network and there is out-of-network partners, and with Solara and what they bring on board, we are preferred. We are, quote-unquote, as I said in the script, in-network. It is a good way to look at it. Now, if I go to HCSC, the account, HCSC will have decisions that they make with Solara—not with us, but with Solara—when they look at how they want to move their books of business. And then, obviously, ASO or self-insured books of business, they get to make that call. So I am going to take a step up for a second before I round out that thought, which is this: just like any of the digital marketplaces that are coming forward, all the self-insured markets get to make a call. There is no more RFP. There is no more business to win, but they have to decide, do they want to go with something in-network, do they want to go with something out-of-network? Obviously, self-insured employers have to make that call on all their benefit design, just like normal health benefits. In terms of the fully insured book, or what HCSC or other Blues plans control, that is up to them. And so as they form those partnerships, we do get to work with them in that regard—how they want to construct the network, how we can work with them in general. So there are some variations there, Charles, that work across the board on all these. But within Solara’s partnerships, as they come up with recommendations with their partners, we, again, are preferred and in-network, which is important for us because that makes the decision very easy, easy to do business, start it up, run it in-network, and launch it. So we are working with them on that execution. They are a very large plan, both fully insured and self-insured. We think that there is plenty of business to be had there, for sure, and we are hopeful that through our preferred status, we will be able to shore that up and what it looks like for 2027. In terms of a capture rate, I do not say this flippantly, but obviously with that many millions of lives, with that size of share, us being in-network for any portion of that book is meaningful to a company our size, for sure. That also said, anything that they do in their fully insured book—Illinois, Texas, some of their larger states—would also be meaningful in that regard. So we are working across the board. I would close by saying capture rate on self-insured: we do normal predictive modeling accordingly. Nothing really changes in that regard. But keep in mind, with fully insured, we are often built into the product, and as I noted today, we are launching—not HCSC, I might add—but we will be launching our largest fully insured client January 2027 as well. Largest by far. Today, we have three accounts that are fully insured, smaller in nature, but we are moving forward with the fully insured piece of business in January. Charles Rhyee: Great. I really appreciate the comments. Thanks, guys. Operator: Your next question comes from Theodore Rudd O’Neill with Litchfield Hills Research. Your line is now open. Theodore Rudd O’Neill: Thank you, and congratulations on the good quarter. I have two questions this morning. The first is on operating expenses, which are down year over year substantially. How should we think about how that changes in 2026? And my second question is, the commercial pipeline here at $122 million—I looked back at last quarter’s press release, and it was $69 million—so there is a big uptick in the commercial pipeline value. I was wondering, is it changing definitions, or is that adding 2027 onto 2026? I am just wondering what the difference is there. Erez Raphael: Could you repeat that first one? Chen Franco-Yehuda: Yes. Good morning, Theodore. Thank you for your question. With regards to operating expenses, indeed, we reduced dramatically the OpEx during this year compared to last year, and we continue to reduce the OpEx. We mentioned several efficiencies—post-merger integrations, AI, etc.—which we expect to continue and see reduction in the OpEx through 2026. We also see that we can project that we can narrow the non-GAAP operating loss by 30% during 2026 compared to the full year of 2025. So that is for your first question. On the second question, I will let Steven respond. Steven C. Nelson: Yes, that is correct, Theodore. We did outline—you covered it at the very end there. What we have done is we are now including the 2027 year, so we are showing the combination of 2026 and 2027 in that regard. Last quarter, we talked about what was just in year 2026; now we are also doing a combined pipeline view. That is why I broke out in detail a little bit of the pipeline as well. Theodore Rudd O’Neill: Yes, I thought you covered it. I just wanted to ask it explicitly. So thanks very much. Erez Raphael: Thank you. Theodore Rudd O’Neill: You bet. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good morning, and welcome to Logistic Properties of the Americas’ fourth quarter 2025 earnings conference call. My name is Carly, and I will be the operator for today's call. At this time, all participants are in listen-only mode. Please note that this call is being recorded. There will be an opportunity for you to ask questions at the end of today's presentation. Now I would like to turn the call over to Camilo Ulloa, Investor Relations. Please go ahead, sir. Welcome to Logistic Properties of the Americas’. Camilo Ulloa: Fourth quarter and full year 2025 earnings conference call. My name is Camilo Ulloa with Logistic Properties of the Americas’ investor relations team. Joining me on today's call are Esteban Gaviria, our Chief Executive Officer, and James Smith Marquez, Chief Financial Officer. Before we proceed with our review of Logistic Properties of the Americas’ financial and operating results, please note that information presented during this call is intended for informational purposes only and does not constitute an offer to buy or sell any securities. Forward-looking statements made during this call are subject to a number of risks and uncertainties, which are discussed in Logistic Properties of the Americas’ filings with the SEC. Our actual results, performance, and prospective opportunities may differ materially from those expressed or implied in these statements. We undertake no obligation to update or revise any forward-looking statements after this call. We have prepared supplemental materials that we may reference during the call. We encourage you to visit our website at ir.lpamericas.com to download these materials. Please also note that all comparisons that we will discuss during today's call are year-over-year unless we note otherwise. Esteban will begin today's review. Esteban, please go ahead. Esteban Gaviria: Good morning, everyone. Thank you for joining our latest earnings call. Without a doubt, 2025 was a great and transformational year in many respects for Logistic Properties of the Americas. Not only did we make significant inroads into Mexico, our fourth operating geography that is characterized by sizable and promising submarkets, but also a year in which the increase in the scope and reach of Logistic Properties of the Americas’ real estate platform accelerated. Furthermore, our fundamentals are shining bright. To start off, we increased operating GLA by over 13%, while delivering a 23.3% increase in fourth quarter revenue and 14.3% for the full year. Benefiting from enhanced operating leverage, our earnings power also strengthened. We posted significant bottom-line profitability in 2025, our first full year as a public company. Particularly noteworthy in demonstrating the growth push that we had conveyed to the market was that net operating income grew by 29.8% in the quarter and 11.9% in 2025. Let me repeat that. NOI expanded almost 30% in the last 2025 compared to the same quarter the previous year. This level of growth speaks to the new speed that we envisage in 2026. In other words, Logistic Properties of the Americas’ NOI momentum is anticipated to be carried over into 2026, and we intend to continue building on top of it. By every key measure, we did everything we said we would accomplish in 2025. The year's impressive results reflect the continued maturation of our international logistics platform, the importance of adding solid talent to our teams, strong tenant demand across our markets, and the rental upside embedded in our portfolio. More specifically, our strong growth was also supported by achieving full occupancy across our operating portfolio, higher leasing rates, and the addition of the assets we acquired in Mexico last August. And despite having reached 100% occupancy by quarter-end, which provides clear evidence of the quality of our team, customer relationships, and real estate assets, we note that we still see opportunities to capture additional rental upside embedded in pockets of our property portfolio as leases roll over to higher market rates and as our new development projects come online this year. Moreover, we are only just getting started in Mexico, a far larger market where we see select opportunities to invest in expanding key logistics submarkets that have similar demand underpinnings and resiliency as our foundational markets. As announced last week, we took a major step towards visibly increasing our presence in Mexico through a strategic partnership we have forged with Fortem Capital, one of Mexico's leading institutional real estate investors, representing roughly a $200 million investment to be deployed over time. Under a master forward purchase agreement with Fortem, Logistic Properties of the Americas will progressively acquire stabilized, dollar-denominated Class A assets within Central Park 57, a modern large-scale industrial and logistics park that is strategically located along Federal Highway 57, a key logistics corridor in the state of Hidalgo. The park provides express connectivity to Mexico City, the State of Mexico, Querétaro, and Bajío, all of which are economically vibrant areas of the country that collectively account for approximately 35% of Mexico's population, and potentially even more economically based on purchasing power. Our high investment conviction is driven by the fact that this particular site offers a power-ready and cost-effective option for companies seeking dual highway connectivity along the greater Mexico City logistics corridor. Once completed, Central Park 57 will have approximately 2,100,000 square feet of GLA in a layout that will consist of eight buildings, which our partners with our systems will endeavor to have fully operational over the next couple of years, with Logistic Properties of the Americas ultimately becoming the beneficial owner of the park. To fund this purchase program, we expect to employ a combination of traditional debt financing, local equity partners, and Logistic Properties of the Americas’ proceeds from selective asset recycling initiatives in other geographies. Importantly, our institutional partnership with Fortem both accelerates and de-risks our expansion in Mexico, which will be a new phase of growth for Logistic Properties of the Americas and on a much larger scale. The partnership provides a clear line of sight to a substantive growth pipeline, one representing a 36% increase in GLA in our total operating portfolio as compared to year-end 2025. And because the partnership enables our international platform to sequentially acquire operating and delivered properties over time, this approach meaningfully mitigates construction and commercial risks. Regarding the overall market picture that we see for Mexico in 2026, we are encouraged by the recent U.S. Supreme Court ruling on tariffs, but remain mindful of shifting tariff policies, the USMCA negotiations, and continue to focus on resilient submarkets in Mexico that are driven by mostly domestic consumption rather than trade. Through that lens, our on-the-ground team and our growing network of local relationships, we continue identifying existing logistics assets as well as attractive development opportunities where there are pockets of strong demand for modern logistics facilities in key logistics corridors. The most recent data from Mexico's real estate market is also encouraging. In the fourth quarter, rents continued to gradually increase while net absorption improved on still limited new supply, as well as high and stable occupancy levels. Furthermore, construction activity was still restrained. Turning to our other markets, we are also pleased to highlight our stellar performance in them. Starting with Peru, PepsiCo has occupied Building 300 in Parque Logístico Callao, which is a significant driver of our fourth quarter growth. The new 254,000 square foot facility is LEED Gold certified and the first and only of its kind in Peru. Strategically located adjacent to Lima's international airport, the park also provides seamless connectivity to the marine port as well as direct access to the metropolitan area's more than 10,000,000 consumers. Additionally, construction of a fourth 215,000 square foot building within the park remains on time and on budget for delivery in the second quarter and will contribute additional revenue and NOI growth in 2026. Prior to breaking ground recently, the building was 100% pre-leased under a dollar-denominated contract, fully de-risking its development. With the addition of this building, Parque Logístico Callao will comprise four state-of-the-art Class A buildings totaling 863,000 square feet of gross leasable area. We now only have one more shovel-ready pad at this location for a fifth and final building that would add close to 210,000 square feet, which we believe we can pre-lease this year with development yields at or around 13%. This highlights the strong cycle and positioning Logistic Properties of the Americas has achieved in this constrained market of Peru. As a reminder, Logistic Properties of the Americas’ sites exemplify the high-barrier nature of the markets in which we operate. In many of these locations, land ownership is fragmented, making large-scale logistics development difficult, and therefore creating structural scarcity for institutional-quality logistics facilities in mission-critical locations. This is supported by our data. Undersupplied market conditions have given us pricing power and enabled us to achieve an 11% increase in rent per square foot across our aggregate regional portfolio last year. Another important contributor to our fourth quarter performance was the leasing of the remaining 97,000 square feet in Logistic Properties of the Americas’ operating portfolio in Bogotá, Colombia. What makes this lease particularly notable is that the tenant, a U.S.-listed warehouse club operator called PriceSmart, became a cross-border customer. Specifically, they were already renting space in one of our facilities in Costa Rica. This illustrates one of the defining advantages of Logistic Properties of the Americas’ platform: our unique ability to provide seamless multi-jurisdiction solutions to leading global and U.S. companies operating across the region. It is why we added Mexico to our platform last year, beginning with two prime logistics facilities in Puebla with a local equity partner, and we have now joined forces with Fortem to deepen Logistic Properties of the Americas’ presence in Mexico's dynamic market in a disciplined and effective manner. This will enable us to leverage long-standing tenant relationships as well as attract new companies that are also expanding in the country. We also continue to see growth opportunities in our foundational markets—Costa Rica, Colombia, and Peru. In a show of resilience and durability that surprises external observers, but not us, these economies continue benefiting from strong domestic consumption levels, rising commodity prices, especially in the metals and mining sectors, e-commerce penetration, and favorable demographic trends. Before turning the call over to James, we think it is important to address our share price performance. We continue to work tirelessly to ensure the market recognizes what we view as a significant dislocation, one that is disconnected from the fundamentals of our business. As we have noted previously, Logistic Properties of the Americas’ shares came under pressure last September following the expiration of the shareholder lock-up from our go-public transaction. Our central mission now, beyond sustaining the strong financial performance that underpins our expansion strategy, is to deepen our dialogue with the market, broaden investor awareness, and highlight the compelling investment opportunity we believe Logistic Properties of the Americas’ shares represent. As a relevant reference point, our book value per share stood at $8.12 as of year-end 2025. While book value does not capture the full picture, particularly the intangible value of our international platform’s near- and long-term growth potential, we remain committed to bringing greater visibility to what we see as a meaningful value opportunity. In that same spirit of visibility and relentless drive, we are marking Logistic Properties of the Americas’ tenth year in business with the next step in our brand's evolution. We have invested in strengthening our digital presence, and yesterday, we launched a renewed brand identity and website, both designed to reflect the company we have become over the past decade and our distinctive and valuable position within the publicly traded logistics sector. Our refreshed visual and marketing assets will also introduce a new ecosystem that captures the essence of Logistic Properties of the Americas’ value proposition: bridging local insight with global impact. This core message reflects the strength of our platform and the differentiated role we play for multinational customers, partners, and investors across the region. In short, Logistic Properties of the Americas’ vision and values emphasize a more purpose-driven organization as we enter our next decade of growth. We invite you to explore our new commercial website at lpamericas.com, which showcases this evolution and the opportunities ahead. With that, I will turn the call over to James to discuss our 2025 results in more detail. Thank you, Esteban, and good morning, everyone. James Smith Marquez: Our consolidated 2025 revenue increased 14.3% to $50.1 million, led by Peru and Colombia, which grew 31% and 14.8%, respectively. Costa Rica's revenue increased just under 1%, while our new facilities in Mexico contributed incremental revenue. The revenue growth was primarily driven by additional rents related to the stabilization of buildings in Peru during the year, the latest of which, as Esteban explained in his remarks, in addition to the stabilization of one building in Colombia, and other key drivers were lease renewals that were marked to market rates, contractual CPI-linked rate increases related to lease rollovers, mainly in Colombia, and the occupancy of previously vacant space in both markets. The new rates and leases increased average rent per square foot by 11% to $8.65, an increase that also benefited from favorable changes in FX rates. As we advance our growth strategy during the year, operating GLA increased 13.3% to 5,800,000 square feet across 34 properties. Leased GLA increased 6.3% to nearly 6,000,000 square feet, while development GLA in Building 200 in Parque Logístico Callao was unchanged at approximately 224,000 square feet. It is important to note that 84.1% of our development GLA is pre-leased. As Esteban pointed out, our development pipeline represents significant revenue and NOI growth in 2026, irrespective of any properties that we acquire under our recent purchase agreement with Fortem Capital or any other acquisitions we might make this year. Our 2025 operating expenses increased 16.8% to $1.2 million, largely in line with our projections for the year. The increase was mainly due to higher real estate taxes, operating costs such as maintenance repairs, expected increases in credit loss provisions, and higher land lease costs. SG&A increased 7.1% to $16.7 million, well below the 14.3% increase in full-year revenues and effectively increasing operating leverage. The most significant expenses were those related to hiring and salary increases, Colombia's alternative minimum tax, as well as the rebranding and digital marketing initiative that Esteban highlighted. Investment property valuation gain decreased by $11.7 million, or 36.2%, to $20.6 million in 2025. The decrease was primarily due to an $11.2 million valuation gain at Parque Logístico Callao, as the building, the largest in this park, mostly stabilized in 2024. Our $20.8 million in financing costs were 7.9% lower in 2025. The decrease was mainly due to securing lower interest rates on Logistic Properties of the Americas’ existing debt, more favorable interest rate environments in Costa Rica and Colombia, and the capitalization of interest related to the development of the two buildings within Parque Logístico Callao in Peru. We also maintain a healthy debt profile, with no significant debt maturing in the near term, and net debt to investment properties improving 150 basis points to 40.2%. Lastly, cash NOI increased 12.4% to $40.3 million in 2025, mainly reflecting the increased GLA as well as higher occupancy and rental rates during the year. That concludes our review. Operator, please open the call for any questions. Operator: At this time, we will open the floor for your questions. If you would like to signal a question on your phone, simply press star and one on your telephone keypad. Also, as a reminder, you may submit your questions online by using the Q&A on the webcast platform. Your first question comes from Andre Mazzini with Citigroup. Andre Mazzini: Yes, team, thanks for the call and the question here. So, if you can speak a little bit about the Mexico markets, a lot going there in terms of M&A in that space. So how you are seeing the market and this whole M&A activity, if it changes your strategy in any sense, consolidation in the Fibra space there in Mexico or not really your focus on, of course, until now, acquiring properties in the private market. If it does not really change how you are thinking about the Mexico market, all this kind of M&A activity in the public space we are seeing? Esteban Gaviria: Thank you, Andre, for joining the call and your question. Actually, it bolsters our confidence in that market. That interest and that activity level does make us think that consolidation might be underway. I do think there is going to be a form of segmentation, for one, such that there are going to be bigger players, allowing a platform like Logistic Properties of the Americas to play more in what I would say is the middle market. So these are billion-plus transactions, and we are going to be looking at opportunities between $100 million, $200 million, maybe even $300 million. And that market segmentation is going to be powerful. That is why, to name an example, the Fortem Capital deal that we agreed earlier this year is a reflection of that. So that is the first takeaway. One, it bolsters our confidence. Second, I think it starts to segment the market and allows us to play in a mid-market tier. The last point I would highlight is the fact that some portfolio pruning might be underway after those consolidation moves take place. And then, once again, Logistic Properties of the Americas will be on the lookout to grasp additional opportunities. So I think that is going to be a beautiful setup as we roll into the market and take a bigger presence. Andre Mazzini: Very clear. Thank you, Esteban. Operator: Again, if you would like to ask a question, press star one on your telephone keypad. It appears that we have no further questions at this time. We will now turn the call back over to Esteban for any closing remarks. Esteban Gaviria: Thank you, operator. I would like to end today's call with a few key takeaways. Number one, it was a transformational year during which we delivered again on what we had promised to our shareholders. The revenue growth and the earnings power of Logistic Properties of the Americas’ regional platform are accelerating. Our most recent results clearly demonstrate the strength of our unique business model, the substantial pricing power that we command across our underserved markets, and the proven ability of our highly experienced team to effectively execute our long-term growth strategy. Two, we have a solid development track record we extended last year, with a 13.3% increase in GLA. Building on top of that, we are establishing a strong foundation in Mexico, where we plan to make additional investments that strategically expand our platform to encompass more of this key market, focusing on select locations that are mission critical to multinational companies. As an internally managed real estate company, our fellow shareholders can count on us to continue investing with sharp focus on capital efficiency and long-term value creation. Moreover, active asset management will remain a strong value driver as well. And finally, having entered 2026 with full occupancy, we see significant rental growth ahead as we roll over leases to market rents and as new, largely pre-leased buildings become occupied in the first half of the year. With the visibility we have going into 2026, we anticipate that it will be another exciting year of high growth and additional strategic investments to substantially scale, further diversify, and augment the optionality and underlying value of Logistic Properties of the Americas’ vertically integrated regional logistics platform. Thank you again for joining us today. We look forward to seeing you on our next earnings call. Have a good day, everyone. Operator: This concludes today's conference call. You may now disconnect.
Operator: Greetings, and welcome to the Caleres, Inc. fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, the conference is being recorded. I would now like to turn the call over to your host, Liz Dunn, Senior Vice President, Corporate Development and Strategic Communications. Thank you. You may begin. Liz Dunn: Thank you, Melissa. Good morning. Thank you for joining our fourth quarter earnings call and webcast. A press release with detailed financial tables as well as our quarterly presentation are available at caleres.com. Please be aware today’s discussion contains forward-looking statements, which are subject to several risks and uncertainties. Actual results may differ materially due to various risk factors, including those disclosed in the company’s Form 10-K and other filings with the U.S. Securities and Exchange Commission. Please refer to today’s press release and our SEC filings for more information on risk factors and other factors which could impact forward-looking statements. Copies of these reports are available online. Discussing our operational results, we will be providing and referring to adjusted operating earnings results and, in some cases, we will be discussing our results excluding the impact of Stuart Weitzman. Additional details on non-GAAP measures as well as others featured in today’s earnings release and presentation are available in the reconciliation tables on our earnings release and on caleres.com. The company undertakes no obligation to update any information discussed on this call at any time. Joining me today are Jay Schmidt, President and CEO, and Dan Carpel, Senior Vice President and Interim CFO and CAO. Our call will begin with prepared remarks followed by a Q&A session to address any questions you have. With that, I will turn the call over to Jay. Jay? Jay Schmidt: Good morning. Earlier today, Caleres, Inc. reported fourth quarter sales and earnings. Earnings per share exceeded our guidance, with sales modestly above our guidance and gross margin better than expectations. Brand Portfolio sales performance in the quarter was driven by continued strength in owned e-commerce and international performance, underscoring key strategic growth vectors for the company. Lead brands once again outperformed, reinforcing their role as Caleres, Inc.’s primary growth engine, and we once again gained market share. At Famous Footwear, we continue to see encouraging signs that our strategic initiatives are working. Our Flair remodels are consistently outperforming the fleet and remain an important growth lever as we elevate the in-store experience. We leaned further into our strategy to elevate and edit the brand and product assortment, and we are seeing consumers respond to a curated mix of premium and in-demand brands. And for the quarter, we gained market share in shoe chains. We were pleased that Caleres, Inc. ended 2025 with momentum in both segments of our business. 2026 will be a build-back year where we begin to build back our earnings power driven by the strategic growth factors and initiatives that are already in place and working. We will say more on that in a moment, but first, let me provide more detail on fourth quarter performance. Brand Portfolio sales on an organic basis increased 1.5% in the quarter and 20.3% when factoring in Stuart Weitzman. Lead brands in total were up 2% organically and represented nearly 60% of Brand Portfolio sales. Owned e-commerce continued to see outsized growth, and our international business was strong. According to Circana, our Brand Portfolio gained significant market share in both women’s fashion footwear and total footwear during the quarter. Boots, particularly tall shaft, were a standout category, complemented by strength in flats and loafers, solid performance in dress, and continued momentum in sneakers. Sam Edelman delivered another very strong quarter with sales growth that exceeded expectations and outperformed the broader premium market. Performance was broad-based across categories, anchored by exceptional results in dress, casuals, and boots, where the brand saw success in both proven icons and new styles. Wholesale sales exceeded plan, reflecting strong demand across core product franchises. Owned e-commerce saw double-digit growth and higher full-price selling in the quarter, closing out a record-setting year. Sam Edelman’s licensing initiatives added incremental growth and visibility, highlighted by a successful fragrance launch with rapid sell-through and expanded national distribution. We continue seeing positive results from our Sam Edelman stores, which now tally 111 doors—56 owned and 55 franchised—with 107 of them international. Stuart Weitzman delivered solid fourth quarter progress as we continue strengthening the foundation of Caleres, Inc.’s newest lead brand. We successfully integrated Stuart Weitzman onto Caleres, Inc. platforms as we completed the quarter both on time and on budget. During this transition process, we implemented a new organization structure, moved teams into new headquarters in New York and Shanghai, completed the relocation of our U.S. and Canadian warehouses, and liquidated a significant volume of aged inventory globally. Operationally, fourth quarter sales were driven by core boots and booties alongside new dress and social styles. As we clear out aged inventory, we are successfully reducing discounting and flowing newness to support improved specialty retail and e-commerce performance. At quarter end, Stuart operated 73 retail locations worldwide, including 50 in China and 23 in North America, with the latter spanning full-price, outlet, and shop-in-shop formats. We remain committed and confident in our plan to bring the brand to breakeven in 2026. Allen Edmonds delivered a very strong fourth quarter with broad-based growth across all channels and continued momentum with the consumer. Performance was led by strength in brick-and-mortar stores, owned e-commerce, and wholesale, with particularly strong demand for dress, loafers, sneakers, and boots. Wholesale momentum, driven by key national partners, strong store-level productivity, and expanded distribution, continued. The Reserve Collection, the most elevated product in the Allen Edmonds brand, continued to scale meaningfully, attracting a highly valuable customer who shops more frequently, spends more annually, and shows higher loyalty engagement. This special collection is available at the majority of our 58 Allen Edmonds stores, including our 18 Port Washington Studio stores, which continue to outperform, reflecting the power of an elevated store experience and recent enhancements to the format. Naturalizer made meaningful progress in the fourth quarter with improving e-commerce sales momentum and new and retained customer growth. Owned e-commerce performance was a standout supported by strength across on-trend product categories, including boots, dress, sport, and sandals, with particular success in tall boots. Marketing efforts were increasingly focused and effective, with refined targeting, strong influencer content, and compelling storytelling driving higher-quality traffic, higher conversion, and higher average order value. These efforts translated into customer growth across both new and returning shoppers, with strong engagement from younger and core generations. And shortly after quarter end, we launched our newest collaboration with Casemaker and style icon June Ambrose. June’s collaboration is building awareness for the Naturalizer brand with new consumers, and June’s Styletics collection sells at significantly higher retails, mostly through naturalizer.com. Vionic closed the fourth quarter with strength in e-commerce and international channels, compelling new product launches, and growing interest in sport and performance walking. Vionic’s wearable well-being positioning has high emotional resonance with consumers. We are pleased with the growing momentum in sport lifestyle and performance walking categories, underscored by Vionic’s first sport collaboration with wellness advocate Gabby Reese, which we launched in January and supported with a robust marketing campaign. International sellers in the quarter closely mirrored those in the U.S., illustrating consistent global demand for the brand’s key styles. Brand awareness is growing for Vionic, particularly with younger and more affluent consumers. Moving on to Famous Footwear. In the quarter, total sales decreased 1.2% and comp sales increased 0.1%, in line with our expectations. E-commerce outperformed stores, but average unit retails were up in both channels. We continue to see the Famous consumer respond strongly during peak shopping periods, with more positive comps during the holiday period followed by more modest results in January. E-commerce sales accelerated and were up double digits for the third straight quarter. The launch of Jordan earlier in the year contributed steady momentum throughout the holiday season, remaining a top-10 brand and reinforcing Famous’s ability to launch leading brands and deliver powerful results. Famous continues to enhance its consumer experience through the Flair format. We ended fourth quarter with 57 Flair locations, which generated a 4.5% sales lift overall and a 6-point sales lift for stores converted in the last year. The success of Flair continues to bolster Famous’s ability to amplify elevated brands and products. We plan to build on that momentum with additional Flair openings in 2026, ending with a range of 65 to 75 locations by year end. From a divisional perspective, men’s performed best in the quarter, kids performed in line with the total, and women’s underperformed slightly. However, fashion boots were a standout category in total. Top growth brands for the quarter were Skechers, Jordan, Birkenstock, Timberland, Sorel, Brooks, and Columbia, while our Caleres, Inc. brands outperformed at Famous Footwear, with sales up mid-teens and a higher margin rate on lower inventory. We continue to make progress on our elevate-and-edit strategy at Famous, with outperformance from premium brands. In 2026, we plan to accelerate this strategy by expanding higher-demand brands and products while exiting underperforming labels. We are also expanding immersive brand takeovers that have been driving outsized growth at key points across the seasons, with multiple takeovers planned for core brands throughout 2026. In summary, Caleres, Inc. made progress on our strategic growth objectives in 2025, including lead brands, international, direct-to-consumer, enhanced customer experience, and edit-and-elevate. Joining us today on the call is Dan Carpel. Dan returned to Caleres, Inc. as Chief Accounting Officer in 2025 and has assumed the additional role of Interim CFO. He is well-versed in our company, and I am pleased to welcome him to the call. Dan will walk you through our guidance in detail, but I wanted to provide some color on what we are expecting for the year. As we look forward, 2026 is shaping up as a build-back year, characterized by relatively modest organic sales growth but meaningful earnings recovery. We have several encouraging green shoots leading us to a place of optimism. Our market share continues to build. Our international business is up, and our owned e-commerce business is up quarter-to-date across the Brand Portfolio. Famous Footwear is seeing slightly down comp store sales, with e-commerce up high single digits quarter-to-date. Our tariff mitigation strategies have taken hold, and we successfully completed our Stuart Weitzman systems integration, which sets the stage for improved profitability in the brand. We also made progress across our centers of excellence, which we have shifted internally to calling centers of expertise. We are finding the greatest success by deliberately leveraging Caleres, Inc.’s core capabilities at scale. This includes expanding our international, accelerating owned e-commerce, and establishing more disciplined planning and costing capabilities. In addition, now that three of our five lead brands have brick-and-mortar stores, we have launched a specialty retail operations team to elevate performance and the consumer experience. We have also established a marketing operations center of expertise to enhance our data, analytics, and media buying. These centers of expertise are helping us move faster and operate more consistently and efficiently. And international specialty retail and e-commerce are where we are seeing some of our earliest improvements with Stuart Weitzman. We see a meaningful opportunity to build on this foundation not just as it relates to Stuart, but for our whole company as we move through 2026, with more to come. So, while the market remains volatile, based on what we know today, we are providing guidance with a realistic view of the risks and the opportunities ahead of us, including geopolitical risk and tariff changes. Our sales growth is coming from our proven growth vectors and the annualized benefit from our recent acquisition, and our earnings bridge is clear. I will now turn the call over to Dan for the financial results and our outlook for 2026. Dan? Dan Carpel: Thank you, Jay, and good morning, everyone. During today’s call, I will provide additional details on fourth quarter results as well as our expectations for 2026. Please note that my comments will be on an adjusted basis, and I will note when they exclude Stuart Weitzman. For the fourth quarter, sales were $695.1 million, up 8.7%. Sales on an organic basis, excluding Stuart Weitzman, decreased 0.1%. Organic sales increased in the Brand Portfolio segment and declined at Famous Footwear. Notably, both segments saw an improvement in the trend versus the first half of the year. Sales for Stuart Weitzman were $56.3 million. Brand Portfolio sales were up 1.5% on an organic basis and up 20.3% including Stuart Weitzman. Lead brands in total, excluding Stuart Weitzman, grew about 2% with growth in both North America and international. Famous sales were down 1.2%, with comparable sales up 0.1%. Comparable sales increased slightly in November and December and declined low single digits in January. Consolidated gross margin was 42.9%, down 10 basis points versus last year, reflecting lower margins in Brand Portfolio and relatively stable margins at Famous Footwear. Stuart Weitzman was modestly accretive to gross margin. Brand Portfolio gross margin, excluding Stuart Weitzman, was down 130 basis points due to tariffs as well as markdown allowances, somewhat offset by favorable channel mix. Brand Portfolio gross margin was 41.6%, down 10 basis points to last year including Stuart Weitzman. Famous gross margin was 42.5%, essentially flat to last year, with a greater proportion of clearance sales to total offset by higher clearance margin. SG&A expenses increased $48.3 million, or 18.3%, to $310.0 million. The increase was primarily driven by expenses of $39.0 million related to Stuart Weitzman. As a percentage of sales, SG&A was 44.6% and deleveraged 370 basis points. Operating loss in the quarter was $11.6 million, and operating margin was negative 1.7%. Excluding Stuart Weitzman, operating earnings were $0.5 million, and operating margin was 0.1%. Operating margin at Brand Portfolio was 2.4%, and was 6.8% excluding Stuart Weitzman. Operating margin at Famous was 0.8%. Net interest expense was $4.7 million, up $0.7 million to last year due to higher average borrowings. Approximately $1.4 million was interest expense associated with the acquisition of Stuart Weitzman. The weighted average borrowing rate in the quarter was down about 25 basis points to last year. Tax rate was 25.4% for the quarter, and 28.9% for the full year. Fourth quarter earnings per diluted share were a loss of $0.36 and earnings per diluted share excluding the acquisition of Stuart Weitzman were a loss of $0.06. For the full year, sales increased 1.3% in total and declined 2.5% on an organic basis excluding Stuart Weitzman. The acquisition added $102.2 million of sales during the year. Brand Portfolio sales increased 7.3% and declined 1% on an organic basis. Famous Footwear sales for the full year declined 3.6%, with comp store sales down 2.3%. Gross margin for the full year was 43.5%, down 135 basis points. Brand Portfolio gross margin declined 170 basis points to 42%, primarily reflecting a 160 basis point impact from tariffs. Stuart Weitzman added 40 basis points to the Brand Portfolio gross margin for the year. Famous Footwear gross margin declined 90 basis points to 43.2%. SG&A expenses for the full year increased $92.5 million, or 7.4%, to $1.2 billion, primarily reflecting $71.0 million of Stuart Weitzman expense. As a result, SG&A was 42% and deleveraged 290 basis points. On an organic basis, SG&A expenses were $1.1 billion. Operating earnings for the full year were $43.0 million, and operating margin was 1.6%. Excluding Stuart Weitzman, operating earnings were $66.3 million, and operating margin was 2.5%. Brand Portfolio operating margin declined 630 basis points, as tariffs, SG&A deleverage, and Stuart Weitzman dilution all contributed similar amounts to the decline. Famous Footwear operating margins declined 250 basis points, with both gross margin declines and SG&A deleverage on lower sales. Adjusted earnings per diluted share were $0.61 for the full year and $1.19 excluding the impact of Stuart Weitzman. Turning to the balance sheet, we ended the fourth quarter with $2.83 billion in cash, $296.5 million in borrowings, and $238.0 million in liquidity. Inventory at quarter end was $610.5 million, up $45.0 million to last year, of which $57.0 million was for Stuart Weitzman. Excluding Stuart Weitzman, organic inventory was down $12.0 million, with Brand Portfolio inventory down 6% and Famous Footwear up 2%. Now turning to our outlook. We continue to face an evolving tariff environment. Our guidance is built on the assumption that new tariffs will be enacted that will largely replace the prior IEPA tariffs. This could prove conservative, but until we have clarity on the level of additional new tariffs, these assumptions appear prudent. We are maintaining a flexible approach to sourcing and will continue to seek the best country metrics for our quality and price needs. Additionally, the conflict in the Middle East introduces risk to our outlook. As of today, we are experiencing modest business disruption with our Middle East business partners. The region is less than 1% of our total business, though an important part of our longer-term international growth opportunity. We are carefully monitoring the situation and working with our partners to mitigate risk. However, with oil prices on the rise, the risk of economic slowdown has increased. The low end of our guidance anticipates some slowdown related to the economic impact of the current geopolitical conflicts but does not anticipate growing issues. For the first quarter, we expect consolidated sales to increase mid- to high single digits compared to last year. For Famous, sales are expected to be down low single digits to flat, with comparable sales down 2% to up 1%. For Brand Portfolio, sales are expected to be up mid-teens inclusive of low single-digit organic growth. Consolidated gross margin to improve 120 to 140 basis points compared to last year. Modest deleverage of SG&A compared to last year due to the inclusion of Stuart Weitzman. With discrete items impacting the quarter, we expect a tax rate of 30% to 32%. GAAP earnings per diluted share of $0.21 to $0.26 and adjusted earnings per diluted share of $0.25 to $0.30, as we expect to incur approximately $2.0 million in remaining Stuart Weitzman acquisition and integration costs. For the full year 2026, we expect consolidated sales up low- to mid-single digits compared to last year. Famous Footwear sales down low single digits to flat compared to last year, with comp store sales of down 1% to up 1%. Brand Portfolio sales up low double digits compared to last year, inclusive of low- to mid-single-digit organic growth when excluding Stuart Weitzman. Gross margin up 140 to 180 basis points compared to last year, driven mostly by the Brand Portfolio as our tariff mitigation strategies improve and with favorable customer and brand mix. SG&A rate relatively flat compared to last year, with cost-saving measures largely offset by increases in incentive and merit build-back and other selective investments. Interest expense of approximately $18.0 million and a full-year tax rate of 28% to 30%. As a result, we expect GAAP earnings per diluted share of $1.31 to $1.61, or adjusted earnings per diluted share of $1.35 to $1.65 due to the aforementioned Stuart Weitzman acquisition and integration costs. CapEx of approximately $55.0 million to $60.0 million that we will continue to evaluate based on macroeconomic conditions and performance. With that, I would now like to turn the call back over to the operator for Q&A. Operator: Thank you. To ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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. Our first question comes from the line of Ashley Owens with KeyBanc Capital Markets. Please proceed with your question. Ashley Owens: Hi, thanks, and good morning. So maybe just starting with the quarter. I know there was concern about potential risk to sales volatility in the bottom line, and that did not really play out here. Could you just help us bridge if there was any volatility you recognized and what some of the offsets were? And then, more importantly, is there any go-forward risk with ongoing factoring reps here? How should we think about it as more one-time in nature? Jay Schmidt: Okay. So first of all, we did provide an estimate mid-January, and that did actually play out. We did not ship Saks for the balance of the month, and we were fully reserved on the bad debt. However, other areas of our business were strong enough to offset the $0.06 that we did play out, and I think that was a key reason for it. It just came in better. Our gross margin impact on tariffs was 40 basis points in the Brand Portfolio in the quarter, which was also better than our expectation. Ashley Owens: Okay. Got it. And can you hear me clearly? So, for just as a follow-up then, as we think about gross margin in the embedded recovery story here, can you help us parse out what is already in the exit rate for the year versus what still needs to come through from either mix or a tariff mitigation standpoint in 2026? Thanks. Jay Schmidt: Yes. So, on the margin, we think about guidance in 2026, you will see relatively flat margins on the Famous business. And as it relates to the Brand Portfolio side, we will see recovery around the tariff side of the business. Also, with mix, we think about Stuart Weitzman as incremental margin accretion because of the margin levels that they play, as well as other mix in our lead brands driving that up. Ashley Owens: Got it. That is super helpful. Thank you. Operator: Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Dana Telsey: Hi. Good morning, everyone. I like the term “build-back year” for 2026. And as you think about the build-back year for 2026, on the Brand Portfolio side, how are you thinking about wholesale with Saks—the $0.06 impact I think you may have expected, or up to $0.10 for the year—how are you planning that this year? What are you shipping them or not shipping them? And with the market share gains that you saw in shoe chains at Famous Footwear in the fourth quarter, key drivers of that—new brands being added—how do you think about the addition of new brands and categories that you are adding in them? And then just lastly, the shaping or cadence of the year—anything on margin profile, whether it is lapping of tariffs, that we should expect to see, and does the rising energy prices—how is that an impact? Thank you. Jay Schmidt: Dana, I will start and then we will fill in along the way. So first of all, we are seeing our key points of our business on the Brand Portfolio continue to support our guidance. We said our order book is in line with that guidance right now. Our owned e-commerce trend line right now looks very good for the Brand Portfolio, and we are seeing international up on it as well. That has been quite good. We are seeing those key drivers coming through with our lead brands, so we continue to see that come through. With Stuart, as you have noticed, we feel like all of the work that was done in the back half of ’26 leads us to a place where they can start to build back their business, and that really goes straight across all of their channels and geography and everywhere. While we are not guiding specifically by brand, we will see good momentum coming through there, which is great. And then finally, on the Saks piece—right now, we do not have anything new to report on that, but we are prepared to go forward at this moment with the wholesale book that we have, and actually, that does support at least our guide for the quarter. We will tell you more when we have more to say, but otherwise, it looks pretty good. And then you also mentioned about Famous Footwear—what drove that market share gain back—and that was, as you had suggested, the lead brands coming through in Famous Footwear was actually the big driver for that. And as we had said earlier, Famous had a nice lift in holiday, really going after that more gift-giving piece. We felt very good about it and saw the brands that I did mention. We had good momentum from Skechers, Birkenstock, Sorel, Timberland, others. And, obviously, the big Jordan piece proved very powerful during holiday, so that was a big win for us too. Again, it just supports our guidance going forward and the momentum we are seeing. Dan Carpel: And, Dana, you had asked a little bit about the spread of margin during the quarter. Just to reinforce the guidance, we said consolidated in the first quarter was going to go up 120 to 140, and then for the full year, 140 to 180. And so you will see results throughout each of those quarters as we look at the year. Liz Dunn: And then, Dana, one more thing on market share. You mentioned new brands. On the Brand Portfolio side, while Stuart Weitzman did add to our market share, we gained market share in women’s fashion footwear on an organic basis as well. Operator: Thank you. Our next question comes from the line of Mitch Kummetz with Seaport Research. Please proceed with your question. Mitch Kummetz: Yes. Thanks for taking my questions. Jay, in your prepared remarks, you talked a little bit about quarter-to-date performance—Brand Portfolio, e-com, and then also at Famous. And I was wondering if there is any way to parse out the impacts that you might be seeing from tax refunds versus, more recently, higher gas prices and maybe just the overall impact from the war in Iran? And I do have a couple of follow-ups. Jay Schmidt: Yes. So, just to characterize right now, we did see on our Brand Portfolio strong owned e-commerce comp performance coming through, which supports our guide. The good news is that from all the key brands we have seen it now on all four of our lead brands—Sam Edelman, Allen Edmonds, Naturalizer, and Vionic. We are also starting to see a nice turnaround at Stuart Weitzman on their e-commerce business where that was not something that we saw in the back half of this year. So it looks like a lot of the team’s work there coming through is working. As it goes over to the Famous side—so kind of a little different story—we had a good February, I would say, and that was through some good performance on some of the big brands there that continued, Skechers being one of them, where we did have a brand takeover there, and that worked very well. We also did sell through some clearance there too, which did support the business there. As we walk into March, it is a little bit of a mixed story right now, and we are monitoring it day by day, week by week. In addition to the geopolitical situation, there was some weather impact, and we do have an Easter shift timing. So right now, as I said, what we are looking at supports our current guide, and we will report more when we know it, but we are managing it week to week. Mitch Kummetz: And then between Famous and Brand Portfolio, could you talk a little bit about what you are seeing from a category performance quarter-to-date? And I am also specifically curious what you are seeing in terms of sandals as we are entering the spring/summer season, and any kind of standout drivers there as you see that playing out over the balance of the season? And I have one last question. Jay Schmidt: Yes. So, on the Famous side, we continue to see a very strong Birkenstock business, and you know it well. It is clogs and sandals—that is where we are—and we are seeing strength in both of them every single week. We are also seeing some good selling on sandals from Crocs, which I think is very good and will overall support that business trend as we look forward. On the Brand Portfolio, we are seeing some good sandal business, particularly in the thong category coming through, on kitten heels, and that has been a key winner. But we are seeing it a little bit more on the fashion side. And even in Vionic, we are seeing very nice sandal strength as of very recently, now that all the inventory is here, with both casual thongs, and we are also seeing casual footbeds work well in that business. It certainly was not supported by weather, Mitch, so we really think it is driven by newness right now, and that does at least give us optimism as we look forward. Mitch Kummetz: And then my last question, just on Stuart Weitzman. You talked about being breakeven for the year. Can you talk a little bit about how you see that playing out by quarter, especially in the first quarter, and what is embedded in the guidance in terms of Stuart? Jay Schmidt: Yes. I will start, and then Dan can cut in. We have completed most of the cost-savings work. Getting it onto our systems was a big piece of that—moving the head TSA, getting it into our distribution center. As we think about Stuart Weitzman SG&A, we have some big buckets, I would say—distribution and logistics being one, facilities being one. We did complete, in January, a restructuring, so that was a big piece of it. And then, moving to the gross margin side of things, we moved through a significant amount of aged inventory. We talked about that last quarter—it was $25 million in inventory. You can see it on the balance sheet that that is where we are. So that positions us in a much stronger place. If you think about Stuart Weitzman’s business, it is a seasonal business, and so there will be some movement there. But in total, we feel very confident that we have positioned the business to return to breakeven in 2026. Longer term, as we have said, we do not think there is anything we see with the business that would not suggest it can operate at the profit margins we are quite comfortable earning for the rest of our Brand Portfolio. Dan, anything to add? Dan Carpel: No. I think, to your point, if you look at our Q3 and Q4, we lay out the with and without with clarity there, and you can see the impact of Stuart Weitzman on that business. And to Jay’s point, a lot of these significant changes have been made. We are on our systems now and, structurally, we are there. So we are certainly not seeing those types of results that we saw in Q3 and Q4 as we walk back to breakeven in the full year ’26. Mitch Kummetz: Alright. Thank you. Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I will turn the floor back to Mr. Schmidt for any final comments. Jay Schmidt: Thank you for your continued interest in Caleres, Inc. Before we close, I would like to recognize the dedication of our teams across the company and across the globe who have shown tremendous determination and resilience this year. We are encouraged by the early momentum building in our business through all of our strategic initiatives, and we look forward to an improved, more profitable 2026. Thank you. Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
Dan Schleiniger: Good morning, and thank you for joining Arcos Dorados Holdings Inc. Fourth Quarter and Full Year 2025 earnings webcast. With us today are Luis Raganato, our Chief Executive Officer, and Mariano Tannenbaum, our Chief Financial Officer. Today’s webcast is being recorded and will consist of prepared remarks from our leadership team, accompanied by a slide presentation that is also available in the Investors section of our website at ir.arcosdorados.com. To better follow the presentation, please note that you can set your view to full screen on the webcast platform. Additionally, you can submit your questions at any time during the presentation using the Q&A function on the bottom of the screen. After we conclude our opening remarks, we will answer your questions. Today’s call will contain forward-looking statements and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial results as compared with GAAP results, which can be found in today’s earnings press release and conference call presentation, as well as the audited financial statements filed today with the SEC on Form 6-Ks. I will now turn the call over to Luis. Luis Raganato: Thank you, Dan, and good morning, everyone. The 2025 marked a solid finish to the year with double-digit revenue growth, expanded margins, and strong adjusted EBITDA growth despite ongoing cost and consumer pressures in certain markets. Importantly, we exited the year with improving trends, particularly in Brazil, as well as continued momentum in Mexico and SLAD. Mariano and I will take you through the highlights of the financial results for the fourth quarter and full year 2025, as well as how we see 2026 developing. As I have mentioned in prior calls, our focus remains centered on three priorities: optimizing the performance of today’s business, maximizing returns on capital investments—especially those related to growth—and preparing the company for tomorrow’s business trends. The fourth quarter demonstrated progress across all three areas. Our teams executed with discipline on pricing, cost control, and marketing relevance while continuing to invest in high-return restaurant development and digital capabilities. Total revenue reached $1.3 billion, representing 10.7% growth. Revenue growth was supported by 16% higher systemwide comparable sales, in line with the blended inflation of the 21 markets in the Arcos Dorados Holdings Inc. footprint. Comparable sales growth was primarily driven by average check, reflecting disciplined pricing, effective promotional execution, and the continued strength of our digital and loyalty platforms. Guest traffic trends were generally stable compared with the third quarter. Adjusted EBITDA totaled $172.7 million, up 17.2% year over year, representing an 80 basis point expansion of the adjusted EBITDA margin. This included a net taxes benefit in Brazil that Mariano will explain in more detail. For the full year, systemwide comparable sales growth was in line with the company’s blended inflation rate, with particularly strong performance in Mexico, Argentina, and several other SLAD markets. Brazil and a couple of NOLAD markets faced a challenging consumption environment last year, but we began to see some improving trends toward the end of the year. Total revenue in 2025 grew by almost 5% in U.S. dollars. Full year adjusted EBITDA was the highest in the company’s history. Boosted by the net tax benefits we recognized, together with strong U.S. dollar growth in both SLAD and NOLAD, this tax benefit more than offset the impact of higher food and paper costs, and lower consumption in the Brazilian market. The strength of our marketing, digital, and loyalty platforms has helped differentiate us from the competition by enhancing the brand experience across all channels. We also expanded the brand’s presence in 2025 by opening 102 restaurants and bringing the modernized percentage of the portfolio up to 73% at year end. Let us take a look at a few of the initiatives we used to generate sales growth in the quarter. Marketing activities strengthened consumer connections with the brand through a series of campaigns and initiatives. The highlight for most markets was a fully integrated menu strategy leveraging the cultural relevance of the Stranger Things Netflix series, which boosted sales, drove high levels of engagement, and meaningful brand conversations among consumers. Several markets also offered compelling value platforms, including Economic in Brazil and Mac Parmenos in Chile, both of which performed well with price-sensitive consumers. Menu innovation in the quarter included a new chicken sandwich in Colombia and limited-time flavors within the dessert category, such as Ovomocini in Brazil. Finally, Happy Meal sales were a bright spot for several markets. During the quarter, we ran engaging campaigns for all ages, built around popular licenses such as Friends, Zootopia 2, and Business Vivints. Digital penetration reached its highest level with 62% of total sales coming from digital channels—mobile app, delivery, and self-order kiosks. Digital channel sales grew 18.7% versus the prior year quarter, with self-order kiosks, delivery, and loyalty showing particularly strong performance. Sales growth in delivery has been strong for several years, which is why the strong performance in self-order kiosks is so important. It demonstrates the continued relevance of the on-premise restaurant experience in the Latin American QSR industry. The loyalty program had 27.2 million registered members at year end and is now available in all main markets, completing the planned 2025 rollout and covering more than 90% of all restaurants in the Arcos Dorados Holdings Inc. footprint. At the divisional level in the fourth quarter, we saw continued strength in SLAD with sequential improvements in both Brazil and NOLAD, contributing to consolidated top-line growth. In Brazil, where restaurant industry traffic was down all year, we saw modest sequential improvement in comparable sales growth. We also maintained a significant market share advantage versus all competitors by leveraging the strength of the digital platform and popularity of the loyalty program. Almost three out of every four transactions were generated through digital channels, and about 30% of total sales came through the loyalty platform. These results were supported strongly by the annual Make It Friday campaign, which capitalizes on the popularity of the Black Friday shopping day to drive mobile app downloads and digital engagement. It is worth noting that the relative strength of the Brazilian real versus the prior year quarter also contributed to U.S. dollar revenue growth in the period. In NOLAD, comparable sales grew 1.7% versus the prior year quarter, with strong guest traffic growth in several markets. As was the case in the first nine months of the year, Mexico was the main contributor in the fourth quarter, with comp sales growth of 5.6%, or 1.5 times the country’s inflation. Importantly, we began seeing improved trends in several other NOLAD markets and also benefited from the stronger Mexican peso and Costa Rican colón versus the prior year quarter. SLAD’s comparable sales increased by 49.5% versus the prior year quarter, or 1.2x blended inflation, driven by strong execution in Argentina. We also saw continued momentum in other markets such as Colombia and the Dutch West Indies. Digital channel penetration reached a new high, and market share gains were particularly strong in Argentina and Chile where guests responded well to the quarter’s marketing campaigns. Over to you, Mariano. Mariano Tannenbaum: Thanks, Luis, and good morning, everyone. Consolidated adjusted EBITDA in the fourth quarter grew by more than 17% versus the prior year quarter as reported. While both periods benefited from tax-related items, even excluding these items, adjusted EBITDA grew by almost 14% in U.S. dollars year over year with a 30 basis point margin expansion. For the first time in 2025, the fourth quarter included lower Food and Paper costs as a percentage of revenue in Brazil. This is a sign that our marketing strategies and supplier negotiations are working as they were designed. The main impact on consolidated Food and Paper costs in the quarter related to some mix shifts in NOLAD and higher beef costs in Argentina. Payroll expenses were up as a percentage of revenue due to the comparison with last year’s quarterly result, which included the tax benefit in Brazil. Excluding this benefit, payroll expenses improved by about 60 basis points as a percentage of revenue. It is worth noting that over the last few years, certain markets have experienced elevated labor costs, but we have been implementing initiatives and technologies that have successfully offset these pressures. Currently, payroll expenses are among the lowest in our history as a percentage of sales. As you have heard on recent calls, we are very focused on capturing efficiencies at every level of the business, not just in the restaurants. With that, we made the difficult decision to reduce our G&A expenses through a reduction in headcount. This process, which was completed during 2026, was designed to focus resources on the projects and investments we believe will generate the most shareholder value. Our adjusted EBITDA definition excludes reorganization and optimization charges, so you will see an $8.7 million add-back associated with this initiative in the EBITDA reconciliation. Finally, the fourth quarter included a net tax benefit in Brazil arising largely from the same items we recognized during the third quarter. We recorded a benefit of $20.5 million mainly as other operating income, and below the line we recorded $13.3 million of interest income. With that, the full P&L impact of this net tax benefit was recognized in 2025. As a reminder, full year adjusted EBITDA includes $106.1 million and interest income includes $52.9 million from this benefit, for a total impact of $159.0 million in 2025. Importantly, we have already begun to apply the credit to tax liabilities in 2026. We expect to utilize the tax credit over the course of the next five years with an annual cash benefit of around $30.0 million. In terms of full year 2025 results, we are encouraged that even though Food and Paper costs rose due mainly to significantly higher beef costs in Brazil, we were able to fully compensate the impact on restaurant margins by capturing efficiencies in payroll, and occupancy and other operating expenses. In Brazil, excluding the tax impacts from both 