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Operator: Good afternoon, ladies and gentlemen, and welcome to the Sera Prognostics, Inc. Fourth Quarter 2025 Financial Results 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 on Wednesday, 03/18/2026. I would now like to turn the conference over to Jennifer Zebuda. Please go ahead. Jennifer Zebuda: Thank you, operator. Welcome to Sera Prognostics, Inc.'s Fourth Quarter and Full Fiscal Year 2025 earnings conference call. At the close of market today, Sera Prognostics, Inc. released its financial results for the quarter ended 12/31/2025. Presenting for the company today will be Zhenya Lindgardt, President and CEO; Lee Anderson, Chief Commercial Officer; Doctor Tiffany Inglis, Chief Medical Officer; and Austin Aerts, our CFO. During the call, we will review the financial results we released today, after which we will host a question-and-answer session. If you have not had a chance to review our quarterly earnings release, it can be found on our website at seraprognostics.com. This call can be heard live via webcast at seraprognostics.com; a recording will be archived in the Investors section of our website. Please note that some of the information presented today may contain forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results, and market trends and opportunities. These statements are based on management's current expectations, and actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's Annual Report on Form 10-Ks, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-Ks. These documents identify important risk factors that could cause actual results to differ materially from those contained in our projections and other forward-looking statements. I will now turn the call over to Zhenya. Zhenya Lindgardt: Thank you, Jennifer, and good afternoon, everyone. I will start with an overview of our 2025 progress, and Lee and Tiffany will speak about our commercial and medical affairs efforts, and Austin will provide a recap of our financial results. As we shared last year, to support Sera Prognostics, Inc.'s next phase of commercialization, we strengthened our leadership team with Lee Anderson joining us as Chief Commercial Officer and Doctor Tiffany Inglis as our Chief Medical Officer, enhancing our commercial and clinical depth, and I wanted to use this opportunity to introduce them to all of you in today's call and have them discuss our progress with you. 2025 was a critical year for Sera Prognostics, Inc., finalizing our PRIME publication to advance our evidence portfolio, setting up for commercial push in 2026, building our organization, ensuring we have capital to deploy in our commercialization efforts, and laying groundwork for potential international expansion. Our goal was simple: to build the evidence, access, and commercial infrastructure required to drive PreTRM adoption at scale. Across all of these dimensions, we made meaningful progress. We began 2025 focused on strengthening the clinical and scientific foundation supporting our commercialization strategy. The presentation of PRIME study at Society for Maternal-Fetal Medicine meeting in Q1 was a major milestone, followed as expected late in the year when our pivotal PRIME study was accepted for publication in December, with a full manuscript published in January 2026. The publication reported important new data showing that the PRIME study resulted in an amazing 56% and 32% fewer babies born before 32 and 35 weeks of gestation, respectively. The full peer-reviewed publication of PRIME in the Pregnancy Journal of Society for Maternal-Fetal Medicine, like studies before it—namely AVERT—reinforces what we have long believed: that biomarker-based identification of women at higher risk of preterm birth paired with a preventive treatment protocol can deliver meaningful reductions in preterm birth rates and drive improved health outcomes for babies. As we move into 2026, we plan to extend this momentum through a thoughtful further analyses, publication, and real-world evidence generation strategy designed to communicate and replicate PRIME outcomes across diverse populations, geographies, and care models. These data will be essential as we engage payers and broaden awareness across the clinical community. I will ask Doctor Inglis to speak more about our scientific and guideline engagement shortly. Post-publication, we are making meaningful strides in advancing coverage and access as our top priority. A central part of the strategy has been launching targeted programs, particularly in Medicaid in high preterm birth burden states, to generate outcomes data that support both clinical adoption and reimbursement expansion. Historically, we referred to these efforts as Medicaid pilot programs. However, with additional real-world experience, it is clear that these programs take many forms, and our discussions involve both Medicaid and commercial payers. As a result, we believe partner programs more accurately reflect the breadth of our commercialization efforts, so we will speak about those. Last year, we set out to engage with our first wave of six target states and to launch partner programs. We exceeded our state engagement goals in 2025, expanding discussions to 13 states, and met our goal of engaging in now two live partner programs. We expect these partner programs to play a critical role in shaping policy, validating economics, and informing future contracting discussion. We are maintaining our disciplined geographic-focused approach, targeting expansion of up to 15 to 17 states by year end, representing 58% to 60% of U.S. births. This strategy allows us to deepen our traction in our existing target states while thoughtfully adding new ones. With this focused growth plan, we are on track to be running five to seven partner programs by the end of 2026. Lee will detail our execution 2026 KPIs for states in active discussion and partner programs, as well as how we expect to convert engagements into coverage pathways. In Europe, we continue to make steady progress towards unlocking a significant, largely unaddressed obstetric care opportunity. Over the last two years, we have advanced our regulatory pathway for the PreTRM Global test and are working towards CE marking approval. We remain on track to submit our European dossiers in the coming months. Importantly, recent European experts' commentary published in the Journal of Maternal-Fetal and Neonatal Medicine reinforces that current prevention strategies miss most women who deliver preterm and highlights our PRIME study approach as well aligned with European health care systems. Alongside ongoing engagement with regulators, clinical leaders, and patient advocacy groups, we are building the foundation needed for successful market entry following regulatory clearance. We continue to expect revenue growth to build gradually as partner programs mature and real-world evidence results are generated and disseminated. We remain disciplined, investing in market access, commercial infrastructure, and state expansion in a measured way. With that, I will hand it over to Lee to discuss our commercial execution. Lee Anderson: Thank you, Zhenya, and hello, everyone. In 2025, we refined a region-first approach pairing payer engagement with OB/GYN and maternal-fetal medicine education, health system outreach, and patient awareness to build local market density. That integrated model now guides our early commercialization across all target states. Following PRIME's publication, we saw strong interest across the payer landscape. Our team engaged broadly with Medicaid agencies, commercial plans, and related organizations nationwide, leading to a meaningful cohort of payers reengaging to begin or advance internal reviews. These interactions reinforce the value of our partner program approach, a flexible model that adapts to each state, payer, and population. As Zhenya mentioned, in 2025, we were in active discussions with 10 payers across 13 states. Looking towards 2026, we expect to expand our efforts to be in active discussions with 15 to 17 states, and we will double the number of payers we are engaged with. As these discussions mature, our goal is to convert these engagements into positive coverage decisions or formal partner programs that support broader access and utilization. For partner programs, we expect to be running five to seven active programs by the end of the year. We expanded provider education and awareness via peer-to-peer programs, medical center in-service sessions, and digital education through leading clinical platforms. Building clinical champions and strengthening relationships across OB/GYN and MFM practices while supporting early health systems conversations. Operationally, we refined the ordering experience, expanded field education, enhanced onboarding, and are progressing integrations and collaborations so that PreTRM can be incorporated more seamlessly into everyday clinical workflows. To illustrate how the model comes together, consider a representative region: we align with a payer on a partner program to evaluate outcomes and economics. We brief the leading hospital system and its OB/MFM department on PRIME and the care pathway. We also provide targeted onboarding and practice-level tools so ordering is simple, and we activate a localized awareness effort so that patients and providers understand the why and the how. Over time, we focus on repeat ordering within early adopters, then widen access as results occur and the payer's review process advances. While each region is different, this playbook helps us drive consistent execution without overextending resources. Our near-term commercial priorities are to convert payer discussions and partner programs into contracted coverage pathways using outcomes and economic data; scale repeat ordering within our current early-adopter providers and health systems by driving workflow reliability and clinical habit formation; and to expand provider awareness and educational efforts. Before I turn the call over to Tiffany, please join me in welcoming Ms. Adrian Lugo as the new Head of Sales and Strategic Accounts for Sera Prognostics, Inc. Adrian brings more