2024 and 2025, adjusted EBITDA grew 3% in U.S. dollars with margin compression of about 160 basis points. The margin decline was primarily related to the higher royalty rate in Brazil in 2025—remember that royalties were equalized starting in 2025, with a higher royalty rate in Brazil more than offset by a lower royalty rate in NOLAD and SLAD. The other restaurant-level cost and expense line items in Brazil improved versus the prior year. NOLAD generated solid U.S. dollar EBITDA growth in the quarter despite some margin pressure in Food and Paper costs as well as G&A. Meanwhile, SLAD delivered another strong quarter to close out a very good year, which included 26.1% U.S. dollar EBITDA growth and almost two percentage points of margin expansion. In addition to operating efficiencies, we are implementing certain projects to improve the efficiency of our capital structure and capital allocation decisions, including the recent liability management transaction, completed during 2026. In December, our Brazilian subsidiary secured $150.0 million in new bank debt that matures in 2029. This is why you see the increase in total financial debt as well as cash and cash equivalents at the 2025 year end, but a stable leverage ratio versus year end 2024. We entered into certain derivative instruments to hedge the interest rate and maintain the foreign currency exposure of our long-term debt. As a result of these transactions, the new bank debt has an estimated U.S. dollar cost of 2.53%. The proceeds of the new debt were used to fund a tender offer for $135.0 million of our 2029 sustainability-linked bond, which has a 6.8% interest rate. The tender was completed earlier this month. Among the benefits of the transaction are a reduction of the average U.S. dollar cost of our long-term debt and the more efficient capital structure both at the consolidated level and in Brazil. Additionally, moving forward, this new local debt increases the deductibility of our interest expenses. In terms of capital allocation, last year, we exceeded openings guidance by adding 102 restaurants to our footprint while deploying less total capital expenditures versus the prior year. Importantly, about half the total CapEx in 2025 was used to fund restaurant openings. For 2026, openings guidance is for 105 to 115 restaurant openings and total capital expenditures between $275.0 million and $325.0 million, with a goal of improving returns on investments through better cash margins and lower per-unit opening CapEx. Also for 2026, the Board of Directors has declared cash dividends of $0.28 per share, up from $0.24 last year, payable in equal installments on a quarterly basis this year. Although it is early, we began the year with good momentum by focusing on factors we control. We expect the underlying profitability trends of the fourth quarter to continue. Importantly, we are seeing the potential for a higher gross margin this quarter and throughout 2026. When sales growth normalizes, we believe this focus on cost and expense discipline will generate incremental margin improvement opportunities in other lines of the P&L as well. Back to you, Luis. Luis Raganato: Thanks, Mariano. Let me wrap up with a few final thoughts. We are encouraged by business momentum entering 2026 and confident we are positioned to deliver sustainable growth, expand profitability, and create long-term shareholder value. Our priorities remain unchanged: disciplined execution, improved returns on invested capital, and continued strengthening of the McDonald’s brand into the future. As Mariano mentioned, early results in 2026 have been relatively strong. Although current events have introduced some uncertainty, we believe in the resilience of the Arcos Dorados Holdings Inc. business model. We see a more normalized consumer environment as the year progresses, and we have a strong marketing plan to strengthen the bond with consumers across income levels. In the short term, we are monetizing the significant market share advantage we built over the last several years. There is no other QSR operator in Latin America and the Caribbean capable of delivering the omnichannel experience guests prefer in an increasingly digitalized world, and we believe longer-term sales trends will recover and we will have even more opportunities to generate value. Thank you for joining today’s call. Dan, back to you. Dan Schleiniger: Thanks, Luis. We will now begin the Q&A session. You can submit your questions using the Q&A function on the bottom of the screen. Please limit yourself to one or two questions so that I can read, understand, and convey them to the speakers. We will now pause briefly to compile your questions. Great. Okay. We have several questions already in the queue. We will try to get to all of them if we can. Good morning again, everyone. Froylan Mendez, JPMorgan: Can you please explain the higher taxes paid during the quarter and if we should expect this higher level going forward? Eric, Santander: Good morning all. Thanks for taking our questions. This quarter income tax was quite elevated. Could you help us understand the moving parts behind such high levels? And how should we think about this line in 2026, especially following the capital structure optimization? Mariano Tannenbaum: Thank you, Dan. Good morning, everybody, and thanks, Froy and Eric, for the question. Regarding the ETR, remember that we analyze the effective tax rate on a full-year basis, not on a quarter-by-quarter. For the full year 2025, it is important to note that the ETR of Arcos Dorados Holdings Inc. was 37.7%, an improvement of almost five percentage points versus 2024, and reasonably close to the regional statutory rates. This reflects the mix of earnings across countries and some discrete impacts, particularly in Brazil. Going to the fourth quarter, the rate was high compared to 2024, but this was in line with our projections. The quarter includes some one-off adjustments—in this case, in Chile and Colombia—higher tax charges in Argentina related to FX and inflation. But it is important to note that there are no structural changes behind that number. So, again, if you go to the full year, 37.7%, five percentage points better than in 2024. Looking ahead, 2026, we expect a full-year ETR in line with what we had for the full year in 2025. Of course, again, there may be quarterly variability, particularly early in the year, but the annual profile remains stable, and we are not seeing any structural changes on our ETR. Of course, during the year, we will continue to look for efficiencies and to look into ways to reduce that number. Dan Schleiniger: We will stick with you before I send a couple of other questions that I think will be yours as well. Can you give more color on the drivers of margin expansion in Brazil and SLAD? Mariano Tannenbaum: Perfect. First of all, we are very pleased with margins in Brazil, specifically with the gross margin. As we have been mentioning during 2025 in the previous calls, the impact of the increase in beef in Brazil was very high and impacted us, particularly in the first half of the year. Now in the fourth quarter of 2025, for the first time in the year, we are seeing an improvement—small, of 10 bps—but we are seeing an improvement that we expect will continue during 2026 in Brazil and in the other two divisions, and we have a favorable outlook for the rest of the year. But it does not end here—the margin expansion or the improvements we have seen in Brazil during the quarter. Excluding the one-off related to payroll in 2024, we have seen an improvement in payroll of 90 bps, mainly due to productivity and headcount, and also an improvement in occupancy and other operating expenses, mostly driven in this case by improving delivery margin. So we are very pleased when you exclude the one-offs related to payroll in 2024 and you exclude the impact of the gross-up of royalties also in 2024. The expansion in Brazil—we are very pleased with that. Regarding SLAD that you also asked about, Froy, payroll expenses, royalties, and other expenses—we saw leverage in all of those lines, having a better other operating income as well, and a flattish G&A in the division. But SLAD has seen an improvement of 180 bps regarding the same quarter of 2024, from 10.8% in 2024 to 12.6% in 2025. Sorry. Froylan Mendez, JPMorgan: Given the recent depreciation of Latin currencies, does this change your outlook for top line and margins versus the time you shared guidance? Mariano Tannenbaum: Well, if we look at the average for the two main currencies, let us go to the Brazilian real and the Mexican peso. In 2026 so far, and we are almost approaching the end of the quarter, the Brazilian real had an average of 5.2 versus 5.86 for the same period of last year, and the Mexican peso an average of 17.4 compared with an average of 20.4 in the first quarter of last year. So we are seeing an appreciation of the currency that, adding the inflation rate, the real appreciation is even higher. We are not seeing that depreciation of the currencies. Of course, in January, at some point, the real was a bit more appreciated than what it is now, which, of course, given the worldwide events that we are experiencing, we are seeing an increase in volatility, but the FX are performing much better than everybody expected at the end of last year and even at the beginning of this year. And you know that when Latin currencies are appreciated and, on top of that, with modest levels of inflation, we are seeing real appreciation of the currencies that, at the end, have a positive impact in our results. Eric, Santander: Secondly, how should we think about Brazil’s comp sales throughout 2026, bearing in mind all of the initiatives undertaken by the company, and the additional resources from the increase in income tax rate exemption level in Brazil? Luis Raganato: Okay. Thank you very much, Eric, for the question. And to answer that, I have to go a few steps into 2025, where the market had a very challenging year, with industry volumes down mid- to high-single digits versus 2024, and this happened since the first quarter of the year, with the additional pressure of the increase in beef costs that somehow made us make an adjustment in our strategy. And the pressure to consumption came especially, or was related to, factors related to disposable income. And, however, given this context, throughout the fourth quarter and full year, we managed to deliver positive comp sales and better margins. So, about the consumption, we believe that consumers, particularly lower-income consumers, are being more rational with their spending power, and even though there is not a lot of room for higher pricing, we are working through a combination of pricing and mix to increase average check, trying to offset those volume declines, protecting our margins. So what happened in the fourth quarter was that the contribution to sales came more from average check and channel shifts than volume, because, as I said, we are trying to strike a balance between sales growth and profitability. And what we are seeing today, these first months of the year, is that we are seeing similar consumption trends. And our performance in the first quarter is about in line with our expectations, and what we expect from the second quarter and on is that consumption levels are going to normalize. Still, our focus during this quarter and the rest of the year is going to be to build healthy comparable sales. Dan, back to you. Jonathan Schwartz, ION Group: In addition to a lower rate and no longer needing to hedge part of the U.S.-denominated debt into Brazilian reals, are there any other monetary benefits of raising debt in Brazil or in BRL, i.e., lowering pretax accounting results that lowers tax, avoidance of taxes for taking money outside the country, etcetera? Mariano Tannenbaum: Johnny, how are you? Thanks for the question. I will walk you through the transaction, and I will try to answer your several questions here. Why did we do, in this case, this liability management exercise? We identified a market opportunity to lower the cost of our debt. You will start seeing that, of course, during the full year 2026. We structured, in this case, three bilateral loans with three different banks and coupled them with derivatives to synthetically maintain our debt in U.S. dollars. Avoiding, of course, paying the cost of carry in Brazil was key in these transactions, and we ultimately repaid our 2029 U.S. dollar denominated debt. In this case, the resulting cost of these transactions ended in an estimated pretax cost of 2.53% on an annual basis—that is the interest rate—which compares, in this case, with the 6.18% coupon of the senior notes 2029. And, on top of that, in January, we launched the tender offer and successfully repaid $135.0 million of these notes. And this transaction, going to your second part of your question, enabled us to capture an even larger tax shield, therefore having advantages from a tax perspective as well. So I hope that with this flow your questions are answered. Alvaro Garcia, BTG Pactual: On Brazil sales, Economy, are you seeing any interesting behavior from cohorts buying the Konamiqi, i.e., adding other items to their order or increased traffic? Luis Raganato: Thank you, Alvaro, for the question. Good morning. As I said, the situation in Brazil regarding volumes is directly related with the slowdown that we see in the consumption. So this value platform, the economic value platform that is a national value platform, is giving us the chance to somehow shield or to protect our market share. For those who do not know about this, it offers a very attractive price point and it gives the opportunity to our guests to build their own menu, and it has a very good margin. So, so far, the platform has very good results. And, yes, we do have some add-ons. The value platform is still going on during the first quarter. And, most importantly, what it did is that we were able with that kind of actions, even though the sector is down, we were able to maintain our market share, leading our nearest competitor by a factor of two. We were able to maintain that gap. This is going to position us very well when the operating environment improves, and we expect that to be around the second quarter and on into 2026. Alvaro Garcia, BTG Pactual: Headcount reduction: can you give more color on the headcount reduction—both financial impact and strategically why it makes sense for the organization? Froylan Mendez, JPMorgan: Can you quantify the impact of the headcount reduction going forward in terms of SG&A reduction, as a percent of sales or any other metric that we can use to understand the impact? Melissa, Bank of America: Can you provide some additional information on the restructuring charge, including drivers of the decision, areas impacted, and anticipated savings? Mariano Tannenbaum: Thank you, and thanks, everybody, for the question. In this case, maintaining strong discipline over G&A expenses continues to be one of Arcos Dorados Holdings Inc.’ top priorities and is aligned with Luis’ message when he assumed his position. We consistently pursue initiatives aimed at improving efficiency and optimizing our G&A structure, always supporting the needs of the business. In full year 2025, G&A as a percentage of revenues remained flat excluding one-off items that affected 2024. Notably, and this is relevant, during 2025 we delivered a 50 basis point improvement in G&A over revenues, also excluding those one-offs. But, in line with our commitment to long-term shareholder value creation and enhanced cash generation, and supported by efficiency gains from technology investment, we implemented a G&A reduction over the last few months that is already completed. The objective in this case was to preserve operational excellence while better aligning resources with activities that are more critical to sustaining growth and strengthening our platform for the future. In terms of numbers, our ongoing cost base has been reduced by more than $10.0 million on an annualized basis and, in this case, positions us to generate operating leverage in 2026. Of course, then there are other moving parts that affect the G&A, as you all know, like FX movements and share price movements, but, in this case, the core cost base is $10.0 million less in the payroll line. And this restructure has been made in the three divisions and at the corporate level. Melissa, Bank of America: Why was CapEx for 2025 below initial guidance despite a higher number of openings? Is this FX-related? And how does investment per unit and ROI for recent openings compare with previous vintages? Max Joseph, Investor: Can you provide more detail on 2025 CapEx outside of new restaurant openings, and how much was allocated to restaurant modernizations, technology initiatives, maintenance, and other categories? Mariano Tannenbaum: Thanks, Melissa and Max, for the question. In 2025, we remained focused on optimizing capital spending while fully executing our planned openings and modernization program. It is important to note that we did not obtain the savings by switching to cheaper restaurant formats. We maintained—indeed, we exceeded—the guidance, and we maintained the number of freestanding openings that we planned at the beginning of the year. In the second half of the year, we accelerated initiatives to be more efficient with localized suppliers. We did rightsizing of the restaurants—so a lot of focus on the construction phase—coupled with FX movements that had some benefits on imported elements that go inside the restaurant, specifically at the kitchen level, but all those allowed us to reduce the per-unit cost without, as I mentioned before, compromising quality or scope. This area, it is important to note, has been a main focus for the entire finance and development teams during 2025, and the objective was to maximize return on investments while maintaining the quantity of our restaurant openings. So, as a result of all these, we were able to surpass the plan—opening 102 restaurants instead of the guidance that was 90 to 100—but with lower capital intensity, and we are very pleased with the results we obtained that contributed to increase and improve the free cash flow of the company. Dan, you were going to ask about 2026. Melissa, Bank of America: What is the allocation of your 2026 CapEx budget across restaurant openings, reimaging, technology, and other areas? Max Joseph, Investor: Are you planning to increase modernization rate to hit your year-end goal of Experience of the Future of 90-plus percent? Mariano Tannenbaum: Perfect. Just as a reference, in 2025, approximately 80% of the total CapEx was allocated to development CapEx and 20% to non-development CapEx that includes mainly technology. For 2026, given that we increased a bit the guideline of openings, our expectation is—and also because we are going to finalize and modernize more restaurants—we are expecting that from the total guidance we gave you in January, approximately 85% will be allocated to development and 15% will be allocated to technology and other types of investments. Julia Rizzo, Morgan Stanley: Are there already signs of same-store sales recovery in 2026 in Brazil and NOLAD? And when do you expect same-store sales to reach inflation levels according to the company’s algorithms? Luis Raganato: Thank you, Julia, for the question. And, I mean, our plan is designed to deliver comparable sales growth about in line with inflation level as the year progresses. And we do have a strategic marketing plan that is very robust, not only in Brazil and NOLAD, but in SLAD also. You saw that in the fourth quarter, for example, we have in Brazil actions, like I was telling just a few minutes ago, about EconoMakie that drives volume, but we also had the Stranger Things action that brings the love for the brand. So we think that the situation in Brazil is going to last for a while. We are prepared for that. And, as I said, our challenge is to build healthy comp sales. And, in the case of NOLAD, we had a slightly different case because even though we did have a challenging and a highly competitive environment across most markets, comparable sales grew 1.7% with positive volume. This was supported by a slight shift in product mix and competitive pricing strategies. Overall, sales growth was driven more by volume than by average check. And the highlight of the fourth quarter was Mexico and Puerto Rico. And looking ahead, we remain confident because Mexico is going to sustain the trend and we believe that Panama and Costa Rica are taking the right actions to rebalance average check and guest traffic trends. So we expect to see that reaching that inflation or about in line with inflation for the second semester. Julia Rizzo, Morgan Stanley: Can we explain NOLAD’s margin fall despite the royalty rate being 100 basis points better? And what should we expect for NOLAD margins in 2026? Mariano Tannenbaum: Perfect. Thanks, Julia, for the question. Well, margins in NOLAD during the last quarter of last year were challenged due to sales growing below blended inflation, and as we always mention, when we have sales growing below inflation, then you start having deleverage in several fixed cost lines. On top of that, we have seen some Food and Paper cost pressures during the last quarter. Remember that during the full year 2025, NOLAD did not experience Food and Paper pressures in the first half of the year, but started having some pressures in the second half of the year. The good news here is that we saw improvements in occupancy and other operating expenses, and we managed to keep payroll almost in line with prior year. Recall in 2024, the payroll line was under pressure in NOLAD due to increases in minimum wages in several markets such as Puerto Rico, Panama, Costa Rica, and Mexico. So we are pleased to see that in 2025, through productivity gains, we saw leverage in this line. We are also very pleased with Mexico’s results—that is the division’s largest market—where comp sales grew well above inflation, and we expect to generate leverage during 2026. Going back to the Food and Paper line, and as I mentioned when I was asked about Brazil, in the case of NOLAD—and let me add, in the case of SLAD as well—we have seen very good signs during the first quarter of this year that, of course, is still ongoing, but early results are showing an improvement in Food and Paper costs in the three divisions and, in the case of NOLAD, particularly in NOLAD. So the fourth quarter was not great, we agree, but we are seeing some good news starting 2026, and we are very pleased with how we have managed the payroll line. Remember that between payroll and Food and Paper are the two most important cost lines in our income stream in our P&L. Thiago Bortolucci, Goldman Sachs: Related to same-store sales in Brazil. At 2% same-store sales growth, I assume traffic in Brazil is at least mid-single-digit negative. How has it evolved sequentially versus the third quarter? To which factors would you attribute this evolution? What are the drivers for an eventual inflection in 2026? Dan Schleiniger: I think Luis addressed this earlier, Thiago. I think you sent this while he was answering a similar question, so I will try not to be repetitive. Thiago Bortolucci, Goldman Sachs: What is your base case for beef prices in Brazil in 2026? And how have you prepared your menu board for the next twelve months in the context of the costs? Mariano Tannenbaum: Okay. Thanks, Thiago. In Brazil, the main pressure—I will try not to be that repetitive—but the main pressure on Food and Paper this year came from beef inflation, which was up about 30% over the last twelve months. The good news is that we have seen two consecutive quarters of sequential improvement and that the trend has continued into early 2026. So we feel confident in our ability to continue recovering gross margin in this respect, and the recent appreciation of the real also helps, especially for our imported items. It is important to mention that our pricing strategy remains disciplined and aligned with inflation, with CPI, so we are avoiding aggressive actions that compromise long-term health of the business. And, as Luis mentioned, our new affordability platform is performing very well so far. Luis Raganato: Alright. Thank you, Thiago, for the question. Good morning. The good news about our menu board is that, under one brand, we have all the categories. We do have beef, and we have our core items, our core sandwiches. We have our value platform and we do have our premium sandwiches. So in beef, we are really well covered. Then we have the chicken category that, with the launch of the McCrispy Chicken, has reinforced and is now an engine of growth. And then we have desserts. We are focused on trying to recoup the levels that we had pre-pandemic. Then we have beverages, for example, and coffee, that many of our main competitors around the region do not have the chance to talk about all the categories. So our menu board is very healthy. We have an opportunity not only to increase our top line but to improve our margins trying to push these other categories. So I would say that, Thiago, it is important to say that in the region 2025 was challenging, and one of the great outputs of 2025 is, for example, we managed to shield our market share around the region—we gained one percentage point versus 2024—and we maintained the gap versus our main competitors two times more. So I already talked about Brazil that had 2.2 times last year, but we have the case of Colombia, Mexico, Costa Rica, Panama. Taking into consideration our internal research, we have more than two times in those countries in comparable footprints and more than three times in markets like Argentina, Uruguay, or Chile in comparable footprints also. So, going back to the question that you had, just to give you a little bit more color, we have seen sequential improvement that is reflected in our market share, in comparable sales, and, of course, in margins. And, as we have mentioned in other calls, our target is to bring sustainable top-line growth and to improve operational efficiency. Our focus is in every line of our P&L. This should drive profitability. This should generate free cash flow, and, of course, create shareholder value. Dan Schleiniger: We actually have no more questions in the queue, so we have reached the end of the Q&A session. Thank you once again for your interest in Arcos Dorados Holdings Inc. and for joining today’s webcast. We look forward to speaking with you again in May on our first quarter 2026 earnings webcast. Until then, stay safe and have a nice rest of your day.
Operator: Welcome to the Biofrontera Inc. Fourth Quarter and Full Year 2025 Financial Results and Business Update Conference Call. Operator: At this time, all participants are in listen-only mode. After today's prepared remarks, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ben Shamsian, with Lithium Partners Investor Relations. Please go ahead. Ben Shamsian: Thank you. Good morning, and welcome to Biofrontera Inc.'s fourth quarter and full year 2025 financial results and business update conference call. Please note that certain information discussed during today's call by management is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that Biofrontera Inc.'s management will be making forward-looking statements, and actual results may differ materially from those stated or implied by these forward-looking statements. The risks and uncertainties associated with the company's business are detailed in and are qualified by the cautionary statements contained in Biofrontera Inc.'s press releases and SEC filings, including the company's Annual Report on Form 10-K for the year ended 12/31/2025. Also, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast. Biofrontera Inc. undertakes no obligation to revise any forward-looking statements to reflect events or circumstances after the date of this conference call, except as required by law. During today's call, there will be references to certain non-GAAP financial measures. Biofrontera Inc. believes these measures provide useful information for investors, yet should not be considered as a substitute for GAAP nor should they be viewed as a substitute for operating results determined in accordance with GAAP. A reconciliation of non-GAAP to GAAP results is included in the press release issued today and is also available on the company's website at biofronteraus.com under the Investor Relations section. Please note management will be referencing adjusted EBITDA, a non-GAAP financial measure defined as net income or loss excluding interest income and expense, income taxes, depreciation and amortization, and certain other nonrecurring or noncash items, including changes in fair value of warrant liabilities, stock-based compensation, gain on sale of assets held for sale, and expense issuance costs. With that said, I would now like to turn the call over to Hermann Lubbert, CEO, Chairman, and Founder of Biofrontera Inc. Hermann Lubbert: Yes. Thank you, Ben, and thank you to everyone joining us this morning. Fiscal year 2025 was a transformational year for Biofrontera Inc. I am proud to say that we delivered record annual revenues of $41.7 million, representing about 12% growth over the prior year, capped by a record fourth quarter in which we generated revenues of $17.1 million, the highest quarterly revenue in our company's history, representing approximately 36% year-over-year growth. These results demonstrate the strength of our commercial execution and the growing adoption of Ameluz PDT across the dermatology community. As a consequence of the amendment in the contractual relationship with our former parent company, Biofrontera AG, I will explain in a few minutes. Q4 2025 was highly profitable for Biofrontera Inc., with an adjusted EBITDA of $4.9 million and an additional capital gain of $700,000 from the Serpi Investigator divestment, resulting in net income of $5.6 million. Let me take a moment to summarize what we accomplished in 2025, which resulted in this profitable fourth quarter and set the stage for an exciting 2026 and beyond. In October 2025, we closed a new asset purchase agreement with our former parent company, Biofrontera AG. The financial consequences were active already as of June 2025. This transaction is one of the most significant milestones in our history. We acquired all U.S. rights, approvals, and patents for Ameluz and RhodoLED, including the New Drug Application, the Investigational New Drug Application, all manufacturing rights and contracts, and all intellectual property. In December 2025, the FDA formally transferred the NDA and IND to us, giving Biofrontera Inc. full regulatory control in the United States. We also completed the transfer of 11 U.S. patents, 10 U.S. patent applications, and 19 international filings and registered designs. The financial implications of these transactions are significant. The new royalty or earn-out structure is 12% when annual U.S. Ameluz net sales are at or below $65 million and 15% in years where they exceed that threshold. This replaces a transfer pricing model that previously ranged anywhere from 25% to 35% of revenue. This change has already begun to improve our gross margin profile, leading to the highly profitable Q4, and Svet will provide more detail on the impact in a few moments. To support the AG transaction and our continued growth, we secured $11 million in funding through a private placement of Series C preferred stock led by Roseland Advisors and AIGH Capital Management. These healthcare-focused institutional investors share our belief in the long-term value of the Ameluz platform. We also completed the sale of our Xepi antibiotic cream license to Pelaos Therapeutics for initial proceeds of $3 million, with the potential for up to an additional $7 million in milestone payments. These transactions, combined with our strong fourth quarter revenue performance, give us the resources and financial flexibility we need to execute on our plan. We made remarkable clinical progress across multiple fronts in 2025, and that momentum has carried into early 2026. First, in superficial basal cell carcinoma, or sBCC, we submitted a supplemental New Drug Application to the FDA in November 2025 based on strong Phase III data from our 187-patient randomized, double-blind, placebo-controlled study. Complete histological clearance was seen in 76% of these tumors with Ameluz PDT compared to 19% with placebo. Complete clinical clearance was achieved in 83% of the lesions compared to 21% with placebo. I am pleased to report that the FDA has accepted this filing, and we have a PDUFA target action date of 09/28/2026. If approved, Ameluz would be the first PDT drug to treat a tumor in the United States, representing an additional commercial opportunity. Second, in actinic keratosis on the extremities and head, neck, and trunk, the last patient completed the treatment phase in 2025. The database was locked in January 2026. I am very pleased to report that in February 2026, we announced positive Phase III results; the study met its primary endpoint. Combined with the completed Phase I pharmacokinetic study, we anticipate filing a supplemental NDA in 2026 to expand the label for Ameluz to treat AK beyond the face and scalp on a treatment field of up to 240 square centimeters. With approximately 58 million American adults having at least one actinic keratosis lesion, treating extensive fields on the extremities, neck, and trunk represents a very large addressable market for our installed base of RhodoLED lamps. Third, in moderate to severe acne vulgaris, the treatment phase completed in Q3 2025 and the database was locked in January 2026. Last week, we announced positive Phase II results. The three-hour incubation protocol demonstrated a 58% reduction in inflammatory lesions with Ameluz compared to 37% with vehicle gel. PDT patient satisfaction was very high, with 86% of patients stating they would choose PDT treatment again. Based on these data, we plan to discuss the design of a future Phase III program with the FDA in 2026. Acne vulgaris is a chronic condition affecting millions of adults and adolescents, and we believe Ameluz PDT has the potential to offer a differentiated treatment option for the moderate to severe form of the disease. Our patent portfolio was significantly strengthened in 2025. We received approval for the new improved formulation of Ameluz, which removes the potentially allergenic propylene glycol, extending patent protection through December 2043. And just recently, we had positive news in our patent dispute with Sun Pharma. The U.S. Patent Trial and Appeal Board issued a final written decision finding all claims of Sun Pharma's patent unpatentable that we had challenged. This decision is a positive outcome in defending our market position, though we note Sun Pharma may seek further review. I would now like to turn the call over to George Jones, our Chief Commercial Officer, to provide a more detailed update on our commercial execution. George? George Jones: Thank you, Hermann, and good morning, everybody. I am pleased to walk you through our commercial progress for 2025. As Hermann noted, we delivered record revenues in the fourth quarter and achieved approximately 11% annual revenue growth. That revenue growth was driven by approximately $4.1 million in organic volume growth. What I want to emphasize today is the underlying quality of that growth and the executional improvements that powered it. First, looking at Ameluz unit volume growth. Ameluz unit volumes for full-year 2025 increased meaningfully. Fourth-quarter unit volumes were particularly strong at approximately 49,840 tubes, bringing the full-year unit volume to approximately 121,000 tubes. This represents approximately 10% volume growth over 2024. These unit growth milestones underscore the effectiveness of the executional changes we implemented in 2025, which I will discuss later in this section. Looking at RhodoLED lamp placements, during 2025, we placed approximately 85 RhodoLED lamps within dermatology practices, including approximately 70 of the newer XL model. As of 12/31/2025, our installed base stands at approximately 745 lamps across approximately 686 dermatology offices nationwide. Looking at our commercial execution, our revamped commercial strategy centered on refined customer segmentation, a more focused and data-driven targeting approach, and increased accountability delivered tangible results in 2025. We saw a significant increase in sales call activity during the year and, importantly, increased in-person activity, which we know drives the highest impact with our customers. Looking a little deeper into the business, our 2025 churn rate, which is a measure of lost business from accounts that have purchased from us in the past year, was the lowest since 2021. On top of this, we were able to open over 150 new accounts and gain significant volume of Ameluz tubes through these new accounts. Additionally, we launched an inside sales pilot in Q4 to cover vacant territories, white space, as well as smaller accounts that were harder for our in-person sales team to reach. Based on the success of this pilot, we are planning for a full rollout of inside sales in 2026. Overall, I am very encouraged by what I have seen in my first six months at Biofrontera Inc. I am impressed by the talent and the drive of the team, and excited by the overall trajectory of the business. The growing installed lamp base, expanding customer adoption, continued commercial strategy refinement, and the potential for near-term label expansions in sBCC and AK of the trunk and extremities give us multiple vectors for continued growth in 2026 and beyond. I look forward to updating you on our progress in coming quarters. With that, I will turn the call over to Fred Leffler, our Chief Financial Officer, to walk through the financial results. Fred? Fred Leffler: Thank you, George, and good morning, everyone. I will walk through our financial results for the fourth quarter and full year ended 12/31/2025. All comparisons are to the prior-year period unless otherwise noted. A full reconciliation of our GAAP to non-GAAP measures is included in the press release we issued earlier today and is available on our website. Starting with fourth-quarter 2025 results. Revenues for the quarter were approximately $17.1 million compared with $12.6 million in 2024. This is an increase of approximately 36%. This was the highest quarterly revenue in our company's history and was driven by strong Ameluz sales execution and pricing adjustments that we introduced in December 2025. Our related-party cost of goods sold, or COGS, decreased 45% year over year, driven by the transition from the transfer pricing model under our prior license and supply agreement to the significantly lower earn-out structure that came with the strategic transaction with Biofrontera AG that Hermann talked about a few moments ago. Under the new arrangement, the cost of revenues per unit declined steadily to about 15% compared with a range of 25% to 35% under the prior agreement. As a result, our gross profit on sales improved significantly, going from about 58% to 82% in 2025, which is a great outcome of all the hard work that everyone at Biofrontera Inc. put into this transaction. Total operating expenses for the quarter were $12.5 million compared with $14.3 million in 2024. With COGS excluded, costs were about $9.4 million in both years. Selling, general, and administrative expenses, SG&A, increased $300,000, or approximately 4%, to $4.8 million in 2025. This was mainly driven by legal costs. Research and development expenses were the same for the fourth quarters year over year at $800,000. This investment directly supported the clinical programs Hermann discussed a moment ago, including the work to complete the Phase III AK extremities trial and the Phase II acne trial. Operating income for the quarter was $4.6 million, a $6.3 million improvement from a net loss of $1.7 million in 2024. Net income for the quarter was $5.6 million, a $7.0 million improvement from a net loss of $1.4 million in 2024. This improvement was driven by the higher revenues and the materially lower cost of revenues resulting from the strategic transaction, which were partially offset by higher legal and R&D expenses. Turning to our non-GAAP measure, adjusted EBITDA for the quarter was $4.9 million compared with negative $1.4 million in 2024. This is an improvement of $6.3 million. Our adjusted EBITDA margin improved to positive 29% from negative 11% in the prior year, reflecting the favorable impact of higher gross profit and improved operating cost management. As a reminder, adjusted EBITDA excludes interest, taxes, depreciation, amortization, changes in the fair value of warrant liabilities, stock-based compensation, gain on sale of assets, and expense issuance costs. A full reconciliation can be found in our press release or on our website. Now turning to full-year 2025 results. Total GAAP net revenues for 2025 were $41.7 million compared with $37.3 million for the full year 2024, an increase of approximately 12%. The increase was primarily driven by $4.1 million in organic Ameluz growth associated with volume. Our related-party cost of goods sold decreased by $7.7 million, or 43%, to $10.1 million from $17.9 million in 2024, again driven by the transition from our former transfer pricing model under the prior license and supply agreement to the significantly lower earn-out structure that took effect in 2025. Under the new arrangement, beginning in July 2025, cost of revenue per unit declined steadily to about 15% compared to a range of approximately 25% to 30% under the prior agreement. Additionally, $2.0 million of purchase price accruals under the prior agreement were forgiven in connection with the closing. These reductions were offset by $2.2 million in earn-out payments under the new agreements. As a result, our gross profit on product sales improved significantly, going from about 50% to 74% for the full year 2025. We expect the full benefit of the new cost structure to be realized on an annualized basis in 2026, as the new 12% rate applied only to about 45% of the Ameluz sales volume in 2025. In the long run, we expect our gross profit margin to range between 80% and 85%. Total operating expenses for 2025 were $53.1 million compared with $54.5 million in 2024, a decrease of $1.5 million or about 3%. Within this, selling, general, and administrative expenses increased $4.0 million, or approximately 12%, to $38.4 million. The increase was driven by a $6.0 million increase in legal expenses related to patent claims, partially offset by a $1.1 million reduction in direct sales personnel expense from a lower headcount, $500,000 in savings from lower sales support activity levels, a $300,000 decrease in intangible asset amortization, and a $200,000 decrease in bad debt expense. Research and development expense increased $1.6 million to $3.7 million in 2025, reflecting our responsibility for all U.S. clinical trials for the full year, which only started in June 2024. This investment directly supported clinical programs Hermann discussed, including wrapping up all of the clinical trials mentioned earlier. Our operating loss for full-year 2025 was $11.3 million, a significant improvement from a net loss of $17.2 million in 2024, a reduction of approximately 34%. Our net loss for 2025 was $10.5 million, a significant improvement from the net loss of $17.8 million in 2024, a reduction of approximately 41%. This improvement was driven by higher revenues, materially lower costs from the strategic transaction, and a decrease in interest expense, partially offset by higher legal and R&D expenses. Turning to our non-GAAP measure, adjusted EBITDA for full-year 2025 was negative $10.6 million compared to negative $15.3 million in 2024, an improvement of $4.7 million or 31%. Our adjusted EBITDA margin improved to negative 25.4% from negative 40.9% in the prior year, reflecting the favorable impact of higher gross profit and improved operational cost management. I will refer you to our press release or website for more details. Finally, looking at our balance sheet and liquidity, as of 12/31/2025, we had cash and cash equivalents of $6.4 million compared with $5.9 million at 12/31/2024. During 2025, we received $11.0 million in gross proceeds from the private placement of Series C preferred stock, $3.0 million from the initial closing of the Xepi divestiture, and we generated $41.7 million in product revenue. Cash used in operating activities for the full year was $13.4 million, reflecting our net loss as well as changes in working capital. With the completion of the strategic transaction, we now have greater control over the supply chain, shorter lead times for our products, and improved inventory management. These operational improvements, combined with the significantly lower cost structure under the new earn-out agreement, are expected to reduce our cash consumption as we advance towards our goal of cash flow breakeven. As we have discussed in our filings, the support of our institutional investors, Roslyn and Biters and AIGH Capital, has been instrumental in positioning us to execute the strategic transaction and invest in our clinical pipeline. We are grateful for their confidence and commitment. With that overview of our business and financial results, we are ready to take questions from our covering analysts. Operator? Operator: Thank you. We will now begin the question-and-answer session. Today's first question comes from Bruce Jackson at The Benchmark Company. Please go ahead. Bruce Jackson: Hi, good morning, and thanks for taking my questions. I want to talk about the gross margin improvement that you are anticipating for 2026. Fourth quarter was quite strong. How do you think it plays out over the course of the year? And is it going to drop and then ramp again? And where do you see it exiting 2026? Fred Leffler: Yes, nice to talk to you again, Bruce. So the gross profit margins, we expect to be between 80% and 85%, and the reason for the range is because of the mix between Ameluz and device sales. But that has started on January 1, and we expect to be within that range from January 1 and throughout 2026. Bruce Jackson: And then, would you say you are going to be—how can I put this? Would you expect it to start at that 82% level and stay there? Or do you think it is going to be variable over the course of the year? Fred Leffler: I think it is going to start there. As I said, it could fluctuate a little bit depending on the product mix in our revenue and cost of goods sold. Bruce Jackson: Okay. Okay. That is all I have got right now. Thank you. Fred Leffler: Thanks, Bruce. Thank you. Operator: That concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks. Hermann Lubbert: Yes. Thank you. So if I summarize what we have said, first, we delivered record annual revenues and record first quarter revenues, demonstrating that our refined commercial strategy is working and that the Ameluz PDT platform continues to gain traction with dermatologists and their patients. Second, the completion of the strategic transaction with Biofrontera AG has fundamentally changed our business model. We now own and control all of our key U.S. assets, intellectual property, regulatory approvals, and manufacturing rights, and the new earn-out structure has materially improved our cost profile. The full annualized benefit of this new structure will flow through to our results in 2026. And third, our clinical pipeline is delivering results. We have a PDUFA date for superficial basal cell carcinoma in September 2026, positive Phase III results for AK on the extremities, and encouraging Phase II data in acne. Looking further ahead, we have planned studies in squamous cell carcinoma in situ and reduced-pain PDT. Biofrontera Inc. is the only company in the United States running FDA-controlled clinical studies in PDT for dermatology, and our patent protection extends through 2043. And finally, the combination of revenue growth, lower cost of revenues based on our new contracts, and disciplined expense management led to a strong profit in Q4, the first quarter where the new cost of goods became fully effective, and we expect these to meaningfully improve our financials in 2026 as we continue to advance towards cash flow breakeven. I want to thank our entire team for their dedication and hard work. I also want to thank our shareholders, the healthcare professionals who use our products, and, most importantly, the patients whose lives we are helping to improve in the fight against skin disease. Thank you all for your continued support. Have a wonderful day. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good morning, and welcome to Aveanna Healthcare Holdings Inc. Fourth Quarter 2025 Earnings Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the call over to Debbie Stewart, Aveanna Healthcare Holdings Inc. Chief Accounting Officer. Thank you. You may begin. Debbie Stewart: Thank you, and good morning, and welcome to Aveanna Healthcare Holdings Inc. Fourth Quarter 2025 Earnings Call. I am Debbie Stewart, the company's Chief Accounting Officer. With me today is Jeffrey S. Shaner, our Chief Executive Officer, and Matthew Buckhalter, our Chief Financial Officer. During this call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements. Additionally, on today's call, we will discuss certain non-GAAP measures we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these measures can be found in this morning's press release, which is posted on our website, aveanna.com, and in our most recent Annual Report on Form 10-K when filed. With that, I will turn the call over to Aveanna Healthcare Holdings Inc. Chief Executive Officer, Jeffrey S. Shaner. Jeff? Jeffrey S. Shaner: Thank you, Debbie. Good morning, and thank you for joining us today. We appreciate each of you investing your time this morning to better understand our Q4 and full-year 2025 results and how we are moving Aveanna Healthcare Holdings Inc. forward in 2026. My initial comments will briefly highlight our fourth quarter and full-year 2025 results, along with the steps we are taking to address the labor markets and our ongoing efforts with government and preferred payers to create additional capacity. I will then provide updates on the recently announced Family First Home Care acquisition and how we are thinking about 2026 strategic initiatives and our full-year 2026 guidance before turning the call over to Matt. Now, moving to highlights of the fourth quarter and full-year 2025. Revenue for the fourth quarter was approximately $662 million, representing a 27.4% increase over the prior-year period. Fourth quarter adjusted EBITDA was $85 million, representing a 54% increase over the prior-year period, primarily due to the improved rate and volume environment and continued cost savings initiatives. Revenue for the full-year 2025 was approximately $2.433 billion, representing a 20.2% increase over the prior-year period, and full-year 2025 adjusted EBITDA was $320.8 million, representing a 74.8% increase over the prior-year period. As a reminder, our fourth quarter and full-year 2025 results did benefit from the 53rd week due to our accounting calendar. As we sunset 2025, I think it is important to reflect on the three-year strategic transformation that we have successfully navigated. I am proud of the Aveanna Healthcare Holdings Inc. team of leaders, employees, and caregivers that believe in our mission and helped execute the key strategies that returned Aveanna Healthcare Holdings Inc. to our current performance. As we look forward, we remain deeply committed to our preferred payer and government affairs strategies that continue to drive our growth in all three operating divisions. As we have previously discussed, the labor environment represented the primary challenge that we needed to address to see Aveanna Healthcare Holdings Inc. resume the growth trajectory that we believed our company could achieve. It is important to note that our industry does not have a demand problem. The demand for home and community-based care continues to be strong, with both state and federal governments and managed care organizations asking for solutions that create more capacity while reducing the total cost of care. Our Q4 and full-year 2025 results highlight that we continue to align our objectives with those of our preferred payers and government partners. By focusing our clinical capacity on our preferred payers, we achieved solid year-over-year growth in revenue and adjusted EBITDA. We also experienced improvement in our caregiver hiring and retention trends by aligning our efforts with those payers willing to engage with us on enhanced reimbursement rates and value-based agreements. While we continue to operate in a challenging environment, our preferred payer strategy supports our ability to achieve normalized growth rates in all three of our business segments. Since our third quarter earnings call, I am pleased with the continued progress we have made on several of our rate improvement initiatives with both government and payer partners as well as continued signs of improvement in our caregiver labor market. Specifically, as it relates to our private duty services business, our government affairs strategy for 2025 was twofold. First, we advanced our legislative agenda to improve reimbursement rates in at least 10 states. And second, we continued to advocate for Medicaid rate integrity on behalf of children with complex medical conditions. Our strong advocacy presence with both federal and state legislatures as well as solid support from our governors across our national footprint provided significant value in 2025. As it relates to private duty services rate updates, we achieved 10 rate enhancements in 2025, which was in line with our expectations. As we reset our legislative goals for the new year, we expect to achieve high single-digit state rate enhancements for 2026. After three years of meaningful rate movement in our PDS states, we are generally in a good place as we navigate 2026 and focus on cost-of-living type rate and wage adjustments moving forward. Now moving on to our preferred payer initiatives. Our goal for 2025 was to increase the number of private duty services preferred payer agreements from 22 to 30. We added eight additional preferred payer agreements in 2025, achieving our goal of 30. Aveanna Healthcare Holdings Inc. preferred payer strategy continues to gain momentum and allows us to invest in caregiver wages and recruitment efforts to accelerate hiring and staffing of nurses for our patients. As we reset our preferred payer goals for 2026, we believe there is still ample room to grow in our current geography as well as new states that we enter through acquisitions. With that in mind, our goal for 2026 is to add eight additional agreements with a target of 38 preferred payers by the end of 2026. Additionally, our Q4 preferred payer agreements accounted for approximately 57% of our total private duty services MCO volumes. This positive momentum in preferred payer volumes continues to highlight the shift in our caregiver capacity and recruitment efforts towards our preferred payer partners. We believe this important volume metric will grow to the low 60% in 2026 as we continue to align our capacity with our payer partners. Moving to our preferred payer progress in home health. Our goal for 2025 was to maintain our episodic payer mix above 70% while returning to a more normalized growth rate. I am extremely pleased to report in Q4 our episodic mix was 78% and our total episodic volume growth was 25% compared with the prior-year period. The continued investment in clinical outcomes, sales resources, and a focused approach to growth is paying dividends with Q4 total admissions of 10,400, or 22.4% growth over the prior-year period. We ended 2025 with 45 preferred payer agreements in home health. Our dedicated focus on aligning our home health caregiver capacity with those payers willing to reimburse us on an episodic basis has led to double-digit year-over-year growth in home health total episodes and improvement in our clinical and financial outcomes. As we reset expectations in home health for 2026, we believe our episodic payer mix will remain above 75% with organic growth rates approaching double digits. We also expect to sign additional preferred payer agreements in home health and are now targeting more than 50 agreements by the end of 2026. Finally, as we have achieved our desired preferred payer model in private duty services, home health, and hospice, we are proceeding with a similar strategy in our medical solutions business. We are in the late stages of implementing our preferred payer strategy in medical solutions and believe it will be fully realized in 2026. At year-end 2025, we had 18 preferred payers, and we expect that number to grow with a target of 25 total agreements in 2026. As we achieve our desired preferred payer model, our gross margins have stabilized in our desired range as we align our clinical capacity with those payers that value our services and pay us in timely fashion. I am pleased with our Q4 volume growth of approximately 92,000 unique patients served, or positive 3.4% over the prior-year period. As we think about medical solutions revenue growth in 2026, I would expect us to remain in the mid-single-digits growth for the next few quarters and then return to double-digit growth by the end of the year. We are encouraged by our rate increases, preferred payer agreements, and subsequent recruiting results. Our business has demonstrated solid signs of recovery as we achieve our rate goals previously discussed. Home and community-based care will continue to grow, and Aveanna Healthcare Holdings Inc. is a comprehensive platform with a diverse payer base providing a cost-effective, high-quality alternative to higher-cost care settings. Now turning to our recently announced transaction to acquire Family First Home Care, a Florida-based company with a great reputation for quality in-home pediatric care. I want to extend a warm welcome to our Family First teammates. I am thrilled to continue our acquisition growth story with great companies like Thrive Skilled Pediatrics and Family First Home Care. Both companies continue to build upon the Aveanna Healthcare Holdings Inc. brand of high-quality, compassionate care in the most cost-effective setting, the comfort of our patient's home. We expect the Family First transaction to close sometime in Q2 with normal regulatory approvals. I look forward to updating you on our progress over the coming quarters. Before I turn the call over to Matt, let me comment on our strategic plan and outlook for 2026. We will focus our efforts on five primary strategic initiatives. First, strengthening our partnerships with government partners and preferred payers to create additional capacity and growth. Second, improving clinical outcomes and customer engagement scores while lowering the total cost of care. Third, implementing high-priority artificial intelligence and automation efforts to improve operational efficiency and productivity gains. Fourth, growing through acquisitions while improving net leverage and generating positive free cash flow, and finally, engaging our leaders and employees in delivering our Aveanna Healthcare Holdings Inc. mission. Based on the strength of our fourth quarter and full-year 2025 results and the continued execution of our key strategic initiatives, we anticipate 2026 revenue in the range of $2.54 billion to $2.56 billion and adjusted EBITDA in the range of $318 million to $322 million. We believe this 2026 outlook provides a prudent view considering the challenges we still face with the evolving environment and does not include the impact of the Family First acquisition. In closing, I am incredibly proud of our Aveanna Healthcare Holdings Inc. team and their dedication to executing our strategic plan while holding our mission at the core of everything we do. We offer a cost-effective, patient-preferred, and clinically sophisticated solution for our patients and families. Furthermore, we are the right solution for our payers, referral sources, and government partners. With that, let me turn the call over to Matt to provide further details on the quarter and our 2026 outlook. Matt? Matthew Buckhalter: Thank you, Jeff, and good morning. I will first talk about our fourth quarter and full-year 2025 financial results and liquidity before providing additional details on our outlook for 2026. Starting with the top line, we saw revenues rise 27.4% over the prior-year period to $662.5 million. We achieved year-over-year revenue growth in all three of our operating divisions, led by our Private Duty Services, Home Health and Hospice, and Medical Solutions divisions, which grew by 28.1%, 27.3%, and 21.3% compared to the prior-year quarter. Consolidated gross margin was $213.3 million, or 32.2%. Consolidated adjusted EBITDA was $85 million, a 54% increase as compared to the prior year. This growth reflects an improved rate environment, increased volumes, as well as enhanced operational efficiencies. As Jeff mentioned, this year's fourth quarter included an additional 53rd week, which had a positive impact on both revenue and earnings. As a result, the current fiscal year reflects an extra week of business activity compared to a typical year. Now, taking a deeper look into each of our segments. Starting with Private Duty Services, revenue for the quarter was approximately $541 million, a 28.1% increase, and was driven by approximately 12.4 million hours of care, a volume increase of 17.9% over the prior year. Q4 revenue per hour of $43.74 was up 10.2% compared to the prior-year quarter, primarily driven by preferred payer volume growth and the rate enhancements previously discussed. We remain optimistic about our ability to attract caregivers and address market demands for our services when we obtain acceptable reimbursement rates. Turning to our cost of labor and gross margin metrics. We achieved $149.9 million of gross margin, or 27.7%. The cost of revenue rate of $31.62 in Q4 was up $3.15, or 11.1%, from the prior-year period. Our Q4 spread per hour was $12.12, reflecting continued normalization as we make ongoing adjustments to caregiver wages to support higher volumes and improve clinical outcomes. Moving on to our Home Health and Hospice segment. Revenue for the quarter was approximately $69.3 million, a 27.3% increase over the prior year. Revenue was driven by 10,400 total admissions with approximately 78% being episodic, and 14,000 total episodes of care, up 25% from the prior-year quarter. Medicare revenue per episode was $3,223, up 3% from the prior-year quarter. We continue to focus on rightsizing our approach to growth in the near term by focusing on preferred payers that reimburse us on an episodic basis. This episodic focus has accelerated our margin expansion and improved our clinical outcomes. With episodic admissions well over 70%, we achieved our goal of rightsizing our margin profile and enhancing our clinical offerings. We are pleased with our Q4 gross margin of 53.7%, representing our continued focus on cost initiatives to achieve our targeted operating model. Our Home Health and Hospice platform is dedicated to creating value through effective operational management and the delivery of exceptional patient care. Now to our Medical Solutions segment results for Q4. During the quarter, we produced revenue of $52.5 million, up 21.3% over the prior-year period. Revenue was driven by approximately 92,000 unique patients served, and revenue per UPS of approximately $570, up 17.9% over the prior-year period. Gross margin was approximately $26.2 million, or 50%, for the quarter. Medical Solutions' Q4 revenue, gross margin, and reimbursement rate benefited from a reserve release driven by stronger-than-expected cash collections on claims we had previously estimated as uncollectible. We expect results to normalize in Q1 with gross margins returning to the 43% to 45% range. As Jeff mentioned, we continue to implement initiatives to be more effective and efficient in our operations to achieve our targeted operating model. We are accelerating our preferred payer strategy in Medical Solutions by aligning our capacity with those payers that value our resources and appropriately reimburse us for the services we provide. We expect margins to normalize and UPS to accelerate its growth as we implement our targeted operating model. While I am pleased with the integration efforts to date, we are entering the final push to complete our efficiency efforts and return to sustained year-over-year volume growth in Medical Solutions. In summary, we continue to fight through a difficult environment while keeping our patients' care at the center of everything we do. It is clear that aligning caregiver capacity with preferred payers who value our partnership is the right path forward at Aveanna Healthcare Holdings Inc., and throughout 2025, with the strong momentum from Q4, we are optimistic these trends will continue into 2026. We will continue to pass through wage improvements and other benefits to our caregivers in the ongoing effort to better improve volumes. Now moving to our balance sheet and liquidity. At the end of the fourth quarter, we had liquidity of $529 million, representing cash on hand of approximately $193 million, $110 million of availability under our securitization facility, and approximately $226 million of availability on our revolver, which was undrawn as of the end of the quarter. We had $24.5 million in outstanding letters of credit at the end of Q4. On the debt service front, we had approximately $1.49 billion of variable-rate debt at the end of Q4. Of this amount, $520 million is hedged with fixed-rate swaps, and $880 million is subject to an interest rate cap which limits further exposure to increases in SOFR above 3%. Accordingly, substantially all of our variable-rate debt is hedged. Our interest rate swaps extend through June 2026, and our interest rate caps extend through February 2027. Looking at cash flow, cash generated by operating activities was $125.9 million, and free cash flow was $131 million. We are encouraged by our strong cash collections and cost efficiency efforts, which drove solid operating and free cash flow in 2025. We expect similar cash flow performance in 2026. As a reminder, the first quarter is typically our seasonal low point for both operating and free cash flow, with improvement expected throughout the rest of the year. Before I hand the call over to the operator for Q&A, let me take a moment to address our outlook for 2026. As Jeff mentioned, we expect full-year 2026 revenue in the range of $2.54 billion to $2.56 billion and adjusted EBITDA in the range of $318 million to $322 million. This guidance does not include any impact from the Family First acquisition, which we expect to close in late Q2. As outlined in our recent 8-K, we are paying $175.5 million in consideration, or approximately 7.5x post-synergy EBITDA. We plan to fund the transaction and related fees with cash on hand and our securitization facility. As we reflect on our Q4 results, I would like to take a moment to express my sincere gratitude to all of our Aveanna Healthcare Holdings Inc. teammates. These strong results would not have been possible without your hard work and dedication. Looking ahead, I am excited for the continued execution of our 2026 strategic plan and look forward to providing you with further updates at the end of Q1. With that, let me turn the call over to the operator. Operator: Thank you. At this time, we will be conducting a question-and-answer session. 