than 20 years of leadership experience in women's health and molecular diagnostics along with a strong track record of building high-performing teams, expanding market access, and partnering with health systems to drive adoption of innovative testing solutions. Her strategic expertise will be instrumental as we scale commercial execution and accelerate adoption of our technology to advance improved outcomes in maternal health. With that, Tiffany will provide a clinical and evidence update. Tiffany Inglis: Thank you, Lee, and good afternoon. Our medical affairs work in 2026 is focused on ensuring PRIME as a catalyst for consistent evidence-based practice. We are emphasizing three themes. One is identify risk early in the second trimester before symptoms are present. Second, we deploy a standardized test-and-treat pathway consistent with PRIME. And lastly, we support improved neonatal outcomes with the potential to reduce avoidable neonatal hospital utilization. We are partnering closely with clinicians on patient selection, timing, and care pathway deployment while expanding our clinical champion network and peer partnerships. In practical terms, PreTRM is designed to provide early, individualized risk information from a routine blood draw—information that clinicians can act on through a standardized care pathway. The goal is straightforward. Know who is at elevated risk early, before symptoms begin; intervene with measures that are already familiar to providers and safe for patients; and do so in a consistent way that has been proven to support both quality and affordability across populations. To complement PRIME, we are generating real-world evidence results across diverse populations, care settings, and payer environments. This includes outcomes tracking within partner programs, health economic and outcomes research, assessment of budget impact, population-level analyses for state and payer decision-making, and collaborations with academic centers to broaden the evidence base beyond the PRIME cohort. These efforts are foundational to guideline inclusion, payer policy updates, and thoughtful adoption. We continue to partner with Society for Maternal-Fetal Medicine and ACOG and other payer guideline committees, providing evidence-based packages that include clinical outcomes, safety considerations, implementation data, and economic modeling aligned to each group's evaluation framework. Our goal is to demonstrate how incorporating PreTRM into care pathways supports early, proactive identification of need, complements existing risk tools, improves episode-of-care quality metrics, and addresses affordability by leveraging a major driver of maternity cost. In addition to these education initiatives, we have also launched a campaign to assist providers in requesting coverage for the PreTRM test. This campaign is available broadly, with multiple providers confirming submission of requests in four states, and an additional 10-plus providers across all of our states in the process of submitting additional requests. Beyond our efforts, several state Medicaid agencies and state legislatures have begun exploring policy approaches to address the significant clinical and economic burden of preterm birth. This could come in the form of a bill, budget appropriation, or coverage from the Medicaid department mandating that payers cover the PreTRM test. While we have been engaged when asked to provide education and perspective, these discussions have largely been driven by the state's recognition of the unmet need, their focus on health equity, the impact preterm birth has on their communities, and the financial burden it places on Medicaid budgets. I will now hand it to Austin for the financials and our capital allocation approach. Austin Aerts: Thanks, Tiffany, and good afternoon, everyone. I will start with our financial results and then discuss our cash runway and capital allocation. Starting with the fourth quarter, revenue for the quarter was $10,000 compared to $24,000 in 2024. As a reminder, revenue remains modest and can fluctuate from period to period in this early commercial stage. We continue to expect revenue expansion as we move towards broader commercialization following the PRIME publication. Operating expenses for the quarter were $9,000,000, down from $9,400,000 for the prior-year period, reflecting our continued disciplined expense management. Research and development expenses were $3,200,000 compared to $3,100,000 in 2024. With the completion of the PRIME study, R&D expenses will likely decrease as we focus resources on activities that support commercialization and awareness building. Selling, general, and administrative expenses were $5,700,000 versus $6,300,000 in the prior year, reflecting our prudent allocation to targeted commercial initiatives and strategic headcount. Net loss for the quarter was $7,900,000 compared to a net loss of $8,600,000 in 2024. Turning to the full year, total revenue for 2025 was $81,000, up slightly from $77,000 in 2024. Total expenses were $36,600,000 compared to $36,700,000 last year as we began our