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. As a reminder, we ask that you please limit to one question and one follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, while we poll for questions. Operator: Our first question comes from A. J. Rice with UBS. Your line is now live. A. J. Rice: Hi, everybody. Congratulations on the Family First acquisition. Obviously, that is a decent-sized deal for you. And I think you have said you are going to fund that with cash and short-term borrowings. How should we think about the impact that is likely to have on leverage? And can you give us any early read on whether there is accretion there, or the trajectory on the margin contribution over time? Matthew Buckhalter: Yes, A. J., we are really excited to welcome the Family First team into the Aveanna Healthcare Holdings Inc. family. They have really strong clinical outcomes and really disciplined operations, and that makes them a really nice cultural fit and operational fit into our family. We value this transaction, as I said in the script, at about 7.5x post-synergy EBITDA. You could see that, on a very short-term basis, having a very minimal impact on our leverage profile. But with the generated free cash flow that we will produce in 2026, you should see us flat to slightly down as the year progresses. On a pro forma basis, with both of those pieces taken into consideration, we still plan on deleveraging in 2026; however, slightly—not the large jumps that you have seen in the past two years. Jeff, anything else? Jeffrey S. Shaner: Yes, I think, A. J., it is well said by Matt. We have gotten leverage down to just right at 4x. As Matt said, we should end 2026 in that range with the Family First addition, and it is just another nice transaction. Thrive was a great transaction for us. It densified our services and allowed us to be better payer partners, with Thrive mainly in Texas. This is a Florida-focused deal for us, and it is just a nice merger of two great companies. We have to clear some regulatory hurdles over the next month or two, and are excited to get through those and get on to doing business with the Family First team. It is a really nice acquisition for us to start the year. A. J. Rice: Okay. Just maybe as a follow-up on the preferred provider arrangements that you are doing. At this point, do you have pretty good geographic coverage across your footprint, or are there still major geographies where you do not yet have it, and is the idea that the incremental eight that you did last year, the incremental eight this year—is that more density, multiple managed care Medicaid programs that you are contracting with in a given geography, or is it still just trying to get the broad coverage? Jeffrey S. Shaner: That is a great question. The eight we won in 2025 and the additional eight that we are anticipating for 2026 are in the current geographies that we have. I will say current geographies post the Thrive acquisition because we added New Mexico and Kansas as two additional Medicaid states. So as we think about executing on the 38-goal for this year, it is still densifying our current geographies. I would tell you, at this point, we have landed most of the major payers in the major markets, so we are rounding out some of our payer partnerships. And then I think the next steps for us, as you think about what is next for Aveanna Healthcare Holdings Inc. from a Medicaid standpoint, we still want to fill in the states like Ohio, West Virginia, Kentucky, Tennessee. That is still an open area today where we do not have any Medicaid services. So those four or five states in the heartland we really want to fill in. That is how we think about additional M&A in the back half of 2026 and going into 2027 on the Medicaid side of the business. Thanks, A. J. A. J. Rice: Alright. Thanks. Operator: Our next question is from Brian Gil Tanquilut with Jefferies Group. Your line is now live. Brian Gil Tanquilut: Hey, good morning, and congrats on this acquisition. Maybe, Matt, as I think about to start, when I think of Family First, any other color you can share with us in terms of how we should be thinking about revenues—and I guess we can back to the EBITDA contribution—but just any KPIs, any metrics that you can share with us? And then kind of related to that, Jeff, is this one of those deals where clearly you are identifying Florida with a deal? Is this one that has been supported or encouraged by the payers where they have asked you in the past to go to new markets? Matthew Buckhalter: Awesome questions, Brian. And obviously, on 2026 financials themselves, the impact will depend on the timing of closing of this, obviously. That said, we really expect this to be a really smooth and efficient integration, consistent with how the team successfully integrated the Thrive acquisition and brought that team on to the Aveanna Healthcare Holdings Inc. platform. On the revenue side, it is in the ballpark of $120 million of revenue. And then you can run the math for the 7.5x based upon purchase price. All that depending on a pro forma basis, 2026—we will see how that really lands just based upon closing timing. Jeff, you want to add on? Jeffrey S. Shaner: Yes. Brian, I think you hit it. Thrive was right down the middle of the fairway, densifying our payer needs in Texas. This one is primarily Florida-focused. Both companies have great reputations in the Florida market today, well respected by the MCO payers. Florida is an MCO market; MCO payers are incredibly important to us. But this acquisition helps us round out the areas in Florida that we were not in, so it does give us geographic expansion within Florida. It allows us to service effectively every county in the state of Florida. And, again, our payer partners are very supportive of our growth. I think this one is right down the middle of the fairway just like Thrive. And again, excited to get through the regulatory approvals here in Q1 and Q2 and get this closed up in the latter half of Q2. Brian Gil Tanquilut: No, that makes sense. And, Matt, any chance you can help us bridge the 2026 EBITDA given I think you have, like, almost roughly $20 million of one-timers in 2025, there is an extra week, and then there is Thrive in there. So just trying to get that bridge and the guidance from 2025 actuals. Matthew Buckhalter: Yes. So on the EBITDA, Brian, take that roughly $320 million. We came out earlier this year and talked about, hey, bridge that back down to the $300 million based upon the retro rate increases, the cash collections, and that 53rd week itself. So really your jumping-off point should be around that $300 million, going up to that range of $320 million as we currently sit organically without any M&A inclusive in there. On the revenue side of things, the 53rd week and Thrive do a really nice offset to one another—within 20 basis points themselves. And so we are still going to be in that 5%+ organic revenue growth as we currently sit today. But that is back in line with our normal expectations, that 5% to 7% range on revenue and that high single digits or mid- to high-single digits on EBITDA. So back into a normalized idea of Aveanna Healthcare Holdings Inc. Jeffrey S. Shaner: And, Brian, the thing I will add to that is what Matt said is on the EBITDA growth implied about 7%. Again, we tried to, in my comments, lay out that we expect our PDS government rate wins to be sub-10 this year. Last year, we landed right at 10, and that is a net number from positive and negative increases. So we expect that number to land somewhere between six and eight state rate increases this year, and we expect them to be more cost-of-living oriented. So I will call it the 1% to 5% Medicaid rate wins—less number of total wins, less percentage per win—that is really what we are factoring into our guidance as we start the year. I think as we get to May, close Q1, close Family First, we will have a much better feel for how the year plays out, especially with our legislative efforts being in session right now in the first half of the year. Brian Gil Tanquilut: Awesome. Thanks, guys. Jeffrey S. Shaner: Thanks, Brian. Operator: Our next question comes from Raj Kumar with Stephens. Your line is now live. Raj Kumar: Hi. Good morning. Maybe just focusing on the preferred payer arrangements and thinking about the Home Health and Hospice book. I guess maybe thinking about you see an episodic mix trending above 75%. And I think you have previously hinted you would not be surprised if it got as high as 80%. So maybe just thinking about what is embedded into 2026. And then maybe just any framing around any membership impacts given how volatile the membership was during AEP on the Medicare Advantage side. Just any color on that would be helpful. Jeffrey S. Shaner: Yes, Raj. Great question. And I am going to take that as a compliment to our Home Health and Hospice business. Like you, we are incredibly proud of their results. I think we mentioned it—pushing 25% organic year-over-year admission and episodic growth is, I would tell you, first-class, best-in-class results. And they have done it from just blocking and tackling. They have done it from just being really good at providing great clinical outcomes and the right level of care to the right payers and the right patients. So we are really robust. Now that we have got a more clear path from a federal home health rate standpoint, we continue to lean in. This is an area that we want to grow through both organic and inorganic M&A-related activities this year. Clinical outcomes are almost four and a half stars on average for our home health locations—I think it is 4.3 stars where we sit today. Gross margins in the 53% to 54%, great cash collections. As you said, episodic mix approaching 80%, and we are growing north of 10% year over year—right now 20%. We are off to a great start to the year in Q1. These teams are having a great start to the year. So I think everything we would say is we are going to continue to lean into home health and continue to grow it. My concern with the trends of managed Medicare? No. I think we are doing our playbook in this business, and our team is just kicking butt and taking names right now. So we are really excited about where we are as we ended 2025 and, equally important, as we sit here kind of halfway through Q1—really excited about what these teams have done for the business model. Raj Kumar: Got it. And then maybe just on the Medical Solutions business, 2025 was a year of optimization around preferred payer strategies. As we think about 2026 and given where the reimbursement dynamics were, any kind of framing around what would be an appropriate run rate when we exclude the reserve dynamics favorability in the quarter? Debbie Stewart: Yes, Raj, you called it out. During the quarter, gross margin and the revenue reimbursement rate were elevated, and that was from a reserve release that we recorded driven by improved cash collections on previously reserved claims. Without the inclusion of that reserve release, the Medical Solutions gross margin was slightly elevated compared to our guide, but we do expect it to normalize in Q1, getting back to that 43% to 45% range. Matthew Buckhalter: Yes. Well said, Debbie. And to put the dollars in there, those contributed $2.5 million to $3 million of additional revenue and EBITDA in the quarter. So not overly material to earnings, but it shows up in the Medical Solutions metrics and gross margin just due to its size. On the modernization efforts, though, Raj, we are really excited about what the team has been able to do and what they have accomplished so far. As we move into 2026, we expect to see preferred payer numbers significantly increase. Currently, we are sitting at 18. We expect that to continue to grow as we become better aligned and put our capacity with those who support us. There is a little bit of work to do at the same time. So we plan on wrapping this up in the front half of 2026, and that is when you will see us return back to a double-digit growth number organically in this business, and gross margins, as Debbie pointed out, sustaining in that 43% to 45% range. Raj Kumar: Great. Thank you. Operator: Our next question is from Ben Hendrix with RBC Capital Markets. Your line is now live. Ben Hendrix: Hi. This is Drew Starritt on for Ben Hendrix. You have previously mentioned continued wage pass through into 2026. Can you quantify the magnitude and timing of these increases? Matthew Buckhalter: Yes. Drew, I think the way to look at it is that spread rate that we talk about a lot. Q4 was at $12.12, which is coming back down in line. But we have continued to push through wages. As we talked about the entire year in 2025, we had some initiatives in place to really drive our volumes, and you see it impacting and really growing our volumes. This really came down, and you can see it in our gross margins. We settled in that 28% range, which was on the higher end of the range that we give for that business and in line with our expectations. Looking ahead, we will continue to actively manage spread, as we do every single day, to meet the needs of our preferred payers and our payer partners. Drew Starritt: Got it. Thank you. Operator: Our next question comes from Benjamin Michael Rossi with JPMorgan. Your line is live. Benjamin Michael Rossi: Good morning. I appreciate you taking my questions and appreciate the earlier comments regarding your state contracting. I guess shifting focus to California, which still seems to be the outlier here on home-based nursing rates, what do you think is the realistic 2026–2027 scenario for California here between, call it, no change, the cost-of-living type increase in that 1% to 5% range, or maybe a structural reset? And then under each of those scenarios, do you have any commentary on impact to your PDS spread rate per hour or maybe your broader market share strategy given your stance to not exit California? Jeffrey S. Shaner: Yes. Thanks, Ben. We met with the Governor of California as early as last week. We are not in the budget. There is no PDN rate increase in the 2026–2027 budget for California as it exists today. We are still lobbying and advocating to be in the May—what is called the May Revised—budget. If I am scoring that as a handicap, I would say it is less than 10% or 15% that PDN makes it in any shape, way, or form in the California budget. We are certainly not expecting it, and we have not modeled that. Over time, I hate to say it, but as our other markets have grown at the 20%, 22%, 25% year-over-year growth rate in PDS, California has unfortunately just gotten smaller and smaller from a materiality standpoint for the company. We still care deeply about our California patients. We still care deeply about California operations. We advocate very hard. Like I said, we met with the governor last week, and we continue to meet with his staff and push forward. But today, as it sits today, I am not expecting any material change that will stopgap. A cost-of-living increase is potential, but I would say is unlikely. There is nothing baked in our guidance that California has a change in heart in 2026. Benjamin Michael Rossi: Understood. Thanks for the additional comments there. I guess just as a follow-up, we have heard from some other healthcare facilities names regarding spillover impact from some of the delayed respiratory season and then some of the additive weather-related pressures from some of the winter storms. When you think about your 2026 outlook, how are you factoring any of the respiratory or weather-related impacts during Q1? Thanks. Jeffrey S. Shaner: That is well said. We did not put it in our prepared remarks, but we have had to fight through—like all of our peers—mainly snow and significant snow throughout the entire country. I would love to say the Northeast, but everything from Texas all the way up through Maine. Our team is doing a good job fighting that through. We have a no-excuse mentality here at Aveanna Healthcare Holdings Inc. We just fight through everything that comes our way. I do not think we changed our guidance based on weather. But like our peers, we have had to fight through two or three weeks of weather in the first ten weeks of the year. I will not say it was nothing, but it is just something we handle. We move on, and we are glad weather for the most part is behind us at this point and back to business. So I do not think it will have any material impact. Matt mentioned in his prepared comments, as a reminder, Q1 is our largest payroll tax quarter. So keep in mind as you think about guidance, Q1 is seasonally low for our margin, mainly driven by the payroll tax on our labor cost. Thanks, Ben. Operator: Our next question comes from Andrew Mok with Barclays Bank. Your line is now live. Andrew Mok: Hi, good morning. Given the recent increase in oil prices, can you remind us how much travel is reimbursed for your caregivers and how much fuel represents as a percentage of total revenue and total cost? Thanks. Jeffrey S. Shaner: Hey, Andrew. Good morning. Great question. Eighty percent of our revenues are driven off of shift care in the home where we do not reimburse any form of mileage or fuel. It is primarily because our nurse goes from his or her home right to the home of the patient. They are there for eight or ten or twelve hours, and they go home. So the vast majority of the business at Aveanna Healthcare Holdings Inc. has zero tied to gas prices from a reimbursement standpoint. Our Medical Solutions has some impact on a minimal amount from our drivers. The business that it does impact is our Home Health and Hospice business, and that is about 12% of our total revenue. So it is not a nothing impact for us, but thankfully, with the size and scale that we are and the diversity of our payer mix and our business mix, it is not as meaningful as it would be to some of our large home health and hospice peers. Andrew Mok: Got it. Maybe just as a follow-up, can you provide a little bit more color on the pace of pass through to caregivers on PDS and how you expect the spread to materialize throughout the year? Matthew Buckhalter: Yes, Andrew. I would go back to the gross margin line item here—27.7% in Q4. A little bit of PTO utilization, holiday pay, etc., occurs in Q4, so a little bit of extra compression in there. But our range should be in that 27% to 28% gross margin for the Private Duty Services segment. We are close to it now. As we continue to drive reimbursement rates—as Jeff mentioned, single high digits on the government affairs side—as we continue to add eight more preferred payers, as we continue to organically grow our preferred payers, we will take those rate wins and be able to continue to push them down to our caregivers, still aligning to that 27% to 28% gross margin. Jeffrey S. Shaner: Thanks, Andrew. We appreciate it. Operator: Our next question comes from Pito Chickering with Deutsche Bank. Your line is now live. Pito Chickering: Hey, good morning, guys. If I think about the PDS business model, the preferred payer strategy makes a ton of sense just due to the pretty large savings for managed Medicaid, and obviously it is more of a niche market. But about home health—it is a huge market with a lot of nurses employed. Can you just walk us through why you can replicate the preferred payer strategy in the home health segment? Jeffrey S. Shaner: Good morning, Pito. I think, one, our discipline around episodic payer mix. A year or two ago, people questioned whether or not being above 70% was attainable long term. I would say at this point, we have put that behind us and said being above 75% is our long-term strategy. Over time, payers have come around. At first, payers did not like the episodic conversation three, four, five years ago, but when you do not bend your backbone and you keep your clinical capacity focused on the right payer base—meaning episodic payers—eventually we have found that our payers do come back around. Clinical outcomes drive the story. Great clinical outcomes lead to good financial outcomes. In our Home Health and Hospice business—specifically home health—we have been able to stand behind great clinical outcomes. I think that when you look at eight quarters in a row being above 75% and we are approaching 80% now on an episodic basis, at this point, this is the business model. We are not moving from it, and our payers have caught up to us. I want to give a shout to our payer team. We have a world-class payer team, and our home health and hospice payer leader has done a fantastic job. She has been amazing. Kudos to our payer team. They are out every day continuing to beat the drum, but they will not take fee-for-service, low-dollar contracts because of how valuable caregivers and clinicians are in today’s world. Thank you for noticing, by the way. Pito Chickering: Okay. Fair enough. And then one more on Family First. How much of the $120 million of revenues are in Florida versus the other six states? And how fast can you roll out the preferred payer strategy in Florida in those new markets? And as I think about the opportunity there, I assume it is more acceleration of the $120 million of revenues versus a around 20% margin business that the business has today? Jeffrey S. Shaner: Yes. Think of the revenue base being two-thirds Florida, one-third everywhere else. Certainly, Florida is the state that we focused on. They do have meaningful business in other states outside of Florida, but Florida is where we focused and what made the most strategic rationale. They have really good relationships in the state of Florida today from a payer standpoint. We have very good relationships as well. The feedback we have gotten early from the payers is very supportive and congratulatory on the standpoint of providing more cost-effective, patient-preferred, win-win type scenarios. At the end of the day, these are two great companies, both providing great care. It is not like Aveanna Healthcare Holdings Inc. is superior in its service. Family First does a really nice job providing care in their seven states. We think this is good for patients. We think this is good for employees. This is good for payers. It will take us a little bit of time. As we saw with Thrive, it takes about a half a year or so to get through the integration-related efforts—systems, back office, benefits—to then really get to the expansion of care. We hope Family First will close at some point in mid to late Q2, and by the end of the year, we are wrapping up Family First. I want to hit on again: we are committed to growing our Home Health and Hospice business through accretive M&A. I think you will see us get back to the home health focus—both de novo and tuck-in M&A. Pito Chickering: Great. Thanks so much, guys. Operator: Our next question comes from John Ransom with Raymond James. Your line is now live. Hey, there. John Ransom: So if we think about the core EBIT growth this year being just below 7% on a consolidated basis—$318 million to $320 million-ish—how does that look by segment? What are the highest growth segments versus the lowest growth segments of your tree as we think about modeling? Matthew Buckhalter: Historically, Medical Solutions and Home Health and Hospice have been our highest organic growth segments, John. We have Medical Solutions going through its modernization efforts at this time. We talked about low single-digit growth in the front half of 2026 but returning to high single digits to double-digit growth in the back half of 2026. There is a little bit of mutedness in H1 compared to H2. Home Health and Hospice is hitting out of the gate strong just as they finished the year strong. That will continue to be at high single digits to double digits growth. We think PDS returns back into the normalization—3.5% to 4% volume growth—add in a point to a point and a half of rate growth, getting back to your 5% to 7% kind of range itself, or 3% to 5% on the upper end of that one. That is how we have it modeled out and how we are thinking about it in 2026 and beyond. Jeffrey S. Shaner: And, John, just being cost-effective and efficient in the back office, corporate office—we are down to 4.5% corporate cost as a percentage of revenue. We think we can keep making that a little better. You were about to bring this up, so I want to highlight generating a meaningful amount of cash flow. I appreciate you highlighting that great point. That $131 million of free cash flow last year was well beyond our expectations, and really kudos to Matt and Debbie and the team for executing on that. Generating that kind of cash moving forward just gives us optionality to continue to do deals like Family First and to use cash. We are excited about the opportunity to do that. Thanks for asking. John Ransom: You are welcome. The other question is just the PDS rate outlook. I mean, you are adding eight preferred payers, but you are only calling for 1% to 1.5% rate. Is that conservative, or are we missing something? Jeffrey S. Shaner: No. I think it shows how far along the spectrum we are in the strategy. When we first started, we were getting 10% of volume, 15% of volume. Some of these now we are tucking in are smaller in nature. They are still niche oriented. They are really important. Even a 1% volume mover, if we can move it into a preferred payer, matters. Think of us being further along the maturity spectrum in preferred payers, which is why we love the idea of additional states because it opens up new markets for us. As we think of Thrive, New Mexico and Kansas were so important because they opened up two brand new MCO markets for us. As we think of preferred payers going from 30 to 38, we are continuing to round out some of those final tweaks in our current markets and really focused on new expansion. John Ransom: Yeah. Last one for me. I know we are a little over time. If we think about the synergy between the nutrition segment and the pediatric segment, but I think about home care, hospice, and personal care—the market is kind of mixed. Is there really that much synergy between the three businesses? Does it help you with payer? Does it help you with nurse recruiting? What is the synergy? And I guess where I am going—with hospice M&A multiples being in the teens—if somebody came to you with a 15x multiple offer for your hospices, is that something you would consider, or do you really think you want to knit all these pieces together? Jeffrey S. Shaner: It is, first of all, a very thoughtful question. I will say this. Yes, obviously, the enteral nutrition business is incredibly synergistic to the PDS business. They operate as a referral entity incredibly well together. We have a lot of crossover in the referral source and the payer conversations between those two businesses. The opposite is true between our PDS and our HHH business. There is very little synergy from a referral source standpoint—even a payer standpoint—they are very different conversations, as you know. Why we love being in both businesses—one, the diversification. As we see right now, the last three years, Medicaid has been the darling. Right now, it is swinging back to Medicare being more the darling. We like the idea of being larger in both of these businesses, and we would like to be larger in the HHH business over time. We think of growth rates where businesses like home health and hospice can grow in double-digit year-over-year organic growth. We like that from a growth algorithm. We are committed to all three segments, excited about all three segments. We just want to get back to blocking and tackling this year and being really good at executing our business plan. Thanks, John. Operator: We have reached the end of the question-and-answer session. I would now like to turn the call back over to Jeffrey S. Shaner for closing comments. Jeffrey S. Shaner: Thank you, operator, and thank you for your attention. We look forward to catching up in mid-May on our Q1 2026 results. Thank you, and have a wonderful day. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Scholastic Corporation Reports Third Quarter Fiscal Year 2026 Results. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. I would now like to hand the conference over to your speaker today, Jeffrey Mathews, Executive Vice President, Chief Growth Officer, and President, Scholastic Education. Jeffrey Mathews: Hello, and welcome everyone to Scholastic Corporation's fiscal 2026 Third Quarter Earnings Call. Today on the call, I am joined by Peter Warwick, President and Chief Executive Officer, and Haji Glover, our Chief Financial Officer and Executive Vice President. As usual, we have posted the accompanying investor presentation on our IR website at investors.scholastic.com. You may download it now if you have not already done so. We would like to point out that certain statements made today will be forward-looking. These forward-looking statements, by their nature, are subject to various risks and uncertainties, and actual results may differ materially from those currently anticipated. In addition, we will be discussing some non-GAAP financial measures as defined in Regulation G. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the company's earnings release and accompanying financial tables filed this afternoon on a Form 8-K. This earnings release has also been posted to our Investor Relations website. We encourage you to review the disclaimers in the release and investor presentation, and to review the risk factors disclosed in the company's annual and quarterly reports filed with the SEC. Should you have any questions after today's call, please send them directly to our IR email address, investor_relations@scholastic.com. I will now turn the call over to Peter Warwick to begin this afternoon's presentation. Peter Warwick: Thank you, Jeff. Good afternoon, everyone, and thank you for joining us. In the third quarter, Scholastic Corporation advanced our strategy to support long-term growth and enhance shareholder value. A key milestone was the successful completion of our sale-leaseback transaction involving our New York City headquarters and Jefferson City distribution facility last December. This unlocked more than $400 million in net proceeds and represented an important step in optimizing Scholastic Corporation's balance sheet. Consistent with our disciplined approach to capital allocation and our belief that the company's shares represent a highly accretive investment, we moved quickly to return cash to shareholders under an upsized $150 million share repurchase authorization we have nearly exhausted. We have already bought back more than 4,400,000 shares for approximately $147 million in the open market, or $33.30 per share on average. With a view toward further optimizing our balance sheet and enhancing shareholder value, today, we are announcing long-term net leverage targets for the company, as Haji will discuss. As a next step, the board has authorized a $300 million share repurchase authorization comprising a $200 million modified Dutch auction tender offer, with the remaining $100 million to be used for repurchases in the open market. The offer price range has been set to $36 to $40 per share. Assuming it is fully subscribed, the tender offer would represent approximately 25% of Scholastic Corporation's shares outstanding as of quarter end. This is yet another step in the capital allocation strategy we have been executing since fiscal 2022, already returning over $650 million to shareholders through share repurchases and dividends while continuing to invest in initiatives that support long-term growth. Haji will provide additional details later in the call. Turning to our operating performance, third quarter results were in line with expectations as we continued executing on initiatives supporting long-term growth and margin expansion. As a reminder, this is typically one of our smaller quarters for revenue and profitability given the seasonality of our business. Based on our performance to date and outlook for the remainder of the year, we are reaffirming our fiscal 2026 adjusted EBITDA and free cash flow guidance. We expect full-year revenue to be approximately flat compared to the prior year, reflecting year-to-date softness in Education and very strong comps in Trade a year ago. Let me now turn to our segment performance, beginning with Children’s Book Publishing and Distribution. Last quarter, Children’s Book Group combined powerful publishing and beloved franchises with unique school-based distribution channels. Through Book Fairs, Trade publishing, and our proprietary school network all working together, we reach children and families and connect them with stories in ways no other company can replicate. Book Fairs once again demonstrated the strength of Scholastic Corporation’s unique school-based channels. Fair counts continue to grow year to date, and we are benefiting from higher revenue per fair, strategic merchandising and pricing initiatives, lower cancellations, and greater adoption of eWallet. That is a digital payment account that allows families to preload funds for students to spend at the fair, increasing participation and simplifying transactions. We have also experienced strong redemption of Scholastic Dollars, the reward currency schools receive for hosting Book Fairs. A key innovation this year is the launch of Discovery Fairs, the first new format we have introduced in more than a decade. These fairs feature curated collections that focus on science, technology, engineering, arts, and math, alongside hands-on science and art kits designed to bring discovery-based reading and learning into the fair experience. Early pilots have already shown robust demand. Building on the partnership we announced last quarter with sensation Mark Rober, which reaches more than 70 million subscribers, we are beginning to bring his highly popular science and engineering brand CrunchLabs to students through Scholastic Corporation’s publishing and school channels, including new books, activity guides, and Klutz-branded products. As we look ahead, Book Fairs remain one of Scholastic Corporation’s most powerful channels to reach children and families and represent a meaningful long-term growth opportunity for the company. In Book Clubs, our other school-based channel, results continue to reflect evolving classroom and teacher engagement patterns. The program is expected to reach nearly 300,000 teacher sponsors nationwide this year, providing Scholastic Corporation with a direct connection to classrooms across the country. We saw sequential improvement from the fall as recent program improvements, including updated flyers, improved digital ordering, and targeted promotions, strengthened teacher engagement and participation. In Trade publishing, Scholastic Corporation’s publishing portfolio and global franchises continue to resonate strongly with kids around the world. Third quarter results were solid, though down relative to the prior year, reflecting shifts in the publishing calendar compared to a year ago, along with the impact of adverse winter weather and other short-term impacts on the retail book market. Following the successful launch of Dav Pilkey’s Dog Man: Big Jim Believes in quarter two, momentum across Pilkey’s publishing universe remains strong. The latest title in the series held the number one children’s title for seven consecutive weeks and was the number one overall title across the industry in both November and December, while backlist titles also continued to perform strongly on bestseller lists. Looking ahead at quarter four, Pilkey’s universe expands into the fast-growing category of children’s manga with Captain Underpants: The First Epic Manga publishing in April. The Hunger Games franchise continued to generate strong global demand with the latest title in the series, Sunrise on the Reaping. This book has now sold approximately 5.4 million copies and remained on bestseller lists since its release last March, including 50 consecutive weeks on the young adult bestseller list and currently ranking number three nearly a year after its initial release. More recent special editions, as well as the award-winning audiobook, have helped sustain momentum across the series. We expect continued Hunger Games momentum from paperback and movie tie-in editions ahead of the Lionsgate film adaptation of Sunrise on the Reaping this fall. Our Wings of Fire series also continues to engage readers globally with the recent release of the graphic novel edition of Talons of Power, which debuted at number one overall in December and currently holds the number three position on the New York Times Graphic Books and Manga bestseller list. Furthermore, in the first week of the new quarter, we published Wings of Fire No. 16: The Hybrid Prince, the highly anticipated new installment in the series and the first in several years. The book debuted as the number one title overall across both children’s and adult categories, already captivating avid fans and new readers of this thrilling dragon series around the world. Turning now to Scholastic Entertainment. In the third quarter, this division continued expanding the reach of our IP across digital platforms and new audiences. We advanced our pipeline of media development and production as we begin work on major new projects expected to be announced in the coming months. Greenlight activity also is improving, and with it, the strength of our development slate, supported by our in-house production and animation capabilities. We grew viewership and reach across our digital platforms, particularly YouTube and Scholastic TV, as families continue discovering Scholastic Corporation’s stories and characters in new ways. Our Scholastic-branded YouTube channels generated more than 85 million views in the quarter, up over 200% year over year, with audiences spending over 21 million hours watching our content. On YouTube last quarter, we expanded our network of branded channels with two new curated hubs, Scholastic STEAM and Scholastic International, surfacing our content to a larger global audience. At the same time, our Scholastic-branded set-top TV app continued to scale as a trusted destination for families seeking high-quality children’s programming in an increasingly crowded digital media landscape. The platform now offers more than 800 episodes across Scholastic Corporation properties and is available across major streaming ecosystems, including Roku, Apple TV, Fire TV, and Android platforms. Since launching this fall, the app has already generated nearly 100 million minutes watched and more than 5 million views, with engagement averaging about 30,000 views per day. Growing audiences across our digital platforms create new opportunities to extend our stories and characters across books, digital platforms, television, and consumer products. One example of this is our Clifford the Big Red Dog franchise, where increased engagement across digital platforms and media is helping introduce the character to a new generation of kids and reinforcing demand for the books. Book sales across all Clifford titles have grown meaningfully this financial year compared to the prior year. Turning now to Scholastic Education, where we are making meaningful progress executing our strategy to transform the business for growth. Revenues were down 2%, representing a significant deceleration of the declines we saw in the first and second quarters of the year. Importantly, profitability improved year over year. In January, we appointed Jeff Mathews as the permanent President of the division, after he stepped in to lead this division on an interim basis last June. Jeff also continues in his role as Chief Growth Officer. Under his leadership over the last nine months, the team has refined the go-to-market strategy and streamlined the product portfolio to align more closely with district and school needs. We have also taken significant steps to sharpen our focus on the areas where Scholastic Corporation is best positioned to help children achieve their full potential through literacy, partnering with districts, schools, teachers, families, and communities while improving the cost structure and operating discipline of the segment. District and school spending on supplemental curricula and resources, including our instructional programs, classroom libraries, literacy resources, and professional services, remains tight given continued funding uncertainty and the ongoing transition of the U.S. education system to science-based approaches to literacy instruction. As seen in last quarter’s results, more effective and efficient go-to-market execution and stronger product alignment with the science of reading are having a positive impact. We continue to close the gap with the prior year as we stabilize this portion of the business and position ourselves for growth in a recovering market. It is important to remember, however, that as a product category, supplemental curricula and resources represented only approximately 25% of Scholastic Education’s revenues last year. Unlike most educational publishers that primarily compete in the instructional space, Scholastic Education also has significant business lines dedicated to serving teachers, families, and community partners. Building on the power of our trusted brand, our solutions give children access to engaging books and magazines and enable their development as readers while empowering teachers and families through evidence-based tools and support. Funding here is significantly more diverse than for instructional sales, spanning district and school budgets, state and philanthropic grants, and teacher and parent purchases. It is not surprising this portion of the division is less volatile and has consistently outperformed relative to the school- and district-focused segment. In fact, teacher, family, and community-focused sales here have grown significantly relative to pre-pandemic levels. With modest investment in our non-school channels and in our existing product, this segment of our business represents a significant growth opportunity in the years ahead. Looking ahead, we believe Education is well positioned to continue stabilizing performance in fiscal 2026 with a goal of returning to growth in fiscal 2027. Turning now to our International segment. Our major markets continued to benefit from the strength of Scholastic Corporation’s global publishing franchises in quarter three, even as year-over-year comparisons reflected the timing of this year’s publishing compared to last fiscal year. During the quarter, we saw strong contributions from markets including Australia and the United Kingdom, where we continue to benefit from operational improvements across the business. Demand for English-language learning materials continues to expand globally, representing a long-term opportunity, as schools and families increasingly seek high-quality literacy materials. Looking ahead, we remain focused on growth and margin improvement in our international operations. In summary, our third quarter results reflect progress executing the strategy we put in place to strengthen Scholastic Corporation’s operating performance and create long-term value. The actions we are announcing today, including leverage targets and the new share repurchase authorization, including the tender offer, reflect our continued commitment to disciplined balance sheet management and shareholder value creation while investing to drive sustainable growth. I will now turn the call over to Haji. Haji Glover: Thank you, Peter. And good afternoon, everyone. As usual, I will refer to our adjusted results for the third quarter, excluding one-time items, unless otherwise indicated. Please refer to the tables in today’s earnings press release and SEC filings for a complete discussion on one-time items. As Peter discussed earlier, during the quarter we completed the sale-leaseback transaction related to our New York City headquarters and the Jefferson City distribution facilities. This generated over $400 million in net proceeds to be used in line with our capital allocation priorities. As noted last quarter, these highly accretive transactions will reduce adjusted EBITDA by approximately $14 million on a partial-year basis in fiscal 2026, primarily reflecting incremental lease expense and the elimination of rental income previously recognized on these assets. Please see last quarter’s earnings presentation for a reconciliation of the estimated partial-year and pro forma full-year P&L impact of the sale-leaseback transactions. Let me begin with our consolidated financial results. In the third quarter, revenues were $329.1 million compared to $335.4 million in the prior-year period. Adjusted operating loss was $24.3 million compared to $20.9 million in the prior-year period. Adjusted EBITDA was approximately breakeven compared to $6 million in the prior-year period, primarily reflecting the partial-year impact of the sale-leaseback transactions, offset by higher gross profits in Children’s Book Group reflecting company-wide cost discipline. Excluding the sale-leaseback transaction partial-quarter impact of $3 million on adjusted operating loss and $6.7 million on adjusted EBITDA, adjusted operating loss was $21.3 million and adjusted EBITDA was $6.7 million, approximately in line with the prior year. Net loss was $3.5 million compared to a net loss of $1.3 million in the prior-year period. On a per diluted share basis, adjusted loss increased to $0.15 compared to a loss of $0.05 last year. Turning to our segment results, in Children’s Book Publishing and Distribution, revenues for the third quarter decreased 3% to $197.6 million, reflecting timing of major publishing releases compared to the prior year, partly offset by continued strength in Book Fairs. Segment adjusted operating profit improved to $8.9 million from $7.6 million in the prior-year period, reflecting the benefit of higher Book Fair revenues and continued cost discipline. Book Fairs revenue increased 2% to $113.3 million in the quarter, primarily driven by higher revenue per fair. We expect higher fair count and revenue per fair to contribute to revenue growth in our Book Fairs business this fiscal year. Book Club revenues were $14.6 million in the quarter, relatively flat compared to $15.2 million a year ago, reflecting lower teacher participation at the start of the school year, partly offset by recent program improvements that have increased participation sequentially from the fall period as teacher sponsor counts stabilize. We anticipate these trends continuing into the remainder of the year. In our Trade publishing division, revenues were $69.7 million in the third quarter compared to $77.4 million in the prior year, a decrease of 10%. These results reflect the timing of this year’s publishing calendar compared to the prior year, when the third quarter benefited from a major Dog Man release. Looking ahead, we remain optimistic about sustained momentum across our major global franchises. Given the timing of this year’s publishing plan, coupled with short-term disruption on retail purchasing patterns, including the impact from severe winter weather, we expect Trade to be slightly below the prior year on a full-year basis. Turning to our Entertainment segment, revenues increased by $3.2 million to $16 million compared to $12.8 million in the prior year, primarily driven by increased episodic deliveries and higher production services revenues. We remain positioned for growth in the fourth quarter and into fiscal 2027, reflecting recent greenlight momentum and revenue recognition typical for media development and production. Segment adjusted operating loss was $2.5 million compared to $2.4 million a year ago. Turning to our Education segment, revenues were $56.1 million in the third quarter compared to $57.2 million a year ago, a decrease of 2%, reflecting lower spending on supplemental curriculum products as school and district spending continues to experience near-term funding uncertainty. We have seen moderating declines throughout the fiscal year as the transformation of this business begins to take hold. Segment adjusted operating loss improved to $5.2 million compared to a loss of $6.9 million in the prior-year period, reflecting a lower cost structure, improved operating discipline, and the benefits of reorganization initiatives implemented over the last several quarters. Ahead of what we expect will be a gradual market recovery, we expect profitability in the fourth quarter, ahead of growth in fiscal 2027. Turning to our International segment, revenues were $58.7 million in the third quarter compared to $59.3 million a year ago. Excluding the $3.5 million year-over-year impact of favorable foreign currency exchange, segment revenues declined $4.1 million, primarily driven by the publication timing of Dog Man compared to the prior year. Segment adjusted operating loss was $4.7 million compared to $2 million in the prior-year period, reflecting lower revenues. We continue to expect modest declines in revenues and profitability in this segment following strong Trade performance in fiscal 2025. Unallocated overhead costs increased by $3.6 million to $20.8 million in the third quarter, primarily reflecting $3 million of higher rent expense and lower rental income previously recognized on the New York City headquarters property, all related to the sale-leaseback transactions. Now turning to cash flow and the balance sheet, in the quarter, net cash used by operating activities was $30.5 million compared to $12 million in the prior-year period, primarily driven by higher tax payments related to the sale-leaseback transactions, partially offset by lower royalty payments. Free cash flow in the third quarter was $407 million compared to free cash use of $30.7 million in the prior-year period, reflecting approximately $400 million in net proceeds from the sale-leaseback transactions completed during the quarter. The company fully repaid the outstanding balance on its unsecured revolving credit facility and ended the quarter with net cash of $90.6 million compared to net debt of $136.6 million at the end of fiscal 2025. As a result, interest expense in the quarter was significantly lower year over year. As part of our broader capital allocation strategy, we are establishing long-term net leverage targets of 2.0x to 2.5x adjusted EBITDA for the company. We believe this target range effectively balances balance sheet strength and our ability to continue investing in long-term growth opportunities on the one hand, with balance sheet efficiency and our ability to enhance shareholder returns on the other hand. I want to emphasize that this is a long-term target as we move toward these leverage levels over time. We have already taken near-term steps to accelerate capital returns to shareholders, supported by the significant liquidity unlocked in December. We have already returned approximately $147 million to shareholders through open-market share repurchases, representing the repurchase of more than 4,400,000 shares since completing the sale-leaseback transactions in December. In the third quarter, the company also distributed $5.1 million through its regular dividend. As announced earlier today, the board has authorized a new $300 million share repurchase authorization comprising a $200 million modified Dutch auction tender offer at $36 to $40 per share, with the remainder available for open-market repurchases. This is another disciplined step to return excess cash to shareholders. We expect the tender offer to commence on Monday, March 23, 2026, and to remain open until Monday, April 20, subject to customary conditions. This transaction is expected to be funded through a combination of available cash on hand and borrowings under our credit facility. Following the completion of the tender offer, we expect to maintain substantial liquidity to pursue our capital allocation priorities. Full details regarding the tender offer will be included in the tender offer statement to be filed with the SEC. With these actions in place, the company has taken measured steps to return excess capital to shareholders while maintaining a strong balance sheet and supporting long-term growth initiatives. Now for our outlook. In the fourth quarter, we continue to anticipate revenue growth in our School Reading Events and Entertainment divisions, partly offset by lower year-over-year revenues in our Trade and International divisions, reflecting strong prior-year comparisons when the publishing schedule benefited from the major Hunger Games release in 2025. We expect fiscal 2026 revenue to be approximately in line with the prior year, reflecting strength in Book Fairs offset by year-to-date softness in Education and strong prior-year comps in Trade, as I just discussed. On a full-year basis, we have reaffirmed our outlook for fiscal 2026 adjusted EBITDA of $146 million to $156 million, which includes a partial-year impact of approximately $14 million from the sale-leaseback transactions. As typical for our seasonal business, we expect a return to profitability in the fourth quarter following the seasonal operating loss in the third quarter. We remain focused on driving favorable operating margins as we continue to benefit from our lower cost structure. We have also reaffirmed our fiscal 2026 free cash flow outlook to exceed $430 million, reflecting the proceeds from the sale of our real estate assets, as well as operating cash flow in excess of our CapEx and prepublication needs. As for the impact of tariffs, we continue to expect approximately $10 million of incremental tariff expense in our cost of product this fiscal year. We are closely following changes in policy and will provide additional details as needed once greater clarity emerges. Thank you for your time today. I will now turn the call back to Peter for his final remarks. Peter Warwick: Thank you, Haji. In conclusion, we are pleased with our team’s progress during the quarter to advance our strategic plan and execute another step in our capital allocation strategy, including quickly and efficiently returning excess cash to shareholders. As we look to quarter four and beyond, we continue to benefit from the strength of our global franchises, trusted brand, and unique school-based channels, while expanding the reach of our stories and characters to audiences. At the same time, we will continue to reposition our Education business for growth. I would like to thank our employees, authors, illustrators, and creators for their dedication and hard work, as well as our shareholders for their continued support. Thank you very much. I will now turn the call over to Jeff. Thank you, Peter. Jeffrey Mathews: With that, we will open the call for questions. Operator? Operator: Thank you. Press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. One moment for questions. Our first question comes from Brendan McCarthy with Sidoti & Company. You may proceed. Brendan McCarthy: Great. Good afternoon, everybody. I appreciate you taking my questions here. Just wanted to start off looking at the rest of the fiscal year and specifically the fourth quarter. Just achieving the flat revenue target for the full fiscal year, it looks like it implies roughly 2% growth in the fourth fiscal quarter compared to the prior-year period. I just wanted to walk through some of the different factors at play there. I know that will exclude about $3 million in rental income in the quarter, and also a challenging comparison in the Trade channel, sales from The Hunger Games release in 2025. I am just curious as to your confidence in achieving that 2% growth target for the quarter? Peter Warwick: Hi, Brendan. It is Peter here. I think Book Fairs are the major factor that we see in the fourth quarter in terms of revenue growth. It is a big quarter for Book Fairs, and we have been doing very well, and all the initial indications that we have got so far are positive. So that is one of the key factors. We also, of course, have to take into account, as you mentioned, the Trade timing issue that we do have to deal with, so Trade is not going to exceed the revenues that we got in the fourth quarter last year because of the big success of Sunrise on the Reaping. The other factor is really in Education, because we have been progressively closing the gap in Education against the prior year, and we are anticipating that the reduction that we have been seeing will be much less of an impact in the fourth quarter. It is a big quarter for Education, and it has been encouraging to see that in that segment we have been doing progressively better each quarter. We actually performed on the bottom line better in the third quarter than we did in the same third quarter last year, and so we are anticipating that all the work that Jeff and everybody has been doing in Education will begin to yield some results in the fourth quarter. So that is why we are feeling that we can be there or thereabouts on our revenues for the year. Brendan McCarthy: Understood. I appreciate the detail there. And in the Education business, I think it is great to see the magnitude of top-line declines has been improving. It looks like in each quarter of this fiscal year. Can you talk about the sales pipeline for the fourth quarter as it relates to the different products being, you know, summer reading packages, supplemental materials, and maybe the state- or the state-sponsored programs as well? Peter Warwick: In terms of the actual sales pipeline, we are obviously expecting to do well with summer reading because this is the quarter when a lot of that happens. One of the great things that we have seen with our sales pipeline is that it has been improving each quarter—quarter two is better than one, three better than two, and fourth looking better than three. So that is where we expect to do well, with summer reading. We are also expecting to do well with the Knowledge Library and with the book packs that we have been putting together that support science of reading. And we have also got the usual for the fourth quarter; we have good initiatives in line for the Books to Home through the programs that we do with the various states. Brendan McCarthy: Understood. Thanks, Peter. And a similar question on the adjusted EBITDA guidance. It looks like you will need about $80 million in adjusted EBITDA in Q4 to hit the guidance range for the full fiscal year. Again, I know there is an impact from the sale-leaseback transaction—$14 million for the full second half of the fiscal year. Any other factors there that give you confidence that you will hit the guidance range? Haji Glover: Hey, Brendan. This is Haji. How are you doing? Brendan McCarthy: Good, Haji. How are you? Haji Glover: I am alright. As we noted in the script today, we definitely are seeing some favorability from our cost mitigation actions that we have been taking throughout the year. So that is why we feel very confident in the fourth quarter. And plus, as you know from watching us over the years, the fourth quarter is our second biggest performing quarter. It is just a little bit more profitable because of all the cost actions that we have made throughout the year. That is really why we are very confident about the fourth quarter from a profitability standpoint. Brendan McCarthy: That is great. And looking at the Entertainment segment, it looks like solid revenue growth there year over year in the third fiscal quarter. Are you really starting to see the pickup in greenlighting activity flow through to preproduction and ultimately the revenue? Peter Warwick: Yes, we are. We have had a number of greenlights that have happened in the third quarter. We have just had a fairly significant one greenlit at the beginning of this week, post-closing for the third quarter, and that is looking good. It is looking better than it was, put it that way. I think that we have seen the bottom of that entertainment market. We have talked to one or two other companies who are involved in entertainment; they are seeing pretty much the same sort of thing. So I think entertainment has turned the corner. It is not going to grow explosively; it is going to be steady growth, but I think that the growth that we see now in that marketplace will sustain the revenues, activities, and bottom line that we have baked into our fourth quarter, and also set us up well for our fiscal year 2027. Brendan McCarthy: That is great. And from an operating income perspective there in the Entertainment segment, are you looking for positive operating income in Q4, or will that flow through in fiscal 2027 maybe? Haji Glover: We should see a little bit of profitability in the fourth quarter from them, from an EBITDA basis. Brendan McCarthy: Got it. Okay. Great. I appreciate the detail. That is all for me. Operator: Thank you, Brendan. Brendan McCarthy: Thanks. Bye. Operator: Our next question comes from Drew Crum with B. Riley Securities. You may proceed. Drew Crum: Okay. Thanks. Hey, guys. Good afternoon. Peter, just on the Book Fairs business to start, a few weeks into the current quarter, it sounds like you are pretty encouraged by what you are seeing, how the business is tracking. Any specific KPIs you can point to behind the confidence in the outlook? Peter Warwick: We can point to, first of all, the number of fairs, which is up, so that is good. Also, the revenue per fair is looking in line or better with what we were anticipating. And we have also had fewer cancellations than the prior year. Those are really the big three in terms of performance. So we are feeling good about that. And, thankfully, this year any bad weather was during the time when there were not very many Book Fairs. Compared to some other years, that has been a factor, but we have not really had that in our fairs this year. So things are looking promising. Drew Crum: Got it. Okay. And then maybe for Jeff or Haji—you guys narrowed the revenue guidance range for the year, it looks like; I know, a $15 million to $25 million downgrade to the top end. Our interpretation is this is specific to the Education segment. Was it a shortfall in fiscal 3Q relative to your internal model? Is the business not tracking to your previous plan for fiscal 4Q, or is it a combination of both factors? Because I thought you guys did a pretty nice job of narrowing the year-on-year decline—that is the first part of the question. And did I hear correctly that you expect that business to grow top line in fiscal 2027? Jeffrey Mathews: Drew, it is Jeff Mathews here. Great question. So on the adjustment in the top-line outlook, I want to be clear that we mentioned year-to-date Education results. The change in outlook was really more related to some of the dynamics we saw last quarter in Trade. I will let Haji talk about that. As far as the fiscal 2027 outlook for Education, of course, we have not provided guidance for next year. Our goal very much from the beginning has been to return this business to growth. We know that is its opportunity, and it is the mandate the team and I have. We will provide more outlook on that, but clearly we are encouraged by the sequential improvements in the business. The cost savings that we have taken, restructuring very strategically, have given us the runway to make some investment in the growth that we will need to drive for next year. Haji, do you want to take the first part on guidance? Haji Glover: Yes. On the Trade business, as we mentioned before, we had a very strong fourth quarter with the Sunrise on the Reaping book that came out, so we are dealing with that. But at the end of the day, we see other groups like Entertainment performing well in the fourth quarter, so that is why we are expecting some good news. And then you take the impact of the sale-leaseback—if you back that out from an adjustment basis, I think that is about $6 million on the top line as well. The other organizations, in terms of, like Peter had mentioned earlier, we definitely see some strong performance in the CBG group, mainly Fairs, and a leveling off in the Clubs business within that group. Drew Crum: Got it. Okay. And then maybe, Haji, one last one for you. I am not sure you are going to answer this, but I will try. The language you use for the 2.0x to 2.5x net leverage target—being “longer term”—how soon could we see the business reach that threshold? Haji Glover: Like I said before, we are definitely not going to jump in and go right up to 2.0x or 2.5x day one. Right now, as you know, we are in a net cash position. But once we go into the tender, if we fully execute the tender, that would only pull us to a little bit under 1.0x net leverage turn. So we feel very comfortable with that number. Like I said, this is a very historical moment for Scholastic Corporation—just setting out targets in general. So I am confident in our future and making sure we continue to manage our balance sheet effectively. One point I do want to mention on that: we will be saving some working capital draw as well on our debt because, due to our seasonality, we do not have a lot of revenue coming in this period, so we would have to draw on that. So that would increase the leverage, but that is seasonal. Drew Crum: Thank you. Alright. Operator: And this concludes our question-and-answer session. I will pass the call back to Peter Warwick for any closing remarks. Peter Warwick: Thank you very much, and thank you to all of you for joining our call today. As you know, we appreciate your support. We will continue on our strategy to strengthen Scholastic Corporation’s operating performance and create long-term value as we move through the end of fiscal 2026. So again, thank you all for your support, and goodbye. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Thank you for joining us, and welcome to Planet Labs PBC fiscal fourth quarter and full year 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. I will now hand the conference over to Cleo Palmer-Poroner, Director of Investor Relations. Please go ahead. Cleo Palmer-Poroner: Thanks, Operator, and hello, everyone. Welcome to Planet Labs PBC’s fiscal fourth quarter and full year 2026 earnings call. I am joined by Will Marshall and Ashley Johnson, who will provide a recap of our results and discuss our current outlook. We encourage everyone to please reference the earnings release and earnings update presentation for today's call, which are available on our Investor Relations website. Before we begin, we would like to remind everyone that we will make forward-looking statements related to future events or our financial outlook. Any forward-looking statements are based on management's current outlook, plans, estimates, expectations, and projections. Inclusion of such forward-looking information should not be regarded as a representation by Planet Labs PBC that future plans, estimates, or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions as detailed in our SEC filings, which can be found at www.sec.gov. Our actual results or performance may differ materially from those indicated by such forward-looking statements, and we undertake no responsibility to update such forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. During the call, we will also discuss historic and forward-looking non-GAAP financial measures. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. For more information on the non-GAAP financial measures, please see the reconciliation tables provided in our press release issued earlier today, which is available on our website at investors.planet.com. Further, throughout this call, we will provide a number of key performance indicators used by management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in our press release and our earnings update presentation, which are intended to accompany our prepared remarks. I will now turn the call over to Will Marshall, Planet Labs PBC CEO, Chairperson, and Co-Founder. Over to you, Will. Will Marshall: Thanks, Cleo, and welcome, everyone, joining us today. Last year was transformational for Planet Labs PBC, and I am proud of everything that our team accomplished. We made incredible progress in the Satellite Services market, signing a €240,000,000 agreement funded by Germany, and a nine-figure deal with Sweden, capping off three such deals in twelve months. We launched 40 satellites, including four of our high-resolution Pelican satellites, invested strongly in AI, and announced a cutting-edge partnership with Google to demonstrate satellites for compute in space. We delivered record annual revenue, adjusted EBITDA profitability, positive free cash flow, and accelerated our revenue growth. And we laid out a strong foundation for the year ahead, enabling us to continue that growth acceleration. So let us dive in. To briefly summarize the full year results, we generated a record $308,000,000 in revenue, representing approximately 26% year-over-year growth. Non-GAAP gross margin was 59% for the year, adjusted EBITDA profit came in at $15,500,000, and free cash flow was $53,000,000, representing our first full fiscal year of non-GAAP profitability, an excellent milestone for the team as we strike a balance between profit and growth. Q4 was also a record for revenue, representing 41% year-over-year growth, and our fifth consecutive quarter of adjusted EBITDA profitability. For the second sequential quarter, we achieved Rule of 40, which is our revenue growth plus adjusted EBITDA margin. And on an annual basis, we achieved Rule of 30, a full year earlier than we anticipated. End-of-period backlog was over $900,000,000, approximately 79% growth year on year, providing us with excellent visibility to accelerating our revenue growth for the coming fiscal year. Defense and Intelligence was a major area of strength for us in FY 2026, underpinned by global dynamics. Full-year growth was 50% year on year, driven by strong performance in our Data Subscriptions, Solutions, and Satellite Services. To recap our role here, Planet Labs PBC was founded on a core mission of making information about our world visible, accessible, and actionable to help both sustainability and security globally. As the geopolitical landscape shifts, security is an urgent mandate for governments worldwide, and our customers face mission-critical decisions in an increasingly complex and chaotic world, and this mission is critical to them. We view security as inextricably linked to sustainability. Resource scarcity and climate disasters are not just environmental issues. They are direct threat multipliers or even triggers for conflict. The Defense and Intelligence sector is essential to realizing our mission. Our customers rely on us to help identify unknown unknowns, detect changes and warning signals that they did not know to look for before they escalate into crises. This is a critical part of our purpose. To highlight a few recent customer wins in this area, during the quarter, we received two awards from the U.S. Defense Innovation Unit. We were awarded a seven-figure extension of our pilot in support of Indo-Pacific Command to deliver vital indications and warnings. The short-term contract demonstrates how customers can leverage Planet Labs PBC data and AI-powered analytics to monitor sites of strategic interest for critical changes and threats. DIU also exercised an option under the existing Hybrid Space pilot with Planet Labs PBC for just under $1,000,000 to demonstrate the cutting-edge capabilities for our high-resolution Pelican satellites. During the quarter, NATO’s Allied Command Transformation also extended its agreement with Planet Labs PBC to deliver persistent space-based surveillance and enhanced indications and warning capabilities. The award underscores Planet Labs PBC’s position as a trusted and essential partner for customers seeking strategic indications and warnings across broad domains. Finally, last month, the U.S. Missile Defense Agency selected Planet Labs PBC as a prime contractor for the SHIELD IDIQ contract vehicle. Planet Labs PBC will now compete for awards under that program. Turning to our Civil Government sector, where full-year revenue was flat year over year, to share some recent highlights, during the quarter, Planet Labs PBC was awarded a seven-figure renewal and expansion by the German Federal Agency for Cartography and Geodesy, or BKG. Under the one-year renewal, BKG will continue its countrywide partnership through which employees of more than 400 German federal institutions gain access to Planet Labs PBC’s data and solutions for a wide variety of uses. As an example, this expansion will allow BKG to track permafrost thawing across the Arctic. In January, we announced an enterprise-scale agreement with Slovenia’s Surveying and Mapping Authority to provide comprehensive satellite data and high-resolution tasking capabilities across the country’s civil public administration in support of agriculture, urban planning, and disaster management. Shifting to the Commercial sector, where annual revenue was down year on year, while this trend was expected given our increased focus on large government customers and the headwinds in agriculture, we remain confident in the Commercial sector as a significant market opportunity for Planet Labs PBC, especially as we continue to advance our AI-enabled solutions. To share a few customer highlights from the quarter, specifically around our work in Energy, we were awarded a renewal at San Diego Gas & Electric, which utilizes Planet Labs PBC data and analytics to monitor vegetation health and conditions within their service areas to manage risk of wildfires during the dry season. We also signed a strategic partnership with AiDash, establishing Planet Labs PBC as the preferred provider of daily and weekly fuel monitoring data for utility wildfire risk mitigation across North America. Through the partnership, leading investor-owned utilities are already using Planet Labs PBC data to identify where and when to deploy fuel treatment resources, reducing ignition risk and targeting high-priority clearance with precision that was not previously possible. Turning to our Satellite Services business, in January, we announced a nine-figure, multiyear deal with the Swedish Armed Forces to rapidly deliver a suite of satellites, space-based data, and solutions to support Sweden’s peace and security operations. In terms of our existing contracts for Satellite Services, our teams are continuing to execute well. We are progressing with the builds for our contract with JSAT and beginning to serve dedicated capacity under the German-funded contract. We continue to find that our Satellite Services contracts are a win-win-win. The customer guarantees their sovereign space capabilities in their desired area of interest; our other clients will benefit from increased capacity and revisit rates in the rest of the world; and Planet Labs PBC receives capital to forward fund our fleet buildouts. They also bolster our Data and Solutions as countries want both the speed and scale of our Data and Solutions and the sovereignty of our Satellite Services technology. Through our AI-enabled solutions, we accelerate time to value, become more deeply embedded in our customer operations, and gain more direct visibility to our customers’ operational needs. We are leaning into these synergies across our product offerings. We are continuing to see demand from around the world for Satellite Services, driven by the current geopolitical landscape and the demand for sovereign space systems. Our competitive edge here is twofold. Firstly, our proven track record, having launched over 650 Earth imaging satellites, by far the most of any commercial company. Our second is speed. We are able to launch the first satellites within a few months of contract signing, as shown with the partnership funded by Germany, far faster than traditional aerospace. The demand is significant, and reflected in our pipeline which has grown appreciably in both number of deals and average deal size since we spoke about this at our Investor Day in October. We are leaning into this demand by expanding our manufacturing capacity in San Francisco and building out our second manufacturing location in Berlin. On the Solutions side, I am pleased to report that our integration of Bedrock Research is going very well. The team is helping us scale rapidly and deliver AI-based solutions, notably standing up 600 new monitoring sites within three hours compared to a weeks-long process when we first launched the service. This deep domain area expertise, paired with our ongoing advancements in AI, has allowed us to expand the number of sites we are monitoring around the world, drastically reduce the time needed to implement, and enable our customers to scale across broader geographic areas. During the quarter, Planet Labs PBC expanded its technology collaboration with NVIDIA on multiple fronts. With Planet Labs PBC’s proprietary dataset and NVIDIA’s compute, we can enable significant new capabilities. This includes exploring the use of NVIDIA’s accelerated GPU-based computing platform for Planet Labs PBC data processing, enabling faster, more efficient processing for all of our customers; testing NVIDIA’s new Thor processor for in-space use, enhancing super-resolution and other AI processing capabilities; and more. As announced earlier this week, we are collaborating to build the world’s first scaled GPU-native AI engine for satellite data and drive huge advances in efficiency and latency. More generally, we anticipate that AI will be transformational to our business this year. Let me give a bit of broader context. While LLMs offer users the incredible ability to have conversations with the text of the Internet, they know very little about the physical world. Real-world models need real-world data, and Planet Labs PBC has it. Our deep data archive, averaging over 3,000 collections for every point in the Earth’s landmass, represents a treasure trove for indexing the physical world and training next-generation models. As Wikipedia was the foundation dataset for LLMs, we believe that Planet Labs PBC’s Daily Scan is foundational to real-world models. Furthermore, AI itself is commoditizing software development, making data the key differentiation in AI. And why does this matter? Because it has the potential to unlock a huge market. While Planet Labs PBC is currently seeing tremendous traction for AI-based solutions in Defense and Intelligence, these developments are making border area monitoring scalable and accessible for other applications and sectors. Ultimately, we believe this will result in generic applications democratizing access to Earth intelligence and unlocking markets far faster. Specifically, we think that more generic AI solutions will soon empower nontechnical users to go from a concept to a bespoke application in under an hour. We expect expanding these capabilities will benefit our current customers and drive new opportunities in markets such as agriculture, insurance, energy, supply chain, and finance. For the year ahead, our top priorities are executing against our current contracts across both Data and Solutions and Satellite Services, and scaling up to capture the massive opportunity before us. We see strong demand, so we are investing into our growth, including the technology roadmap. We are doubling our satellite manufacturing capacity. We are scaling our Pelican fleet with multiple launches scheduled this year. We are launching demos of our Owl and SunCatcher spacecraft. And we are investing in AI for existing solutions and the aforementioned more generic capabilities. In sum, last year we saw the start of returns on our investments into Satellite Services. This year, we expect to see the start of returns on our investments in AI. We sit uniquely at the intersection of space and AI revolutions, and Planet Labs PBC is the first space-and-AI company. By year’s end, we believe Planet Labs PBC’s Earth intelligence will deliver transformational global impact as our customers leverage space and AI to transform data into action. We are leaning in to meet the moment, and we are playing to win. With that, I will turn it over to Ashley to discuss our financials. Over to Ash. Ashley Johnson: Thanks, Will. It was indeed a fantastic year, underpinned by strong execution and key wins in Satellite Services. I would like now to cover the results in more detail. Revenue for the fourth quarter came in at a record $86,800,000, representing approximately 41% year-over-year growth. Full-year revenue was $307,700,000, representing approximately 26% year-over-year growth. Outperformance in the quarter was driven primarily by strong usage from our Defense and Intelligence and Civil Government customers as well as new wins that came in during the quarter. During fiscal 2026, our Defense and Intelligence sector revenue grew more than 50% year on year. The Commercial sector was down modestly year on year, and the Civil Government revenue was flat, driven in large part by the end of our contract with Norway for their NICFI program. Turning to our regional revenue breakdown, growth was distributed across the globe in fiscal 2026 with approximate revenue growth of 41% year over year in Asia Pacific, 48% in EMEA, 11% in North America, and down about 2% in Latin America. As of the end of fiscal year 2026, end-of-period customer count was 897 customers, slightly down on a sequential basis, reflecting our direct sales team’s intentional shift to focus on large customer opportunities and leveraging our self-serve platform to provide access to our data for other customers. As a reminder, Planet Labs PBC Insight platform customers are not included in our end-of-period customer count. Given our focus on larger customers and the shift to a self-serve model for the long tail of the market, we believe this metric has become less relevant for investors and is not proactively monitored by management. We believe our retention rates on ACV are far more constructive measures of our business health and opportunity. Therefore, we plan to discontinue this metric beginning with the 2027 fiscal year. We continue to see strong revenue growth and thus a solid increase in revenue per customer as a positive indicator that our sales team’s focus on landing and expanding high-value accounts is yielding results. As we shift to some of our ACV metrics, I want to remind you that our Satellite Services contracts are not included in ACV, although they are included in our RPOs and backlog, which we will discuss in a moment. Recurring ACV was 98% of our end-of-period ACV book of business, reflecting our continued focus on selling subscription data contracts and solutions as opposed to one-time professional or engineering services. Approximately 85% of our end-of-period ACV book of business consists of annual or multiyear contracts, lower than prior periods, as we have seen a higher proportion of large, shorter-term government contracts signed in recent quarters. Net dollar retention rate at the end of fiscal year 2026 was 116%, and net dollar retention rate with winbacks was 118%. Our non-GAAP gross margin for fiscal year 2026 was 59%, compared to 60% in fiscal year 2025. For Q4, our non-GAAP gross margin was 57%, compared to 65% in 2025, reflecting investments in support of our Satellite Services contracts and a mix of contracts including AI-enabled partner solutions. Our gross margins came in better than expected for the quarter and the year, primarily driven by the revenue outperformance in the quarter. Adjusted EBITDA profit was $15,500,000 for fiscal year 2026, better than expected, primarily driven by revenue outperformance and disciplined OpEx spend. Fiscal year 2026 marks our first year of delivering adjusted EBITDA profitability on an annual basis, a milestone we are incredibly proud of. Adjusted EBITDA profit for Q4 was $2,300,000, also better than expected, marking our fifth sequential quarter of adjusted EBITDA profitability. Capital expenditures in FY 2026, which include our capitalized software development, were approximately $81,500,000. Capital expenditures in Q4 were approximately $23,000,000. To echo Will’s remarks, we are currently in a growth CapEx investment cycle as we lean into market demand, scale up our manufacturing capacity in Berlin, and build out our next-generation fleets. Turning to the balance sheet. We ended the year with approximately $640,000,000 of cash, cash equivalents, and short-term investments, an increase of approximately $418,000,000 year on year, driven by our issuance of convertible debt and free cash flow profitability. In fiscal year 2026, we generated approximately $134,400,000 in net cash from operating activities and $52,900,000 in free cash flow, representing our first year of achieving positive free cash flow on an annual basis. Our focus remains on managing the business to enable sustainable cash flow generation through efficient growth across our Data, Solutions, and Satellite Services revenue streams. At the end of FY 2026, our remaining performance obligations, or RPOs, were approximately $852,400,000, up about 106% year over year, of which approximately 34% apply to the next twelve months and 65% to the next twenty-four months. We estimate our backlog, which includes contracts with a termination-for-convenience clause, to be approximately $900,000,000, up approximately 79% year over year. Approximately 37% of our backlog applies to the next twelve months, 67% to the next twenty-four months. Let me now turn to our guidance for the first quarter and full fiscal year 2027. For Q1, we are expecting revenue to be between $87,000,000 and $91,000,000, which represents approximately 34% year-on-year growth at the midpoint. We expect non-GAAP gross margin for the quarter to be between 49% and 51%. The step-down is driven by our Satellite Services contracts, the mix of deals with AI-enabled partner solutions, and investments in our next-generation fleets. Our range for adjusted EBITDA in the quarter is expected to be between minus $6,000,000 and minus $3,000,000, reflecting our investments to drive sustained growth. We are planning for capital expenditures of approximately $17,000,000 to $23,000,000 in the quarter. For the full fiscal year 2027, we expect revenue to be between $415,000,000 and $440,000,000, representing approximately 39% growth at the midpoint. We believe our backlog provides us with strong visibility to our revenue, which is enabling us to raise our growth expectations for the year. Our non-GAAP gross margin for the year is projected to be between 50% and 52%, in line with our prior expectations and driven by the forecasted mix of business. We anticipate margins will expand as we realize returns on our growth investments in subsequent years. We are targeting adjusted EBITDA profit for fiscal 2027 of between breakeven and $10,000,000, reflecting our desire to maintain EBITDA profitability on an annual basis even as we continue to invest in our space systems capabilities, AI-powered solutions, and our global sales and marketing organization. We also aim to deliver Rule of 40 for this fiscal year, where Rule of 40 is our revenue growth rate plus adjusted EBITDA margin. We are planning for approximately $80,000,000 to $95,000,000 in capital expenditures for the year, reflecting the necessary investments in our next-generation satellites to meet accelerating market demand. Even with these operating and capital expenditures, we expect to be free cash flow positive on an annual basis again in fiscal year 2027, with a focus on sustaining and expanding free cash flow generation into the future. As a reminder, while cash flow can vary quite significantly quarter to quarter, based on the timing of cash collections and capital outlays for procurements, our ultimate objective is generating sustainable annual positive cash flow. To close, the incredible momentum we generated in fiscal year 2026 provides us with a strong foundation for the future. Given the strength of our backlog and our robust pipeline, we have significant visibility into our continued revenue growth. As our revenue scales, we anticipate non-GAAP gross margin expansion as well as Rule of 40 for fiscal year 2028 and beyond. This gives us the confidence to invest into the massive market opportunity unfolding in front of us, and as Will mentioned, we are leaning into these trends and playing to win. As always, Will and I are incredibly grateful for the outstanding dedication and teamwork of our Planeteers around the globe. Fiscal year 2026 was a standout year because of you. And we are excited for the year ahead. Operator, that concludes our comments. We can now take questions. Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, press star 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Your first question comes from the line of Colin Canfield from Cantor. Your line is open. Please go ahead. Colin Canfield: Can you perhaps update us on the timing and the scaling of both the SunCatcher opportunity as well as sounds like a pretty nascent geo-intelligence platform with NVIDIA? And then if you could maybe talk about how much of that was included in the set of opportunities from the Investor Day. Thank you. Will Marshall: Well, both are very exciting opportunities, and in a way both involve both a space component and an AI component. Let me talk to the Google one first since you brought that up. SunCatcher is going well. It is early days. Just to recap that project, you know, this is about putting their TPUs into space. It is an early tech demo that is what we are doing right this second for them. There is a lot of interest in that space that you have seen in recent months. It is very exciting. It is heating up. But we are focused on executing towards those research goals. And there is a big potential market there long term. As Sundar put it, I think within ten years, he expects most compute spending to go into orbit, and that is a big amount of money. That is a huge, huge market to go after, but we are at very early days. So, you know, it is exciting. We are staying focused on executing on those early missions. And then to NVIDIA, yes, that is also exciting. It was great to announce that extension of our partnership. It is also a research partnership at this stage. You all know about the fact that we have been putting those NVIDIA GPUs into orbit on our Pelican spacecraft, which is pretty cool. This is actually more focused on the compute on the ground, how we leverage the GPUs in particular to speed up our data processing pipeline. In an increasingly fast-changing world, people want those answers really quickly. And GPUs have the potential to really speed things up. And we have seen some early results that are very promising, with big speedups like 100x on certain parts of our codebase. Getting answers to our clients faster is really important. So research collaboration, they are leaning in, and we are leaning in too. It is very exciting. But as to the revenue implications, I do not know if you wanted to touch on that. Colin Canfield: Actually. I mean, I would just remind you that the— Ashley Johnson: SunCatcher partnership is structured as an R&D partnership, so it is recognized as contra R&D expense. And with respect to the NVIDIA partnership, that is really just a research collaboration. Colin Canfield: Got it. And then as we think about imputing working capital tailwind or tailwinds for 2027, is there a right framework to think about it maybe as like a percentage of the backlog increase or kind of high level, what are the building blocks on working capital that we should consider? Ashley Johnson: First of all, I just want to correct myself. I made a misstatement on my prior answer. It is not contra revenue. It is contra R&D expense. Thanks for letting me clarify that. As for your second question in terms of the building blocks for working capital, obviously, as I said, as we are acquiring investments to execute on our backlog, that includes all of the capital expenditures we need to make to build out the Pelicans for our customers. That obviously will weigh into the procurement quarter to quarter. The nice thing about the way these contracts are structured is they typically provide us upfront capital to match the timing of those expenses, at least on an annual basis. There may be differentials quarter to quarter as to when we make procurements and when we receive milestone payments. So as I said in the prepared remarks, cash flow is expected to vary quarter to quarter, but on an annualized basis, these contracts really enable us to operate the business in a free cash flow positive way. Colin Canfield: Got it. Thank you for the color. Appreciate it. Operator: Your next question comes from the line of Ryan Koontz from Needham & Company. Your line is open. Please go ahead. Ryan Koontz: Great. Thanks for the questions, and congrats on a great quarter and outlook. Starting with maybe some of the segment—your real strength you saw in Europe in the quarter. I wonder if you can maybe unpack that for us, what were some of the drivers behind that? Obviously, a lot of Defense work there, but any kind of color you can give us on the European market and how that has been progressing so well for you? Will Marshall: Yes. Well, maybe I can kick it off. I spent quite a big fraction of the quarter in Europe going to a number of capitals, speaking to a lot of our customers there. The demand is off the charts, and we are leaning into it as best we can both for our data and AI solutions and Constellation Services. We talked about the interest in that going up. Yes. I mean, it is back to the geopolitical dynamics. Right? That is what is underneath this and driving a lot of this demand. They need their own sovereign systems. They need it quickly. They need speed and sovereignty, and we can provide both those things. Speed: immediate access to our present satellites. Sovereignty: building satellites dedicated for them. And even that, we can do very swiftly compared with anyone else, and our history of having launched hundreds of satellites really puts us in a great position to do that. So that is the sort of demand signal. Ashley, towards the breakdown, I do not know if you want to comment at all on that. Ashley Johnson: We provide the breakdown in the materials. I would just say, you know, we have historically had a very strong presence in Europe, and have a strong team in Berlin foundationally, and we have built on that with acquisitions that have given us presence in the Netherlands as well as in Slovenia, and that really helps us when we are engaging with governments across both their Civil and Defense and Intelligence needs. Will Marshall: If I could just add one final thing, of course, our commitment to building satellites there in Berlin adds to that interest. I mean, we both needed it for expansion and it lent into the European demand because, of course, that helps connect the dots there. Ryan Koontz: Sure. That is great. And just any comments around supply chain right now? Is it getting more difficult to acquire the types of kind of key components you need on the supply chain side? Will Marshall: Not really. No. We are not seeing anything material. Ashley Johnson: Obviously, it is something that we track carefully. Our teams are always seeking to diversify our supply chain sources. Ryan Koontz: Got it. Thanks so much, guys. Ashley Johnson: Thank you. Operator: Your next question comes from the line of Edison Yu from Deutsche Bank. Please go ahead. Edison Yu: Thank you very much, and congratulations on the quarter. I want to come back to the AI element. You talked a little bit about LLMs. What is the latest status on the Anthropic partnership, and have we kind of progressed further from kind of just testing or early testing the models or the training? Will Marshall: Yes. I mean, in AI in general, as I said, we are moving from this world of LLMs that can tell you things about the text of the Internet to how models are increasingly trying to move towards real-world models. And real-world models needing real-world data. I have this stack that is necessary. We are doing these research collaborations that we have mentioned, and they are very exciting. What they are really building a foundation towards is, you know, we have been building these bespoke solutions, these what we call AI-based enabled solutions for our broad area PlanetScope Daily Scan—so Maritime Domain Awareness solution, the Global Monitoring solution, and the Area Monitoring solution for Civil Government. And those are really good, and they are starting to take off. And that is what is driving a lot of great growth that you are seeing in the numbers. But AI has this potential of making that more generic. That is, anyone can turn up, build their own bespoke application of equivalent fidelity in short order, like maybe within an hour, and, you know, in a completely bespoke way for their needs. That is just on the horizon. And so what we are focused on with those research collaborations is how we can build towards that capability, and that is what—I mean, what is so exciting about that is the ability to unlock all the potential of our data, especially for Commercial and Civil Government markets where we have been less focused of late because of the strong interest on the Defense and Intelligence side, but are huge markets for Planet Labs PBC. So, basically, that is the direction and leaning of those partnerships. It is enabling us to build out that capability to expand the TAM. Edison Yu: Absolutely. And just a follow-up on that, to get there, what do you see as the biggest—I do not know if you want to say bottleneck or thing we should look out for. Is it a question of just needing more compute? Is it a question of just, you know, it takes time—more training? How do you think about the path there and the bottlenecks? Will Marshall: Oh, it is complex and evolving in that the space is changing so fast. I mean, literally, we are seeing capabilities that just a couple months ago we were not able to do because of the advances in especially coding. Like, that makes it now that you can even build whole applications very quickly. So we are just seeing that potentially take off much faster than we thought. There is nothing really standing in the way per se. We have the data. That is the critical ingredient, and it is the differentiating ingredient for AI. And as I said briefly, like, I mean, in many ways, AI is commoditizing more the software layer that is making the AI piece—the data piece—most useful for AI, you know, and so that is very differentiating that we have such a unique dataset coming into it. So there is nothing holding us back there, and it is moving very fast. And that is why I was saying that I think you are going to start to see this come to fruition this year. And so watch this space. Edison Yu: Amazing. Thank you. Operator: Your next question comes from the line of Christine Lee Weg from Morgan Stanley. Please go ahead. Christine Lee Weg: Hi. This is Gabby on for Christine. Congratulations on the quarter. Given your recent decision to extend the satellite imagery delay in the Middle East to fourteen days as a result of the ongoing conflict, have you seen any changes in customer behavior, and are there any potential contractual implications that we should maybe be aware of? Will Marshall: Yes. I mean, the short answer is nothing material. Look, what we are focused on there is helping our critical customers in the region do the things they need, which is get critical answers fast, and trying to help them through that. We are focused and mainly heads down on supporting those customers in this critical time as best we can. The delay is a lot to do with the balance of thinking about those operational needs and making sure we do not put people in harm’s way and very genuine needs, at the same time as the transparency and accountability mission that we care about and ensuring all of our actors get access eventually. So it is a carefully thought through decision and we are just trying to do our best to help the people that need it. Christine Lee Weg: Great. Thank you. Super helpful color. And if I could have a quick follow-up. I mean, you announced the Satellite Services agreement with Sweden in January. Can you just talk about how you are seeing the pipeline for similar deals progressing relative to what you had laid out at the Investor Day? And what are you seeing in terms of conversion timelines and potential scale of upcoming opportunities? Will Marshall: Yes. I mean, as I have mentioned in my prepared remarks, since that October Investor Day, both the number and the average size of those deals has been increasing. And so, I mean, just to give you a sense that it is a strong market demand right now, even stronger than we had said then. And, you know, it is a bit too early to talk about sort of average deal length because these are very few in number. Right? So I have not got any comments to that effect, but overall, the demand is very strong. Christine Lee Weg: Great. Thanks so much. Operator: Your next question comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group. Please go ahead. Jeff Van Rhee: Great. Thanks for taking the questions, guys, and congrats—a lot here to love. Let me start first with Civil/Commercial—about 40%, a little less than that as a percent of revenues. What do you think when you look at those markets—obviously, D&I is killing it. You have got a lot of sovereign deals flowing through, it makes sense to be pursuing those deals. I am wondering how you think about Civil and Commercial and what dynamics have to play out for those markets to reaccelerate? Will Marshall: Well, as I said—see earlier answer to Edison about the AI piece—because that is what unlocks these things and enables that. And we are just on the precipice of that. And so yes, I see that beginning to come this year. And just to be clear, in my opinion, the biggest markets are those two segments, not Defense and Intelligence. And we think that is a long and sustaining and really great market. But the Civil Government market is huge. The Commercial market is huge. There are so many, but it has been lacking those critical solutions. Here, we have a generic way of crossing that chasm to the follow-on solution that enables us to unlock that market. And so we know those capabilities—that those answers—are latent in our data, and this gives the bridge to the actual solution that the customers need. So, I mean, you know, it is back to my earlier point: AI is going to enable it, and I think we are going to see beginnings of that really take off this year. Jeff Van Rhee: Yes. And over to the sovereign deals for a second. I mean, obviously, what—three mega deals here roughly trailing twelve months, give or take. It sounds like the pipeline has expanded. It sounds like you are thinking deal count there should improve. I mean, just any other observations on those sovereign deals—on the magnitude of the growth in the pipeline? Sounds like it really accelerated even further potentially in the last ninety days. Will Marshall: No. I did not want to quantify that, but I just give you a sense that it is really growing and it is very strong. And, yes, that is it. Ashley Johnson: The only other thing that I would add, Jeff, which I think is an important point, is that when we are selling these sovereign capabilities, we are coupling with that our Data and Solutions. And it actually is the synergies across that that is a competitive differentiator because we can drive value to these customers out of the gate. We can give them visibility and intelligence that they did not have before as we work with them over the longer-term contract to build out what their sovereign capabilities will ultimately be. And so it is worth pointing out that actually a lot of our backlog growth is in Data and Solutions. In fact, that part of the backlog has almost doubled year over year. Jeff Van Rhee: Wow. That is great color. Last one if I could, just on the Owls. Any updates there that you could share? Will Marshall: Yes. I mean, we are building that tech demo as we announced last year towards that improved Daily Scan capability. The team is working hard on it. It is going well. It is quite an incredible capability that we are obviously building there. Just to remind everyone that we are moving towards one-meter scan rather than three-meter, and that is roughly 10 times more data per unit area of the ground. And roughly a 10x improvement in latency as well because they will be equipped with both onboard compute systems as well as satellite-to-satellite comms so that we can get the data back as well. So those things are all going to be faster as well. So much lower latency—at 10x there too. So it is really a significant improvement on that system. And, yes, we are looking forward to launching a demo. Jeff Van Rhee: Sounds great. Thanks, guys. Ashley Johnson: Thanks, Jeff. Operator: Your next question comes from the line of John Gooden from Citibank. Please go ahead. John Gooden: Hey, guys. Thanks for taking my question. Really appreciate it. I just wanted to square off the backlog strength and all of the positive commentary with revenue guidance. The revenue guidance is fantastic. Do not get me wrong. But even so, it just seems like there is upside to it based on the commentary of, you know, incredibly strong demand signals, particularly in Europe, as well as the fact that as a percentage of the backlog that you guys have right now, it does not seem like the revenue guide is a particularly large percentage versus maybe how you set guidance in the past. Ashley Johnson: Yes. It is obviously a good question, John. We are in a really favorable position right now in terms of the level of visibility that we have. Obviously, there is a lot of execution that goes into turning backlog into revenue, and we are laser focused on that. And in terms of setting guidance, I think what you have seen from us, particularly in recent periods, is we try to give ourselves room for the fact that, you know, on these big mission-critical types of transactions and contracts, there are things that can shift from quarter to quarter, and we want to give room in our guidance for that to happen so that we can keep our customers, you know, front and center around execution. Similarly, we have a great pipeline, but when those deals land, given how big they can be, they can really impact revenue in the year. And so we tend to assume that new signings are back half-loaded, which gives us opportunity to deliver upside if that does not end up being the case, if it ends up landing sooner, but does not put us in a position where we are out over our skis in terms of the numbers we have given you. John Gooden: That makes a lot of sense. It sounds like, you know, that there are some layers of conservatism in there, which is appropriate, and we will see how that plays out throughout the year. If I could ask one more, just in terms of the activities in the Middle East, the conflict there, do you feel that that has additionally kind of turbocharged the demand for your product in any way? I know the backdrop is strong, but has that had an obvious impact, you know, as sort of a recent event? Will Marshall: Well, obviously, there is a huge amount of focus in that, and we are—but, again, as I said earlier, we are just focused on delivering pieces—doing mission-critical things. We are trying to focus on that, but we will see. It is early days. Ashley Johnson: Yes. I think, you know, one of the things that we have seen in these types of situations is you do see an increase in usage as there is just more urgency in getting as much data as possible around the situation. You know, but ultimately, as Will said, situations like this can be very dynamic. John Gooden: Got it. Thank you. Operator: Your next question comes from the line of Trevor Walsh from Citizens. Please go ahead. Trevor Walsh: Great. Hey, all. Thanks for taking my questions. Will, you called out the SHIELD IDIQ in your prepared remarks. Can you maybe just give us a sense—I know early days on this, very large project and a lot of it is TBD—but can you give us a sense of how you are thinking about that opportunity? Is that something where it is just kind of bread-and-butter Planet Labs PBC Earth observation data that you would be providing for that as you go after contracts and opportunities there, or might it even look like something more akin to Satellite Services where you might be building spacecraft that are fairly nontraditional for you guys, but just being used for all the things that are part of that project? Will Marshall: Well, yes, as you say, it is early days. It is obviously a big opportunity. There is, you know, huge budget behind it. But the specific ways in which we fit in will have to be figured out as we understand the architecture, and they are still working on many of those aspects. There are, of course, ways in which our present datasets could fit into that—early warning of certain things, strategic analysis across broad areas. That obviously makes sense. But right now, that is merely a vehicle, and we will compete on awards within that, and that is the same for all the people that have got awards under that system. So, yes. But obviously, finding unknown unknowns—there could be specific missions, but it is very early days to be thinking about that. What I will say is that we are continuing to lean into specific opportunities that are very live right now, like with LUNO, with our Navy, and others. So, you know, we are seeing a lot of interest in cislunar awareness around the world. So the department has a lot of interest across the board, and we are leaning into it. Trevor Walsh: Great. Awesome. Appreciate that. Ashley, maybe just one follow-up for you. I appreciate the color you gave around free cash flow. I know you guys are not giving an official guide, but just given how strong you guys ended this current fiscal year and we think about 2027, there is obviously—there can be a bit of a step down from just going $50,000,000 to something that is just generally positive. So just want to make sure we do not get—just given the CapEx spend and everything else, could you just give us a little bit of maybe guardrails to how we think about that for 2027? Would be great. Ashley Johnson: Yes. I mean, first, I will just reiterate the point that I made. We definitely expect there to be pretty significant fluctuations quarter to quarter. Just like I said, timing of procurement versus timing of milestone payments can cause, you know, one quarter to be much more positive and another quarter to be, you know, significantly negative. So that is one caution that I would provide, and that makes it a little bit harder to give, you know, very precise guidance around it, which is why I have not. And to your point, you know, depending on how much more of this opportunity we continue to realize, it would not make sense for us to optimize expanding free cash flow on the year versus setting ourselves up to both deliver against the contracts we have and to bring more on. So if that offers enough color to you without giving specific guidance, which I am really not in a position to do, we are not focused on, you know, kind of sustaining or expanding free cash flow from last year, but really focused on balancing it quarter to quarter and leaning into the market. Trevor Walsh: That makes sense. That is helpful. Thanks, Ashley. Will Marshall: Thank you. Operator: Your next question comes from the line of Greg Pendy from Clear Street. Please go ahead. Greg Pendy: Hey, guys. Thanks for taking my question. Just one quick one—just so that I understand kind of the approach on this year of leaning in, in terms of the Commercial and Civil side. I mean, it is hard to think back, but, you know, you did have a cost rationalization program at one time, and your Sales and Marketing is down around 15% from fiscal 2024, yet your revenues are up roughly 40%. So is it kind of that the customers through Anthropic will figure out how to use the data and how valuable it is into their daily workflows, or do you think that, you know, you will need some boots on the ground to educate the Civil and Commercial markets? Thanks. Ashley Johnson: Yes, Greg, it is a very good callout. We did, you know, realign the team across the board to really focus on where we had the largest account opportunities, which I think did disproportionately impact, you know, how much resource we were putting behind going after a more distributed Commercial market. And as we said, we were building out the platform to enable smaller customers to really access the data on a self-serve basis. I think as we are growing those markets and leaning into the AI that Will highlighted, we will be making some targeted investments in those markets where we are seeing the most traction out of the gate. So we do have feet on the street going and meeting with customers and demonstrating for them. And that is a really exciting part of these new capabilities that we have, as we can really show, not tell, in these customer meetings, all the things that you can—all the insights you can extract—from the data to answer their specific questions. So we did a lot of training with our sales team earlier this year, really showing them how to use these tools and demo environments. Obviously, the world has changed a lot in the last six years. You can do a lot of that without putting people on airplanes, but it will require some investment across Sales and Marketing. And I did highlight that as one of the investment areas for us this year. Greg Pendy: That is very helpful. Thanks a lot. Operator: Your next question comes from the line of Alex Latimore from Northland. Please go ahead. Alex Latimore: Hey, guys. Excellent quarter. Alex Latimore on here for Mike Latimore. I had one question—I just wanted to hit on guidance one more time. Good raise on guidance. I was wondering if you could talk about what assumptions are factored into that raise on guidance. Does this assume any new eight-plus-figure wins or any commentary there? Ashley Johnson: Yes. Thanks, Alex. I would say we are very balanced in terms of how we think about those types of opportunities that may be in our pipeline, because, obviously, those could swing outcomes based on whether they come in or not. So typically, what we will look at is a pipeline of opportunity where, if an eight-figure deal were to fall out of the pipeline, what type of backup we have for that opportunity, and then probability-adjusted. So we are definitely looking at active opportunities, probabilities, and then giving ourselves room for those deals where maybe we do not have enough pipeline to make up for that one landing on time or in the year, which gives us opportunity to outperform. And, like I said earlier, it does not put us in a position where we feel over our skis. Alex Latimore: Awesome. And then one more—I just wanted to hear if there are any footholds in the Golden Dome initiative. I understand there was a $10,000,000,000 incremental add to the Golden Dome initiative for space-based capabilities. I am not sure if you are seeing any demand there for Planet Labs PBC systems, but any commentary around Golden Dome would be helpful. Will Marshall: Yes. I sort of said all that I can on that at the minute. It is very early days as they are architecting that system, and potentially that is—you know, the SHIELD IDIQ, just to be clear, is going down that path. And so that answer was about that. And, again, it is a framework that we have, and now we will bid for actual awards under that program. But we do not know what they are exactly yet. Then when we do, we will respond. But per my earlier answer, the general thing is giving domain awareness and other things that could be useful for that. But we obviously have to wait and see what comes through that. Alex Latimore: Awesome. Excellent quarter. Thanks, guys. Ashley Johnson: Thank you. Operator: Your next question comes from the line of Caleb Henry from Quilty Space. Please go ahead. Caleb Henry: Hi, guys. Thanks for the call. Couple of questions on satellite manufacturing. Actually, first one—sorry—on Pelican. I have noticed that you guys lowered one of the Pelican satellites a little past 400 kilometers recently. Is that part of a larger fleet migration to a very low Earth orbit? Or is there another way that we should think about that? Will Marshall: Yes. We lower spacecraft, of course, to the operational ~30-centimeter ultimate resolution target for those missions. But no changes to the plan. Those were just operational adjustments, as we will start with the satellites in a slightly higher orbit and bring them down to operational orbits as we progress. By the way, on Pelican, you may want to look in the associated deck with this earnings. There are a few really cool pictures of some of the fast timelines that we had—three pictures in about an hour. It is very exciting to see and a great performance of that system. So it is very exciting, and we have got multiple launches for more of those systems going up this year. So it is exciting times. And was there a broader question about the manufacturing? Caleb Henry: Yes. I definitely have to look through these pictures. But looking at the contract for Sweden and tying that into manufacturing, can you give a sense of when those satellites are supposed to be delivered and how many satellites? Is that sort of the reason for the ramp-up in manufacturing space in California? Will Marshall: Nothing specific I am going to say specifically to that customer, but we are ramping up because of the demand overall. Right? And we are building fleets for multiple customers as well as for our own system, and that demand is obviously already clear such that we are expanding here in San Francisco and in Berlin. Caleb Henry: Okay. And then last question. Just curious if you could shed more light on what makes 2026 the year you first anticipate seeing a return on investment on AI. Was there more of an “aha” moment that happened, or is this just the natural evolution of the years of investment and how customers use Planet Labs PBC data? Will Marshall: Yes. And that is an oversimplification because, I mean, we have had revenue from AI a fair bit before. What I mean is in terms of the big way in which AI can unleash those other market potentials, and I think we are going to really start to see those generic solutions that I mentioned—ways in which anyone can turn up, build an application that is relevant to their needs, and then start getting value. That unlocks other markets that we have been talking about for years latent in our data—energy, insurance, finance, and so on. And so I think that it is just more that I see that all the pieces are coming together such that that will come to fruition this year, and you will start to really see that take off. Just like, you know, the Constellation Service—or Satellite Service—has really started to take off in FY 2026. Operator: Thank you. That is all the time we have for questions today. I will now turn the call back to Will Marshall, CEO and Co-Founder, for closing remarks. Will Marshall: Well, I would just say that, obviously, it is great to see the business doing great, both in the Satellite Services and in the AI-powered Solutions side. And we are very proud of the financials that we reported today. Not just beating the revenue expectations, but I am especially proud of the backlog improvement to $900,000,000 and achieving the Rule of 40 again in the quarter. And it really has set us up for a strong foundation for this coming year. And given that backlog and confidence in our pipeline, we have projected quite strong growth again for this year, and even for years that follow, which is why we are investing this year strongly into that market opportunity. And like I was just saying, this will be the year of AI for Planet Labs PBC, and I think this bridge to the solutions gap will unleash a huge opportunity later in enhanced data. I just want to end by thanking our teams, as we started, around the globe that have enabled all of this to be possible. Thanks again for joining, everyone. Operator: This concludes today’s call. Thank you all for attending. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Curis, Inc. fourth quarter 2025 business update conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded today, Thursday, 03/19/2026. I would now like to turn the conference over to Diantha Duvall, Curis, Inc.’s Chief Financial Officer. Please go ahead. Diantha Duvall: Thank you, and welcome to Curis, Inc.’s fourth quarter 2025 business update call. Before we begin, I would like to encourage everyone to go to the Investors section of our website at https://www.curis.com to find our fourth quarter 2025 business update press release and related financial tables. I would also like to remind everyone that during the call we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. For additional details, please see our SEC filings. Joining me on today’s call are James E. Dentzer, President and Chief Executive Officer; Jonathan B. Zung, Chief Development Officer; and Ahmed M. Hamdy, Chief Medical Officer. We will also be available for a question-and-answer period at the end of the call. I will now turn the call over to Jim. James E. Dentzer: Thank you, Diantha. Good afternoon, everyone, and welcome to Curis, Inc.’s fourth quarter business update call. We continue to make steady progress in our TakeAim Lymphoma study in primary CNS lymphoma, one of the rarest and most difficult to treat of the NHL subtypes. As a reminder, the TakeAim Lymphoma study is a single-arm registrational study with an ORR endpoint that is evaluating emavusertib in combination with ibrutinib after a patient has progressed on BTKi therapy. After collaborative discussions with the FDA and EMA, we expect the study to support accelerated submissions in both the US and Europe. We continue to make good progress on enrollment in this registrational study and appreciate the ongoing support of our clinical investigators, key opinion leaders, and regulatory authorities. As you recall, last quarter we engaged with a number of KOLs who were excited and highly supportive about expanding our emavusertib studies into additional NHL subtypes. They were especially interested in exploring emavusertib’s potential to fundamentally change the treatment paradigm for CLL patients, where the current standard of care is BTKi. Over the last decade, BTK inhibitors have become the standard of care in CLL and NHL because of their ability to help patients achieve objective responses. However, these responses are typically partial responses, not complete remission. The result is that patients treated with a BTK inhibitor end up having to stay on it in chronic treatment for the rest of their lives. Additionally, because they never achieve complete remission, many of these patients develop BTKi-resistant mutations, and ultimately their disease progresses. We are looking to improve upon the current standard of care by adding emavusertib to a patient’s BTKi regimen, applying a dual blockade to the two biologic pathways driving CLL. This dual blockade can enable patients whose NHL subtype partially responds to a BTK inhibitor to achieve deeper responses with the combination, including the ability to achieve complete remission or undetectable disease and the potential for time-limited treatment. If we are successful, adding emavusertib to BTKi could change the treatment paradigm in CLL, reducing the risk of developing a treatment-resistant mutation and improving a patient’s overall quality of life. The first step in testing this hypothesis in CLL is our proof-of-concept study in patients currently on BTKi monotherapy who have achieved partial remission but have been unable to achieve complete remission or undetectable MRD. We have begun activating clinical sites in the US and Europe and expect to have initial data at the ASH Annual Meeting in December. With that, let us turn to AML. At the ASH meeting in December, we presented data for our ongoing AML triplet study, which is evaluating the triple combination of emavusertib with azacitidine and venetoclax in AML patients who have achieved complete remission on aza/ven but remain MRD positive. These data were for the first two cohorts where patients received emavusertib for either seven or fourteen days in a 28-day cycle in addition to their azacitidine and venetoclax treatment. In this study, five of eight evaluable patients were able to achieve MRD conversion; that is, they were able to convert from MRD positive to undetectable disease. We are very encouraged by these initial data and the exciting potential of combining emavusertib with azacitidine and venetoclax. As you can see, we had a very productive quarter, and we look forward to a very exciting 2026 as we are advancing our registrational study in PCNSL and initiating our proof-of-concept study in CLL. With that, I will turn the call over to Diantha for the financial update. Diantha Duvall: Thank you, Jim. Curis, Inc. reported net income of $19.4 million, or $1.23 per share, for Q4 2025, as compared to a net loss of $9.6 million, or $1.25 per share, for the same period in 2024. The net income in 2025 is due to a $27.2 million one-time non-cash gain attributable to our sale of Erivedge to Oberland. Curis, Inc. reported a net loss of $7.6 million, or $0.58 per share, for the year ended 12/31/2025, as compared to a net loss of $43.4 million, or $6.88 per share, for the same period in 2024. Research and development expenses were $5.8 million for Q4 2025, as compared to $9.0 million for the same period in 2024. The decrease was primarily attributable to lower manufacturing, employee-related, and clinical costs. Research and development expenses were $28.3 million for the year ended 12/31/2025, as compared to $38.6 million for the same period in 2024. General and administrative expenses were $2.9 million for Q4 2025, as compared to $3.4 million for the same period in 2024. The decrease was primarily attributable to lower employee-related costs. General and administrative expenses were $14.0 million for the year ended 12/31/2025, as compared to $16.8 million for the same period in 2024. Curis, Inc.’s cash and cash equivalents as of 12/31/2025, together with initial gross proceeds of $20.2 million received in January 2026 and expected gross proceeds of up to an additional $20.2 million from the exercise of the January 2026 PIPE financing Series B warrants upon the public announcement of dosing of the fifth CLL patient in our TakeAim CLL study, expected later this year, should enable our planned operations into 2027. We will now open for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment please for your first question. Operator: Our first question comes from the line of Kripa Devarakonda from Truist Securities. Your line is now open. Kripa Devarakonda: Hi, guys. Thanks so much for taking our question, and congrats on the progress. Just one quick question in terms of how you are thinking about prioritizing the trial progress between the pivotal PCNSL versus CLL and AML? James E. Dentzer: Sure. Thanks for the question, and thanks for calling in. As you can imagine, we are very thoughtful about how we are prioritizing our resources. The January financing puts us on a very solid course, but we are still prioritizing our resources to be as efficient as we can in our spend. With that said, we are definitely prioritizing NHL ahead of AML. Right now, we have a dual-pronged strategy where we are pushing forward very aggressively in PCNSL—that is one of the smallest and most rare of the subtypes of NHL—as well as CLL, which is inarguably the largest. PCNSL, of course, is going to be for registration approval, and we are moving ahead right on track on that one. With CLL, we have just started that study. In terms of spend, I would say the bulk of our spend is going toward PCNSL, and in these early days CLL is much smaller, but I imagine that over time that will get larger. My hope is that by the time we get to the end of the year, we will have made significant progress toward a registrational data set in PCNSL, and hopefully have some initial data, our first view, at CLL. Those two are clearly our first priorities. As we are able to raise more cash, and we can get more work started, I think that is when we start to look at AML. Right now, the bulk of the work in AML is more analyzing what steps we want to take as we have more resources and what makes the most sense, and making sure that operationally our focus is on PCNSL and CLL. Operator: Our next question comes from the line of Yale Jen from Laidlaw & Company. Your line is now open. Yale Jen: Great. Thanks a lot, and I appreciate taking the questions. Just two up here. The first one is in terms of the PCNSL. You mentioned the enrollment is on track. Could you give us any updates at this moment? Then I have a follow-up. James E. Dentzer: Sure. We are trying not to give enrollment on PCNSL other than we are on track for what we have suggested. As you all know, it is very hard to find these patients. We get a patient or two a month, but it is pretty choppy. You might go one month where you do not get any patients, and then the next month you get three. I would say right now we are enrolling patients, and on balance I think everything is going according to plan. If we are correct, I have said in the past that we are somewhere in that 12- to 18-month range from full enrollment. That would place us at full enrollment with the potential to file after six months of following patients somewhere in the 2027 range. We could well be in a position by the end of the year that we are really close to that full enrollment number, and we have some nice data to talk about. But I do not expect we are going to have a whole lot to say ahead of then. Yale Jen: Okay. Great. That makes a lot of sense. Then maybe just a quick question for modeling for next year. Given that you have this $27 million non-cash item as well as reduced revenue in the fourth quarter of last year, should we model that there will be no meaningful revenue for 2026 and maybe beyond before your product approval and other stuff? Thanks. Diantha Duvall: Sure. So, Yale, that is correct. We will have no meaningful revenue. Revenue effectively ended in November 2025. From a cash flow perspective, remember that we had sold the right to about 85% of those royalties to Oberland prior to giving them the remaining 15%. From a cash flow perspective, the remaining 15% of those cash flows are now going to Oberland. There will be no revenue and the remaining 15% of cash flows, but it is not a meaningful impact to cash flows. James E. Dentzer: Yes. What you saw in the release is really the non-cash wind-down of that arrangement. It was a very small revenue stream associated with Erivedge in the last couple of years, and we sold what was remaining to Oberland to clean it all up. We are now completely independent of the Erivedge stream. Yale Jen: Okay. Great. That is very helpful, and congrats with the good balance sheet and the advance of programs forward. James E. Dentzer: Thank you. We really appreciate that. Operator: Our next question comes from the line of Li Watsek from Cantor. Your line is now open. Tanya Brown: Hey, team. This is Tanya Brown around for Li. Congrats on the progress. Just a question from us on the expected or potential update at ASH 2026 on CLL. Just curious what kind of data we should be expecting, how many patients you expect to be able to share at that point, and how you would determine success at that early stage? James E. Dentzer: Sure. I am going to start answering that one, and then I will ask Dr. Hamdy to chime in as well. First and foremost, let us not get too far ahead of ourselves. That is in December, and I think as we get closer we can provide more guidance on what we are looking to talk about. At this stage of the game, it is an execution story. We are getting our sites open, we are enrolling patients, and hoping to be in a position that we have some data to talk through in December. This is more about our plans and our expectations at this point. As we get closer to the conference, of course, we can narrow that down and talk a little more specifically. The second part of your question—what would define success in this first proof-of-concept study—that is a wide-ranging one, and I might ask Dr. Hamdy to chime in on his thoughts. Ahmed M. Hamdy: Sure. Thanks, Jim. As Jim mentioned earlier, we are trying to change the CLL treatment paradigm. BTK inhibitors only get patients to partial responses with MRD positivity. We are aiming to deepen that response and see that patients are moving toward a complete remission and, hopefully, MRD negativity. We still do not understand the kinetics of response in the combination, where we are aiming to inhibit both pathways—the BCR signaling pathway and the TLR pathway—aiming to inhibit the NF-kappa B pathway, which is a driver of the disease, at a much deeper level. We have to dose a lot more patients to understand how fast that conversion from PR to CR happens, and I do not intend to venture there just yet, but I am quite hopeful that by ASH we will have some meaningful data to present. James E. Dentzer: Let me expand on that a little bit more because I know at least for some of the investors who may be listening to this call, a little reminder is helpful. As Dr. Hamdy mentioned, we know there are two pathways driving disease in these patients—the BCR pathway and the TLR pathway. Historically, the standard of care is BTKi. BTKi blocks the BCR pathway, and it works; you are blocking one of the two pathways driving disease. That said, it is also why patients are only getting partial response; they are not getting complete remission because they are only blocking one of the two pathways. In our previous studies, and certainly in our ongoing study in primary CNSL—another NHL subtype where standard of care is BTKi—if you add emavusertib to it, if you add a blockade of the TLR pathway on top of the blockade of the BCR pathway, you get deeper responses. We have seen complete remission, and we have seen time-limited treatment. Our goal is to see if we can repeat that success across all five of the subtypes of NHL where BTKi gets used. The biggest of them by far is CLL. We are very excited about getting into that study and seeing what effect we can have. At this stage, we are learning. The mechanism tells us that it should work. Our previous studies tell us it should work. We cannot wait to see the data, frankly. I hope that longer explanation is helpful. Tanya Brown: May I ask a follow-on? James E. Dentzer: Please. Of course. Tanya Brown: Have you dosed your first patients yet in this study? James E. Dentzer: We have not disclosed that yet. What we are saying for now is that we are in the process of initiating the study. We have sites opening in the US and Europe, and our hope is to have data by the time we get to ASH. We are going to try to get out of the path of month-by-month reporting on where we are in enrollment, if that is alright. Tanya Brown: Thank you so much. James E. Dentzer: Great. Thank you. I really appreciate it. Operator: There are no further questions at this time. I will now turn the call over to James E. Dentzer. Please continue, sir. James E. Dentzer: Thank you, and thank you, everyone, for joining today’s call. As always, thank you to the patients and families participating in our clinical trials, to our team at Curis, Inc. for their hard work and commitment, and to our partners at Aurigene, the NCI, and the academic community for their ongoing collaboration and support. We look forward to updating you again soon. Operator? Operator: Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to the Eton Pharmaceuticals, Inc. fourth quarter 2025 financial results conference call. At this time, participants are in a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised that this call is being recorded at the company’s request. I will now turn the call over to David Krempa, Chief Business Officer at Eton Pharmaceuticals, Inc. Please proceed. David Krempa: Thank you, Operator. Good afternoon, everyone, and welcome to Eton Pharmaceuticals, Inc.’s fourth quarter 2025 conference call. This afternoon, we issued a press release that outlines the topics we plan to discuss on today’s call. The release is available on our website, etonpharma.com. Joining me on our call today, we have Sean Brynjelsen, our CEO, James Gruber, our CFO, and Ipek Erwan, our Chief Commercial Officer. In addition to taking live questions on today’s call, we will also be answering questions that are emailed to us. Investors can send their questions to investorrelations@etonpharma.com. Before we begin, I would like to remind everyone that remarks made during this call may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those contained in these forward-looking statements. Please see the forward-looking statements disclaimer in our earnings release and the risk factors in the company’s filings with the SEC. I will now turn the call over to our CEO, Sean Brynjelsen. Sean E. Brynjelsen: Thank you, David. Good afternoon, everyone, and thank you for joining us today. As you have seen, it has been a very active time at Eton. A number of major developments in recent weeks. We have some exciting topics to discuss today. During the call, we will review fourth quarter results, provide additional color on the Hemangiol acquisition, and an update on our recent FDA approval and commercial launch of Desmota. We will also cover growth trends in our on-market products and provide an update on clinical development programs. And finally, we will provide 2026 financial guidance and unveil our new long-term goals for the company. Let me start with our financial results. It was another strong quarter for Eton, capping off an outstanding year. 2025 was truly another transformational year for our company as we successfully launched three new products, Incrolex, Galzyn, and Kinduvi. These were not minor products. They represent important cornerstones of our long-term growth plan. These new products helped us more than double our revenue in 2025 compared to 2024 and set us up for major growth in 2026 and beyond. Our fourth quarter product revenue was $21.3 million, an increase of 83% year over year, driven by continuing strong performance from Alkindi Sprinkle and the addition of revenue from Incralex, Galzyn, Kandivy, and Kandivy. Galzen and Incrolex have continued to be great success stories for Eton. Both products were relaunched by Eton in early 2025 and contributed revenue well beyond our initial expectations for the year. A key goal for us is continuing to drive strong revenue growth while maintaining our focus on profitability through disciplined cost management and expanding margins, and I am pleased to report that we made meaningful progress on that in the fourth quarter, as our adjusted EBITDA margin was 29%, a significant improvement from 18% in the prior-year period. We also reported GAAP net income of $1.5 million and non-GAAP net income of $5.4 million. Looking ahead, we expect our profit margin profile to continue improving as revenue scales across our portfolio, and we will further discuss our profitability outlook later in the call when we communicate new long-term goals. Now let me turn to one of our most important recent developments, the approval and launch of our oral liquid formulation of desmopressin, Desmota, which received FDA approval in February for the treatment of central diabetes insipidus. Diabetes insipidus is a serious condition caused by inadequate production of the hormone vasopressin, and treatment with desmopressin is the standard of care. Dosing is patient-specific and must be individualized and fine-tuned over time, but there were historically no products available that could provide accurate low doses of desmopressin. As a result, clinicians and caregivers were forced to use workarounds, including splitting or crushing tablets. As the only FDA-approved liquid oral formulation, Desmota offers patients a treatment option that provides precision, consistency, and convenience, fulfilling a large unmet need frequently expressed to us by pediatric endocrinologists. Leveraging our established team of pediatric endocrinology rare disease specialists, we launched Desmota within two weeks of FDA approval. While we are still in the early phases of launch, I could not be happier with how this Desmota launch is going. I believe this was the most well-prepared we have ever been for a commercial launch. Our entire team was ready to execute on day one, and the initial demand and interest in the product has been incredibly encouraging. Our team has been hard at work promoting the product for two weeks, and we have already seen significant traction. Many institutions that were historically unreceptive to sales rep visits have reached out to us asking for meetings because they are interested in learning about the product. We have already seen a number of patients begin therapy in the first week and a half of launch. Another important aspect of the approval is that Desmota received a clean label with no age restriction. In fact, the FDA’s indication even includes adults. This means that our addressable market will not be solely the 3,000 to 4,000 children in the U.S. We will also be able to meet the therapeutic needs of the 9,000 to 10,000 adults living with central diabetes insipidus. Our historic market assessment and $30 million to $50 million peak sales forecast were based solely on the pediatric market. However, we believe there could be a meaningful incremental opportunity within the adult population for patients who have difficulty swallowing tablets, require precise and titratable dosing, or simply prefer a liquid option. While the percentage of adults needing a liquid or precise dose will likely be smaller, the population is roughly three times as large, so it could be a quite meaningful number of patients. This month, we are launching a pilot initiative where our existing sales team will target high desmopressin-prescribing adult endocrinologists. We will assess the opportunity over the next 90 days, and if we see traction with the adult patient community, we will expand our commercial efforts to fully capture this additional opportunity. Regarding pricing, the dosing varies by patient, but we believe we will net an average of approximately $80,000 per patient per year. As I said, it is still too early in the launch to say definitively, but all initial signs are pointing to a successful launch for Desmota. For now, we are confirming our guidance of $30 million to $50 million in potential peak sales. We should know more in the coming quarters and we will update our outlook accordingly. Desmota also benefits from strong intellectual property protection via multiple patents extending to 2044, which we believe positions the product as a critical long-term value driver for Eton. Turning now to our other pediatric endocrinology assets. When we acquired Incrolex in December 2024, the product only had 67 patients on therapy. We saw a tremendous opportunity to increase awareness and education of severe primary insulin-like growth one deficiency, otherwise known as SPIGFD. In conjunction with our relaunch of Incralex in January 2025, we kicked off an extensive disease and therapy education campaign complementing physician engagement efforts of our seasoned pediatric endocrinology sales team. This included targeted outreach to health care providers, strong conference engagement in the endocrinology space, peer-to-peer presentations, and strategic collaboration with patients and patient advocacy groups. Incrolex is approved for pediatric patients aged two and up and is highly effective at increasing height during critical development years. Because earlier diagnosis leads to better outcomes, increasing awareness and improving time to diagnosis are central to our strategy, ensuring that every patient achieves their full therapeutic potential. We are already seeing encouraging progress. Since acquiring the product, we have meaningfully reduced the average age at which patients begin therapy and continue to see steady growth in the treated population. Based on ongoing discussions with physicians in the community, we remain confident that a significant opportunity for growth remains within the existing indication. We now have over 100 patients on treatment, and our goal is to reach 120 patients by year end. So far this year, we have seen the number of patient age-outs and closures decline significantly from the level we saw earlier in 2025 prior to our last earnings call. Long-term, we see a big opportunity in harmonizing the patient definition between the U.S. and the EU. In the U.S., a patient meets the label criteria if their IGF-1 levels are more than three standard deviations below the median. In Europe, where Incrolex is also available, the definition is two standard deviations below the median. And based on the European patient registry data collected over the past 15 years, we believe that Incrolex is a safe and effective treatment for patients with IGF-1 levels between minus two and minus three standard deviations. We held a meeting with the FDA in December to discuss label harmonization, which we believe was positive. As a result, we submitted the final proposed study protocol to the FDA in February, and we expect to receive their feedback—either clearance to proceed or comments—later this month. Once the FDA signs off, we will initiate the study with our CRO, and we expect to see the first patient dosed in the third quarter of this year. Our proposed study is an open-label study of approximately 30 patients tracked for five years or until they reach full adult height, with a primary endpoint of change in average annual height velocity at month twelve compared to pretreatment height velocity. Given that it is an open-label study, if the data is as compelling and clear as we expect it to be, we believe there may be an opportunity to approach the FDA with interim data after a couple of years. The study is expected to cost approximately $1 million per year. If we are successful with this label harmonization, we believe that the Incrolex market opportunity could increase fivefold in the United States. Also in our pediatric endocrinology portfolio, we continue to see strong growth from our adrenal insufficiency franchise Alkindi Sprinkle and Kindivy. 2025 was Alkindi’s fifth full calendar year on the market, and its strongest year yet in terms of number of patients on therapy and number of new patient referrals. This momentum reflects the continued impact of our focused efforts to expand awareness and adoption of pediatric-appropriate hydrocortisone dosing and to reduce friction for both physicians and caregivers, making it easier for providers to diagnose, prescribe, and initiate therapy for children with adrenal insufficiency. Kin Divvy was developed to address the needs of patients that had an aversion to the texture of the Alkindi granules or who preferred a liquid option, and it is the first and only FDA-approved oral solution of hydrocortisone. Similar to Desmota, the liquid dosage form allows for mixing and accurate dosing tailored to patient needs and does not require refrigeration, mixing, or shaking. Together, Alkindi and Candivi allow us to offer physicians multiple pediatric-appropriate hydrocortisone options, enabling them to choose the formulation that best fits the needs of each child and caregiver. For our combined franchise, our target market is the estimated 5,000 children under the age of eight in the U.S. with adrenal insufficiency. We believe we have captured around 12% of the market to date, and there is still a long runway ahead of us. Eton remains confident that the franchise can achieve peak annual sales of at least $50 million, which requires only around 20% market share, and we ultimately believe that Eton can capture even greater market share if we are successful in expanding the Candivis label. Candivis is currently approved for patients five and over, but we believe the largest unmet need is within children under five. The FDA restricted the age due to limited availability of safety data of the three active ingredients when these ingredients are used in combination. However, we have developed a new formulation which substantially lowers levels of these excipients, and Eton held a meeting with the FDA in the fourth quarter where the agency indicated they were receptive to a label expansion. The agency requested that we run a bioequivalency study and then submit our supplement to the existing NDA. Last week, we dosed the first patient in that bio study and now plan to submit the supplement as soon as the final study is available, which we currently expect to be in the third quarter. The FDA indicated the submission would receive a 10-month review, allowing for a potential launch by mid-2027. Next, I would like to discuss our recent acquisition, which we are very excited about. Earlier this month, we announced the acquisition of Hemangiol, the only FDA-approved treatment for infantile hemangiomas that require systemic therapy. Infantile hemangiomas are noncancerous vascular tumors that typically appear shortly after birth and, in severe cases, can lead to serious complications including loss of vision, trouble breathing, or permanent disfigurement. An estimated 5,000 to 10,000 infants are treated with Hemangiol annually in the United States. We have been clear with our acquisition strategy. Eton seeks opportunities where we can meaningfully add value to a product. We are unlikely to earn remarkable returns and create value for shareholders if we are purchasing assets only to maintain the status quo of their current level of revenue and earnings. We look for opportunities where a rare disease company-wide expertise in commercial infrastructure can unlock significant growth and profitability. Similar to how we successfully executed on Galzin and Incralex last year, we believe there is a significant opportunity for value creation with Hemangiol. Hemangiol had the product characteristics we looked for. It treats a rare condition with a small prescriber base. It is the only FDA-approved treatment in its class. It has a strong safety and efficacy profile, and there is a meaningful opportunity to improve operational efficiency and margin performance. Our team is hard at work preparing for our May 1 relaunch of the product. One of the key opportunities we see is optimizing the product’s distribution model with our dedicated rare disease infrastructure and proven go-to-market capabilities. Currently, the product goes through the traditional pharma distribution model, utilizing the large national wholesalers, open pharmacy distribution, and significant payer rebating. While this may make sense for higher-volume products, we believe transitioning to our rare disease-focused distribution model can significantly lower costs, improve the patient and provider experience, and significantly strengthen the long-term economics of the product by reducing gross-to-net deductions. In addition, we will implement our best-in-class Eton Cares patient support program, which we believe will improve the treatment journey for families and expand access to treatment. For instance, we will be offering our standard zero commercial copay for patients, where today most patients are paying $55 a month on their copay. Hemangiol will also establish a third strategic call point for us. The majority of prescribing occurs within pediatric dermatology, but care for these patients can also involve pediatric hematology-oncology who specialize in vascular anomalies. This is a highly concentrated specialty with roughly 400 pediatric dermatologists and a smaller number of specialized pediatric hematology-oncology physicians actively managing these patients. While we look for other bolt-on opportunities within pediatric dermatology, the Hemangiol opportunity is certainly large enough on its own to justify the dedicated commercial effort. In tandem with the transaction, we are hiring seven new commercial employees that were previously working for the seller and fully dedicated to Hemangiol. They will start with Eton on April 1, and we are excited to have them joining our organization. This existing team had done an excellent job growing Hemangiol in recent years, and we believe their current relationships, combined with Eton’s rare disease infrastructure, expertise, and capabilities, will position the product for accelerated momentum following the relaunch in May. We were pleased that because of our strong cash flow generation in 2025, we were able to pay for the $14 million Hemangiol acquisition entirely with cash on hand and avoid any dilution or incremental debt. This will make the transaction even more accretive to our earnings. With our ongoing plans to streamline distribution, shrink the gross-to-net gap, optimize revenue, and expand access, we believe Hemangiol can be one of Eton’s largest products in 2027. Now let me turn to Galazim, which was another very impressive contributor for the year. When we acquired the product, we expected to be able to grow the product over time, but the product has actually performed well ahead of our expectations. When Eton relaunched in March 2025, we made major investments into physician education, patient awareness, and access support, and those investments are clearly paying off. Through Eton Cares, we know that more people than ever are able to access their medication, and we have heard from many patients that were previously forced to take non-FDA-approved zinc supplements because they could not afford their copay obligations. They are very grateful to now be able to receive the FDA-approved treatment. In addition, we have found that many patients and providers were unaware of the availability of Gallicin or were unaware of the advantages of the prescription product. We have also seen renewed interest from patients and physicians. Now that we know that Eton Cares will provide patients with access to medication regardless of potential insurance pushback or lack of insurance, physicians can prescribe the product with confidence and not worry that the patient will call them back in a week to complain about high copays or looking for alternatives. The benefit to physicians is twofold. First, they have increased comfort knowing that the FDA-approved Galzan is manufactured to pharmaceutical standards for quality, potency, and consistency, whereas the over-the-counter products are not. Second, patients taking the prescription product require periodic refills and return visits, so they have much better compliance with follow-up visits and regular lab monitoring and make any needed dose adjustments. Many over-the-counter users end up failing to return for regular visits, contributing to worse patient outcomes. I am pleased to share that last week, we reached 300 active patients on Galcen, a big accomplishment just one year after our launch. We still believe there are at least 800 Wilson disease patients in the U.S. taking zinc therapy and potentially over a thousand, so most of the market still relies on the non-FDA-approved zinc products. We view this as a substantial opportunity for us to potentially more than double our thousand patients in the coming years. Through our deep collaboration in the Wilson disease community on Galzin, we have seen the strong desire for an extended-release version of Galazin and ET700 was developed to address this need. Currently, Galzin must be taken three times per day with patients fasting both before and after each dose. It is an onerous schedule that can often lead to noncompliance, especially with the middle-of-the-day dose. Eton has developed a proprietary, patent-pending extended-release formula. Our clinical batches have been manufactured, and we are ready to initiate a proof-of-concept positron emission tomography, or PET, study to verify that our proprietary delayed-release formulation can effectively block copper absorption. The study should begin in April, and we expect top-line results later this year. If we are successful, we expect to initiate a dose-ranging study and pivotal clinical trial in early 2027. If approved, we are confident that ET700 has the potential for more than $100 million of peak annual sales. We have also made strong progress advancing our internal pipeline, and in fact, 2026 is set to be by far our busiest year ever in terms of clinical studies. Eton has already touched on the anticipated studies for Candivy, Incralex label harmonization, and ET700, and we also plan to run PK studies on AMGLIDIA and ET800 later this year. Our goal is to submit the AMCLIDIA NDA by the end of this year and the ET800 NDA in 2027, so our pipeline for new product launches in the coming years remains very strong. Overall, 2025 was a standout year for Eton, and we have set the stage for an even stronger 2026, which is reflected in our 2026 financial guidance. We expect 2026 revenue to exceed $110 million and to deliver an adjusted EBITDA margin of at least 30%. As we wrap up 2025 and set our plans for 2026, it was a good moment to reflect on how far we have come and where we are headed. A few years ago, I outlined three long-term goals for the company. Goal number one, have 10 commercial products. Goal number two, reach a $100 million revenue run rate. Goal number three, reach a $1 billion market cap. At this time, we had just three products when the goal was announced. We had only $20 million of revenue and a $100 million market cap. While these goals may have seemed miles away from the outside, internally, we had strong conviction in the opportunity ahead of us, and I believed that these goals were much more attainable than the market perceived them to be. I am pleased to share that we have now achieved two of these long-term goals. With the acquisition of Hemangiol, we have reached 10 commercial products, and as you have heard, we are expecting more than $100 million of revenue this year. While there is still work to do on the market cap goal, we are confident that if we continue executing our strategy and delivering consistent, profitable growth that we expect to achieve, the long-term value creation will be reflected in our stock price. I believe it is important to keep pushing the organization forward towards ambitious but achievable long-term goals. As a result, we are setting some new long-term goals today. First, we want to build the largest rare disease portfolio in the United States. Among the dedicated rare disease companies, we are already near the top, and reaching 13 or 14 commercial products will position Eton as having the largest portfolio of any dedicated rare disease company in the United States. We believe that this is very achievable in the coming years through both our internal pipeline and business development activities. Second, we want to exit 2027 at a $200 million revenue run rate. This requires roughly doubling our revenue within the next 24 months, and we see a very realistic path to doing this: continued growth of Alkindi, Incrolex, Galzin, a successful integration and relaunch of Hemangiol, strong launch of Desmota, and the expected launch of Candivy’s expanded label in 2027. Plus, we remain confident that we can close at least one more product acquisition that will provide incremental revenue before 2027. Third, we want to reach a 50% adjusted EBITDA margin in 2028. Profit has always been a central focus of our company. Unlike many of our peers in the industry, we are not pursuing revenue growth at the expense of profitability. We have made continued progress in our profit margins and expect to continue to see improvement as we grow. Our adjusted EBITDA margins first turned positive from product sales in 2024 when we reported an 8% margin; that grew to 20% in 2025, and we expect to be over 30% this year. With continued revenue growth, we expect to see the benefits of operating leverage that can drive us to 50% EBITDA margins in the coming years. With our existing base of commercial and operational infrastructure, as well as our products continuing to grow, an outsized portion of that growth should fall to the bottom line. Our fourth and final goal is to reach $500 million of revenue by 2030. Again, we believe that this is an achievable goal through our three-pillar growth strategy. First, our existing portfolio has strong organic growth prospects. This includes Incrolex, Alkindi, Tendivi, Galvan, Desmoda. All of these products have achieved just a fraction of the market share that we think they can reach in the years ahead. Second, our existing pipeline has several large programs that could add significant revenue by 2030. This includes ET700, which we believe has peak revenue potential well in excess of $100 million annually on its own, plus our Incralex label expansion opportunity, Amglidia, ET800, and other programs in development that we have not yet announced. And finally, we will layer on more business development deals. We believe we have proven our ability to close, integrate, and create significant value through acquisitions, and we expect to sign more deals like Incrolix, Gelatin, and Hemangiol, which will further boost our revenue in the years to come. It is clear that we have come a long way over the last few years, but I truly believe that we are just getting started. We have found a proven winning strategy, assembled the right team, accumulated a diversified portfolio of growing products, and built an attractive pipeline to fuel long-term growth. We are in the best position we have ever been. Thank you for your continued support, and we look forward to keeping you updated on our critical developments in the months and the years ahead. With that, I will hand it over to James, our Chief Financial Officer, to discuss the financials. James R. Gruber: Thank you, Sean. Our fourth quarter revenue increased 83% to $21.3 million, compared to $11.6 million in 2024, and revenue was comprised entirely of product sales in both periods. Revenue growth in the quarter was driven primarily by increased sales of Alkindi Sprinkle, plus the addition of sales from Incralex, Galzan, and Candivy. As we discussed previously, our third quarter revenue included a meaningful contribution from Incralex outside the U.S., tied to the transition of that business to a new licensing partner. Looking strictly at U.S. product sales, our revenue grew sequentially by 8% in the fourth quarter relative to the third quarter. We expect our reported total revenue to resume sequential quarterly growth in 2026 and continue to ramp throughout the year. Cost of sales for the fourth quarter was $8.2 million, compared to $5.2 million in 2024. Adjusted gross profit, which adjusts for the impact of acquired inventory step-up adjustments and intangible amortization, was $15.5 million in 2025, or 73%, compared to adjusted gross profit of $6.8 million and 59% in the prior-year period. The margin improvement was driven by favorable product mix, as well as manufacturing cost efficiencies as the products grow. Hemangiol and Desmota are both expected to have margin profiles well above our company average, so they should be positive contributors to future gross margins. We may still see a slightly lower adjusted gross margin in early 2026 due to margin-dilutive orders of Incralex outside the U.S. as our licensing partner ramps up their distribution efforts in more countries. But on a full-year basis, we expect adjusted gross margin to be comfortably above 70%, and this margin is expected to continue to ramp and reach between 75% and 80% in the coming years. R&D expenses for the quarter were $1.8 million, an increase of $2.7 million compared to negative $0.9 million in the prior-year period, due primarily to increased expenses associated with our development activities. In addition, during 2024, Eton’s ET400 product was granted orphan drug designation by the FDA, which resulted in Eton receiving a $2.0 million refund of the NDA filing fee that was paid and expensed a prior quarter. R&D expense for 2026 depends on the timing and final protocol of the numerous studies that we have planned for this year, and we believe it will likely increase from the $7.8 million in 2025 but will remain below $10.0 million for 2026. General and administrative expenses for the quarter were $8.9 million, compared with $6.7 million in the prior-year period, primarily due to increased promotional and launch-related investments associated with the expansion of our product portfolio, an increase in compensation and benefit expenses due to increased general and administrative headcount, and an increase in FDA program fees. On an adjusted basis, which removes the impact of share-based compensation, transaction-related costs, and other one-time expenses, G&A expense was $7.8 million, compared to $5.8 million in the prior-year period. We have talked extensively about the one-time increase of additional investments made in 2025 to support our long-term growth, driving increased spending in SG&A. However, we are pleased that the increased G&A investment was substantially less than our growth in revenue. One of the factors driving increased G&A spend is the FDA’s annual program fees. For all NDA products, the FDA charges a program fee each year. The FDA grants an exemption for products that have orphan designations if the parent company has gross sales of less than $50 million. Eton has previously received these exemptions and thus avoided the fees. However, starting with the 10/01/2025 annual program fees, Eton no longer qualified for an exemption. For the FDA’s fiscal year 2026, the annual program fee is $442,000 per strength for NDA products. As of October 2025, when the annual fee was assessed, Eton had eight unique strengths, for a total annual fee of $3.5 million. The annual fee is prepaid on October 1, and for accounting purposes, the expense is amortized throughout the year. As a result, $0.9 million was recorded as an SG&A expense in Q4 2025. These program fees are estimated to drive an incremental $2.8 million increase in SG&A spend for 2026 over 2025. Regarding overall SG&A spending for 2026, we have two main growth drivers: FDA program fees and Hemangiol. The FDA program fees are estimated to add an incremental $2.8 million expense over 2025, and the Hemangiol acquisition is expected to add $3.5 million in annualized SG&A spend, and about $2.5 million in the partial year 2026. Separately from those two one-time step-ups, we believe that our base SG&A spending would have increased by less than 10% in 2026. Adjusted EBITDA for 2025 was $6.2 million, 29% of revenue, compared to $2.1 million, or 18% of revenue, in 2024. Again, adjusted EBITDA will likely see large fluctuations quarter to quarter depending on the timing of inconsistent R&D expenses and ex-U.S. Incralex orders, but we expect the full-year adjusted EBITDA margin to be above 30%. Total company GAAP net income was $1.5 million for the quarter, compared to a net loss of $0.6 million in the prior-year period. Net income per basic and diluted share during the quarter was $0.06 and $0.05, respectively, compared to a net loss per basic and diluted share of $0.02 in the prior-year period. On a non-GAAP basis, we reported net income of $5.4 million for 2025, compared to $0.7 million in the prior-year period, and diluted earnings per share of $0.19 for 2025, compared to $0.02 per share in the prior-year period. Eton finished the fourth quarter with $25.9 million of cash on hand. We had an operating cash outflow of $11.6 million in 2025, compared to an operating cash inflow of $12.0 million in the previous quarter. The fourth quarter included $12.4 million of Medicaid rebate payments as multiple quarters’ worth of Incralex rebates were paid in Q4, $3.5 million of the aforementioned FDA program fees, and $1.4 million of inventory payments associated with the one-time transition of ex-U.S. Incralex distribution in Europe. Looking forward, we expect to generate significant operating cash flow throughout 2026 and beyond. This concludes our remarks on fourth quarter results. We will now open for questions. I will turn it back over to the Operator for Q&A. Operator: We will now open for questions. To ask a question, please press star-1-1 on your telephone. To remove yourself from the queue, you may press star-1-1 again. Our first question comes from the line of Chase Knickerbocker of Craig-Hallum. Your line is open, Chase. Chase Richard Knickerbocker: Good afternoon. Congrats on all the progress here. A lot to get to. But maybe just first on Hemangiol. You mentioned that that could be one of your largest products in 2027. That implies quite a lot of growth from kind of the roughly $12 million in 2025 sales. Can you walk us through your assumptions on how the product gets there? What do you think from a volume perspective? And then what does that assume as far as any actions on price or gross-to-net improvements? Thanks. Sean E. Brynjelsen: Hi, Chase. This is Sean. Thanks for the question. We believe we will increase the number of patients on product, partly that zero copay was preventing a lot of patients from using the product. It previously had a higher copay amount and went to other alternatives. So we think that is part of it that will certainly drive more patient adoption. We will be raising awareness, working with the advocacy groups, and certainly detailing the product at a much more aggressive level. Would you want to use that word? But to the task, we want to be able to reach out, make sure that all the patients that can use the product will get the product. And in terms of the pricing, we have not made any final decisions on that. We will launch it on May 1, and we will see where we end up on that. But our philosophy has always been to be at the lower end of rare disease pricing, and so as a general rule, that is our approach. And it is largely based upon how many patients are out there and making sure that the pricing is competitive with the rare disease products out. Chase Richard Knickerbocker: Got it. And maybe just on Desmota, on how you see the pace to peak. The value proposition is pretty similar to the idea behind Kindivy. You obviously know all these physicians already, selling to multiple assets. How do you think about the time to peak sales, as far as being potentially quicker here because of those dynamics? Sean E. Brynjelsen: Well, I do not know if I could comment too much on the time to peak sales, but I can tell you the launch has gone well. We are very pleased. We are getting scripts continuously. Doctors are very excited about the product. I will say I believe the launch to peak sales will be far quicker than what we had in Alkindi. This is a very specific unmet need. Obviously, Alkindi was an unmet need in a bit of a different way. But unlike Alkindi, there were not a lot of compounders out there compounding desmopressin, so doctors are thrilled to have the product. We know that the uptake has been right according to plan, if not better. So I would say that it will be faster. We guided to that $30 million to $50 million. Million—you know, I am hoping we are well on our way there in, you know, six months or so. Chase Richard Knickerbocker: Got it. And maybe just last kind of two-parter here. Maybe just one for James on how you see cash flow conversion from EBITDA in 2026. And then, Sean, just lastly, on that $200 million run rate exiting 2027, could you delineate between what might come through BD and how you see the existing portfolio today performing to get to that run rate at the end of 2027? Thanks for taking the question. Sean E. Brynjelsen: Yeah, sure. James, why do you not take the first part? James R. Gruber: Sure. Maybe we can try to give some context on the Q3, Q4 cash flow of 2025. 2026 will firmly be in positive operating cash flow territory. We will have some timing with supplier commitments, namely with Incralex, that will be planned for the second half of the year. In the first half of the year, there should be not nearly as much as we experienced in 2025, but some of the larger-than-average volume with study orders in Europe for Incralex. But other than that, we are firmly in positive operating cash flow territory. We will start making debt principal payments, which will be new in 2026. 2025, but even with that, we will be generating a lot of positive cash flow. Sean E. Brynjelsen: Okay. And then, Chase, regarding your question on the $200 million run rate, as you know, and as I think we have demonstrated throughout the history of our company, we generally set goals which are achievable. We believe the $200 million run rate in Q4 of next year is entirely achievable, primarily based on what we have on deck. This does not really include new product deals, licensing, that type of thing. We believe that Hemangiol will be a great product for the company. We believe Desmota will continue to grow quickly. We are seeing higher sales than ever on Alkindi and Kindivy. Those continue to increase. We are very pleased with the Incralex business and how that grows, and it has been nice because we have not lost as many of the older patients, and now we are gaining momentum and going forward on that. That has been solid. And really, all areas of the business are functioning well. There are a lot of growth prospects in the coming quarters in terms of the revenue. Hitting the $200 million run rate in Q4 next year, I think, is entirely achievable. We will be providing further updates on future conference calls to try to better ascertain what is the number, what can it be, and that type of thing. Chase Richard Knickerbocker: Awesome. Thanks again. Sean E. Brynjelsen: Sure. No problem. Welcome. Operator: Thank you. Our next question comes from the line of Madison Wynne El-Saadi of B. Riley Securities. Your line is open, Madison. Madison Wynne El-Saadi: Hey, guys. Thanks for taking our question, and congrats on a lot of positive updates here. Maybe to follow up on Desmota, it sounds like you are having interest both de novo and from existing. Could you characterize if the majority of interest is from the existing Alkindi population? How much of it is de novo? Also curious if you are seeing already some adult patient interest. And then secondly, on Incralex, as you prepare for this registry study, just wondering if you had any payer discussions regarding potential internal payer reimbursements for the registry patients, if that is something that is possible. Thanks. Sean E. Brynjelsen: Sure. So, Madison, I am going to have Ipek, our Chief Commercial Officer, answer the first part of your question with regards to Desmota and the pediatric versus adult. Ipek Erwan: Hi, Madison. So I think you are right. From our script, more than 97%–98% of our existing relationships with pediatric endocrinology are actually our target prescribers for central diabetes insipidus, which is for Desmota. So these relationships are already there from day one of launch, which was March 9. Our team was already talking to these physicians. There is a lot of excitement from key writers, thought leaders, big institutions already in the past two weeks. What we are excited about is call points that our team traditionally have not gone after, which are the adult endocrinologists, like Sean mentioned. We gave our team, two weeks ago when we launched the product, more than 3,000 new targets, and they just started going after those. We talked to several who are big in the adult space. Some of them actually end up still keeping the pediatric patients. So they definitely see room, and it is the right therapy for several adult patients as well, and they also see the pediatric patients based on the region and institution. So there is definitely a dual-path opportunity that is incremental to our relationships there. Sean E. Brynjelsen: Understood. And remind me again the second part of your question. Madison Wynne El-Saadi: And then on Incralex, if there have been any early payer discussions related to— Sean E. Brynjelsen: No. Yeah. The payer discussions have not happened because we feel it would not be any different. If we get the label expansion, there should not be any issues with payers. Right now, if a doctor has to even prescribe something off label from time to time due to a medical need and can demonstrate that, there will be reimbursement. But generally speaking, what we want to do is initiate that study as soon as possible. That protocol feedback should happen by the end of this month. And I am quite confident that we will be undertaking the study later this year. And obviously, it is going to have a huge impact on our Incralex sales. We are hoping that when we are a portion of the way into the study—it is open label—we can go to the agency and get that label updated as soon as possible. Madison Wynne El-Saadi: Got it. Congrats again, guys. Sean E. Brynjelsen: Thank you. Thank you. Operator: Our next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright. Your line is open, RK. Swayampakula Ramakanth: Thank you. This is RK from H.C. Wainwright. Good afternoon, Sean and James. So, I mean, obviously, there is a lot of things to chew here, and all good stuff. In terms of the ongoing business, especially focusing on Galzin, you said you have already eclipsed 300 active patients at this point. And then we can still see about 500 remaining out there and possibly on OTC products. What portion of that is achievable in the immediate couple of quarters? And how much contribution of that are you assuming going into 2027, when you are trying to hit that $50 million per quarter in the fourth quarter? Sean E. Brynjelsen: Thanks, RK, for the question. Obviously, we got to 300 patients much faster than we had expected. It continues to increase week over week. I am going to ask Ipek, actually, to comment a little bit more on the second part. Ipek Erwan: Hi, RK. I think your diagnosis of the fact that the next chapter of growth needing to come from the OTC products is correct. The good part is, in the Wilson disease space, the centers of excellence are pretty established. And at this point, after a year into launch, we have pretty strong relations and ongoing initiatives with several of these Centers of Excellence health leaders and the top prescribers. So we do know where some of these patients—some of that Wilson population—is. I think based on our projections, I am confident to say within that time frame that you mentioned, we would be able to get to half of the remaining population out there who are on zinc therapy or some form that is not FDA approved. Between everything that we are doing in the field with these prescribers, as well as the awareness and education initiatives that we are closely working on with the Wilson Disease Association, which is the key patient advocacy group—really a lot of patients are very much in sync and present in that community as part of this community. Swayampakula Ramakanth: Great. So my next question is on the label expansions or the indication expansions that you are trying to achieve. One is on Incralex. What specific feedback do you need from the FDA at this point in terms of harmonizing the definition of SPIGFD and to get your study going? And the second part is on the Kindivy one. If the patient population gets increased successfully below age five, what sort of population are we assuming that you will have access to? Sean E. Brynjelsen: Sure. On Incralex, we have already received feedback from the agency on that. We took the feedback and put that in the form of a protocol. So, they send you feedback, the general letter—they say we want to see this and this and this. Then you formalize that in a scientific protocol. That takes a number of weeks, then you submit it to the agency. They then should look at that, make sure that they feel you incorporated their thoughts and comments. And hopefully when we get it back, there are few or no changes. If that is the case, which it should be unless they change their mind, then our belief is we can start the study. We hope to have that protocol back by the end of this month. So that is that one. And then regarding the Tyndivi formulation, we should have that wrapped up for the study here shortly, get it submitted in the third or fourth quarter—maybe third quarter; I am guessing third quarter submission—and then it will launch next year. The population is really intended for under five. That is really what the whole product was about. We believe it will do in excess of $20 million of additional revenue in a rather short quarter. Swayampakula Ramakanth: Okay. And then the last question is on the inventory burn-off. How much is the remaining inventory step-up from the acquisitions, and to be fully amortized through the P&L? James R. Gruber: Yeah. Very well. There will be a slight amount remaining in early 2026, but a small fraction. We burned through most of it in 2025. Swayampakula Ramakanth: Perfect. Thank you. Thanks for taking all my questions. James R. Gruber: Thanks. Operator: Thank you. That is all the time we have for Q&A today and does conclude today’s conference call. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to Torrid Holdings Inc.'s fourth quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I will now turn the conference over to Chinwe Abaelu. Thank you. You may begin. Chinwe Abaelu: Good afternoon, everyone. Thank you for joining Torrid Holdings Inc.'s call today to discuss our financial results for the fourth quarter and full year of fiscal 2025, which we released this afternoon and can be found on our website at investors.torrid.com. With me today on the call are Lisa Harper, Chief Executive Officer, and Paula Dempsey, Chief Financial Officer. Ashlee Wheeler, Chief Strategy and Planning Officer, is also present and will be participating in the Q&A session. Before we get started, I would like to remind you of the company's safe harbor language, which I am sure you are familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate, and other words and terms of similar meaning. All forward-looking statements are based on current expectations and assumptions as of today, March 19, 2026. These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC. This call will contain non-GAAP financial measures, such as adjusted EBITDA. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. I will now turn the call over to Lisa Harper. Lisa Harper: Thank you, Chinwe, and hello, everyone. Thank you for joining us today. On today's call, I will review our fourth quarter and full-year 2025 performance and discuss the substantial progress we have made over the past two years. We have optimized our channel, product, and pricing platforms. With these foundational elements now in place, I will outline our primary focus for 2026, which is accelerating customer file growth through retention, reactivation, and acquisition. Finally, I will turn the call over to Paula to discuss the financials in detail and our outlook for the year ahead. I am pleased to report that for 2025, we reached the top end of our net sales outlook, delivering $1,000,000,000, and exceeded the high end of the adjusted EBITDA range, achieving $63,600,000. For Q4, we registered net sales of $236,200,000 and adjusted EBITDA of $5,100,000. These results reflect early progress in our strategic initiatives. Throughout the year, we made deliberate decisions to strengthen our foundation, optimizing our store footprint, launching our sub-brand strategy, pausing and relaunching our footwear category, and, later in the year, sharpening our product assortment around core franchises, fabrications, and silhouettes. The trends we experienced in Q4 give us confidence we are moving in the right direction and position us well for comparable sales growth in 2026. From a category perspective, we saw strength in dresses, demonstrating growth for four consecutive quarters. We also saw acceleration in sub-brands, and a turnaround in knit tops, which comped positively for the latter half of the fourth quarter. Jeans and activewear both gained momentum and are poised for growth in 2026. Additionally, we reintroduced footwear with great success, having paused the category to resource it in the elevated tariff environment. We sold out of the limited assortment in record time, and look forward to being back in the footwear business at scale and more profitably in 2026. As we close 2025 and enter 2026, we have strategically rightsized our channels, reinvigorated our product, and optimized our pricing platforms. With these foundational elements now in place, our primary focus for 2026 is accelerating customer file growth through targeted, segmented marketing to acquire new customers, reactivate lapsed ones, and increase purchase frequency among our most loyal customers. This is our number one priority, and we are deploying resources, talent, and capital accordingly. I will expand on this initiative momentarily, but first, an update on our channel optimization initiative. As we have discussed on prior calls, we identified up to 180 structurally unproductive stores for closure. These locations averaged roughly $350,000 in annual sales. We completed 85% of the closures by Q4, or 151 stores in 2025, and we have closed an additional 11 thus far in Q1. We are on track to finalize the full optimization plan by the first half of the year. Essentially, our channel platform is now optimized, supported by a more productive and strategically aligned store fleet. Our retention metrics validate that our strategy is working. Customer retention from last year's store closures is meeting and, in many cases, exceeding our model. This demonstrates the strength of our omnichannel ecosystem. We are also seeing customers shift to nearby stores in markets impacted by closures, driving increased traffic and transactions, and resulting in dramatically improved four-wall profitability in our remaining store fleet. Even more encouraging, our 2025 closure retention rates are outperforming 2024 results, with more customers shifting to our digital platform. Our enhanced retention strategies, including targeted multi-touch communications, are seamlessly migrating customers to nearby stores and online channels. What this tells us is simple. Our most loyal customers are truly channel agnostic. The seamless and frictionless omnichannel platform we have built, combined with our commitment to superior and consistent fit, allows our customers to remain highly engaged with confidence in their channel of preference. Our product platform is built and now scaling effectively. We entered 2026 with five sub-brands live and, critically, 80% of our assortment planning and buying decisions are now data-informed, covering both product selection and seasonality. 2025 was our learning year. We launched all five sub-brands and received real customer feedback across the board. We stayed agile, reading demand signals, adjusting buys midstream, chasing winners, and refining our assortment mix. Those learnings are now embedded in our 2026 plans. But we have done more than just learn. As we shared on our Q3 call, we fundamentally strengthened our merchandising foundation. We have implemented stronger guardrails in our merchandising process and built out a more robust assortment planning function, both of which I am directly overseeing. This represents a much more integrated way of working. Design, merchandising, planning, and product development now operate as a cohesive unit. The new guardrails keep us anchored in improving categories while still allowing us to expand strategically and maximize opportunity. It is a disciplined approach that balances innovation with reliability. Our sub-brands are driving meaningful growth. They generated over $70,000,000 in sales in 2025, and we are projecting roughly 60% growth in 2026 to approximately $110,000,000, growing from approximately 7% of total net sales in 2025 to 12% in 2026. Importantly, this growth is margin accretive. Sub-brands carry higher product margins than our core assortments because they are bought with scarcity and achieve higher full-price sell-through. But the benefits extend beyond margin. Our sub-brands are customer acquisition engines, attracting new shoppers, reactivating lapsed customers, and driving higher spend among our most valuable customers. These lifestyle concepts deliver the newness and excitement that broadens our appeal while deepening engagement with our existing base. Each brand, with their distinct positioning, inspired aesthetic, and lifestyle appeal, allows for broad reach and market share expansion. We are exploring multiple paths forward, not just through our direct channels, but also through pop-up experiences and expanded in-store assortments. We will be testing these concepts throughout the year to determine the best approach for scaling these sub-brands, representing a disciplined approach to their growth. As I mentioned, our intimate apparel business showed strong momentum in Q4. We are building on that strength with the relaunch of Curve, our intimate apparel brand, this February, and we will see the launch of two new bras in 2026. Bras are a pillar of our product portfolio that drives strong customer acquisition, reactivation, and long-term loyalty. Finally, as we discussed on our Q3 call, we refocused the foundation of our product assortment on core franchises, fabrications, and silhouettes that resonate with our customers. We had previously stepped away from essential fabrications like SuperSoft, a key favorite among our core customer base. Recognizing this gap, we began reintroducing these franchises in Q4 and immediately saw positive sales momentum and a turnaround in our tops business. Building on this success, we have introduced the knit dressing capsule collection built around that franchise, and we will expand in a meaningful way in 2026. In footwear, we selectively reintroduced a curated assortment as I mentioned, and the results are encouraging. We fundamentally restructured our sourcing strategy and assortment mix. This more disciplined approach delivers a shoe offering that drives stronger attachment rates and improved profitability. This will allow us to recapture both the direct revenue and attachment-driven sales we lost during the absence of footwear. The temporary pause of the footwear business had a 260-basis-point negative comp impact to the full year in 2025 and a 460-basis-point negative impact to the fourth quarter. Looking ahead, we will face a first-half headwind to comp and then a positive impact in the second half of the year. Now for an update on our opening price point strategy, which is exceeding our expectations. Developed in close partnership across merchandising, design, planning, and product development teams, this strategy is anchored in customer insight. We are successfully balancing customer demand for accessible price points with two nonnegotiables: margin discipline and product quality. Maintaining our quality standards while delivering accessible value remains imperative. OPP now represents approximately 30% of our total assortment and nearly 40% in stores, represented across jeans, leggings, non-denim bottoms, and anchored in tops and graphic tees. This collection of most-loved items is offered at an approachable value and provides everyday price parity across our e-commerce and brick-and-mortar channels. We are seeing the most-loved opening price point collection drive conversion and UPT in both channels, and we believe that this will be a critical component of customer file growth, driving reactivation, acquisition, and frequency. Built on our disciplined product development platform, this assortment is cost-engineered in support of opening price point value and leverages the strength of our sourcing. We have platformed fabric to enable speed. The combination of these efforts and the unit acceleration we see in the early stages of this initiative point to a highly accretive strategy with even greater runway ahead. As I have mentioned, our primary focus in 2026 is growing our customer file. We are implementing several targeted strategies to accomplish this critical goal. First, we are doubling down on reactivation of lapsed customers, leveraging our wealth of customer data to reintroduce customers to the expansive assortment offering of core, opening price points, and sub-brands. Second, and this goes hand in hand with reactivation, we are deeply committed to more informed customer segmentation and personalization across our owned and organic marketing channels. Early results are promising in our ability to drive incremental reactivation of lapsed customers and frequency among our most active. This includes greater email segmentation, personalized content and message strategies, testing initiatives, and the reintroduction of direct mail to augment owned marketing channels. Our intent is to work methodically through the full marketing funnel, continuing to allocate resources and investments to channels and tactics that drive positive ROAS and increase customer lifetime value. Third, we are strengthening the marketing and analytic infrastructure to support these efforts. We have redeployed senior marketing and analytical talent, oriented around individual marketing channels, messaging, and content strategies, in support of a more comprehensive and effective commercial plan that is laser-focused on customer file growth. And fourth, we are continuing to evolve and refine our loyalty program, of which over 95% of our active customers are engaged, with a focus on strengthening the value proposition, ensuring the program remains a meaningful reason for customer engagement with our brand, and most importantly, driving long-term retention and increased customer lifetime value. Our mission is clear: to leverage the foundational work we have completed across our channel, product, and pricing platforms to acquire new customers, reactivate lapsed customers, and increase purchase frequency among our most loyal shoppers. This is our number one priority, and we are deploying resources, talent, and capital accordingly. We know the most efficient path to customer file growth is through increased retention efforts and reactivation of our lapsed customer population, followed by new customer acquisition. We have over 7,000,000 lapsed customers who are reachable through owned marketing channels. The cost of reactivating these customers through segmentation and personalized communication costs roughly one-third of a new customer acquired through paid digital media channels. Leaning into this pool, leveraging in-house owned and organic marketing channels in a more strategic way, supports a marketing spend outlook consistent with prior years, in the 5% to 5.5% of net sales range. We have completed the substantial two-year transformation, strategically optimizing our channel, product, and pricing. Q4 results reflect early progress on our strategic initiatives, including the store footprint optimization, the sub-brand expansion, the footwear reintroduction, and a product assortment anchored in core franchises and opening price points. The foundational platform is now built. We are entering a phase of maximization and scale. I would like to take this opportunity to speak to the entire organization and thank them for their extraordinary dedication and resilience throughout the year and this transformational journey. Your hard work, adaptability, and commitment to excellence have been the driving force behind our progress. The operational improvements we have achieved would not have been possible without your daily efforts and unwavering focus on execution. I will now turn the call over to Paula Dempsey. Paula Dempsey: Thank you, Lisa. Good afternoon, everyone, and thank you for joining us today. I will begin with a review of our full-year 2025 results and our fourth quarter financial performance, then walk through the strategic progress we have made on our multiyear transformation and close with our outlook for fiscal 2026. Fiscal 2025 was a year of intentional structural change. We delivered full-year sales of $1,000,000,000 in line with our guidance and an adjusted EBITDA of $63,600,000, slightly ahead of expectations. Most importantly, we achieved this while simultaneously executing a significant transformation of our physical footprint, proactively managing an estimated $50,000,000 in gross tariff headwinds, and maintaining the inventory discipline that leaves us entering fiscal 2026 in a balanced inventory position. The headline result is this: we enter 2026 with a fundamentally stronger operating structure. Turning to the fourth quarter, net sales were $236,200,000 compared to $275,600,000 in the prior year. Comparable sales declined 10%, which includes 460 basis points of negative comp impact due to the temporary pause of the shoe business. Gross profit was $70,900,000 versus $92,600,000 last year, and gross margin was 30% compared to 33.6% in the prior year, reflecting promotional activities, product mix, and deleverage on a reduced sales base. SG&A expenses declined by $11,400,000 to $62,400,000 compared to $73,800,000 a year ago. As a percentage of net sales, SG&A leveraged 40 basis points to 26.4%. This is a meaningful proof point. Our cost structure is coming down drastically, supporting our EBITDA margin expansion, which is precisely the outcome our store optimization program was designed to produce. We expect this leverage to continue and accelerate through fiscal 2026 as the full benefit of our rationalized footprint flows through. Marketing investment decreased by $1,900,000 to $13,500,000. Net loss for the quarter was $8,100,000, or $0.08 per share, compared to a net loss of $3,000,000, or $0.03 per share, last year. Adjusted EBITDA was $5,200,000, a 2.2% margin, versus $16,700,000 and a 6.1% margin a year ago. We ended the quarter with $200,000,000 in cash and cash equivalents and $31,000,000 drawn on our revolving credit facility. Total liquidity at the end of the year, including available borrowing capacity under our revolving credit agreement, was $84,900,000, providing adequate liquidity to execute our plan. Inventory totaled $136,500,000, down 8%, reflecting both tighter receipt management and the intentional reduction of our store base. Aligned with our store optimization program, during the fourth quarter we closed 77 stores, bringing our full-year total to 151 closures for fiscal 2025. We expect to close up to an additional 30 stores by the end of the first half of fiscal 2026, at which point the program will be substantially complete. Customer retention rates from closed locations have performed consistently with historical levels, validating both the network strategy and the underlying brand health. Our customers are finding us where we remain open and online. We minimized exit costs by structuring closures around natural lease expirations wherever possible, significantly reducing the cash cost of the program and preserving liquidity. Most importantly, the financial impact is substantial and compounding. For fiscal 2025, we realized approximately $18,500,000 in lower operating expenses from this year's 151 closures, plus the 35 stores closed in the prior year. As we move into fiscal 2026 with a fully rationalized footprint, we expect to capture an additional $40,000,000 in expense savings. Now turning to our outlook. As Lisa mentioned, we entered 2026 in a much stronger position. We have strategically optimized our channels, products, and pricing platform. For the full year, we expect net sales of $940,000,000 to $960,000,000 and adjusted EBITDA of $65,000,000 to $75,000,000, representing margin expansion of up to 140 basis points versus fiscal 2025. Capital expenditures are expected in the range of $8,000,000 to $10,000,000, reflecting continued reinvestment discipline. For the first quarter, we expect sales of $236,000,000 to $244,000,000 and adjusted EBITDA of $14,000,000 to $18,000,000. The EBITDA expansion reflects the full-year benefit of our optimized cost structure and the compounding effect of those operating savings flowing through the P&L. It is worth providing some context on the bridge from our $40,000,000 in expected cost savings to our EBITDA guidance range calling for midpoint growth of 10% to $70,000,000. I want to be transparent about what is moving in both directions. On the offset side, the lower sales base naturally reduces gross margin dollars, which absorbs a portion of the cost savings. We are also resetting our incentive compensation program in fiscal 2026, which represents a meaningful year-over-year headwind as we return to a more normalized bonus structure. Taken together, these offsets explain the gap between the gross cost savings and the net EBITDA outcome. What the guidance reflects is a business where the structural cost work is fully embedded and the underlying earnings power is growing, even after absorbing those headwinds. In closing, the store optimization program is largely complete. The cost structure has been reset, inventory is aligned to our full-year plan, and this team demonstrated it can execute through complexity, tariff pressures, demand volatility, and a major operational transformation. Our path forward centers on growing our customer file and expanding EBITDA margin. We will now open for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, you may press star and the number 2. If you would like to remove your question from the queue, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from Janine Hoffman Stichter with BTIG. You may proceed. Janine Hoffman Stichter: Hi. Congrats on the progress. Was hoping to hear a little bit more about the learnings from the first year of sub-brands at 12% of sales next year. I think at one point, you had talked about it being 25% to 30% of the assortment. Is that still the right number? Just trying to reconcile those two figures. Lisa Harper: Hi, Janine. We are still very happy with the progress in that business. I think that we have made a decision to be more conservative about the growth cycle of that business. We are still happy the margin is a benefit overall. Some of the brands are incredibly strong. I would say out of the five brands, I would highlight Festi, Nightfall, and Retro as being very consistent performers, with Festi particularly being the number one sub-brand and with the largest opportunity for expansion. Belle Isle has a very high level of seasonality, so we are adjusting that, as it sells better in the first half of the year than the back half of the year. And we are still exploring the opportunity with Lovesick, which is the younger-oriented brand. We are still feeling very bullish and have seen very positive momentum in that business. We think that it will expand a little bit more in the front half than the back half, really because we will be lapping in the back half a full presentation of all brands, and we launched them sequentially in the first half of last year. I think I had said earlier in the mid-twenties as a mix. I think we will be more in the mid-teens as we play. I think we talked about going up to about $110,000,000 estimated opportunity this year. We are still very happy with how they are performing, and we will be testing some additional store-in-store opportunities as well as potential pop-ups later this year for sub-brands. As we see the stores performing better with the store optimization program, it gives us some room to add some of those businesses to stores, very judiciously, but to expand that opportunity. Janine Hoffman Stichter: Okay, great. And then maybe just on the retention and lapsed customer reactivation, what have you learned about the reasons why some of these customers have not stayed with the brand? And maybe just elaborate more on the communications that you are going forth with now to reactivate those lapsed customers. Thank you. Ashlee Wheeler: Hi, Janine. We have heard time and time again from lapsed customers that one of the primary reasons for spending less is economic pressure and price, which we have addressed through opening price point. In the prepared remarks, Lisa expanded on opening price point as an initiative that now represents about 30% of the business and will expand to be closer to 40%. We are seeing incredible response to that. We are seeing it as a vehicle to reactivate customers through a more approachable value pricing as well as acquire new customers that way. We are seeing it drive frequency among existing customers as well. Beyond that, we recognize with the 7,000,000 customers in our lapsed file who are marketable through our owned channels, we have enormous opportunity through more advanced targeted segmentation and personalization of messaging, using product affinity as a starting point as well as other demographic and price preference signals among that population to get them back into the brand. Lisa Harper: Thank you. Operator: Our next question comes from the line of Dana Telsey with Telsey Group. You may proceed with your question. Dana Telsey: Hi. Good afternoon, everyone. Can you talk a little bit about the cadence that you saw of sales during the holiday season, quarter-to-date what it looks like, any thoughts on how the shaping of this year is going with tariff expenses, what you have built into the model on margins with the puts and takes, and lastly, the return of footwear—how you expect that to come back, impact on margins? And are there other categories, Lisa, that you are looking to that could be sales drivers going forward? Thank you. Lisa Harper: I am going to do this backwards, and I am going to take the category conversation, and then I will talk about tariffs and categories, and then I will let Ashlee go through the rhythm of the business. We do have, obviously, tariff pressure in the first quarter, as everyone does, and we think we have managed this well, even with other types of supply chain challenges. We have very, very good relationships with our vendors, and they have been great partners with us, and so we have been able to manage that pretty consistently. From a category basis, the shoes are—just to remind you, when the tariffs came, we were running a pretty much, I would say, even EBITDA business in shoes from that specific shoe business, but we had a very high level of attachment to it. So we were keen on reengineering it to make sense both from a margin perspective as well as the customer acquisition modality and attachment to other types of products. We tested the new vendor structure and the new look and feel and quality of the product in November, and it was a resounding success. We are very happy with the results. We have some inventory coming in in the first half of the year, but we still have substantive headwinds, I would say, in the first quarter and second quarter related to footwear. We will be back in stock in the June–July time period, and we expect to have a benefit in that business in the back half. The way that we have tested it and the way that we are rolling it out allows us to expand margin in footwear as well as recapture the associated sales from customers who come to the brand through footwear. Other categories that we see expanding, outside of the OPP—which actually touches many of the categories of the business—I think denim, non-denim, tops, dresses, and sweaters in the back half. The other categories would be active. We have a fleece program rolling out that we think will be very advantageous, and then the expansion of OPP in some of these broader categories as we move forward. Those would be the bulk of the categories for expansion. Ashlee will go through the business rhythm. Ashlee Wheeler: Sure. Hi, Dana. We are pleased with fourth quarter, as communicated. Holiday performed as expected. We really saw improvement in the business in January. If you recall, we talked in our third-quarter call about chasing goods into core franchises and core fabrications, particularly in our tops business, and those goods arrived in late December or January selling, and we immediately saw the business turn in those categories. Our knit tops business, as an example, which is the second-largest department in our portfolio, started to comp positive as a function of those chase receipts. We continue to see really positive momentum in the categories that we have chased into, further supported by opening price point. As for the shape of 2026, footwear, as Lisa communicated, will continue to be a headwind in the front half of the year. The largest headwind will be felt in the first quarter, abates a little bit in the second quarter, and then will provide a benefit on a year-over-year basis starting in the third quarter when we launch the boot business in a fulsome way. Additionally, in the back half of the year, we will see the launch of two bras that will support expansion in the Curve business as well as some additional fleece programs and knit dressing capsules. So there is more to come in the back half of the year. Lisa Harper: Thank you. Operator: Our next question comes from the line of Brooke Roach with Goldman Sachs. You may proceed. Brooke Roach: Good afternoon, and thank you for taking our question. Lisa, I was hoping we could dive a little bit deeper into your marketing plans for the year, specifically around pricing, promo, and loyalty. What is changing in the loyalty program as you look to reactivate lapsed customers and increase dollars per spend on active customers today? And how does that tie into your plans for Torrid Cash and marketing? Thank you. Lisa Harper: Great. We have talked a lot about price, beyond the opening price point. As we survey our customers, more than half of our customers articulate that one of their reasons for lapsing would be their personal financial situation and that they would like to see more price parity in terms of both channel and opening price point in our core businesses. We have talked a lot about that, and that is moving forward. I would say the biggest shift that we will see this year in promotion is that we are putting less pressure on Torrid Cash redemption. That has been dwindling over time, and we have reset our expectations for the redemption in those categories. We will be able to pull back on our reliance on that piece. I think the other piece for us for the customers is price-point messaging versus percentage-off messaging, and I think all of those things are working well. We also have a lot more multiples in our promos right now—multiples in bralettes and knits and woven tops—those types of things that have tested very well for us and are exceeding our expectations. So promos will shift out of much reliance on Torrid Cash, a bit more into everyday opening price point opportunities and price parity between channels, which we also think is important. Loyalty has been pretty consistent for us. What we are looking to build in the loyalty piece is a bit more frequency. Retention is not as much of an issue there as we think we have opportunity in driving a bit more frequency among those loyalty customers with better segmentation. We just did a special sale for them a couple of weeks ago that we delivered in a very different way than we normally deliver. It was very well received, and the conversion on that was quite good. We are testing different tactics to highlight their loyalty levels and giving them more attention. We have also reinstituted the Icon level of our loyalty program, which is the top of those customers, so that we ensure that we continue to get very robust feedback from the loyalty customers. Some of the decisions that we have made are very much driven by the feedback that we get from our customers with every level of communication, every touch point that we have. I would say that we feel like there is a grassroots version of marketing that will augment what we do in more of the paid spend, and I will let Ashlee talk a little bit more about that. Ashlee Wheeler: Hi, Brooke. We recognize that we have an enormous amount of opportunity to leverage our owned and organic channels, particularly to reactivate customers but also to drive frequency among our existing loyalty members through really precise targeting and personalized or segmented content and messaging in a way that we have not historically. We have an enormous amount of data on our customers, with over 95% of them participating in our loyalty program. It gives us a great advantage to communicate to them in a more personalized way, and that is going to be one of our key focuses for the year. Additionally, we have reentered direct mail as a modality, an additional touch point. A portion of that will be allocated to loyalty customers or actives as a frequency-driving touch point, and we will really leverage that in a more powerful way toward acquisition and reactivation. Brooke Roach: Great. And then just one follow-up for Paula. As you look on a multiyear basis, do you think that double-digit EBITDA margins are achievable? And if so, how should we be thinking about the core drivers of achieving that recovery in margin rate? Thank you. Paula Dempsey: Hi, Brooke. Yes, I do believe so. Our plan has up to 150 basis points of EBITDA margin increase in fiscal 2026, and that is really through leveraging our SG&A platform. As we progress throughout the year, we are going to see that leverage increase more and more. Even with the Q1 guidance that we have provided, you will see us starting to leverage SG&A, and at the end of the year, you are going to see that gap increase and, therefore, drive that to the bottom-line profitability. So yes, 150 basis points of leverage this year is very much a possibility, and for that to continue to grow in the next few years is probably a good assumption. Brooke Roach: Great. Thanks so much. I will pass it on. Operator: Our next question comes from the line of Corey Tarlowe with Jefferies. You may proceed. Corey Tarlowe: Great, thanks. Lisa, I guess high-level strategic question. 