strategy of capital reallocation from R&D to commercial activities and advanced PRIME publication. Research and development expenses for the full year were $13,200,000, down from $14,700,000 in 2024 and driven by lower clinical study costs following PRIME completion. Selling, general, and administrative expenses were $23,300,000 compared to $21,900,000 last year due to targeted commercial readiness investment. Net loss for the year was $31,900,000 compared to $32,900,000 in 2024, again demonstrating our disciplined approach to capital deployment. We ended 12/31/2025 with $95,800,000 in cash, cash equivalents, and available-for-sale securities. Based on our current operating plan and commercialization strategy, we believe this capital will fund the company across significant adoption and commercial milestones through 2028. In summary, 2025 was a year of important financial and operational progress. We maintained tight expense controls, strengthened the balance sheet, and positioned the company to execute effectively as we move into a transformative year with the publication of PRIME and our expected commercial extension. Before we open the call for questions, I will provide a brief overview of our capital allocation philosophy for the near term. Our approach is anchored in disciplined deployment toward milestones that derisk the commercial model while maintaining the strength of our balance sheet. One, we will prioritize market access, making investments that accelerate coverage decisions, such as partner programs that include quality-of-care and health economic outcomes research. Two, focus on commercial scale-up, concentrating resources where we see the greatest adoption potential, like regions with payer engagement, clinical champions, and health system readiness. Three, fund additional evidence-generating programs, such as RWE and targeted clinical collaboration that could support guideline inclusion and payer policy updates. And four, maintain financial discipline and flexibility, pacing spending in line with key milestones and emerging adoption or reimbursement tailwinds. As sales volumes build following payer decisions and broader access, we will sequence certain commercial and infrastructure investments when appropriate. This ensures our ability to preserve runway while supporting a healthy, sustainable ramp from early adoption to repeat ordering. Regarding this last point, concurrent with today's 10-K filing, we reestablished our at-the-market, or ATM, facility. While we have no immediate plans to issue shares, maintaining an ATM is the best practice in corporate hygiene for companies at our stage. It provides the optionality of an efficient and low-cost tool to maintain financial flexibility and provide sustainable ramp as we advance payer coverage, commercial adoption, and key milestones for PreTRM. With our current cash position providing runway through 2028, this does not reflect any change in the capital allocation priorities I discussed or any near-term funding needs. It simply renews our access to our existing shelf registration and maintains financial preparedness. With that, let's open the line for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press the star followed by the two. I would like to advise everyone to have a limit of one question and one follow-up. If you are using a speakerphone, please lift up the handset before pressing any keys. Your first question comes from the line of Andrew Brockman with William Blair. Please go ahead. Andrew Brockman: Hi. Afternoon. Thanks for taking the questions. I want to go back to something Lee said in his remarks, sort of converting payer discussions and partner programs by using outcomes and some economic data. Can you maybe just expand on that a little bit, just in practical terms? How does that work with each of these partners? And then, typically, what do you expect that these partners will look for in those results to move forward with some of those contracts that you might have sketched out? Lee Anderson: Thank you for the question. I am also going to enlist Tiffany on this as well. But by this partner program approach, you take an entity that is interested, and they look at the clinical outcomes. They are also going to look at their books and their numbers and their patient population and equate that to the fact that if they adopted PreTRM and the treatment regimen as standard of care, what could that do for their patient base, so to speak? So as we have these discussions, we are not only highlighting the clinical outcome improvement, but also the health economic outcome improvement. And that is, as you can imagine, very important for state Medicaid agencies or providers throughout the country. Tiffany Inglis: Yes, I will make that add—agree completely. As we look at the results of 20% reduction in NICU admissions, NICU utilization is a huge driver of spend and trend for those who are paying the bill on the backside, whether that is our government, or whether that is employer groups, or whether that is payers. So as we think about our partnerships with each of those