2025 sort of felt like a defensive year, closing stores. What do you think more is left on the defensive side of the equation as opposed to when do you feel like you can really get to playing offense? And is that the way to think about what 2026 should be? And I have a follow-up. Lisa Harper: Hi, Corey. I do think about us pivoting into a more offense-oriented approach. I think what we have done to restructure the channel expense base, to expand product, and now refine—what we are talking about in terms of segmentation and refocus on owned and organic marketing efforts—is a great opportunity for us and should expand the customer file this year. We are also seeing the reinvigoration of the loyalty interest in the business through sub-brands. We are seeing those aspects of the business. I feel great about product. OPP is working very, very well and will expand. Sub-brands are working well and expanding. We have cut a substantive amount of fixed expense from underperforming stores. The stores that are open right now are exceeding our expectations in terms of their performance. We are starting to see that turn and have actually put a little bit more pressure on store sales as we move through the year, which we think is a better mix in terms of the margin opportunity there. My message overall is intended to share that we have accomplished this store closure very effectively and executed that very well. We have integrated and introduced OPP through multiple categories of the business and are pleased with how that is working. Our store profitability is improving. We are bringing back footwear. We are expanding other categories of the business. We do feel like we are in the position to start reaping the benefits of this as we move through the year. Corey Tarlowe: Got it. That is helpful. And then just as a follow-up, how are you thinking about pricing and promotions for 2026? Lisa Harper: One of the things that helps us with OPP is we actually generate a similar out-the-door price point as well as an enhanced margin, as we are cost-engineering these products due to volume opportunities. As I mentioned, Torrid Cash has less pressure on it this year, as we are moving into more aligned, integrated channel promotions that are more price-pointed. The last piece is targeted promotions throughout segmentation efforts that we think, early on, are showing nice results. So a much more targeted opportunity, using those promotions to reactivate and build frequency of our customers, and using the OPP product on one end and the sub-brands on the other to really engage a broad swath of our customers and build the basket. We are seeing early results in segmentation to be positive, early results in segmentation in the loyalty program to be positive. Being more personalized and surgical about those messages, both from a product and promotional basis, is what the business needs, and we are prepared to do that this year. Operator: Our next question comes from Dylan Carden with William Blair. You may proceed with your question. Dylan Carden: Hi. Can you guys hear me? Paula Dempsey: Yes. Dylan Carden: Awesome. I just want to ask a general question about your consumer. How are they behaving? How have they changed over the last six months? Are you expecting anything from refunds? Any changes in the performance of different demographics? Ashlee Wheeler: Performance within the customer file from a demographic basis has been very consistent. We have seen consumer behavior, or our customers' behavior, be very consistent as well. As Lisa talked about earlier, when we survey customers, the most frequent response we get is related to price or economic pressures that she is feeling, and we have been able to answer that with opening price point in a very effective way. Dylan Carden: Gotcha. So on the refunds, do you expect that to lift any of your OPP sales or anything on that front that you are embedding in the outlook? Ashlee Wheeler: We are encouraged with the trends of the business we are seeing now. Whether or not that is related to tax refunds, I cannot say for certain, but we are encouraged by the trends that we are seeing in the business so far this quarter. Lisa Harper: I would say we do not have anything outsized embedded into the guidance related to accelerated tax refunds. Operator: There are no further questions at this time, which now concludes our question-and-answer session. I would like to turn the call back over to Lisa for closing comments. Lisa Harper: Thank you. Thanks, everyone, for joining us today. We look forward to sharing the progress in the business as we move forward and we release Q1. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines, and have a wonderful day.
Operator: Greetings, and welcome to the Tejon Ranch Co. fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicholas Ortiz, Senior Vice President of Corporate Communications. Please go ahead. Nicholas Ortiz: Good afternoon, and welcome to Tejon Ranch Co.’s fourth quarter 2025 earnings call. My name is Nicholas Ortiz. Joining me today are Matthew Walker, President and Chief Executive Officer, and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today’s press release, Form 10-Ks, and this webcast are available on our investor website. A replay will be posted after we conclude. That site is investors.tejonranch.com. Today’s remarks may include forward-looking statements. These statements are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. These factors are detailed in our SEC filings, including our most recent Forms 10-Q and 10-K. We assume no obligation to update any forward-looking statements. We may reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for, GAAP results. Reconciliations to the most directly comparable GAAP measures and reasons why we use non-GAAP are included in today’s filings and are posted on our website, again, investors.tejonranch.com. After prepared remarks, we will address questions. Shareholders were invited to submit questions by email in advance. With that, I will turn the call over to Matthew. Matthew Walker: Good afternoon. I am Matthew Walker, President and CEO of Tejon Ranch Co. Thank you for joining us. For this, our second earnings call, we will be using the same format as last November. I will share my perspective and turn it over to our CFO, Robert Velasquez, who will cover our financials, and then we will answer questions. As we did last quarter, we will be answering each shareholder question that is asked. So moving on to this quarter, I would like to talk about where we have been and where we are headed. For the quarter, our operating income was up compared to the fourth quarter 2024, while our net income was down. Our net income reflects one-time proxy defense costs, but our overall operating performance was strong, which we will explain as we go through our segments. For the year, our $49,600,000 in revenue and $24,200,000 in adjusted EBITDA both improved over 2024. Our company’s economic driver remains our commercial real estate business. Commercial revenue was up $1,000,000 for the quarter and $3,500,000 for the year, led by two land sales. One of which was a hotel site and the second, a back-end payment on our Nestlé transaction from 2025. In farming, we had one of the stronger years in recent memory. This was supported by an on-bearing year for pistachios. Farming revenue was up 20% over the same quarter last year, and up nearly 26% annually. I am pleased to report that our farming revenues were the highest in a decade. Income from our joint ventures was down for the quarter and down for the year. While our industrial real estate JVs performed well, our travel center JV with TA Petro was impacted by reduced car and truck traffic on Interstate 5. This led to lower fuel sales and fuel margins as well as lower sales in our travel centers and restaurants. On the positive side, we have seen encouraging signs from the Outlets at Tejon, with December generating the highest retail sales of any month since we opened in 2014. There are many factors in play, but among them is the positive impact of the new Hard Rock Tejon Casino, which opened in November. So far, the casino’s impact has been extremely encouraging, and we look forward to further positive benefits from the casino in 2026. Last fall, I talked about commitments made by the board with respect to corporate governance. Today, I am pleased to report that our board is delivering on those commitments. First, as I hope you saw this morning, we filed an 8-K announcing a proposal to provide shareholders with the right to call a special meeting. We are proposing that our shareholders or groups of shareholders owning at least 25% of the outstanding shares can call for a special meeting. Our proposal is consistent with the majority of public companies, and we think it better aligns us with our shareholders. Shareholders will be able to vote on this proposal as part of their proxy ballot prior to the annual meeting in May. Second, I have spoken in the past about our board size and composition. We filed an 8-K earlier this month announcing the decision by our board to reduce in size from 10 to 9. Also, the board decided that two board members, in the event that they are elected this May, would step down by May 2027, which would bring our board size down to 7. In addition, as part of our board size reduction, the board voted to eliminate our executive committee. These changes reinforce that our board is committed to positive governance change. Next, we will be holding our annual meeting on-site at the Ranch on May 13. We invite each of our shareholders to attend. We will also provide an opportunity for our shareholders to attend virtually. It will be a good opportunity to see our assets up close and also a chance to spend time with our management team and board. Following the annual meeting, we will be hosting tours of the Ranch including the Tejon Ranch Commerce Center, the Terra Vista apartment community, and the Hard Rock Tejon Casino, and we hope you can join us. Registration information will be provided with your proxy statement. Last year, we completed a number of cost-saving measures. Looking ahead, I want to communicate that we are not done yet. We are continuing to streamline our operations and have targeted an additional $1,000,000 of overhead savings by 2027. When you add all of this up, our operating business is showing signs of positive momentum. However, I want to emphasize that cost improvement alone is not our only goal. As a company, we must put more of our assets to work generating higher cash flow, producing more earnings, and increasing value for our shareholders. I described my first year at the company as setting the table. This consisted of taking a close look at all aspects of the business, formulating a strategy, and then communicating that strategy to the market. This year, we are working on activating those plans. Right now is an exciting time for the company as we look to grow our revenue base and realize the benefits of our cost savings to drive more earnings growth. With all this as a backdrop, I would like to turn the call over to our Chief Financial Officer, Robert Velasquez, so that he can go through the quarterly financials. Robert Velasquez: Thank you, Matt, and good afternoon, everyone. I will focus my remarks on our fourth quarter results, provide some additional detail on segment performance, and then briefly discuss liquidity. For the fourth quarter of 2025, net income attributable to common stockholders was $1.6 million, or $0.06 per diluted share, compared to $4.5 million, or $0.17 per diluted share, in 2024. Revenues and other income, including equity in earnings from unconsolidated joint ventures, increased 8% to $23.3 million compared to $21.6 million in the same quarter last year. Adjusted EBITDA for the quarter was $11.4 million, an increase of 9% compared to $10.5 million in the prior period. Turning briefly to segment performance, commercial and industrial real estate generated $4.2 million in revenue for the quarter, compared to $4.1 million in the prior-year period. Operationally, the portfolio remains strong, with the industrial portfolio fully leased and the commercial portfolio approximately 98% leased, which includes the Outlets at Tejon at 93% occupancy at year-end. Equity in earnings from unconsolidated joint ventures totaled $2.1 million in the fourth quarter, compared to $3.3 million in the prior-year period, reflecting lower earnings from the travel center joint venture. Farming revenues for the quarter were $12.2 million, an increase of 26% compared to $9.7 million in 2024, reflecting the impact of the pistachio harvest on the on-bearing year cycle as well as improved performance across other permanent crops. Adjusted farming EBITDA before fixed water obligations increased to $4.4 million in the fourth quarter from $3.4 million in the same quarter last year, with margins improving modestly as higher crop production drove operating leverage. Mineral Resources revenue totaled $2.4 million for the quarter, compared to $2.5 million in the prior-year period, reflecting lower oil and natural gas production volumes, and pricing. I am pleased to introduce a new reporting segment and a milestone for the company. For the first time, we are reporting a segment dedicated to our multifamily revenues and expenses. As lease-up activity at Terra Vista at Tejon gained momentum, we evaluated whether the business warranted its own segment and concluded that it did. Here is where things stand. During the quarter, the company recognized $536,000 of multifamily revenue, reflecting leasing activity at Terra Vista at Tejon, which commenced leasing early in 2025. Phase one of the project, consisting of 228 units, was completed during the year, and the property continues to progress through a lease-up phase. Turning briefly to our balance sheet, as of 12/31/2025, cash and marketable securities totaled approximately $24.9 million. Available capacity on our revolving line of credit facility was approximately $66.1 million. Total liquidity was therefore approximately $91.0 million. We believe our liquidity position provides sufficient flexibility to continue advancing development initiatives while maintaining balance sheet discipline. With that overview, I will turn it back to Matt. Matthew Walker: Thanks, Robert. To close, our direction is clearer. We are strengthening our core business, tightening our cost structure, and concentrating on leveraging our assets to generate recurring cash flow. At the same time, our board has made significant progress in governance and shareholder alignment. We remain committed to providing you, our shareholders, with clear communication and accountability. We will now open for questions. We will respond to the questions that have been submitted. So please just give us a moment to get those pulled up. Alright. Nicholas Ortiz: Thank you, Matt. We received 11 questions before the deadline. We will read each one as submitted, as we did last quarter, and identify the submitter. Before we begin, I just want to thank all of our investors who submitted questions for their engagement. Our first question: When will TRC management and its self-serving board finally respect and benefit all the shareholders as its prime goal rather than the selfish history of self-enrichment? When will management stop being a disgrace and finally unlock the assets of the company for the benefit of its owners, not its management who, for decades, only sought the benefits for themselves? The question is from Samuel Koenig. Matthew Walker: Okay. I understand the question, Samuel, and I understand the sentiment and the frustration behind it. I have been at the company for just over a year now. And in that time, I have scrutinized our operations looking for opportunities to grow our revenue base and reduce our costs. We have been able to reduce our workforce by 20%. We have cut millions from our overhead. We have also taken a much more proactive approach with our shareholders. We held an Investor Day last October. We are now hosting earnings calls like the one we are having right now, and those include a format where individual shareholders like yourself can engage in a direct dialogue with management. We provided additional financial disclosures like the ones that Robert just mentioned, plus investment scorecards and hurdle metrics to better explain our business to shareholders. These are all examples of the company’s new approach. You alluded to accountability with executive compensation. Right now, we are in the process of finalizing our proxy statement. When it is released, I think you will see how our existing compensation structure is responsive to the company’s financial performance and how it addresses the accountability issue in a meaningful way. And in addition, we have been working on a revised compensation plan, which will be covered in the upcoming proxy, that further aligns us with shareholders and increasingly ties our performance to share price improvement. Moreover, I personally made adjustments to my compensation to further align myself with shareholders. Furthermore, a few weeks ago, as we discussed just a few seconds ago, our board shared its plan for governance reform. We reduced the board size. We eliminated the executive committee. Today, we announced the proposal for a shareholder meeting right. Our board is, on top of that, we have increased representation from our shareholder base compared to where we were a few years ago. I think you should know that our board is not monolithic, and our board members have diverse opinions and they are not afraid to share them. So these are just a few of the things that we are working on between management and the board to enact change for the better. Taken in aggregate, we have made a positive difference in the last year. I cannot speak to all the things that you mentioned before I joined the company, but what I can tell you in the answer to your question is I do think that we are on our way to demonstrating accountability and creating value for our shareholders. Next question. Nicholas Ortiz: Next question. As California continues to tighten regulations on traditional rodenticides, including the 2021 restriction on second-generation anticoagulants, how is Tejon Ranch approaching wildlife-friendly or nonlethal rodent control methods across its almond, pistachio, and cattle operations? And is this an area where you see potential for innovation or outside partnership as proof of your broader sustainability and environmental stewardship commitments? The question is from Eli Simo. Matthew Walker: So one of the things that I have grown to appreciate on the Ranch in my first year here is how interconnected the various businesses are and how important it is to take a long-term view of the Ranch and its stewardship. The Ranch really is a special place that requires active management. Our team has been doing this for nearly two hundred years. The vast majority of the Ranch is also part of the Tejon Ranch Conservancy, and that means we have numerous rules and restrictions that are designed to protect the Ranch and the wildlife that calls the Ranch home. And I can see some of that wildlife outside of my window as we speak. Your question gets to how we balance our farming business with our game management business. We take our responsibility to grow crops seriously and to do so in a sustainable manner, just as we are committed to safely operate a high-quality hunting program and one that respects the stewardship of our wildlife resources. We approach pesticide and wildlife management with an integrated framework. We emphasize prevention and habitat management over reliance on any single tool or chemical approach. And all of that means if the regulatory environment evolves, we are well positioned to adapt because that philosophy is already embedded in how we operate everything that we do here. Nicholas Ortiz: We have two questions from the same submitter. I am going to read them both before you respond, Matt. The first question is this: As of year-end, we have roughly $300,000,000 of invested capital in Mountain Village and Centennial combined. These assets generate no income, and between the associated water costs, land management, and continual development planning, they continue to impede our ability to generate acceptable returns on invested capital. How are you going to grow returns on invested capital to an acceptable level over the next few years while we continue to hold on to these assets? Even with no additional investment, these projects would need to go from generating losses to contributing over $20,000,000 of annual income simply to earn a minimal ROIC. The next question is: We would greatly appreciate hearing how the company will be able to significantly increase ROIC and earnings over the next five years while we continue to have $300,000,000 of capital tied up in these projects. Both questions are from Justin Lebo. Matthew Walker: Thank you for your questions, Justin. As Nick said, let me take those together. They are important topics and I want to recognize that there are varying opinions on this. Let me share our perspective and build on what I have said and what I have written in the past. Our master-planned communities have been an important component of our overall business plan for several decades. You are right. They have required a significant capital investment. My goal is to move our communities into active implementation so that they can begin to generate cash flow and a return on our invested capital as you noted. Reality is that this is going to take a few more years. There are many examples of public companies who are operating in this master-planned community space from Florida to Texas to right here in California. Each of them has had to go through some degree of effort to complete their approvals, to complete their design, and to finish their infrastructure before they can start producing revenue. And all of that takes time and capital. We are no different, and we have consistently communicated that to the market. Fortunately, we have other businesses that also generate cash, and we hope to increase that while our community development ramps up. When you look at the other companies developing MPCs, you can see that there is significant cash flow that is generated, which achieves an attractive ROIC, and we would expect that our master-planned communities can generate significantly more than the $20,000,000 of annual income that you mentioned. Also, our business plan is to utilize third-party joint venture equity, so that should help a little bit too. On Mountain Village, we started the capital raising process. And on Centennial, first and foremost, our approach is to complete a reentitlement effort, which will result in significant value creation and preserve the value of our investment to date. As we mentioned in our press release, that project is advancing through the reentitlement process and will soon be entering a more public stage, and we expect to be in front of Los Angeles County later this year. Alright. Nicholas Ortiz: Next question: Have there ever been any outbound efforts or inbound inquiries to monetize the Mountain Village and Centennial, or the land held under the conservation agreement? What is the status, and what is your thinking about this? This is a question from David Ross. Matthew Walker: Thanks, David. As we mentioned before and in my answer to the previous question, there have been outbound capital raising efforts in the past related to Mountain Village. As I mentioned in my letter last fall, and in my previous remarks today, we are in the process right now of capital raising for that project. As it relates to inbound inquiries, we are always happy to chat with anyone who has an interest in our business, including our land. And as I just previously mentioned, Centennial is in a little bit different position given its ongoing reentitlement status. Nicholas Ortiz: Alright. Our next question is: Given the large amount of investments the company has made in Mountain Village and Centennial over the last thirty years, would not the highest and best use of capital be to monetize these assets and focus on Grapevine and TRCC? How do you justify the alternative? This is a question from Paul Ross. Matthew Walker: Hi, Paul. I do not look at Mountain Village and Centennial as being mutually exclusive with Grapevine and TRCC. The Commerce Center is already a huge focus for us, and I think you can see from our notable investment at Terra Vista we are committed, economically and strategically, to TRCC. We are also committed to expanding and developing out TRCC, and we plan to do so. The same goes with Grapevine. I have tried to state the case for Mountain Village and Centennial. What I would add is that with respect to any of the company’s assets, the ones I have spoken about or the ones I have not, we need to maintain flexibility so that we can adapt to market conditions and any opportunities that might arise, so that we are deploying our capital on a go-forward basis in the most advantageous way possible. I have tried to be clear that capital allocation is one of the most important things that we do here at Tejon Ranch Co. Nicholas Ortiz: Alright. Are you satisfied with the pacing and absorption of the apartments? Will you expand into phase two or bring in a partner? This is a question from Stuart Ross. Matthew Walker: Stuart, I appreciate the question. Yes. We are pleased with our current lease-up at Terra Vista, and I am happy to say that we are now 70% leased. We are approaching our one-year anniversary, which is exciting. We brought on Greystar to manage the apartments, so we are benefiting from the horsepower of the nation’s largest multifamily owner and manager. They are leveraging their platform in Los Angeles and Northern Los Angeles County to expand into Kern County. We have also done a good job with programming and events and things like that, and our tenants really enjoy living there, and we hope to have them for years to come. On phase two, yes, the plan is to expand into our second phase. It really, for us, comes down to a capital allocation and prioritization decision. There are a number of ways that we can proceed. Fortunately, the amenity complex from phase one is already in place, so there are efficiencies that would come in developing that second phase. Nicholas Ortiz: Next question. As of the end of this year, the company has close to $600,000,000 of invested capital on its own balance sheet, while our joint ventures, fully owned commercial real estate assets, and Mineral Resources segments generate roughly $20,000,000 of annual recurring profits, or total annual net operating profit after taxes has never exceeded $3,500,000 in any of the past three years. To achieve a sustainable return on invested capital of just 5%, a reasonably low expectation for a shareholder, you would need to either grow total net operating profit to over $30,000,000 per year or remove a substantial amount of capital from the business. How will you be able to achieve this over the next few years? This is a question from David Spear. Matthew Walker: Thanks, David. Let me see if I can provide some additional thoughts on top of what I already said earlier on this topic. You are absolutely right. Big picture, we need to take more of our company’s balance sheet, and we need to convert those assets into cash flow production. And this needs to happen as quickly as possible. And believe me, I feel the urgency. Beyond our master-planned communities, and I think this is what you were getting at, is we need to increase our cash flow from all of our non-MPC assets as well. So there are a number of ways that we can address this. First, we need to drive bottom-line improvements across our existing operating assets through active asset management. We are doing all sorts of things. We are renegotiating contracts. We are looking for lower-cost alternatives. We are finding better ways to be more efficient across our different segments. Second, we need to continue to advance our business plan, as I mentioned before, particularly at TRCC, where we have a consistent track record of producing high-yielding commercial real estate assets, particularly in the industrial sector. This is a priority for us, and we are working hard to move forward, and it is critical that we do this, and it is a critical way for us to increase our cash flow. Third, we need to think out of our commercial real estate box, and we need to leverage our key differentiating asset, and that is our 270,000 acres of land, and we need to monetize that land. So our team is hustling. You would be surprised at who is interested in utilizing our land. So overall, it is a balanced approach, and it is going to take a combination of singles and doubles and more than that to move the cash flow needle to where it needs to be, whether you are talking about EBITDA or NOPAT or net income. Okay? Our next question. Nicholas Ortiz: Given that the Tejon Ranch property is in proximity to Los Angeles, will the company consider holding an Investor Day at the company headquarters rather than in New York, as was done previously? This question is from Richard Rudgley. Matthew Walker: Good question, Richard. I think you are onto something. I have some good news to report on this front, which we talked about a little bit before. There really is not any substitute to seeing Tejon Ranch firsthand. There is a lot to see, and even for the people who have toured over the past couple of years with us, I think there is reason to come out. As I mentioned earlier, we are pleased to share that our upcoming annual meeting will be on May 13. It is going to be right here at the Ranch. It will be a hybrid format, so shareholders can participate in person or remotely. We are going to have a lot of the same components that we did for last October’s Investor Day in New York. So we will be giving a presentation about the company. We will take your questions just as we did in New York. But since we are on-site, we will also be hosting property tours of the Ranch. Our goal is to make it immersive and informative, and it will be a great way for shareholders to interface with our management team while also getting a close-up look at some of our recent additions. And these would include our Terra Vista apartments and our new neighbors at the Hard Rock Tejon Casino, which ought to be packed no matter when it is that we have to go. And good for them, as I have mentioned before. We are going to be sending out details on the event shortly. We will be taking reservations for our tours, so stay tuned. And then as it applies to a dedicated Investor Day, we will start planning for that after our annual meeting. So your feedback, Richard, is noted and appreciated. Nicholas Ortiz: Next question. How much is estimated to be needed to fund the development of Centennial, as well as separately, Mountain Village? And will a shareholder rights offering be considered as a way to fund some of this to limit dilution of future profits? This is a question from Bob Edwards. Matthew Walker: Thanks, Bob. We have not disclosed publicly the future all-in development cost of Mountain Village or Centennial. While I can appreciate the desire for you to see that, it is something that we would intend to share closer to groundbreaking. As with any large-scale master-planned community, construction is phased, and we recycle the cash flow on the front end to minimize how much equity is required. And as I noted earlier in the call, we would plan to use third-party joint venture equity as opposed to a rights offering to avoid dilution of our shareholders. Okay. Which is our eleventh and final question. Nicholas Ortiz: What level of confidence do you have that Los Angeles County will approve the Centennial development, and what timeline do you project for potential approval? This is a question from Steven Chats. Matthew Walker: Hi, Steven. Good question. I have touched on Centennial some already, but let me answer your question with some more detail. First off, we are not going to prejudge any regulatory outcome, and we want to be respectful of the process before it proceeds. But I will say this: Our confidence in advancing Centennial to approval is high. It is important to note that our relationship with Los Angeles County remains genuinely strong; throughout this entire process we have built a long-standing partnership with the County, which has been extremely productive. The challenge at this stage is not really the County; it is the pace of any legal process that may unfold. And that is a distinction that is worth noting. So as it relates to Centennial, we have been working hard to prepare a comprehensive plan, which we believe addresses the court’s previously identified issues. What is encouraging is that the list of open issues continues to narrow. We have been through a lot on this project. It includes the Antelope Valley regional area planning process, which identified the site for economic development and growth. We worked on the General Plan. There has been new case law on fire protections, you name it. We have consistently taken the approach that we should show up, engage, and then move through the process just like we have successfully done at TRCC, at Mountain Village, and at Grapevine, which are all today fully entitled and fully litigated. This year at Centennial, we will be moving into a more public phase of environmental review, and as I mentioned before, we hope to be in front of Los Angeles County and the Board of Supervisors later this year. Centennial does shine a spotlight on something broader, and that is California’s need to modernize its environmental review framework. We are active in those conversations at the state level, and we think there is real momentum at last to enact positive reform. But we are not waiting for a policy miracle. We have demonstrated that we know how to get through a process. We have done it multiple times. And we are confident that we will get Centennial approved. So if that is all, I would like to thank everyone for providing questions. As I mentioned earlier, we also look forward to our upcoming annual meeting in May right here at the Ranch, and we hope you will join us here. So thank you very much, and have a good day. Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Rob Fink: Greetings, and welcome to the electroCore Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Reminder, this con call is being recorded. Earlier today, electroCore published results for the fourth quarter and full year ended December 31, 2025. A copy of the press release is available on the company's website. I'd like to remind you that members on the call will make statements during the call that include forward-looking statements within the meaning of the federal securities law, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact should be deemed to be forward looking. All forward looking statements, including, without limitation, any guidance, outlook or future financial expectations, our operational activity and performance, including any statements regarding first quarter 2026 and full year performance and the path to profitability are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list of these risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. ElectroCore disclaims any intention or obligation, except as required by law, to update or revise any financial projections, forward-looking statements whether because of new information, future events or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, March 19, 2026. It's now my pleasure to introduce Dan Goldberger, electroCore's Chief Executive Officer. Daniel Goldberger: [indiscernible] participating in today's electroCore earnings call. Joining me today are Dr. Thomas Errico, one of our founders and investor and Chairman of the electroCore Board of Directors; and Joshua Lev, our Chief Financial Officer. Before we begin, I want to express the privilege it is to address so many colleagues, partners, investors and their friends who have supported electroCore since I took the CEO position in late 2019. For the years, we've taken meaningful steps in building a great company. I'm Deeply proud of what we accomplished and truly thankful for your support as well as the support and hard work of all the employees worked tirelessly in making our noninvasive pain therapeutics available to patients who need them. With that in mind, I'd like to share an important personal decision about the next chapter for myself and for this organization. After a thoughtful discussion with the Board about the company's next phase of growth I have made a decision to retire as CEO of electroCore effective April 1, 2026. When I joined in late 2019, [indiscernible] was strengthening the company's financial position and establishing a focused commercial strategy. For the past several years, we've made substantial progress on those objectives, including building momentum in the VA channel, expanding our product portfolio and putting the company on a stronger financial footing. With that foundation now in place, the Board and I believe this is the right time to begin a leadership transition as electroCore moves into its next stage of growth. To ensure a seamless transition, the Board of Directors has appointed Joshua Lev as Interim President, electroCore is also hiring a new Chief Operating Officer. These steps will provide stability and operational momentum while the Board conducts a thorough search for my permanent successor. I look forward to continuing to support the company during the transition and to exploring new opportunities where my experience may be helpful. I step away knowing that electroCore is in excellent hands and well positioned for continued success. I'm confident the leadership team will continue building on the progress we've made and drive the company forward in the next phase of growth. It's been an honor to lead this organization and serve you, our shareholders. Thank you for your unwavering support. I look forward to watching electroCore thrive [indiscernible] Now the Chairman, Dr. Errico like to share a few thoughts on strategy and [indiscernible] Thomas Errico: Thank you, Dan. On behalf of the Board of Directors, I want to take a moment to recognize Dan Goldberger, for his outstanding leadership. We're grateful for the strong foundation he has built and for the momentum the company carries forward today. As we look ahead, I'm pleased to share an update on our leadership transition, which is designed to ensure continuity and focus as we enter our next phase of growth. Effective April 1, Joshua Lev, our Chief Financial Officer, will assume the role of Interim President, overseeing day-to-day operations while continuing to serve as CFO. Josh has more than 15 years of experience in finance and operations and has played a central role in guiding the company through several key milestones. He is well positioned to lead during this transition as we conduct a search for a permanent successor. In April, we will welcome Michael Fox as our new Chief Operating Officer. Michael joins us from Pro Medtech, where he served as Chief Revenue Officer. He brings more than 3 decades of experience across pharmaceuticals, biotechnology and medical devices with deep expertise in complex federal markets, including the VA system. His operational leadership will be instrumental as we continue to scale across the organization. With this transition in place, the Board and management team remains fully focused on executing our strategy of increasing sales within covered entities such as the VA system and driving long-term value through market expansion into general wellness with our Truvaga product offering. Being now to the business. We remain encouraged by the continued momentum of our noninvasive vagal nerve stimulation or MVNS platform. Before Josh Lev reviews the financials, I'd like to briefly highlight the clinical foundation supporting our portfolio. Our flagship gammaCore device is supported by a substantial body of scientific evidence, including more than 20 peer-reviewed publications and multiple randomized controlled trials, such as AT1, AT2, Presto and premium. These studies have demonstrated statistically significant reductions in migraine and cluster headache frequency, intensity and duration, gammaCore is FDA cleared for both acute and preventive treatments in adult and adolescents and real-world adoption continues to build. For example, U.K. audit data shows that a meaningful portion of cluster headache patients achieved clinically significant response rates alongside measurable cost savings compared to standard care. Beyond gammaCore, exploratory studies plus additional indications, including Schorn syndrome, gastroparesis, traumatic brain injury, and inflammatory conditions related to COVID-19 highlighted the potential for broader anti-inflammatory potential of nVNS. These studies have shown encouraging signals across fatigue, quality of life measures and anti-inflammatory biomarkers. At the same time, ongoing trials in areas such as PTSD, long COVID, substance abuse disorder, muscularskeletal pain and concussions, supported by partnerships, including the NFL and NFLPA funded research support our long-term strategy for indication expansion. In addition, our Quell device is supported by a growing body of peer-reviewed research. -- including randomized controlled trials published in well-regarded journals. These studies demonstrate efficacy across multiple pain-related conditions, including difficult-to-treat fibromyalgia, further strengthening the clinical foundation of our portfolio. On the consumer side, Truvaga continues to gain traction as a wellness product, focused on stress reduction, sleep quality and emotional well-being through parasypthetic nervous system activation. Truvaga has recently received recognition from major lifestyle publications and engagement across social and digital channels continues to grow. For example, national media outlets like women's health and men's health have been driving website traffic. Miranda Kerr mentioned Truvaga on the skinny confidential podcast, [indiscernible] like true met, Ben Greenfield and Luke story have been promoting Truvaga, and Truvaga is now available through online retail outlets like Best Buy and Rehab. Independent in-home studies indicate high levels of user reported commonness and sleep improvement after consistent use. Importantly, this momentum supports diversification of our revenue mix and highlights the scalability of our nVNS technology in direct-to-consumer channels. First, the expanding clinical validation across our product lines continues to support prescription growth, payer engagement and international expansion. We believe this positions the company well for sustained revenue acceleration and long-term value creation as we bolster our commercial team with VA governmental specialists to further execute against our pipeline and strategic priorities while maintaining our attention on operating efficiency to progress towards profitability over time. And now I will turn the call over to our Interim President and CFO, Joshua Lev to walk through the financial results. Joshua Lev: Dr. Errico. Before reviewing the financial results, I want to briefly acknowledge the leadership transition announced earlier. [indiscernible] played an important role in shaping the company over the past several years and the strategy we have in place today reflects that work. On a personal note, I've learned a great deal from working with Dan, and he has been a strong leader for the organization. Our focus remains on executing the [indiscernible] strategy expanding adoption across the VA system and continuing to scale our wellness platform. [indiscernible] details of our fourth quarter and full year 2025 operating performance. electroCore delivered another year of strong top line revenue growth, extending our growth trend and exceeding both revenue and EPS analyst consensus [indiscernible] The VA hospital system remains our largest customer, continues to grow. We expect adoption of our noninvasive same therapeutics. Truvaga sales also showed great strong driven primarily by our e-commerce store at www.truvaga.com and an expanding network of affiliates to actively promote Truvaga to their [indiscernible] Revenue in the fourth quarter of 2025 was our highest ever, reaching a record of $9.2 million, up 31% year-over-year and bringing our full year 2025 revenue to $32 million or 27% over full year 2024. [indiscernible] revenue increased 23% year-over-year to $26 million by continued growth gammaCore and Quell within the VA hospital system. Acquiring the Quell assets in May 2025, [indiscernible] generated $1.5 million in revenue. As of December 31, 2025, [indiscernible] facilities [indiscernible] products, up from 170 a year ago. Approximately 13,400 VA patients [indiscernible] gammaCore device and [indiscernible] we estimate this represents roughly 2% penetration of the addressable VA headache market. Given the scale of the VA system and the number of patients experiencing headaches, related to PTSD and mild traumatic brain injury, we believe there may be a significant opportunity for continued growth. For this opportunity we expanded our VA sales presence during 2025 by adding both internal team members and contracted representatives. In 2026, we will also welcome Michael Fox as Chief Operating Officer. We [indiscernible] experience commercializing products within federal health care systems to help accelerate [indiscernible] and expand our commercial reach. Turning to our general wellness channel Fourth quarter revenue reached $1.4 million, representing 31% year-over-year growth. Full year general wellness revenue totaled $5.5 million, an increase of 97% compared to 2024. [indiscernible] primarily driven by $5.4 million in Truvaga sales, up 93% from 2024. While Truvaga revenue was flat sequentially [indiscernible] quarter included a onetime $500,000 order associated with a third-party clinical trial. Excluding that order, Truvaga revenue grew approximately 40% sequentially. Return on advertising spend or ROAS for the [indiscernible] period was approximately $2.10, meaning for every dollar spent on media, we generated nearly $2.10 [indiscernible] $1.80 in Q3 2025 was primarily driven by a seasonal increase in sales during the holiday season. [indiscernible] across our e-commerce platforms have increased slightly but remain at approximately 12% to 15% with prior periods. We believe that ROAS as a result of the shift away from Amazon and the teams increased [indiscernible] driving sales through other direct-to-consumer platforms. As we look forward to 2025, we expect to expand the potential applications for our NDNS platform while introducing additional wellness offerings, including Quell relief for lower extremity pain. We are also developing our next-generation mobile application signed to complement an [indiscernible] differing more personalized and data-driven user experience, which could support recurring revenue opportunities. Based on the opportunities ahead, we are investing in people, marketing and product development to accelerate growth in 2026 to 2027 while maintaining discipline around operating [indiscernible]. Turning briefly to the full year 2025 financial results. Net sales in 2025 increased 27% to $32 million, driven by growth of prescription gammaCore and Quell fiber biologic products in the VA system as well as increased sales of our nonprescription group data general wellness products. We expect the majority of 2026 revenues continue coming from the U.S. Department of [indiscernible] Net profit increased to $27.8 million for the year ended December 31, 2025. Margin was 87% compared to 5% full year 2024. Research and development expense of $2.7 million decreased by approximately $375,000 compared to the prior year, [indiscernible] primarily related to the development work on our gammaCore Emerald and our next-generation [indiscernible]. Selling, general and administrative expense, $38.2 million year ended December 31, 2025, increased by $7 million compared to $31.2 million in the [indiscernible] marketing increased by $4.3 million from the prior period. The increase in sales and marketing was primarily driven by a $3.8 million increase in burial expenses, which contributed [indiscernible] increase in sales. General and administrative expense increased by $2.7 million from the prior year. This increase was primarily driven by a $800,000 increase in legal fees and early associated development activity, $500,000 [indiscernible] with 1 customer, $300,000 investment [indiscernible] systems and $200,000 of increased transaction fees [indiscernible] Total operating expenses for the full year 2025 were approximately $40.9 million as compared to $33.6 million in the full year of 2024. Other expense of $800,000 for the year ended December 31, 2025, increased by $1 million versus the prior year period. The increase is primarily attributed to nonrecurring expenses, including $0.5 million change in the estimated liability payable pre-closing shareholders of [indiscernible] metrics pursuing to with CDR equipment and interest expense associated with our term debt financing with [indiscernible] other income for the year ended December 31, 2024, which is primarily of interest. Net loss for 2025 was $14 million or $1.65 per share compared to a net loss of $11.9 million or $1.59 per share in 2024. Net loss is primarily attributed to an increase in operating expense and other expense [indiscernible]. Adjusted EBITDA net loss this full year 2025 was $8.7 million compared to $9 million in the prior year. [indiscernible] and adjusted EBITDA primarily reflects a GAAP net loss, offset by adjusting for Neurometrix acquisition-related items [indiscernible] for reserve bad debt expense and IP litigate [indiscernible]. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement table concluded [indiscernible] and marketable securities at December [indiscernible] 2025, or approximately $11.6 million approximately $12.2 million as of September 30, 2024. Looking ahead, we remain focused on accelerating growth in our high-margin [indiscernible] particularly within the VA by adding leaders, Michael Fox spent a career successfully commercializing products in the federal channel, while also continuing to build durable inefficient general wellness channel. We believe our full year 2026 revenue has the potential to continue growing at approximately 30%. [indiscernible] However, in light of the leadership transition, you're not issuing detailed guidance at this time and expect to revisit formal guidance when appropriate. We believe the company is well positioned in driving growth and adoption in the [indiscernible] how our wellness platform and maintain discipline on operating efficiency drive long-term shareholder value and profit. I would now like to turn the call over to the operator for Q&A. Rob Fink: [Operator Instructions] Our first question comes from Jeffrey Cohen of Ladenburg. Jeffrey, can you please unmute? Jeffrey Cohen: Congrats on all the accomplishments and we wish you well. I guess, firstly, could you talk about the channels? Talk about the VA and talk about DTC for both gammaCore as well as Quell where you anticipate in '26. I know that you've done a great job in adding centers of excellence PAs. How might the outlook into 2026 and steps and thoughts about the DTC business for both Truvaga as well as Quell. Daniel Goldberger: Jeff, thanks so much. Appreciate you joining the call and always appreciate your great questions. From the VA channel, we've had a lot of acceleration over the course of the last year in 2025. And we've been pretty adamant that we believe the way for us to go ahead and grow that is to increase the number of boots on the ground, either through W-2 employees or through a 1099 network. And we've done a really nice job over the course of the 2025 of increasing those 1099s, which is a variable expense as it relates to the overall sales and marketing, right? It doesn't add any headcount. But we're really enthusiastic that we have a new commercial leader joining and Michael Fox, who's joining mid-April. Michael comes to us with a background in selling primarily into the federal channels. He has years of experience and actually decades of experience in building out commercial-related teams, primarily focused in accelerating growth within those federal channels, particularly in the VA. So as we think about how we think the VA is going to grow over the course of 2026, while we haven't given any specific guidance to that. Our thought is that we have an existing team, which has been proven successful to go ahead and grow within those channels. And then we've got Michael who's going to come in and bring his know-how, his knowledge and hopefully, some of his relationships to help accelerate growth within the VA. When it comes to the direct-to-consumer channel, I think what we realized earlier on this year is we're much more effective in terms of our efficiency of media spend. when we're focused primarily in driving traffic to our own website at www.truvaga.com. And the way that we've been able to go ahead and grow that most efficiently is by increasing the number of affiliates and influencers that we have that are out there that are talking about electroCore and our Truvaga product. So as we look into 2026, our goal is to focus on identifying more partnerships such as the Miranda Kerr relationship that we talked about earlier, we have Mark, Best Buy, things of that nature that will help us with the growth in the channel that will help grow around the truvaga.com traffic. Jeffrey Cohen: Okay. That's perfect. And then one more as a follow-up. Could you talk about OUS channels and any expectation into '26 of US or any specific geographies worth calling out today? Daniel Goldberger: Yes. From our perspective, NHS England is still a channel that's much -- that's worthwhile in terms of mentioning as it just relates to our overall revenue. We have the most adoption within the NHS in England. But the NHS does have a bit of a bottleneck because of the way that the rules are written as it relates to who specifically has to write the prescription in order to get prescriptions adjudicated and ultimately fulfilled through the program. While we have interest in other countries outside of England, we've got distributors in locations such as Belgium, where we have some reimbursement -- we're still developing the infrastructure, if you will, or the adjudication infrastructure more than anything to make sure that there is a pathway for which patients can go ahead and actually either get this covered or pay through cash providers. And we're doing that through third-party distributors. So right now, I'd say NHS England is really going to be our focus as it relates to the main driver of OUS revenue. But as additional distribution partners come available and reimbursement opens up, we'll be sure to update the Street on that. Rob Fink: Our next question comes from Carl Wallace of HCW. Unknown Analyst: This is Charles on for RK. And Dan, congrats on on all you've done for electroCore, and it was great working with you. Daniel Goldberger: Thank you. Unknown Analyst: So for my first question, with the changes with management, the new hiring of Michael Fox and increased responsibilities for Joshua. I wanted to better understand these new leadership dynamics. And so will Michael focus primarily on kind of the VA business. Will Joshua handles the wellness in ex-VA. Daniel Goldberger: Charles, great question. Yes. So the short answer to your question is yes. But Charles -- I'm sorry, Michael has really -- has a strong background and history in driving and building commercial organizations. So our expectation is going to be that Michael is going to need to come in here, get his feet wet a little bit and get a firm understanding as to how our sales operations currently work. But we believe that Michael's background primarily around commercial and whether that's not just VA, but it could be other federal systems as well. It could also be other commercial systems, perhaps such as Kaiser or commercial insurers is really going to fall under Michael's purview. As it relates to the day-to-day activities as well as Truvaga, right now, the plan is for that to fall in my court. Unknown Analyst: Perfect. And then can you remind us of the prior VA contracts? And with the onboarding of Michael, is there going to be any adjustment to this contract? Daniel Goldberger: Great question. At the moment, the answer is I don't know, but I don't think so. Our VA contract already has our products listed on it. The name and who's the at the helm of an organization doesn't really necessarily change the nature of the contract in its own right. That said, Michael is coming to us with years and decades of experience in selling to these different channels. So if there are opportunities for us to make that contract more efficient for both electroCore or for the VA for that matter for the customer then what's absolutely on the table that we would consider it. Unknown Analyst: And then for my final question. So Dan has kind of been the architect on kind of TAC-STIM in the military channel. So with him leaving, does that mean that there might be a deemphasis on the TAC-STIM product? Daniel Goldberger: No, I don't think so. TAC-STIM has always been a lumpy business for the company, and we still have a robust pipeline of different military groups and military organizations that are of interest. If anything, I think that there could be an opportunity here to maybe pull through some of that or accelerate, as mentioned before, Michael Fox's experience isn't just necessarily in the VA, it's all federal systems. So I do think that there could be -- it doesn't mean that there will be, but there could be an operation to maybe pull forward some of those revenue opportunities. Because we have someone that's been in depth in working with those with the Hill and different military organizations. Rob Fink: Our next question comes from Charles Wallace. Okay. Let's go to Jeremy Pearlman, Jeremy, do you want to unmute? Jeremy Pearlman: First related, you mentioned earlier on the call the Quell relief -- is that going to be sold into the VA DoD channels? Is that going to be in general wellness also is that a first half or second half '26 event? And is revenue from that going to be baked into the guidance? Or do you think anything from any revenue generated would just be icing on the cake. Daniel Goldberger: Jeremy, thanks so much for the question. So our Quell Relief product, which is also internally, we know as Quell over-the-counter is it's technically an over-the-counter product. So it's not technically a general wellness product. Our plan is to launch that product in the first half of 2026. Our expectations for that product are similar to how when we originally launched Truvaga. I'm not sure if you recall, but -- we did a very soft launch early on just to see what kind of access and traction we got. The Quell brand itself has legacy users and legacy demand. And we're hoping that by doing a soft launch of the program, we could start getting a sense as to where to best spend our media dollars. Which will then give us a more robust plan as to how we go ahead and grow that into its own product category. But to answer your question, right now, when we look at our 30% guidance that we've given year-over-year, anything that would come out of the Quell OTC or the Quell relief product would be incremental to that. Jeremy Pearlman: Okay. Understood. Great. And then maybe if we could jump to your return on advertising spend. You said it was $2.1 million ex this quarter. And you did mention on one of the earlier questions, you are trying to identify more partnerships to help growth. Is that -- is there a goal for 2026? And how much can you really increase that return? Is it -- you can get into the 3x range even more? Or is it an incremental gain? Daniel Goldberger: That's a fantastic question. The true answer is it really depends right? We have a team of dedicated people that look at our -- look at our return on advertising spend on a daily basis, and they move our media dollars around based off of where we're getting the highest efficiency or the highest return on our investment. From what we've seen in the category, we think industry would be somewhere between the 2 to 2.5 range. If we -- there have been times within Truvaga's lifespan that we have actually achieved greater than 3% return on media spend. But typically, what happens is the more efficient you get over time in a particular channel, that efficiency then hits its it's peak and then starts coming down and you have to find different avenues. So to answer your question, I think that our goal for the year is going to try to have that above 2, having that above 2 or $2 of revenue for every dollar of media is a good place as a sort of conservative number. And then our expectation would be is that we try to hover around that, call it, between 2 and 2.5 on an average basis for the year. Jeremy Pearlman: Okay. Understood. And then just last question. in the past, you -- maybe you could any updates on your insurance reimbursement coverage? And maybe what do you think the biggest barriers to broader reimbursement adoptions are you're facing? It's always been -- it seems like it's been a struggle over time. Daniel Goldberger: Yes. Thank you. So just from an update point of view, I think the biggest opportunity we have in front of us is the work that we've been doing with Kaiser. We've spent some time talking about it in the past. Earlier on in this year, we finally got on contract with Kaiser. So not only are we on formulary, but we're also on contract. That allows us to give us a license to sell, if you will, within the organization and gives prescribers an easier opportunity to actually prescribe the product itself, but it's not necessarily the end all be all. We spent a better part of the last quarter. And within 2026, what we plan to do is spend more time trying to develop the right KOLs and subject matter experts advocates for the product within the system. I think Kaiser will remain to be our largest sort of opportunity, if you will, as it relates to from an insurance point of view, where can we get coverage. And the reason why I say that is Kaiser is the largest of these managed care systems. Typically, they're kind of like a beachhead strategy. If you can get Kaiser and show other managed care systems that it works. Other managed care systems will follow suit. So right now, we've guided in the past that we've got dedicated resources focused primarily on trying to get Kaiser up and running. If we do, our plan would be to leverage that success and turn it into additional adoption throughout other managed care insurers. Jeremy Pearlman: Okay. And you think that, that could be a 2026 event? Daniel Goldberger: No, I would think that Kaiser, some Kaiser success the plan is or the hope is for it to be in 2026. I think other additional insurers would be after that. It would be 2027 and 2028. Rob Fink: And Josh, I'm going to turn the call back over to you for a closing statement that has exhausted our questions from live callers. Joshua Lev: Well, great, Rob. Thank you so much. Just wanted to thank everyone for the opportunity and for joining us today. I want to recognize the team for their continued hard work and their commitment to our patients to the health care providers and to our customers, especially as we go through this transition. I also want to thank our shareholders for their continued support. Before we conclude, I'd like to extend our sincerest appreciation to Dan for all of his leadership and the foundation that he's leaving behind. We're excited about the opportunities ahead and remain focused on execution, disciplined investment and long-term value creation for our shareholders. On behalf of myself, the employees of electroCore and everyone who has benefited from your leadership. Dan, thank you for your dedication, your vision and the lasting impact you've made on the organization. We wish you the very best in your retirement and in the next chapter ahead. Rob Fink: That concludes today's call. Thank you for your participation.
Operator: Good afternoon, and welcome to the Relmada Therapeutics, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the prepared remarks, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded and will be available for replay on the Relmada Therapeutics, Inc. website. I would now like to turn the call over to Brian Ritchie from LifeSci Advisors. Please go ahead, Mr. Ritchie. Brian Ritchie: Good day, everyone, and thank you for joining us today. This afternoon, Relmada Therapeutics, Inc. issued a press release providing a business update and outlining its financial results for the three months and year ended December 31, 2025. Please note that certain information discussed on the call today is covered under the Safe Harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Relmada Therapeutics, Inc.'s management team will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Relmada Therapeutics, Inc.'s press release issued today and the company's SEC filings, including in the Annual Report on Form 10-K for the year ended December 31, 2025, filed after the close today. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast on March 19, 2026. Relmada Therapeutics, Inc. undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. With me on today's call are Relmada Therapeutics, Inc.'s CEO, Dr. Sergio Traversa, who will briefly provide a summary of recent business highlights; Dr. Raj S. Pruthi, Relmada Therapeutics, Inc.'s CMO, Oncology, who will provide an NDV-01 program update; and Relmada Therapeutics, Inc.'s CFO, Maged S. Shenouda, who will provide an update on cipranolone and a review of the company's Q4 financial results. After that, we will open the line for a brief Q&A session. Now, I would like to hand the call over to Sergio Traversa. Sergio? Sergio Traversa: Thank you, Brian. Good afternoon and welcome everyone to the Relmada Therapeutics, Inc. Fourth Quarter and Year-End 2025 Conference Call. 2025 has been a transformational year for Relmada Therapeutics, Inc., marked by significant progress for our lead program NDV-01. As a reminder, NDV-01 is a sustained-release formulation of gemcitabine and docetaxel. We are developing this investigational product candidate for the treatment of non-muscle invasive bladder cancer, or NMIBC. Most recently, we reported compelling responses and durable 12-month efficacy data for our ongoing Phase II study of NDV-01. We achieved FDA alignment for our planned registrational Phase III RESCUE programs. We fortified our team and we substantially strengthened our balance sheet. As we reflect on our recent accomplishments and planned next steps, I would like to highlight four key areas. First, NDV-01. We believe that the strength of the recently reported 12-month follow-up data could position NDV-01 as a potential best-in-class therapy for the treatment of NMIBC. Furthermore, the strength of the clinical data and the unique, easy-to-administer sustained-release formulation give us confidence that NDV-01 has the potential to provide what urologists and patients with NMIBC need: a simple, durable, effective treatment that readily fits into real-world practice settings. We plan to initiate the Phase III RESCUE program in the middle of this year. Our Phase III regulatory strategy, agreed upon with the FDA, includes two independent registrational pathways. Pathway one is focused on adjuvant therapy following TURBT in patients with intermediate-risk bladder cancer, which affects about 75,000 patients in the United States. Pathway two is focused on second-line treatment in BCG-unresponsive patients, which represents about 5,000 patients in the United States. Second, cipranolone. Cipranolone has previously demonstrated proof of concept in Tourette syndrome. It is a disorder characterized by compulsive behavior. We are getting ready to begin a proof-of-concept study in Prader-Willi syndrome in the middle of this year. And third, our team. We substantially strengthened our development team with the appointment of Dr. Raj S. Pruthi, a highly regarded physician-scientist and urologic oncologist, as Chief Medical Officer, Oncology. In addition, we established a scientific advisory board comprised of similarly distinguished peers to further support the NDV-01 program, including Dr. Yair Lotan from the University of Texas Southwestern Medical Center and Dr. Kates from Johns Hopkins University School of Medicine. Fourth and last, financial strength. We just completed a successful $160 million private financing. Based on existing forecasts, these funds plus our existing cash balance provide Relmada Therapeutics, Inc. with capital through 2029 and, importantly, through the completion of the planned NDV-01 program. Looking ahead, 2026 is poised to be another important year of value creation for Relmada Therapeutics, Inc., with the initiation of our Phase III RESCUE program for NDV-01 in bladder cancer and the Phase II proof-of-concept trial for cipranolone in Prader-Willi syndrome. With that, I also would like to express my appreciation for the trust and support of our investors, employees, collaborators, and the patients who participate in our studies. Next, I will turn the call over to Dr. Raj S. Pruthi, who will provide a review of the NDV-01 program, including 12-month follow-up data from the ongoing Phase II study and the summary of our Phase III plans. Raj? Raj S. Pruthi: Thank you, Sergio. Good afternoon, everyone. It is a privilege to share an update on the clinical progress we have made this year, headlined by the truly compelling and best-in-class results for NDV-01 in NMIBC. Bladder cancer is a high-frequency cancer that has a major impact on the lives of patients, generally diagnosed in their early to mid-70s. High recurrence rates and burdensome treatments disrupt quality of life at a time when patients are eager to enjoy life. I want to touch on three topics during today's call. One, an overview of the NDV-01 12-month data. Two, a summary of our planned Phase III program. And three, a discussion of how NDV-01 might fit into the practice of urologic oncology. As Sergio noted, NDV-01 is a novel, sustained-release intravesical formulation of two chemotherapy agents, gemcitabine and docetaxel, or GemDosi, as we say. Our program builds on physicians' established familiarity with the efficacy and safety profile of conventional GemDosi. More specifically, in patients who are unresponsive to BCG, this combination offers a salvage, bladder-sparing option that may help avoid a radical cystectomy. Moving on to the 12-month data, we are pleased to report that NDV-01 has demonstrated a high response rate and durable 12-month efficacy from the ongoing Phase II study. We believe these data stand out in comparison to the other benchmark programs and could position NDV-01 as a best-in-class treatment option for patients with bladder cancer if approved. The study is an open-label, single-arm trial in patients with high-risk NMIBC. Patients receive six biweekly doses, every other week times six, followed by monthly maintenance for up to one year. Patients undergo regular assessments with cystoscopy, pathology, and, if needed, biopsy. The study was designed to enroll up to 70 patients with high-risk NMIBC. The primary endpoints are safety and complete response rate at 12 months. Secondary endpoints are duration of response and event-free survival. The data demonstrated a 12-month complete response rate of 76% with a favorable safety profile. Notably, the study also showed a 12-month complete response rate of 80% in the BCG-unresponsive population, one of the most difficult-to-treat segments of NMIBC. These findings support the advancement into the Phase III registrational program, which we are calling RESCUE. The program will evaluate NDV-01 in both second-line BCG-unresponsive disease and in intermediate-risk disease as an adjuvant therapy following TURBT. When you look at the complete responses, or CR, at any time in the overall population, we see a CR anytime of 95% based on 38 patients. Among those with BCG-unresponsive disease, we see a CR rate at any time of 94%. Given the burdensome nature of recurrent bladder cancer treatment, safety is a critical element of our product profile. We continue to be encouraged by the favorable safety profile observed for NDV-01 across our clinical program. In the 12-month data set for NDV-01, no patients had progression to muscle-invasive disease, no patients underwent a radical cystectomy, no patients had a grade 3 or higher treatment-related adverse event, no interruptions or discontinuations of treatment due to adverse events occurred, and most treatment-related adverse events were at the grade 1 level. Moving on to the planned Phase III RESCUE program. We believe our 12-month response and durability data compare quite favorably to the current commercial and development-stage trials. We have constructed our Phase III registrational pathways to maximize our probability of success and create the most efficient path to FDA approval. The entire RESCUE registrational program was designed in alignment with the FDA to provide two separate approval pathways. We expect to secure U.S. IND clearance and initiate the Phase III RESCUE program in the middle of this year. Let us review the two studies that form the RESCUE program. Registrational pathway one focuses on the evaluation of NDV-01 in patients with intermediate-risk bladder cancer as an adjuvant therapy following TURBT surgery. We estimate there are about 70,000 to 75,000 patients each year in the U.S. in this setting. This study is planned to be an open-label, randomized, controlled trial. Since there are no approved treatments for adjuvant intermediate-risk NMIBC, the study will evaluate NDV-01 versus observation. The primary endpoint is disease-free survival, or DFS. Secondary endpoints include high-grade recurrence-free survival, progression-free survival, and quality-of-life metrics. We feel that the opportunity to incorporate NDV-01 into patient care post-TURBT is very attractive, and it could pave the way for an important clinical indication and broader adoption. Registrational pathway number two is focused on the evaluation of NDV-01 in the second-line setting in patients who are BCG-unresponsive with carcinoma in situ, or CIS, or refractory to first-line therapies approved or in development. We estimate that there are about 5,000 patients per year in the U.S. in this setting. Since these patients have few, if any, effective treatment alternatives to radical cystectomy, the study is designed as a single-arm, open-label trial. The primary endpoint is CR anytime. Secondary endpoints will include the duration of response, or DOR, progression-free survival, and recurrence-free survival among responders. We expect to report the initial three-month response data from this study by the end of 2026. We are excited about this pathway because it could offer a rapid route to approval. Before I hand the call over to Maged, I would like to make a note about how we feel NDV-01 might fit into clinical practice. NDV-01 is formulated to create a soft matrix in the bladder to enhance local bladder urothelial exposure and minimize systemic toxicity. It is delivered in the office in less than five minutes. This simple formulation and administration model has the potential to optimize the delivery experience for patients and providers, offering a level of simplicity and time savings that stands out amongst the others. Our Phase II data give us high confidence in our registrational program. By addressing a clear unmet need with a unique sustained-delivery profile, we believe NDV-01 is uniquely positioned to redefine the standard of care in bladder cancer. We look forward to initiating the RESCUE registrational program at an estimated 80 sites in North America in the middle of this year, and we will work to bring NDV-01 to bladder cancer patients as soon as possible. Maged? Maged S. Shenouda: Thanks, Raj, and good afternoon, everyone. Today, I will spend a few minutes on 2025 financial results. Because cipranolone modulates GABA, one of the most important neurotransmitters, it is defined as a GABA or GABA-modulating steroid antagonist. Cipranolone's novel action on the GABA neurotransmitter pathway gives it the potential to normalize the activity of the GABAA receptor and alleviate the repetitive symptoms of compulsivity disorders. These disorders affect millions of people around the world and include indications such as obsessive-compulsive disorder, Tourette syndrome, and Prader-Willi syndrome. We are preparing to initiate a proof-of-concept study in Prader-Willi syndrome in mid-2026. Our immediate efforts are dedicated to completing study preparations, including engaging with the FDA on our proposed trial design and establishing a robust supply chain. Moving now to our financial results. As noted earlier by Brian, this afternoon, Relmada Therapeutics, Inc. issued a press release announcing our business and financial results for the fourth quarter and twelve months ended December 31, 2025. During this call, I will review our fourth quarter 2025 financial results and refer you to our press release and Form 10-K filing issued this afternoon for financial information for the last twelve months. Starting with our cash balance, Relmada Therapeutics, Inc. closed 2025 with a cash balance of $93 million. This includes net proceeds of approximately $94 million from an underwritten stock offering announced on November 5, 2025. This compares to cash, cash equivalents, and short-term investments of approximately $45 million at December 31, 2024. On March 9, 2026, the company announced a $160 million private financing with net proceeds of approximately $150 million. This financing, along with our cash balance as of December 31, 2025, is expected to provide sufficient resources to fund company operations through 2029, including completion of the Phase III RESCUE program for NDV-01. Moving through our fourth quarter financial results, research and development expense for the three months ended December 31, 2025, totaled $8.1 million compared to $11.0 million for the three months ended December 31, 2024, a decrease of $2.9 million. The decrease was primarily driven by a decrease in study costs associated with the completion of two Phase III trials for REL-1017, partially offset by increased costs related to the start-up of the Phase III NDV-01 trials and Phase 2b cipranolone study, and additional R&D personnel. General and administrative expense for the three months ended December 31, 2025, totaled $12.3 million compared to $8.1 million for the three months ended December 31, 2024, an increase of approximately $4.2 million. The increase was primarily driven by an increase in compensation costs, partially offset by a decrease in stock compensation costs. Net cash used in operating activities for the three months ended December 31, 2025, totaled $14.6 million, compared to $8.8 million for the three months ended December 31, 2024. The net loss for the three months ended December 31, 2025, was $19.9 million, or 27¢ per basic and diluted share, compared to a net loss of $18.7 million, or $0.06 per basic and diluted share, for the three months ended December 31, 2024. Before we open the call for questions, I will turn back to Sergio for some closing comments. Sergio? Sergio Traversa: Thank you, Maged. In closing of our prepared remarks, I would like to share that I am very confident and optimistic about our clinical programs and the long-term prospects for Relmada Therapeutics, Inc. As we are getting ready to initiate the RESCUE registrational program for NDV-01, we are focused on execution and looking forward to updating you on our progress in the coming quarters. Operator, I would now like to open the call for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. One moment, please, while we poll for questions. Our first question is from Uy Sieng Ear with Mizuho Securities. Uy Sieng Ear: Hey, guys. Congrats on the great data and the financing. Yeah, it seems like you did a lot of work this quarter. Maybe we are getting some questions on whether you will present additional data from your Phase II study. Should we expect, going forward, updates every three months, and will you also have data at AUA by any chance? That is the first question. The second question that we have been getting is there is some concern that the second-line patients may not be necessarily second line, but maybe, by the time they get to your regimen, it could be their third line. Please help us understand what you are doing to ensure that those patients are truly second-line patients. And the third question is, you indicated that you have three-month data from your Phase III BCG-unresponsive second-line patients. Will this be from the entire patient population, or would this be an interim from a portion of the number of patients that you expect to enroll. Thanks. Sergio Traversa: Thank you, Uy, for the questions. I think Raj can answer these questions. I will pass it to Raj. Raj S. Pruthi: Thank you, Sergio. Good to hear from you, Uy. Regarding the data, we will be presenting updated 12-month data at the AUA. It has been accepted to AUA. We will also be presenting a trial in progress as we get RESCUE going. Our plan is to focus on introducing data, and to your last question, in the BCG-unresponsive second-line group, starting at the end of the year. As we start the trial in midyear, we should have some three-month data to share externally by the end of the year, as it is a single-arm, open-label study. Our thought is then to have, at a cadence of about every three months, additional updates as we get six-, nine-, and twelve-month follow-up on that data set. You provided an excellent question on second line, third line, fourth line. We are indeed limiting the number of prior therapy lines to two. So you can have had one line of therapy and still have been BCG-unresponsive, for example, while allowing a second line to be an alternative intravesical. We are also going to look at 15 patients at three months for those who received one prior line of therapy versus two, just to make sure there is nothing concerning in this open-label study that would warrant exclusion. This is reflective of the conversations we have had with the FDA. But it is a good question, and we are limiting the number of third or fourth lines. Uy Sieng Ear: Thank you. Operator: Our next question is from Farzin Hak with Jefferies. Congrats on the progress, and thank you for taking my questions. Farzin Hak: I have one on the operational standpoint. The NMIBC space is becoming congested with active trials and drugs approved, too. What is your expectation for enrollment cadence across your two studies, and can the drug’s in-office profile potentially serve as a recruitment advantage? Sergio Traversa: Thank you, Farzin. Raj, do you want to take that? Raj S. Pruthi: Thank you. Yeah, Farzin, good to hear from you. I think you are right. The high-risk, BCG-unresponsive space has been crowded, but I think ours, coming in as a second-line therapy, provides a unique advantage. There are no drugs that have been approved in that setting and none that I am aware of that are even being investigated as a pivotal study in that setting. So I think we have a competitive advantage in that we can go to sites that, even with drugs in development, can follow them in this unique path. The same for intermediate risk. Right now, it is becoming an area of broader interest. CG Oncology, for example, has an intermediate-risk trial that looks like it is ahead of schedule and accrued very rapidly. I think there is a lot of interest from investigators in intermediate-risk patients. I expect us to enroll that study pretty rapidly and ahead of schedule like CG did. Thanks for the question, Farzin. Farzin Hak: Got it. And then for the second-line high-grade settings, beyond the primary endpoint of CR rate at any time, has the FDA stipulated a minimum duration of follow-up required for all patients by submitting the NDA? Raj S. Pruthi: Another great question. They have not required a minimum follow-up. They said they want to see CR anytime, as you said, and durability of response or duration of response. I think the wording they used, which I think is important, is they want to see the totality of the data. They want to see that you have a response and there is some level of durability. They have not specified what that number is. Farzin Hak: Got it. Thank you so much. Operator: Thank you, Farzin. Your next question is from Christopher with Lucent. Christopher: Hey, guys. Thanks for the question. I was wondering, given the population differences between your Phase II and Phase III RESCUE, what are you expecting to see in terms of the CR rate at the three-month mark, as well as what we should be benchmarking against with the status of the field? Sergio Traversa: Thank you, Chris. Raj, do you want to take this one as well? Raj S. Pruthi: Yes. Thanks, Chris. Thanks for the question. In the intermediate-risk study, we structured the trial statistics around a two-year RFS of 75%. That is reflected in the literature with GemDosi. With what we have seen in this population and with sustained release, we should exceed that, but that is our target number and it drives the statistics. It is an event-driven study with a target of 128 events. Regarding the BCG-unresponsive second-line, if you look historically, in first line the first drug approved was valrubicin in 1998 at 8% 12-month CR, followed by Keytruda at 19% and then other programs in the 24% range. So I am glad the FDA was not fixated on a certain number, but I think that threshold should be at those levels or lower than what we have seen in first-line therapy, just as precedent. Christopher: Got it. Thanks for the question. Operator: Our next question is from Kelsey Goodwin with Piper Sandler. Kelsey Goodwin: Hey, thanks so much for taking my question and congrats on the recent clinical update. Regarding that update, on the patient baseline characteristics and the CIS versus papillary split, how should we be comparing this data set to that of competitors with primarily CIS patients? And do you have any data to support that GemDosi looks similar in CIS and papillary patients? Sergio Traversa: Hi, Kelsey. It is Sergio here. Raj, it seems that this one also is for you. Raj S. Pruthi: Great question, Kelsey. Starting with the last part of your question, as a clinician you often think if the patient is BCG-unresponsive, this might be more virulent, but we do not often parse whether it is CIS versus papillary. Some people show pure CIS behaves better, but T1 actually is worse, so it is a mixed bag. For GemDosi, there is an article by Steinberg in 2020 in the Journal of Urology that looked at heavily pretreated patients, and at 12 months the RFS or CRs were 60% in the CIS population and 61% in papillary, so there is not a marked difference typically. If you go back and look at our data, our 12-month CR in BCG-unresponsive is 80%, and our 12-month CR in the overall population is 84%. That includes four patients with CIS; we had four out of four with complete response at any time and two out of two at 12 months. These are small numbers, but they still compare quite favorably. Even if you take NDV-01 and the BCG-unresponsive population, including CIS, and compare it to the best-in-class categories, I think their 12-month CR was 74%. Taking our entire cohort, we are significantly higher, so I think it is still best in class. I hope I answered your question. Kelsey Goodwin: That is super helpful. Thank you so much for that. And one follow-up: with respect to the intermediate-risk setting and that market overall, how much do you think that market might need to be built out by these early launches, given we have not had an approved agent until last year? Thanks so much. Raj S. Pruthi: You bet, Kelsey. Right now, we mentioned there are about 75,000 to 80,000 patients with intermediate-risk disease. If you look at the data now, only about 35% of those patients receive adjuvant therapy. What is important in our studies and in CG’s study is that in our intermediate-risk population, we include small, less than 3-centimeter Ta high-grade patients. That is very important because 20% of the intermediate-risk disease is these high-grade Ta patients, and those are the ones, probably more than anybody, who need adjuvant therapy to prevent recurrence. Going back, while about 35% receive adjuvant therapy, I think that number will grow as you see data from Moonlight or from PIVOT-006 or from our RESCUE intermediate study. As we get data, it gives patients confidence that there is an agent that might reduce the risk of another TURBT and gives urologists confidence that there is an agent they can deliver in the office that will reduce TURBT risk for patients. It is only going to grow. Kelsey Goodwin: That is great. Thank you so much. Operator: Thank you, Kelsey. Thank you. This concludes our question-and-answer session. I would now like to hand the floor back over to Sergio Traversa for any closing remarks. Sergio Traversa: The closing remark is a big thank you to everybody that has allowed Relmada Therapeutics, Inc. to get where we are now. We created data with a drug that can really help patients with bladder cancer. We are looking forward to updating everybody on our progress. Thank you, and enjoy the rest of the day. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Greetings, and welcome to the Tenon Medical Fourth Quarter and Full Year 2025 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded. Your hosts today are Steve Foster, President and Chief Executive Officer, and Kevin Williamson, Chief Financial Officer. Mr. Foster and Mr. Williamson will present results of operations for the fourth quarter and full year ended December 31, 2025, and provide a corporate update. A press release detailing these results was released today and is available on the Investor Relations section of our company's website, www.tenonmed.com. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates and other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned, not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. For a more complete discussion of these factors and other risks, you should review our quarterly and annual reports on file with the Securities and Exchange Commission at www.sec.gov. At this time, I'll turn the call over to Tenon Medical's Chief Executive Officer, Steve Foster. Please go ahead, sir. Steven Foster: Thank you, Shamali, and good afternoon to everyone. I'm pleased to welcome you to today's fourth quarter and full year 2025 financial results and corporate update conference call for Tenon Medical. Our fourth quarter and full year 2025 results demonstrate continued momentum in executing our strategic growth initiatives within our unique structure. We achieved record full year revenue of $3.9 million, a 20% increase compared to 2024, driven by strong second half momentum with fourth quarter revenue of $1.5 million, representing a 92% increase over the prior year period. The increase in revenue for the year was primarily driven by growth in surgical procedures across both the Catamaran and SImmetry+ platforms in the back half of 2025, led by new physician users. To support that clinical engagement, we hosted 24 physicians and targeted training sessions for both platforms during the fourth quarter alone. Importantly, alongside top line expansion, we leveraged operational effectiveness initiatives to achieve a reduction in cost of sales, reflecting improved operational efficiencies, better field productivity and greater leverage within our commercial infrastructure. We believe these gains underscore the effectiveness of our execution strategy alongside growing market awareness of our differentiated technologies. During the quarter, Tenon achieved several significant milestones that meaningfully strengthened our competitive position and lay the groundwork for continued growth in the coming year. Most notably, we received FDA 510(k) clearance for the next-generation SImmetry+ SI-Joint Fusion System, expanding our portfolio to include a complementary lateral approach alongside Catamaran. This milestone enhances our ability to serve a broader range of surgeon preferences and patient anatomies. We also successfully initiated and completed early clinical cases with SImmetry+, marking an important step in the system's commercial rollout. These procedures performed at leading Centers of Excellence, validate the system's readiness for broader market adoption and provide valuable real-world feedback as we scale development. To support these strategic enhancements, we strengthened our balance sheet through a $2.85 million At-The-Market PIPE financing that provides flexibility to expand our commercial organization, support our product rollout initiatives, advance clinical programs and continue building operational infrastructure. Subsequent to quarter end, we further strengthened our financial position by closing a private placement of senior convertible notes for gross proceeds of $4.3 million. Net proceeds will fund continued commercial expansion, upcoming product launches, clinical studies, working capital and general corporate purposes. Collectively, these accomplishments demonstrate disciplined execution across regulatory, clinical and financial fronts. With an expanded product offering, growing clinical validation and enhanced financial flexibility, we believe that Tenon exited the quarter and year well positioned to accelerate adoption, deepen our market penetration and drive sustained growth in the quarters and years ahead. We also expanded our intellectual property portfolio subsequent to quarter end, receiving notices of allowance from the U.S. Patent and Trademark Office for multiple applications expected to issue in 2026. This brings our global estate to 29 issued U.S. patents, 9 international patents and 31 pending applications, further reinforcing the defensibility of our platform around both the Catamaran and SImmetry technologies. Looking ahead, we remain firmly committed to advancing our strong market position with increased adoption across our expanding portfolio, now bolstered by the recent FDA 510(k) clearance of the SImmetry+ SI-Joint Fusion System. With this expanded product portfolio and growing clinical validation, we are leveraging both regulatory and market momentum to drive broader commercial uptake and deepen physician engagement. Building on strong execution in Q4, we are optimizing our cost structure and scaling operations to extend our market reach more efficiently. As we continue to refine our go-to-market strategy and capitalize on multiple surgical approaches across the SI-Joint Fusion landscape, we intend to accelerate revenue growth and deliver sustained value in the quarters ahead. With that, I'll turn the call over to Kevin to discuss our financials. Kevin Williamson: Thank you, Steve. I will now provide a summarized review of our financial results. A full breakdown is available in our press release that crossed the wire this afternoon. Revenue for the fourth quarter of 2025 was $1.5 million, an increase of 92% compared to $0.8 million in the fourth quarter of 2024. Revenue for the 12 months ended December 31, 2025, was $3.9 million, an increase of 20% from $3.3 million during the prior year period. The increase in the fourth quarter was primarily due to growth in surgical procedure volume across both the Catamaran and SImmetry+ platforms, driven primarily by new physician adoption. The increase in revenue for the year was driven by sales growth and momentum we saw in the back half of the year, which we expect to continue throughout 2026. Gross profit was $1 million or 69% of revenue in the fourth quarter of 2025 compared to $0.4 million or 46% of revenue in the prior year quarter, an increase of 188% and a 23 percentage point improvement in gross margin. For the 12 months ended December 31, 2025, gross profit was $2.4 million or 60% of revenue, compared to $1.7 million or 52% of revenue for the previous year's period, a 38% increase and an 8 percentage point improvement in gross margin. The gross margin improvement for the quarter and full year was primarily driven by higher revenue and the further absorption of fixed costs within our cost of goods sold. We expect gross margin to continue to improve with further revenue growth. Operating expenses totaled $3.9 million for the fourth quarter of 2025, up from $3.5 million in the prior year quarter. For the 12-months ended December 31, 2025, operating expenses totaled $15.2 million compared to $15.5 million in the prior year period. The increase in the fourth quarter was primarily due to higher variable expenses within sales and marketing, driven by increased revenue in the period, while the decrease in the year ended December 31, 2025, was due to reduced general and administrative expenses, partially offset by increased sales and marketing investments to support increased sales and continued commercial expansion. Net loss for the fourth quarter was $2.8 million or $0.29 per share compared to a net loss of $3.1 million or $0.98 per share in the fourth quarter of 2024. For the 12 months ended December 31, 2025, net loss was $12.6 million or $1.70 per share compared to $13.7 million or $11.26 per share in the same year ago period. The year-over-year improvement in both periods, was largely driven by increased revenue as well as reduced general and administrative expenses, which together improved operating leverage across the business. We ended the quarter with $3.8 million in cash and cash equivalents compared to $6.5 million as of December 31, 2024. The company had no outstanding debt as of quarter end. Subsequent to quarter end, we closed a $4.3 million private placement of senior convertible notes, which provides additional runway to fund our commercial and clinical priorities deep into 2026. Overall, we believe the financial and strategic actions implemented both this quarter and throughout the year have positioned Tenon to drive continued growth in 2026 while sustaining a streamlined and disciplined cost base. I'll now hand the call back to Steve for closing comments. Steven Foster: Thank you, Kevin. In summary, we believe that the fourth quarter and full year of 2025 served as a pivotal inflection point for our company, delivering meaningful progress across our key priorities, including record top line performance, the commercial debut of SImmetry+ and the advancement of important regulatory and clinical programs. These achievements created a strong platform for continued execution. Building on that foundation, we have entered the current quarter with increased traction across our commercial channels and tighter operational discipline through optimizing our expense base and driving efficiencies throughout the organization. With expanding engagement from physicians and continued progress across our pipeline, we believe this strengthening momentum supports sustainable growth and long-term value creation for patients, providers and shareholders alike. I thank you all for attending. And now I'd like to hand the call over to our operator to begin our question-and-answer session with covering analysts. Shamali? Operator: [Operator Instructions] Our first question comes from the line of Scott Henry with Alliance Global Partners. Scott Henry: Really strong results for the fourth quarter. So just had a couple of questions on that. First, on the expense line, the operating expenses were down sequentially even with the addition of the other business. How representative do you think the Q4 rate is for 2026? Sometimes there's timing or seasonality issues, but just trying to get a sense of that $3.9 million in Q4 '25. Should we think about that as a baseline going forward? Or are there some unique situations that come into play? Kevin Williamson: Yes. Thank you, Scott, for the question. This is Kevin. Happy to answer that. So I think we talked about this a little bit last quarter as well. And I think, yes, this becomes a better baseline in Q4 moving forward into '26 for an expense line, total operating expense. And I think you're seeing two things there. Some higher integration and deal-related costs that were in Q3 that increased that operating line, those falling out in Q4, but then seeing a little bit higher variable expense around higher revenue to offset some of that, ultimately landing you though at a better run rate here in Q4 and moving forward. So it's a good metric to use to look at the business moving into '26. Scott Henry: Okay. Great. And then on the revenue side, $1.5 million in the quarter, annualizing at $6 million. I guess two questions. How do you think about 2026 relative to that $6 million run rate? And specifically first quarter, which only has about 11 days left, how do we think about that sequentially from fourth quarter? Steven Foster: Scott, this is Steve Foster. I'll comment just quickly. While we don't give future projections at this point, given our early stage, we're really excited about two things. One, the adoption momentum out there. We set records in all aspects, every metric of our business with incremental users with total surgeries done, our SImmetry+ alpha, these early surgeries to make sure the technology was meeting physician expectations, exceeded all expectations. The adoption rate was really high, a lot of enthusiasm about that product as well. And then lastly, I'll point to a very, very engaged and active pipeline. The transaction we did with SiVantage last year not only loaded what we're capable of selling at that moment, but perhaps more importantly, loaded technologies into our development pipeline, and those things are moving through quite efficiently. And we really do think once these things start hitting in 2026, they can have a meaningful impact on what we're able to achieve in 2026. So lots of excitement within the organization and confidence that we can meet and exceed expectations in '26. Kevin Williamson: Sorry, Scott. I'll go ahead and add a couple of points there, maybe to think about -- yes, as you look at revenue throughout the year in '26. So as you recall, we launched SImmetry+ in Q4, and that was right in the middle of Q4, November time frame. So a successful alpha there. We'll be commercializing SImmetry+ throughout the year here in '26. As Steve mentioned, some products in the pipeline that we plan to launch here in '26 will also be catalysts as well. So when you look at the momentum we built in the back half of the year, and you saw the incremental increase there between Q3 and Q4, we feel good about that momentum continuing. And then you bake-in the initiatives we have throughout the year. I think when you look at the year in general, you're typically going to see a higher Q4 as revenue increases, especially as those initiatives bake throughout the year. So likely on that track, but we feel good about taking that $6 million run rate that we're now on, as you mentioned, Scott, into Q1 here and then driving revenue through the catalyst throughout the year. Scott Henry: Okay. Great. And just the final question, just kind of qualitatively, when you look out to 2026, what do you see as your key driver for this revenue growth? Because you have a lot of things going on. You have SImmetry+, we've got the Catamaran SE launch, you've got SiVantage. Is there anything that kind of jumps out as leading the way in your opinion? Steven Foster: Yes, I'll take it real quick and then Kevin jump in if you'd like. Yes, what jumps to me is, look, we now have built a multiproduct portfolio that can address a ton of variables, whether it's approach to the anatomy variables, whether it's patient variables, et cetera. And physicians are seeing now that, that tool bag that they have that Tenon Medical provides is not only diverse, but it's backed by data. It's something they can count on. And so now that we've built that foundation, it really is for us about commercial expansion and execution in 2026. So what are you going to feed into that? You mentioned them, Scott, with Catamaran SE with SImmetry+, et cetera. But we also have other launches of new product, which we'll talk about here very shortly as they sort of come into view and as we prepare for FDA submissions and what have you, that we also think are going to continue to be very compelling for our physician customers. They're looking for solutions for the patients. We want to be there for them for every aspect of the sacropelvic challenges that they deal with. So that's how I would comment. Kevin, do you have anything to add there? Kevin Williamson: No, well said, Steve. Operator: Our next question comes from the line of Anthony Vendetti with Maxim Group. Anthony Vendetti: Yes. Steve, I was wondering if you could just talk a little bit about the launch of SImmetry+. And then maybe just what the physicians are saying now that you have a broader portfolio? Is that helping you gain access to more prospective physicians or medical centers? So maybe we'll start with that. Steven Foster: Yes, Anthony, thank you. It does. So when we were a single product organization, Catamaran got attention, people were excited about it, and there was a lot of good stuff going on. But no matter how you cut it, you're still a single solution provider. The SiVantage transaction now makes us a multi-solution provider. Okay, what's multiple solutions mean? Well, for the physicians, it's, okay, what does this patient really need? And how do I want to approach this anatomy. There are inferior-posterior approaches, lateral approaches, oblique approaches, et cetera. And it's usually driven by what the patient needs and sometimes it's driven by the physician's preference and what they prefer, how they were trained, things of that nature, right? And so now you can sit down with the physician and deliver multiple options for them. It's more of a full bag of options rather than a one-dimensional option for them. And that is -- that it is opening doors for us. You mentioned SImmetry+. SImmetry+ is a lateral and oblique technology. The reaction to the implant itself has been extremely positive. It's a 3D-printed technology. And I think perhaps more importantly, is the instrument set, the tools that they use to put the implant in have been recognized as highly refined, very efficient and something that the physicians really like. Last thing I'll say real fast is SImmetry+ is an interesting one, right? It's a phased launch. And when I say that, the first thing that came out was the SImmetry+ screw. We have additions to the way we can do that construct coming down the pipe throughout 2026 that we're very excited about. Again, we'll talk more in detail about it when we get closer to FDA submissions. But suffice to say that SImmetry+ will include the ability to decorticate the joint appropriately, prep it, graft it and fixate it with the technology. So we're really encouraged by the initial reaction to SImmetry+ and the screw itself, and there's a lot more to come. Anthony Vendetti: Okay. Great. And then maybe just the last couple of questions here is on -- for a lot of these physicians, some of these products are new. How do you balance that, the training with the selling? And then do you feel like this really gives you the portfolio you need? Or is there something else that you're looking at that would really round it out in terms of making it a more compelling offering? Steven Foster: No, it's a great question. So really two buckets of activity, that are probably pretty typical to medical device companies, right? One, you're trying to make your existing technology sticky. You want people to stick with it, stay excited about it, et cetera. And that's a lot of refinement and making sure that technology and that system is delivering at a high level. And then, of course, that second bucket is what you're talking about, which is, hey, look, what's next? What else, right? And I alluded a little bit to it earlier. We'll have some technology to talk about here, again, that's getting very close to submission to FDA that we really are extraordinarily excited about. Provides, again, even more flexibility and optionality to the physician who's treating these various maladies in the sacro-pelvic region. And it's interesting because -- and we talked a little bit about this before, Anthony, there are primary cases here, there are revision cases where something has already been tried and for whatever reason, it didn't work out very well. And then there's this entire bucket of an adjunct to a complex multilevel spine procedure that is just now sort of emerging within what we're capable of doing. And so we'll be hitting all three of those spaces really hard with our existing and our newly developed technology. And yes, just a lot of enthusiasm for 2026 going forward. Operator: Thank you. And we have reached the end of the question-and-answer session. Therefore, I'll now turn the call back over to Steve Foster for closing remarks. Steven Foster: Great. Thank you, Shamali. I'd like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who will be more than happy to assist. And with that, I wish everyone a good evening. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, everyone, and welcome to GrowGeneration Corp.'s fourth quarter and full year 2025 earnings conference call. My name is Alan, and I will be your operator for today's call. At this time, participants are in listen-only mode. Following prepared remarks, we will open the call to questions from analysts, with instructions to be given at that time. This conference call is being recorded, and a replay of today's call will be available on the Investor Relations section of GrowGeneration Corp.'s website. I will now hand over the call to Phil Carlson with KCSA Strategic Communications for introductions and the reading of the safe harbor statement. Please go ahead, Phil. Thank you, operator. Phil Carlson: And welcome, everyone, to GrowGeneration Corp.'s fourth quarter and full year 2025 earnings results conference call. Operator: With us today from GrowGeneration Corp. are Darren Lampert, Co-Founder and Chief Executive Officer, and Greg Sanders, Chief Financial Officer. Phil Carlson: The company's fourth quarter and full year 2025 earnings press release was issued after the close of market today. A copy of this press release is available on the Investor Relations section of the GrowGeneration Corp. website at ir.growgeneration.com. I would like to remind everyone that certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any of the forward-looking statements made today. During the call, we will use some non-GAAP financial measures as we describe business performance. SEC filings, as well as the earnings press release, which provide reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures, are all available on our website. Following prepared remarks, management will be happy to take your questions. We ask that you limit yourself to one question and one follow-up. If you have additional questions, please reenter the queue, and we will take them as time allows. Now I will hand the call over to GrowGeneration Corp.'s Co-Founder and CEO, Darren Lampert. Darren, please go ahead. Darren Lampert: Thanks, Phil. And good afternoon, everyone. Thank you for joining us to review GrowGeneration Corp.'s fourth quarter and full year 2025 financial results, and to discuss our outlook for 2026. 2025 was a defining year for GrowGeneration Corp. We transformed the business, right-sizing our retail footprint, dramatically expanding proprietary brand penetration to 32.8% for the full year, and delivering a 370 basis point improvement in gross margin to 26.8%. These structural improvements drove a 58.9% year-over-year improvement in adjusted EBITDA and cut our GAAP net loss by more than half. The cost structure and brand platform we built in 2025 are the foundation for profitability in 2026. With the permanent structural improvements we have implemented, we believe the company is well positioned to reach approximately breakeven adjusted EBITDA for the full year 2026. First, I would like to talk about some of the financial highlights of last year. During 2025, net sales came in at about $162 million. The year-over-year decline was expected and driven by store closures. During 2025, we consolidated eight retail stores, bringing our current retail footprint to 23 locations as of December 31. On a same-store basis, our core locations remained relatively stable, which tells us the business is stabilizing as anticipated. Importantly, looking specifically at the fourth quarter 2025, net sales were up year over year. So during what is typically our seasonally lowest revenue quarter, we had slightly higher sales compared to last year with fewer retail locations. I think that says a lot about our core business and the revenue we were able to generate with a smaller, more focused retail footprint. For the full year 2025, gross margin expanded 370 basis points to 26.8%. As such, we were able to grow gross margin substantially, even as total revenue declined as the market came under considerable pressure. This highlights that our proprietary brands are working exactly as they were designed to. For the full year, our private label sales penetration represented 32.8% of cultivation and gardening revenue, up from 24.2% last year. Looking at the fourth quarter of 2025, our private label sales penetration was 35.8%. We are very happy about this because every percentage point of private label mix adds margin and pricing control for GrowGeneration Corp. Moving down our P&L, in 2025, we took nearly $27 million out of operating expenses compared to last year. That is a 28% reduction. Again, just looking at the fourth quarter of 2025, we saw a 44.4% year-over-year improvement in operating expenses. To be clear, these are not temporary cuts. They are permanent structural changes we have implemented throughout the company that will drive improved costs and savings going forward. All this led to an $8.5 million, or 58.9%, year-over-year adjusted EBITDA improvement for 2025, going from negative $14.5 million to negative $6 million. That is a sizable increase and puts us well within striking distance of reaching breakeven. To sum everything up, in 2025, we improved our adjusted EBITDA profitability by $8.5 million despite lower revenue volume. We think this shows the tremendous operating leverage that we have been able to achieve at GrowGeneration Corp. and the expanded margins we have generated from our growing segment of proprietary brand sales. Private label brands remain our primary growth driver as we move forward. Our leading brands Charcoir, Drip Hydro, The Harvest Company, Dialed In, and Power Si continue to see strong adoption in the market. These brands are still in their early stages of introduction, and we are expanding into new revenue channels and product extensions, mainly B2B as well as via multi-state operators. We expect proprietary brands to reach 40% of cultivation and gardening revenue in 2026. On a broader basis, we continue to shift beyond our legacy retail base to a national controlled environment agriculture supplier focused on the largest specialty agricultural and controlled environment markets. In the fourth quarter of 2025, we started selling our proprietary brands into the independent garden center channel and relaunched theharvestco.com to serve greenhouse and specialty crop growers. We also established a distribution partnership with Arett Sales, expanding our wholesale and B2B reach into thousands of new retail stores across 32 states. Additionally, the company entered the home gardening market through our 2025 acquisition of Viagrow, a domestic brand distributed across retailers such as Amazon, The Home Depot, Walmart, Lowe's, and Tractor Supply. The addition of Viagrow further provides us with a scalable platform to serve home gardeners and hobbyist cultivators across multiple retail channels nationwide. Last year, we also began to see cultivation infrastructure projects become a larger portion of our business. In 2025, this offering that we have branded as GrowGeneration Corp. Build contributed considerable revenue to GrowGeneration Corp. These are projects where we help commercial and craft operators to either modernize existing facilities or build new ones, including areas such as lighting, benching, fertigation, HVAC, irrigation, and automation systems. Demand for this offering remains strong, and we expect this business will be a meaningful contributor to revenue in the coming years. In 2025, we also continued our digital transformation of sales as more customers adopt our customized B2B Pro portal. Our commercial and wholesale customers are continuing to move their purchasing online, utilizing automated ordering and custom catalogs, while being able to view inventory in real time. Concurrently, this is reducing transaction costs and driving greater recurring revenue for GrowGeneration Corp. Last year, we also commenced our international expansion to improve our growth trajectory. Specifically, we look for opportunities to enter new high-growth cultivation markets with growing numbers of hemp and cannabis licenses. As part of this, we formed a distribution partnership with V1 Solutions to support commercial sales throughout the European Union. We also began distributing our proprietary products in Costa Rica, which opens up the Central American markets for us. We are thrilled to bring our proprietary products to professional growers across Europe and Central America and believe these distribution partnerships will allow us to quickly scale our brand presence in these markets with minimal capital investment. Complementing this, our MMI Storage Solutions segment also grew in 2025, reaching $27.5 million in revenue. MMI continues to diversify into industrial, agricultural, and specialty end markets, and we expect this segment will continue to grow steadily in 2026. Given our progress this past year, we believe repurchasing shares at current levels represents a compelling and responsible allocation of capital. Today, in tandem with our financial results, we announced that our Board of Directors has authorized a share repurchase program for up to $10 million of the company's outstanding common stock. This authorization reflects our confidence in GrowGeneration Corp.'s long-term strategy and our commitment to driving sustainable shareholder value. Turning to our outlook for 2026, we expect modest revenue growth for the full year, as we are focused on revenue quality, not volume. As I mentioned previously, we expect proprietary brand sales as a percentage of cultivation and gardening revenue to reach 40% by year end. We also expect to see further steady improvement in margins and operating expenses during 2026. Through all of this, we anticipate reaching approximately breakeven adjusted EBITDA for the full year. Greg will give more color on this shortly. With over $46 million in cash and no debt, our improved cost structure and growing multichannel brand strategy, we believe GrowGeneration Corp. is well positioned to capitalize on the anticipated growth of the controlled environment agricultural industry as well as positive developments within the cannabis industry. We expect to generate sustainable and profitable long-term growth from our growing proprietary brand sales, further revenue expansion across independent garden centers, greenhouse agriculture, specialty crops, and cannabis, and through cultivation infrastructure projects. We believe we are still in our early stages of the growth cycle, and that the best is yet to come. With that, I will turn the call over to our CFO, Greg Sanders. Greg Sanders: Thank you, Darren, and good afternoon, everyone. I will briefly review our fourth quarter and full year 2025 results, and then I will provide additional context on our outlook for 2026. Starting with our fourth quarter 2025 results, GrowGeneration Corp. reported net sales of $37.8 million, up $0.4 million compared to $37.4 million during the same period last year. Encouragingly, the fourth quarter returned to year-over-year revenue growth despite operating with eight fewer retail locations. Net sales in our Cultivation and Gardening segment were $32.1 million for the quarter, compared to $32.9 million in the same period last year. Proprietary brand sales represented 35.8% of Cultivation and Gardening revenue, up from 30.4% in the prior year. This continued shift towards higher margin proprietary products remains one of the primary drivers of our margin expansion and long-term profitability strategy. In our Storage Solutions segment, net sales were $5.7 million for the quarter, up from $4.5 million in 2024, reflecting stable demand across product lines and diversification into new end markets. Gross profit increased to $9.1 million, an increase of $3 million compared to gross profit of $6.1 million for 2024. Gross margin increased to 24.1% in 2025 compared to 16.4% for the prior-year period, primarily due to higher proprietary brand penetration and the absence of restructuring-related costs incurred in the prior year. Now turning to expenses, in 2025, store and other operating expenses declined by approximately 26.6% to $6.8 million compared to $9.3 million in 2024, reflecting the benefits of our cost reduction initiatives. Selling, general and administrative expenses were $7.3 million compared to $6.8 million last year. This increase was mainly due to one-time severance and legal costs of approximately $1.5 million. Total operating expenses decreased by $13.3 million, or 45.3%, to $16.7 million, compared to $30.1 million in the comparable 2024 period. Depreciation and amortization totaled $2.4 million compared to $7.1 million in the same period last year. The decrease primarily reflects the absence of prior-year asset impairment and restructuring-related depreciation associated with store closures. GAAP net loss decreased to $7.4 million, or negative $0.12 per share, a $15.9 million improvement compared to a net loss of $23.3 million, or negative $0.39 per share, in the prior-year period. The improvement was primarily driven by higher gross margins and lower operating expenses. Non-GAAP adjusted EBITDA, as defined in our press release, was a loss of $2 million, a $6.1 million year-over-year improvement compared to a loss of $8.1 million in the prior year, reflecting improved sales mix from proprietary brands, gross margin expansion, and the continued benefits of our cost reduction initiatives. Now I will provide a quick overview of our full year 2025 results. Net sales were $161.7 million compared to $188.9 million for 2024, primarily due to declining retail volume from store consolidations. In 2025, proprietary brands accounted for 32.8% of Cultivation and Gardening sales, up from 24.2% in 2024. Additionally, proprietary brand sales increased on an absolute basis, growing from $39.5 million in 2024 to $44 million in 2025, representing an 11.3% year-over-year growth. Gross profit was $43.3 million for the full year 2025, a slight decrease compared to gross profit of $43.7 million for the full year 2024. Gross profit margin increased to 26.8% for the full year 2025 compared to 23.1% for 2024, an improvement of 370 basis points. Net loss was $24 million for the full year 2025, or negative $0.40 per share, a $25.5 million improvement compared to a net loss of $49.5 million for the full year 2024, or negative $0.82 per share. Adjusted EBITDA, as defined in our press release, was negative $6 million for the full year 2025, an $8.5 million improvement compared to negative $14.5 million for the full year 2024. The improvement in adjusted EBITDA was primarily driven by gross margin expansion from higher proprietary brand penetration and the continued realization of operational cost reduction initiatives. Now turning to the balance sheet, we ended the year with $46.1 million of cash, cash equivalents and marketable securities, and no debt. We have maintained one of the strongest balance sheets in our sector, which provides significant financial flexibility to support our strategic initiatives. As Darren mentioned, today we announced a share repurchase program authorized by our Board of Directors for up to $10 million of the company's outstanding common stock. Our Board evaluated the program in the context of our financial position, capital needs, and our view that the current share price does not reflect the long-term value of the business. With $46 million in cash and no debt, we have the financial strength to execute this program while preserving flexibility to pursue organic and strategic growth opportunities. We expect to be in the market in the near term. Now I will discuss our guidance for 2026. For the full year 2026, we expect modest revenue growth, as our focus remains on revenue quality and margin improvement more so than volume. We are guiding net revenue in the range of $162 million to $168 million. We expect proprietary brand sales as a percentage of Cultivation and Gardening revenue to reach approximately 40% by year end. We also anticipate further improvement in margins and operating expenses during 2026, although the majority of the savings we had expected to realize are already reflected in our current run rate. With this and the improvements we have made in our inventory base, we anticipate gross margins for the full year 2026 to be in the range of 27% to 29%. Based on these factors, we expect to achieve approximately breakeven adjusted EBITDA for the full year 2026. Our updated guidance assumes a softer first quarter, as is typical for our seasonally lightest period. We expect profitability to build progressively throughout the year, with Q2 and Q3 benefiting from outdoor cultivation season, continued gross margin expansion, and a lower operating cost base relative to 2025. Taken together, this expected cadence supports our goal of approximately breakeven adjusted EBITDA for the full year. To summarize, in the fourth quarter, we generated net sales that were slightly higher than the same period last year, despite having fewer retail locations. At the same time, we improved profitability dramatically, reflecting margin expansion and structural cost reductions. We have maintained a strong balance sheet while remaining debt free. Looking ahead, we enter 2026 with a significantly improved cost structure, meaningful financial flexibility, and clear operating targets, including 40% proprietary brand penetration by year's end, a return to sustainable top-line growth, and breakeven adjusted EBITDA for the full year. We believe the structural work we completed in 2025 positions us to execute on future growth and profitability targets. With that, I will turn the call back to Darren for closing remarks. Darren Lampert: Thanks, Greg. And thank you again to everyone for joining us today. In closing, 2025 was a year of significant change for GrowGeneration Corp. We exited underperforming stores, reduced headcount, and implemented cost reduction initiatives across our entire organization. These actions were difficult but necessary for our future. Today's results clearly show that our restructuring plan is working. We have stabilized revenue, successfully executed our private label strategy, improved margins, and fundamentally reset our cost structure, demonstrating the tremendous operating leverage within our business model while improving profitability dramatically year over year. Looking forward in 2026, GrowGeneration Corp. is well positioned to scale as a lean, brand-led company supported by a strong balance sheet and ample liquidity. In 2026, we will continue the expansion of our private label brands. At the same time, we will work to increase our presence in the larger specialty agricultural and controlled environment markets. We will also continue our digital sales transformation as more and more customers migrate through our B2B e-commerce portal. Importantly, we also continue to prioritize margin expansion and disciplined cost control. We are proud of what we have accomplished in 2025, but now 2026 is all about executing with our new business model. Our target is clear: breakeven adjusted EBITDA for the full year, driven by 40% proprietary brand penetration and continued cost discipline. We appreciate your continued support and look forward to keeping you updated on our progress. That concludes our prepared remarks. Operator, please open the lines for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Aaron Grey of Alliance Global Partners. Your line is now open. Aaron Grey: Hi. Good evening, and thank you for the questions here. So first for me, I just want to talk about the share repurchase that you announced, mostly just in terms of what went into the contemplation. We can appreciate how you might feel the stock is undervalued, but we know there are a lot of struggles in the hydro products market right now that could present potential M&A opportunity that you spoke to in the past. So I will get some incremental color in terms of how you thought about the potential use of $10 million, assuming it is all used for the share repurchase, to be used for that versus potentially buying an asset to drive greater sales growth or potential profitability? Thank you. Darren Lampert: Yes, I can start. I can answer that for you, Aaron. To start with, like anything else, nothing is ever an easy choice. When you take a look at GrowGeneration Corp.'s stock right now, we are trading at about a $60 million market cap with about $85 million of cash and inventory, and some tremendous assets within our company. We have been looking for the past year for acquisitions and have not found anything that really fit our profile. On the private label brand side of it, we continue to roll out new products. We have a tremendous R&D team at GrowGeneration Corp., so the products that we are rolling out are best of breed. As you can see from the increase of private label penetrations into the markets, on the store side of it, we are shedding stores, not buying stores. But we have pretty much shifted our operations around tremendously. So on the brand side of it, we just have not found something that, for the right price, fits our operations. With that, we believe come 2027, this company will be throwing off cash and still have $46 million cash on our balance sheet and almost $40 million of inventory. So we still have plenty of flexibility if we found that right acquisition. So we believe right now it is in our shareholders' best interest and certainly our company's best interest to start buying back stock and see where it goes. But we still are in the market still looking to find the right fit for GrowGeneration Corp. But, unfortunately, we just have not found it as of yet. Aaron Grey: Okay. I appreciate the color. That is helpful there. And on proprietary brands, we want to talk a bit there. I know you have increasingly been selling your proprietary brands outside your own stores. Can you maybe give some color in terms of how much sales now are within your own channels versus third-party channels for category brands? And then secondly, how much of proprietary brand sales do you expect to be driven by sales to third party, and whether or not those third parties now start to increasingly go towards more traditional controlled environment markets? Thanks. Darren Lampert: I think the majority right now, Aaron, you are seeing going through GrowGeneration Corp.; I would probably say about 80% still. We certainly would love that number to go down to 50/50. A majority of our private label brands are being sold either through portals or the commercial markets through our commercial team. So as we continue to shed stores, we are seeing an increase in private label penetration, as opposed to the other way. Way back when, it was pretty much the stores that were selling our own brands. But now, I think with the continued success of these brands, the continued success of our commercial team, our facility advisers that are going to the largest facilities around the country and certainly helping sell and introduce the value proposition of our brands, it is working. When you take private label divisions, when you go back a couple years ago, that was in the teens. Expecting over 40% this year and growing, it has been quite a successful endeavor for GrowGeneration Corp., and I do believe it changed the company, the outlook of the company, and where the company is going. You are starting to see products of ours going into the agricultural side of the industry. You are also seeing Drip Hydro products being sold through The Home Depot and certain other stores right now. Our Viagrow products are starting to sell within some of the big box stores. But we are starting off a base of zero in the gardening centers. So you will see 20% plus growth on this side of our business, but it is going to take time to ramp up to become a meaningful part of the GrowGeneration Corp. story. Aaron Grey: Okay. I appreciate that, Darren. Last one from me, if I could. Just on Storage Solutions, nice rebound holistically for 2025 after some softness in 2024. Some accelerated growth in Q4. So maybe just talk about some of the dynamics that you are seeing there and outlook for 2026. Maybe if there has been some effort put back into the business after you no longer have it for potential sale. So any color in terms of that business line would be helpful. Thanks. Darren Lampert: We have put effort into it. We will be consolidating different locations for MMI this year onto one location. Middletown. So it is starting to hit on all cylinders. The product that it sells is space saving. It is something that is needed in retail right now, in agriculture, and anything you do. As buy online, pick up in store, whether it is grocery, whether it is golf, whether it is agricultural, they have a tremendous niche and a tremendous clientele. And we see growth in that company for years to come. We are consolidating it into one location, which we believe will help, closing some legacy locations, buying new equipment for this company, putting some money into it, and believe it will pay off and continue to grow. Aaron Grey: Okay. I appreciate the color, Darren. I will jump back in the queue. Thank you. Operator: Your next question comes from Brian Nagel of Oppenheimer. Your line is now open. Brian Nagel: Hey, guys. Good afternoon. I think I want to follow up on maybe that prior question, but I guess in a bigger picture. Darren, as you look at the business now, you have had a lot of success expanding the proprietary brands and really diversifying away from, as I understand, the core cannabis market. So as long as we watch here, you have been dealing with these cannabis headwinds, which have persisted a lot longer than I think most people expected. But what I guess I want to ask is, given the change in mix here and given the change in complexion of the business, at what point do you see GrowGeneration Corp. as a company really being driven by a different set of sector or macro factors? Darren Lampert: As of now, Brian, our core competency still is in growing, whether it is cannabis, whether it is fruits, vegetables, specialty crop. Again, we were brought up in the industry in the cannabis industry, and when you look at the mix of our customers right now, it is commercial, it is B2B. So we have gone away from the business-to-consumer model. When you take a look at big ag, it is no different than big cannabis—MSOs, large single-state operators—with very complex growing techniques and facilities, and that is what we do. It is something that we have gotten much more involved in recently, again, starting to build facilities. We have brought in facility advisers. We have brought in some tremendous talent on the build side of it that are project managing, bringing in groups to build facilities for some of the larger groups out there in the cannabis space. It is no different in the ag space. We just have not gotten there yet. But we believe we have the products to do it. We have the best products on the market coming out of GrowGeneration Corp. right now, and they are extremely price competitive. The quality that we are seeing out there on the markets right now is exceptional. So we believe right now, the restructuring has taken way longer than we would have liked it. We have gone from 65 stores; we are down to 20 stores right now. We closed another three stores in the first quarter, and we will be closing an additional store in the first quarter. So you will see the store count down to 19 at the end of the first quarter. And you are not seeing it affect sales, and you are not seeing it affect private label brands. So I think the restructuring—what you have seen over the last three years—is coming to an end. Our cost structure is at a place right now where we believe we can start making money. We were dealing with some tariff issues last year that we have worked ourselves through. We saw almost a $3 million to $3.5 million tariff that, over the last couple quarters, has flowed through our P&L. So even with that, we do believe that you will see a profitable year out of GrowGeneration Corp., from losing $14 million on an adjusted basis in 2024. You are seeing us picking up about $6 to $7 million a year on the EBITDA side of it, and we do not see that stopping. We think these brands are just getting stronger. We think their reach is getting further. We just signed a deal six months ago with Arett, but that takes time. And same thing, getting into the agricultural industry. But we are hiring people and salespeople on that side of it. We have been to some of the trade shows on the ag side of it. And if we could start diversifying product mix from 90% cannabis to 50% cannabis, we are not losing cannabis business; we are picking up cannabis business. So if we can start on the other side of it, you can see an extremely explosive sales side of our business at high margins. That is what we are looking forward to, and that is one of the reasons why we feel comfortable right now with our share buyback of $10 million to start bringing the float down, especially at these levels. Brian Nagel: That is helpful, Darren, and that is my segue to my second question. So you announced the buyback today. How should we be thinking about the timing of that? Is it something you could do relatively quickly, or is it more of an ease into it? Darren Lampert: I think we will be easing into it, Brian, depending upon where the stock trades. I think it is more of an ease. Like anything else, it is not a quick fix. We are certainly not looking to move our stock, so I think it will be a controlled buyback, but I think it will be effective. And like anything else, GrowGeneration Corp. is happy to buy back stock at these levels. Brian Nagel: Appreciate all the color. Thank you. Darren Lampert: Thank you, Brian. Operator: Your next question comes from Mark Smith of Lake Street. Your line is now open. Mark Smith: Hi, guys. Darren, you just hit a little bit of this, but I wanted to dig deeper into the store base. Ended at 23. Sounds like you are 20 today and likely go to 19 at the end of the quarter. You called early in your commentary the store base kind of stable. I am curious if this ends some of these closures, or if there are still some maybe that come up at the end of lease periods that we see closed as we work through 2026. Darren Lampert: I think we have been pretty clear that the future of GrowGeneration Corp. certainly is not in the retail stores. We are a B2B business, and some of our locations are not stores; they are more B2B distribution centers. So the name store is probably going to come out, and we are probably going to rename so there is no misunderstanding. GrowGeneration Corp. is no longer a business-to-consumer operation. Our stores are closed on weekends. Hours are different right now. There are warehouse people working in our stores as opposed to salespeople. There is a salesperson in each store, but even the mix of employees has changed within our stores. So I think when you look at GrowGeneration Corp. in 2026 and beyond, it is really a business-to-business, brand-driven company, as opposed to a retail location. Any of our retail sales are going through portals out of warehouses and also through distribution channels that we secure in the future. One is Arett, and hopefully there are others in other countries. We do believe probably this year we will finish somewhere in that 15-location range. So there are probably another four locations that we will shed by the end of the year, as long as we can do some work with the leases. But most of them are the smaller locations that are in areas where cannabis is not as abundantly sold as it used to be, as abundantly grown as it used to be. The future is small hubs, as we always said—not small, but 20,000 to 30,000 square foot hubs around the country—and a few large warehouses to supply for marketing and some areas where the growing is so intense that we believe that product within those areas makes sense. Mark Smith: The next question for me is similar as we look at operating expenses that you guys cut in 2025. As we look at 2026, it certainly looks like built into your guidance is continued cuts. Is a lot of that just having a full year of some of the cuts that have already been made, or are there other places where you feel like you can still cut operating expenses? Greg Sanders: Thanks for the question, Mark. In terms of operating expenses for 2025, we brought down our operating expense base $27 million in comparison to the prior year of 2024. We do see incremental improvements in 2026. Some of it is due to the eight closures that we had in 2025 where you had partial impact throughout the course of the year from those stores, potentially even closure costs that got embedded into the results as we are working through consolidation and moving inventory and shutting down the locations. And so some of the fallout in 2026 from an expense improvement perspective is just due to those changes operationally in the business. There are other areas of the business just in the same sense that we think there is incremental opportunity to continue to improve upon the expense base. So we expect expenses to continue to come down generally for both reasons in 2026. Mark Smith: Great. Thank you, guys. Operator: There are no further questions at this time. I would hand over the call to Darren Lampert for closing comments. Please go ahead. Darren Lampert: Thank you. I would like to thank our shareholders and employees for their continued support. I look forward to sharing our progress on our first quarter call in early May. Thank you, everyone, and have a beautiful day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good evening. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sky Harbour Group Corporation 2025 year-end earnings call and webinar conference. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply submit a question online using the webcast URL posted on our website. Thank you. Francisco Gonzalez, Chief Financial Officer, you may begin your conference. Thank you. Thank you, Tiffany. Francisco Gonzalez: I am Francisco Gonzalez, CFO of Sky Harbour Group Corporation. Hello, and welcome to our 2025 full-year results investor conference call and webcast for Sky Harbour Group Corporation. We have also invited our bondholder investors in our parent subsidiary Sky Harbour Capital and now also our lenders in Sky Harbour Capital Two, and the 2026 series bondholders of Sky Harbour Capital Three, to join and participate on this call. Before we begin, I have been asked by counsel to note that on today's call, the company will address certain factors that may impact this and next year's earnings. All the information that we will discuss today contains forward-looking statements. These statements are based on management assumptions, may or may not come true, and you should refer to the language on slides one and two of this presentation as well as our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statements. Now let us get started. The team with us this afternoon, you know from our prior webcast: our CEO and Chair of the Board, Tal Keinan; our Treasurer, Tim Herr; our Chief Accounting Officer, Mike Schmitt; our Accounting Manager, Tory Petro; and, at Treasury, Frank, our Assistant Treasurer. We have a few slides we will want to review with you before we open it to questions. These were filed with the SEC about an hour ago in Form 8-Ks, along with our 10-K that will also be available on our website later this evening. We also filed our February construction report one day early today, this afternoon, with the MSRB and the fourth quarter’s Sky Harbour Capital obligated group financials that were filed a couple of weeks ago. As the operator stated, you may submit written questions during the webcast during the Q&A using the Q4 platform, and we will address them shortly after our prepared remarks. Let us now get started. We turn to the first slide. On a consolidated basis, assets under construction and completed construction continue to increase, reaching over $328 million on the back of construction activity at phase two in Miami, the new campus well in construction in Bradley International, and phase two in Addison in the Dallas area. Please note this graph is soon to accelerate its upward trajectory as we broke ground already in Salt Lake City Airport and also soon will be doing that at Houston, New York, and our Lantana Executive Airport, Florida, Trenton, New Jersey, and Dallas International later this year. On the revenue front, we increased year-over-year by 87%, reaching a record $27.5 million for 2025, reflecting the acquisition of Camarillo in December 2024, as well as higher revenues from existing and new campuses that opened last year. Sequentially, revenues have the natural progression of occupancy increasing at the three new campuses. Operating expenses for the year increased to almost $28 million reflecting increasing campuses of operation, the higher number of ground leases; remember, we expense ground leases on an accrual basis, so our larger number of ground leases impacts our operating expenses. These are mostly noncash and something that Mike, our Chief Accounting Officer, will cover shortly. One of our goals in 2026 is to achieve higher efficiencies at the campus level, especially as we open second phases in Miami and Dallas. In Q4, you will notice a slight dip in SG&A. This relates to a reduction in the cash component of compensation for our senior management team. We are working to keep SG&A as stable as possible. As we have discussed in prior public conversations, we look to peak at no more than $20 million SG&A on a cash basis and, obviously, enjoy the operating leverage that will entail. This line item, in terms of operating results, includes a lot of noncash items, again, that Mike will discuss shortly. On our cash flow from operations basis, we are pleased to report that we reached positive territory on a consolidated basis for the first time in our history. But I need to point out that this is mostly driven by the realization of $5.9 million in upfront rent, part of an extension of an existing tenant that closed in December. That tenant went to twelve years and is now our longest tenant lease in our portfolio of developed campuses. We are also pleased to report that, on an adjusted EBITDA basis that Mike will discuss shortly, we also reached breakeven on a run-rate basis in December. Next slide, please. This is a summary of the financials of our wholly-owned subsidiaries, Sky Harbour Capital, that form the obligated group. This basically incorporates the results of Houston, Miami, and Nashville campuses along with the campuses that opened during the year in Phoenix, Dallas, and Denver. Revenues for the year increased 49% year-over-year, and in Q4, 18% sequentially. We expect a moderate increase in 2026 and then a step up in Q2 2027 on the back of the opening of phase two in Miami, and then another step up in Q1 2027 on the back of the completion of our last project that forms the obligated group first vintage in Addison Airport in Texas. Operating expenses increased year-over-year given the higher number of operating campuses in operation. Let us turn now our attention to our Chief Accounting Officer for a breakdown of adjusted EBITDA for the year and for Q4. Thank you, Francisco. As with prior quarters, I would like to take this opportunity to provide some additional context regarding elements of our reported results. Adjusted EBITDA is utilized by our management team to evaluate our operating and financial performance. Mike Schmitt: It is supplemental in nature and a financial measure not calculated in accordance with US GAAP. We define adjusted EBITDA as GAAP net income or loss before the add backs and subtractions that are enumerated on the left of this slide, which consist entirely of noncash or nonoperating elements of both income and expense, including, in the fourth quarter and for the year ending 12/31/2025, the significant unrealized gain on our outstanding positions. We have provided a reconciliation from our GAAP net income results for the year and quarter ended 12/31/2025. The primary item worth highlighting here is the general trend of adjusted EBITDA as we conclude fiscal 2025. While slightly down on a year-over-year basis, adjusted EBITDA improved for the third consecutive quarter to a negative EBITDA of approximately $1 million in Q4. This was driven by increased occupancy and rental rates at each of our campuses, particularly during the latter half of the fourth quarter as our run rates improved and turned positive. With that, I would like to take the opportunity to pass the call. Tal Keinan: Thanks, Mike. Good to be with everyone again. I am not going to run through this entire leasing update, but I will point your attention to a few items. First, on the stabilized campuses, we have been talking for a while about greater than 100% potential occupancy, and we are, on a number of campuses, starting to break into that greater-than-100% territory. There is still a long way to go on those, but we are there on a number of campuses already. On campuses in initial lease-up, the blue, you will see Phoenix and Dallas going quite nicely. They are moving a little bit faster than we expected, and Denver is moving a bit slower than we expected. And, you know, again, we are not going to nail the timing on all of these. But Denver is now coming along nicely. We also, I think, encountered some seasonal effects in Denver opening up in the winter season. That plays in your favor in Phoenix and Dallas, less so in Denver. In addition, have a look at the last three lines of that main chart: the high, average, and low rent. And a couple things that you will see in there. First of all, in the blue campuses, campuses that are in initial lease-up, you will see a significantly larger discrepancy between the highest and the lowest rent. The reason for that is, as some of you will probably remember, our leasing strategy on these campuses is to achieve 100% occupancy or greater as soon as possible, which means we do very short-term leases, including some six-month leases, at very low rents with the idea of beginning to negotiate in earnest on the basis of 100% occupancy. That is a strategy that we have seen work in the previous vintages, so we are doing it now in a much more deliberate way. So what you will see, for example, if you take the Denver column, APA 1, you will see that the highest rent is $41. That is somebody who is actually on a long-term lease. We are only doing long-term leases, meaning a year or more, at or above our target rents. And that $14.36 as the lowest is a short term. That is somebody who will either be cycled out or will agree to come up to the target rates once we are in, call it, full or long-term lease-up. And then, lastly, on the main chart, I will call your attention to the preleasing activities, which, again, after we finish Denver, Phoenix, and Dallas, we move to that preleasing strategy. Again, it is already in place. It has to be. In order to do that, you will see significantly higher average rents. Remember, just to make everything apples to apples, that $44.85, that is rent alone. That does not include fuel revenue on those campuses, whereas the numbers for the green and blue sections include rent and fuel. In the case of blue, it is contracted fuel. We could get more fuel flow-ish than that. But the preleasing numbers do not include fuel at all. And what that is beginning to point to, we think, is what we have been maintaining for a while now. Our first campuses were chosen on a somewhat arbitrary basis. We are now targeting the best airports in the country, and we expect to see that trend continue of rents coming up as we go. The last thing I want you to be able to look at on this page is the bottom left, the re-lease update. We promised to give the numbers on this, and I think we have alluded to the fact that it has been quite robust. But what we are talking about is, in 2025, leases that came to term—remember, these were all mature leases. This is not that initial lease-up exercise that I just referred to where we try to get to 100% occupancy. No. These are mature leases in Miami and Nashville, where the lease comes to term. Twenty-two percent is the average markup from the last year of the previous lease to the first year of the new lease. So what we think that is pointing to is, again, our thesis on airports being essentially Manhattan or beachfront property. There is a fundamental supply-demand mismatch, and supply cannot grow because of the limited number of airports at the rate that demand is growing. I do not want to say that we are going to see 22% escalations for the next fifty years of these ground leases, but we do expect a very robust re-lease rate. Reminding everybody on the call, the multiyear tenant leases feature annual escalators of CPI. It used to be with a floor of 3%. Today, it is a floor of 4%. So, on top of those CPI-with-a-floor-of-4% escalators, we are seeing an average 22% jump when one lease comes to term and the new one is signed. Next slide. Thank you. Okay. So—site acquisition, a couple things to call everyone’s attention to. I am looking at the chart on the right first. The green bar, that 1,096,000 square feet, that is airports that are in operation, starting in Houston and running all the way to Denver. The orange, the 1,149,000 square feet, that is airports that we have under ground lease that are fully funded. And we will go through the funding a little bit further. But those are airports where we are now developing, and you will see a list of which airports are coming online in what order. So the green is in operation. The red is secured and fully funded. The yellow is secured and not yet funded. Again, we are not really in a rush to fund these yet because we are in a permitting process on all those airports. It will take some time. And there is phasing. There are airports where we are going to do phase one and wait a bit before we do phase two. In some cases, there is also a phase three on those airports. If you sum up all of the square footage of hangar buildable on airports on which we have ground leases, that is 4,160,000 square feet. Calling your attention to the left side of the slide, the map speaks for itself. The bottom of the slide is something that we want to try to get people used to a little bit. We have been defining our site acquisition goals in terms of number of airports. That is a proxy, a not-so-close proxy of what we are really going for, and it has the virtue that it is simple and easy to communicate a number of airports. But, as you saw, we met our guidance for 23 airports last year. We also secured new lands at two existing airports last year. And I can say that in the case, for example, of Stewart International in New York, securing that extra, whatever it was, 240,000 to 250,000 square feet of hangar-constructible land, that is worth a lot more to us than almost any new airport in the entire portfolio. So those expansions mean something, but they are obviously not captured if all you are doing is counting the number of airports. A closer proxy of what we are really going for is square footage of revenue-producing hangar. An even closer proxy is the total revenue available, because a square foot of hangar in the New York area is going to be worth more than a square foot of hangar in most other parts of the country. And then, finally—and we are going to find a way to communicate this simply. We do not have it yet. Internally, we do, but we do not have something simple enough, I think, to put out on these earnings calls. We will. It is: what is the total NOI available? Because there are airports where our OpEx per square foot is higher and airports where it is lower. Fundamentally, that is really what we are going after. We are trying to capture as much NOI as we can, assuming we are above a certain yield-on-cost threshold. So, again, we will find good and simple ways to communicate these things better. We are not releasing guidance yet. We will do that in the next earnings call for guidance for 2026. But expect that guidance to come in these terms, not really a number of airports, because, again, we just do not think that is a close enough proxy to what we are actually trying to achieve. Next slide is development. We spent a lot of 2025 really reconfiguring our development effort to go from something that is a little bit more sporadic and on fewer airports to a really significant program that is operating at scale. So we are seeing that happen right now. Just to make sure everyone understands what these numbers mean, starting at the top of the slide: rentable square feet under construction. You can see the timeline, what is going up as we enter 2026. It is about 750,000 square feet that is actually under construction, and that will continue to ramp up. Important to say, we are only talking about construction on existing ground leases, which is why you will see the 2027 square footage under construction, that 819,000 square feet, is likely to be low—meaning airports that we secure now, that we enter construction in 2027, are not captured here. And 2028 is very low; in fact, it is going down on this chart. And, again, that is because most of the construction that is going to be conducted in 2028 is on airfields that we have not secured yet. And then, based on our construction timeline, the next line is rentable square feet that is actually built and ready for occupancy. And, again, you can see how that grows. I think through 2026 is probably pretty accurate. 2027, we might start to see a little bit of a bump up on that 2.35 million square foot number. 2028, we expect something significantly higher than 3.17 million that you see here. Shifting to the bottom, I am not going to take you through the eye chart on the right. But on the left, you will see our schedule of deliveries of campuses. We expect to deliver Miami phase two toward the end of next month, then in September Bradley, Connecticut, our first New York area campus. At the end of this year, Addison two, our second phase in Dallas. And you can see, as we go down the list leading all the way to Dallas International at the bottom of the list, the pace of deliveries is obviously starting to ramp up. So I think we have gotten our development program to a place that we feel very comfortable right now in our ability to deliver on our 2026 and early 2027 schedule. There is still more ramp-up of our development resources required for the surge that is coming in 2027. With that, let me hand it back to Francisco. Tim? Francisco Gonzalez: Thanks, Tal. As we announced last quarter, we finalized a five-year tax-exempt drawdown facility with J.P. Morgan that will provide debt funding for our next projects in the development pipeline. Tim Herr: We expect to draw on the facility over the next two years as our airfields become ready for construction. To cover Sky Harbour Group Corporation’s required corporate contribution to the facility, we closed last month on $150 million of tax-exempt subordinate loans. The pricing was three times oversubscribed, with 18 distinct institutional investors coming into the credit. These bonds have a five-year maturity with a 6% fixed interest rate and a call option starting in year four, as we plan for an eventual takeout of both the bank facility and the subordinate bonds with long-term tax-exempt bonds once the projects are completed and cash flowing. Next slide. Quickly, these charts highlight the recent trading in our credit. Our long bond from the original 2021 issuance has been trading higher as we approach the completion of our first obligated group project later this year. Our newly issued 2026 series bonds have also been trading higher following issuance last month. Now let me turn it over to Francisco for a discussion on future capital— Francisco Gonzalez: Thank you, Tim. The 2026 series that Tim mentioned, of subordinate bonds, represents a fundamental rethinking of how we think of our economics and capital formation. We always knew we were going to issue subordinate bonds, but not this early in the life of our portfolio and not while still unrated on our senior obligated group credit. In this slide, we illustrate what the unit economics of a new campus looks like on average. We aim to target campuses across the US where we believe we will earn $40 per square foot in rent and $5 in fuel margin. After $9 per square foot of operating expenses, we are left with, again, as an illustration, $36 per square foot of NOI. Before the issuance of these subordinate bonds, we had been assuming 70% leverage on the program or on the projects, resulting in a return on equity at the unit economics level close to 30%. With the increased use of our debt, specifically subordinated bonds replacing the use of equity, the same campus can now be expected to generate returns on equity higher than 60%. Of course, we are going to be deliberate and cautious in our level of leverage. I look forward to refinancing, as Tim mentioned, the subordinated bonds and the J.P. Morgan facility well in advance of their five-year maturities. On a pro forma basis, we expect the coverage of such refinancing to still support investment-grade ratings for those bonds given the predicted coverage of all the existing and future projects under construction. Next slide. We closed the year with $48 million in cash and U.S. Treasuries, which now are enhanced with $150 million in gross proceeds from the 2026 series bonds, which closed last month, and $200 million of the committed J.P. Morgan facility late last year, which was undrawn at year-end but which we now start to use here in the current quarter to fund capital expenditures at the Bradley campus. We now feel that we have created a fortress of liquidity at the company and are fully funded to double the size of our campuses and reach over 2 million rentable square feet, as I mentioned earlier. In terms of future capital formation, we will continue to be deliberate and prudent on our debt management, opportunistic in monetization of assets. As previously noted or disclosed, we received $5.9 million in an upfront rent payment last December as part of the extension of one of our hangars in our portfolio. We also continue to negotiate and have now actually broadened the number of potential partners for the previously announced joint venture of one of our hangars in Miami, likely to include more hangars throughout the portfolio. We also have received interest from tenants who would also like to acquire hangars and then lease them. This type of asset monetization, either in the form of hangar sales or hangar lease prepayments, is a prudent way to generate equity capital in front of our future growth if, but only if, the valuation is supported and the alternatives are less attractive from dilution and cost-of-capital perspectives. Let me now turn it back to Tal for end-of-year highlights and forthcoming initiatives in the four pillars of our business. Tal Keinan: Thanks, Francisco. Okay. So on-site acquisition—2025 guidance of 23 airports under ground lease has been met. Like I said before, from our perspective, it is exceeded substantially through the two new ground leases on existing airports. And, like I said as well, we are refining our guidance metrics. Again, internally, we already use a metric that is much closer to targeting total available NOI rather than number of airports or square footage. But, again, we will get back in the next earnings call with guidance and with some clearly understandable metrics. On development, 2025 was the year of great investment in our development program. What I can say right now is, in the short term, things are looking good. We are on time, on budget, on all projects. Our scale-up for the next big surge in development activity is underway, and, you know, hopefully, in our Q2 call, we will be able to say we are ready to go with the program that will carry us through 2027. And as we continue to grow, it is not just economies of scale; it is our vertical integration. First, it is steel manufacturing. Now into general contracting. Our prototype improvements, the constant value engineering of that prototype, has gotten our cost per square foot down lower and lower. And I think a lot of people on the call appreciate that not only impacts our unit economics, it impacts our total market, because the number of airfields on which you can get a double-digit yield on cost goes up dramatically as your cost of construction goes down. I could say the same thing for cost of capital as well. On leasing, we continue to increase our revenue run-rate every quarter. And that is, again, something to be expected. Every time a new campus comes online, that is a ratchet up in our revenue run-rate. Again, once these things are stabilized, they are long-term leases. Again, just to avoid any confusion, we do have a period where we have a mix of long-term and short-term leases in order to achieve 100% occupancy. But then we re-lease for the long term. Once that happens and stabilizes, that is a ratchet up in your revenue run-rate. It is stable. These are multiyear leases, again with escalators. And when they do come to maturity, the trend has been a very significant jump in revenue each time. So I think we can expect to see that continue. We talked about re-leasing, and we talked about the preleasing program, which is in place. I think the first airport we will see dramatic wins on preleasing, really months before we actually open our doors, is going to be Bradley, Connecticut. On operations, our first phase two campus is ready to go operationally. We open our doors late next month; that is Miami phase two. One of the things to look at here is, we talk about the power of phasing. And so far, I think we have already seen the leasing dynamics. If you are opening up 160,000 square feet of hangar at once in Miami, it is a challenge on its own. If we had opened up 350,000 square feet at once, that would have been that much bigger a challenge. So I think we are already seeing the benefits of phasing in that respect. But it is also an OpEx question, in that we will be able to operate the combined campus in Miami with the same headcount, or almost the same headcount, that we are already operating just phase one in Miami. So, you know, very significant efficiency gains as we do that. The next place we will see that is going to be Dallas phase two. The second, we will come up with a metric that is kind of objective for measuring the quality of our service offering. The best we have been able to do so far is get some testimonials from some of the top flight departments in the country that base at Sky Harbour Group Corporation. There is a metric that we are going to put out hopefully by the next earnings call because it is increasingly important to us. It is a big differentiator. The time to wheels-up, the efficiency, the access of the aircraft, the security, the privacy, the customizable space, all of these things are a very big deal in aviation. We know it. We see it. We live it every day. We want to find a kind of objective way to communicate that to our investors. So, hopefully, we will have that by the next earnings call. And then our big thrust in 2026—if the construction program was the big thrust in 2025—getting our OpEx efficient is the big thrust in 2026. What I can say today is that we are effective. And that is by design. We said, listen, we are going to overinvest. If we have an equipment shortage, there is no equipment shortage. We might have an equipment surplus. We are going to have a headcount surplus. We are going to do everything a little bit over to make sure that we have the absolutely bulletproof service offering, and really the best service in business aviation. We are paying more than we need to pay to have that, though. So we are now in the process of very carefully and very deliberately finding the efficiency that we can find. I alluded to one of those, which is when you open phase two, for example, or if you have multiple airports in a single metro center—which you can see in our map we are having now—you can find all sorts of very, very exciting efficiencies. So I think part of that is kind of free money. There are those things that we can do, and that we are doing, that will, without any risk or any significant effort, increase the efficiency. Then there are certain things that we have to be, again, very deliberate, and it will be a bit of an effort to get it down. But that is our big strategic focus for 2026. Looking forward, last slide. So site acquisition—again, our focus is on maximizing our NOI capture. I am going to preempt questions. We are feeling the rumblings of competition in our industry. I think we have talked about it on pretty much every earnings call. We are seeing it. It is still kind of anecdotal. We do not see a player like Sky Harbour Group Corporation coming and doing exactly what we do, but we think that is on the way. And, again, the deepest moat we can dig around this business is capturing the last available land at the best airports in the country. So the focus this year is on max NOI capture—the best geographies in the country. Secondarily is same metro center expansion. And one of the things that we have learned is, knowing a market that we know intimately is a massive advantage. The fact that those markets know us intimately is a massive advantage. You cannot get space at Sky Harbour San Jose. You cannot get space. And we love that. That is great. It would be great if we could expand in that market, because we know the specific people—because we are talking to them—who would like to be based at Sky Harbour and cannot because we have run out of space. So look to that trend happening as well in 2026. On the development side, the prototype program continues. Again, we have a biannual refinement of the prototype, so it gets better each time we go: higher quality, lower life-cycle cost, lower development cost of the flagship SH37 hangar. And, like we said, we are preparing for the big surge in development that will happen with the big surge this year and the bigger surge beginning in early 2027. On the leasing side, the big challenge: square footage is coming online very fast. As you can see, we are stretched a little bit thin on the leasing side. We are looking to grow that team early this year. So short term, our objective is to meet that surge. The order of operations is: get those new campuses up to 100%, then go back and get those new campuses to market rent, and then third is take the legacy campuses—we are talking about that 22% jump in rents between lease terms—get those enhanced in Miami and in Nashville and in all of the legacy markets. And then long term, like I said, we are growing the leasing team. It has always been a little bit too small, and I think it is one of the areas that we have been a little bit behind the eight ball. But we are growing it now. And then, lastly, operations—the defense—I never want to forget it. I do not know if our investors are particularly interested in this. We definitely are. A boring quarter in operations is a victory: zero safety incidents, zero service lapses. That is a very big deal. I do not think any other provider in business aviation can make that claim, and we continue to be able to make it. We do not take it for granted. There is a lot of work that goes on to deliver that. What I consider offense is continuing to add services. We are working in conjunction with our residents to define the areas where we can really ratchet up our level of service, not looking at our competition. We do not really—does not bother us what our competition does. Looking at our residents and understanding their needs. And then, lastly, our 2026 OpEx efficiency program, and we will hope to have good numbers to report by the end of this year on OpEx. With that, thanks everyone. Francisco Gonzalez: This concludes our prepared remarks, and we now look forward to your questions. Operator, please go ahead and lead the queue. Operator: At this time, I would like to remind everyone, in order to ask a question, please submit it online using the webcast URL. We will pause for just a moment to compile the Q&A roster. Ryan Myers: Should we be expecting the signing of any new ground in 2026? Tal Keinan: Alright, Ryan. This is Tal. First, thanks for the coverage. Yes. The answer is yes. Again, we will be putting out guidance on the next earnings call for 2026. It is not going to come in the form of number of airports, like I said. It is going to come in the form of NOI capture, and we will have some clear metrics. Ryan Myers: Nice work on reaching operating cash flow/adjusted EBITDA run-rate breakeven by year-end. How should we be thinking about that in 2026? Will you be breakeven going forward from here? Francisco Gonzalez: Thank you, Ryan, for the question, and, again, also for your research coverage. Yes. So, obviously, our cash flows follow revenues. Revenues follow campus openings and leasing and lease rate increases. So Q1, Q2, if we are on time and on schedule for the opening of the second phase at Miami of Boca, we should be moving north from breakeven, and then, similarly, Q3 and Q4. Then, as I mentioned earlier, with Bradley opening up later on in the fall, and then phase two, we should then be a deep in deep black towards the end of this year. Thanks, Ryan. Michael Tompkins: We noticed construction spend came in a little lighter in Q4 than prior quarters, likely due to timing of deliveries and development starts. Now, with the proper team and financing in place, how can we think about construction spend ramping as we move throughout 2026 and beyond? Francisco Gonzalez: Thank you, Michael, for the question. Yes. As I mentioned earlier, construction expenditures are ramping up. We are breaking ground now in a variety of projects, and we have raised the capital to be able to raise the accelerator on a lot of these projects that we have been preparing for. Also, we need to note that we completed the onboarding of Ascend, our new subsidiary, doing in-house construction management, also general contracting of some, not all, but some of the campuses. With that and our liquidity being strong, you are going to see the acceleration of the construction spend in the coming quarters. Next question. Michael Tompkins: It looks like you made some great leasing progress this quarter, especially at Deer Valley. What are your expectations for when those rents start to roll into earnings, and what are your expectations for stabilization across the three assets that were delivered in 2025? Tal Keinan: Francisco, do you want to start, and I will finish? Francisco Gonzalez: Yes. So you are correct. We have recently received the increase in occupancy at Deer Valley, and then, you know, we have noticed that, again, market by market, very specific to the situation, but we are seeing that it takes us from six to nine months to reach stabilization. And then we are doing more preleasing, as Tal mentioned earlier, on some of our upcoming campuses. It is great to see, from the finance perspective, some hard leases signed for products that we have not even broken ground on, even getting on a permit, like in Dallas. So that bodes well for future stabilization and the speed at which we reach that after opening. But we expect some progression for the three assets that opened, basically, in the coming two quarters. Tal Keinan: Yep. Fair, and, Michael, I appreciate that you asked specifically about those three assets delivered in 2025, because, like Francisco just said, we are transitioning to a different lease-up strategy where we start a lot earlier. Just to remind everybody, even though you see, for example, Phoenix and Dallas at roughly 80% leased now, remember that when we hit 100%, we do not call that stabilization. A, because some of those are short-term leases that need to be recycled into long-term leases at our true market rates; and B, because we do not really stop at 100%. We can get beyond 100%, as we are showing in the legacy accounts. Gaurav Mehta: How many additional ground leases do you expect in 2026? Tal Keinan: It is Tal. Gaurav, thank you for the question. Thanks for the coverage. We are going to put out formal guidance at the next earnings call. Again, expected to come not in the form of number of ground leases, but some metric that is much more specific to how much NOI we are generating. That fundamentally is the metric we should be pursuing. Gaurav Mehta: Why is the average rent at preleasing campuses higher than stabilized and in initial lease-up campuses? Tal Keinan: Yep. Thanks for that as well. It is Tal again. It is what I alluded to in my earlier remarks, which is, when we—not to disparage Houston—but we showed up at our first airports, it was very much, “Hey, stay away from New York City,” because we know that is the best metro center in the country for us, and we know we are going to make mistakes at the beginning. Other than that, we were not that particular about which metro centers we targeted at the beginning. Some are better than others, as you can see. Our targeting is much more precise today. The airports are getting better and better. We know what we are looking for at those airports. So when we lease a hangar literally eighteen months out—we are talking about hard cash deposits in the bank, binding contracts on those leases—they are coming in at higher numbers than our existing campuses. That is the reason. Timothy D’Agostino: Quarter over quarter, multiple facilities had their projected construction start and completed dates changed to TBD: APA phase two, DVT phase two, HIO phase two, IAD phase two, ORL phase two, and POU phase two. Can you walk us through what led to those changes shown in the 10-K? Francisco Gonzalez: Thank you, Tim, for the question. It is clear that you are reading the detail, and thank you for your coverage. I am glad of this question because we obviously have, at the margin, to decide where do we go and do a phase two, and where we do a phase one, of the ground leases that we have secured. And, you know, ground leases will continue to be generated every year. So we set to put TBD on phases two to give us the flexibility in terms of when we actually are going to go ahead and implement that. It is going to depend on, of course, how phase one went, how the leasing went, how we feel in terms of making sense of adding that capacity to that particular market. Let me also note that having our funding of construction now through a drawdown facility in the bank gives us even more flexibility to do that type of optimization in terms of when we do a phase two versus a phase one on our campus, which is not something you get if you are doing it with fixed financing from the get-go where you almost have to determine exactly what you are doing from the get-go. Tal Keinan: Next question. Pranav Mehta: Can you explain the unit economics slide more? The most recent feasibility study has NOI around $20 per square foot for both obligated groups. Why do you think it would be $36? Only two properties have rent above $45 per square foot. Francisco Gonzalez: Thank you for the question. And, again, let me remind that this was an illustration, but something that we believe we are going to meet or likely surpass. Right now, we are entering into leases, and we have leases higher than $40 of rent in Miami, in San Jose, in Bradley, and in Dallas. The ones that we have preleased. We feel very comfortable that, as Tal mentioned, the airports that we are constructing now and are still forthcoming, on average, are better airports than our first vintage obligated group, so we are likely to see rents and overall revenues per square foot trending higher on our new accounts. Pat McCann: At this point, how much of a new campus do you ideally want preleased before construction begins, and how do you balance early visibility against the opportunity to push rents higher closer to delivery? Tal Keinan: Just reading the question again. At this point, how much of a new campus do you ideally want preleased before construction begins, and how do you—okay. Great question, Pat. And, again, thank you as well for the coverage. First of all, it is not really before construction begins per se. Yes, we are preleasing now before construction begins in a lot of these campuses. That is not really the threshold moment. The right time is about nine months before we intend to open those campuses. How much do you tend to—your question is very elegant. The first part ties to the last part very well. You are leaving some money on the table, of course, when you do that, when you prelease so far in advance. I think a good number—and we will experiment with this as we go and optimize it—but a good number is 50%. And when you open up, you are going to leave the second 50%. And you are right, our expectation is you will see somewhat higher rents on the second 50%. But the fact that we go in cash flowing—remember, at 50%, we are meeting our debt obligations handily already—I think is probably the right way to do it. And remember, we are not doing, you know, the average lease term is significantly less than five years. Whatever money you are leaving on the table, you are not leaving it on for a very long time. But I think your relapse will come over time as we optimize that. Don Kedick: With the first obligated group nearing completion, what is the actual IRR or yield on cost you think you achieved? Francisco Gonzalez: Thank you, Don, for the question. At Sky Harbour Group Corporation, we are very data driven, and we have all the data, and we are going to be looking back with backtesting at all our projects by phase and crunch all the numbers in terms of looking back and keeping track of profitability by campus and by vintages and so on. Of course, if you look back, we faced in our first portfolio the COVID construction inflation that we certainly underestimated, and then we had the design issue that we addressed a year and a half ago. That obviously resulted in us having to put more equity into the obligated group than we really expected. So the yield on cost at the outset is not going to be what we would hope for our campus. Having said that, though, rents have been coming in higher than we originally forecasted. So, yes, we are going to be lowering yield on cost at the first point of stabilization, but then, as Tal mentioned, we are experiencing higher rents and we are experiencing higher bumps on those first renewals. So there is another calculation that happens, I would say, two years after the first stabilization or the second stabilization when you have hit market rates of those leases in that particular campus or that particular vintage. And then, lastly, in terms of IRRs, IRRs incorporate that increasing rent that we experienced with inflation. Remember, we have CPI with a floor of 3% or 4%—only new leases have 4%—and then those bumps. The IRRs should offset some of those increased costs that we experienced. So stay tuned for those vintage portfolio calculations when we complete the obligated group at the end of this year. Next question. Gaurav Mehta: Can you please provide details on your interest in selling hangars? Should we expect any sales this year? Francisco Gonzalez: Thank you for the question. As I said in the prepared remarks, we are going to be very deliberate about entertaining this. There are some big concerns out there that really just increasingly do not like to rent. They maybe made their money in real estate and just do not want to lease. So, of course, we will be deliberate in terms of—and for us, the sale is an ultra-long forty- or fifty-year tenant lease where the tenant pays upfront for the right to basically have that hangar. It is just, conceptually, a sale. So we put up, obviously, numbers, and we are in the leasing business. We truly believe that, on a present value basis, we have maximized the value to our shareholders by keeping these assets and leasing them over time. But at the right price, and if that tenant will only participate in a particular campus if by “acquiring,” we will state that if it makes sense. Tal Keinan: I would add to that, Gaurav, that those ultra-long-term prepaid leases, aka sales, should be looked at as a tool in the growing arsenal of cost-of-capital reduction mechanisms that Francisco and team have at their disposal. It is another one of these: what is it worth to us today, from an NPV perspective? You never want to do these deals—and, to be clear, the conversation that we have with our residents who want these deals are very explicit. They are coming to us saying, we agree with you on your inflation expectations. We want to protect ourselves. I think, in one case, “I am going to be flying for the next fifteen years or so. I am probably going to phase out. I want to lock in whatever I have. I am willing to prepay. I am willing to prepay at a premium to get that done because I do not want to be subject to escalations and to reset.” So, by definition, there is a zero-sumness to this whole exercise. So it is definitely not an exercise in trying to beat our NPVs on the leases. It is about cost of capital. Alex Bossert: A recent sell-side report from BTIG indicates that you are now seeing build costs closer to $250 per square foot on your active sites. Could you unpack the primary drivers of this reduction in build costs? Specifically, how much of this efficiency is being driven by the vertical integration of Stratus and Ascend versus the natural economies of scale as you shift into phase two expansion? Finally, is $250 per square foot the right baseline to use, or do you see room for even further cost compression as you scale? Tal Keinan: Thanks for that question, Alex. Starting at the end, no, we are going to continue fighting. This is definitely not, you know, when we hit our goals, we reset our goals. Again, this is very, very material. To get your hard cost below $250 a foot not only improves your unit economics, it grows your total addressable market. If you can get that to $240, even more so; if you get that to $230, even more so. So we will continue fighting to get it down. How are we doing it? Yes, vertical integration is definitely a big part of it. The fact that we are subject, for example, to volatility in steel prices, but we can manage that volatility because we have virtually limitless space for inventory of steel at our plant in Texas, means we are not subject to the much higher volatility in pre-engineered metal building component prices, because that is our output. So the vertical integration is a key piece of it. The vertical integration into construction management and general contracting is another big piece, as a guess. I think I have said on this—say, if you are going to assemble a set of eight dining room chairs from IKEA, you are probably going to get something wrong in that first chair. You follow the instructions, but you are going to mix up left and right, and you are going to have to take it apart and put it back together again. Second chair, you are going to get it right. Third chair, you are not going to be looking at the instructions. Four through eight, you are going to be doing faster than you did the first chair. Same thing in our business. The erection of these hangars comes at a very, very specific sequence. There is a lot of nuance in it. Getting it right and getting it fast matters a lot. Here is the fact that we are now doing it over and over again across the country, not working with the general contractor who is seeing it for the first time as we have done up until now, is a big deal. There is more to it, but put all of those together; that is where we are seeing the economies. Christian Solberg: What percent of your airports that are operating currently have waitlists? Tal Keinan: Yep. Christian, thanks. We—so, not exactly waitlists that we operate. Meaning, it is not first come, first serve. If you are first on the list, you get a hangar first. If you are second, you get the hangar second. We keep lists of interested parties, and they are dynamic lists. Somebody could come and say, “I really need a solution right now.” If we do not have room, they might find a solution elsewhere and might become not relevant for a while. So we have lists of interested parties. When we come up with space—and this is particularly on the semi-private model; that happens a lot more frequently—we reach out to all of those guys. What is important, I think, to understand in that is, it is a flipping of the dynamic. When we open Miami phase one, you have got 160,000 square feet of vacancies. Everybody is shrewd. Everybody is sophisticated in this business. They understand that they have the leverage in that negotiation. Once the campus is stabilized, it is really the mirror image of that: you have multiple parties interested in one space. And if you stagger appropriately, which we do—you want to have two or three hangars coming to term at the same time—if staggered appropriately, you can keep that dynamic. So it is not exactly a waiting list. It is really an interested-parties list. Alan Jackson: First, is the gestation period shorter for the expansion of existing airports as compared to acquiring brand new ground leases? Are there any differences in the acquisition process between the two? Second, does management anticipate a need for hangars with a door threshold higher than 28 feet? Is the prototype able to be adjusted for airplanes as they become larger? Tal Keinan: Yes. Two good questions, Alan. Thanks. So, yes, there are a lot of advantages to expanding an existing field. Like I said earlier, you know the market and the market knows you at those airports. So that is a very big deal. We can also typically achieve greater efficiencies on ground rent. If you have a larger plot, you have more options for layout plans that could be more efficient. Again, revenue density is obviously critical to us, so the bigger plots lend themselves to that. And then, lastly, your OpEx—your OpEx per rentable square foot goes lower. There is a certain number of people that you need, come what may, on a campus, so scale is your friend as you grow. With regard to door threshold height, I do not know if you are watching it, but the NFPA 409 Group 3 standard 2026 edition allows you to go up to 34 feet of threshold height. So we have adjusted the prototype to go up to 34 feet. Remember that NFPA 409 is not mandatory, so the adoption rate is different in different geographies. We have come up with a kind of temporary solution where you have a valance which takes you down to 28 feet, keeps you compliant with 2021 standards for NFPA 409, and then, once the jurisdiction adopts those standards, you can remove the valance, and now you are at 34 feet. Because you are absolutely right: Falcon 10X, likely to be certified this year, is a 29-foot-and-change tall airplane. It does not fit in 28-foot door threshold hangars. So, good question. Francisco Gonzalez: Operator, I think we have time for two more questions. We started a little late. Let us take two more questions, and we will close it there. Alan Rodlow: Might a NetJets or a Flexjet decide to rent out an entire hangar for their clients to use where they are not able to build their own hangar? They seem to be moving away from always leaving jets on the ramps of airfields. Tal Keinan: The short answer is yes. Dave Storms: With regards to the step up of 22% following re-leasing, how sustainable is this kind of step up, and are there any geographies that are running ahead of or behind this? With the OpEx program underway, can you talk more about any specific levers being pulled here or maybe where you are seeing easy wins? Tal Keinan: With the second one. The easy ones are things like just enforcing our triple nets on our leases. We did not have good enough standardization on our tenant leases early on, and most of those are the leases that are in effect. Slightly different rules on each lease, which leads to lack of enforcement of triple net. So, you know, your insurance rates go up on an airport; we are covering a lot of what we do not really need to be covering today. That is an example of an easy one. It is just being compliant with our agreement. With regard to the sustainability of that 22% step up, it is a good question. We do not want to make huge claims going forward. To be clear, I do not think it is going to be 22% ongoing for the duration of these leases. If it were half that, if it were a quarter of that, I think you have a very exciting story. Just throw that into the model. Your inflation rate is probably the most sensitive item in the entire financial model of the whole business. So it is a very big deal. We are excited about—what I can say is, if you own a car in New Jersey, a $50,000 car, and you have a house in New Jersey, you park it for free in the driveway of your house. When you move into Manhattan, they are going to charge you a thousand bucks a month to garage your car. That is going to bother you for a little while. But at some point, you just accept it as part of the cost of owning a car in Manhattan. Fundamentally, hangar rents have been a footnote in the annual OpEx of a large jet owner, a footnote. I do not think that should be the case. If anything is a commodity in this business, it is fuel. It is not real estate. Real estate is actually the most precious asset in this entire industry. It should occupy a much higher level on your ranking of aircraft ownership OpEx. We think it is going there, and there is a lot more to go on that. Francisco Gonzalez: Thank you, operator. Operator: There are no further questions at this time. Mr. Francisco Gonzalez, I would like to turn the call back over to you. Francisco Gonzalez: Thank you, operator, and any leftover questions, because we are out of time, we will answer directly. Also, let me remind everybody again that you can find further information on our website, www.skyharbour.group. You can always reach out directly with financial questions through our email, investors@skyharbour.group. Thank you again for your participation. With this, we have concluded our webcast. Thank you all. Operator: This concludes today’s conference call. You may now disconnect.
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