entities, they have really struggled with how to control that spend and trend, and this is really an avenue for them to have a significant impact on something that drives a cost driver for many of them, as well as something that drives things like high-cost claimants and things like that on their books. So as we continue to do sub-analyses and evidence generation post-PRIME, the health economic model and the impact to what that looks like will be something that we will be able to speak even more deeply about from a publication perspective, but we are able to share with our partners now what that 20% NICU reduction really looks like. Andrew Brockman: Perfect. That is really, really helpful. And then I want to go back to the comment made around SMFM was earlier in the year. It has been a couple months now. Can you maybe just talk about some of the feedback that you received at the conference? And then since then, how the conversations may be changed now that PRIME is published? You have gone through that conference, and sort of where we are at today. Thank you. Tiffany Inglis: Yes. No, it is a great question. So, the SMFM conference, the national conference, was in February, and it was shortly after we obviously had our publication go live in the Pregnancy Journal, which is the SMFM journal. And it was a great conference, a ton of engagement with providers, but also with the leadership at SMFM and really understanding next steps and how we work together and how we make this test more accessible to women. And so we are continuing on those next steps with our partners there, many of whom are investigators on our study and have been integrally working tightly with SMFM from day one, including the company itself as well. So really looking at all the steps—what does that look like—and then opportunities for rapid response or other things like that with those partners so that we can understand what those guidelines and what the changes would look like and how we get to that endpoint, which, again, is just about access for patients for this test and for providers for this test to be able to change those outcomes for moms and babies. Zhenya Lindgardt: And I will add, Andrew, that the team has seen a marked improvement in engagement across providers, payers, state legislators, key opinion leaders, societies, employers. The study really proved and gave us credibility. We have long believed PreTRM can be supported by an RCT level evidence and, indeed, it is coming to fruition. It has been only about 10 weeks since the publication took place, but we are incredibly excited about the signal we are seeing from all of these audiences. And we will keep reporting on engagement specifically with the guideline-setting bodies and the signals that we can send to the market about where the standards of care are evolving to. Operator: Again, if you would like to ask a question. Your next question comes from the line of Tycho Peterson with Jefferies. Please go ahead. Lauren: This is Lauren on for Tycho. My first question, I guess, is around the cash runway into 2028. How are you guys planning to balance investments in successful U.S. states versus the capital requirements of the global EU launch? And do you expect to accelerate SG&A spend into this year? Thanks. Austin Aerts: Yes. Hi, Lauren. Thanks for the question. Yes, I think we said this in the last quarter, but I will reiterate some of the basics, and then I will get into the question. So last year, OpEx—cash OpEx—was in the low thirties. We have budgeted roughly the same cash OpEx this year, and that is with reallocating a significant amount of our spending from our clinical and R&D activities more towards our commercial activities, which does include the work we are doing in the EU, a pretty significant spend that we are doing in the EU to explore the opportunities there as well. Certainly, as the commercial opportunities—domestic or EU—continue to develop, we will continue to shift, reallocate more capital from other areas to the commercial side of the business. Lauren: Great. Thank you. And I guess one more going back to the second active partnership program. Could you elaborate a bit more on the profile of this new partner, whether it is a regional health system, national commercial carrier? And whether or not and how their model differs from your first partnership? Thanks. Lee Anderson: Great question. Multiple partners, multiple partnerships. All of them a little similar, but all of them different. You hit the nail on the head. Yes. We have large health systems, IDNs that we are negotiating with. We have provider-payers we are negotiating with. We have large, large group practices. And then we cannot forget the PRIME sites themselves. You know, how do you take the study site from a great study site with PRIME and now input this into their clinical workflow for their entire organization so that it is truly standard of care for any woman that comes in and appears to be low risk preterm birth—they get a PreTRM test. So there are very similar aspects of the model, but each payer partner or each partner is going to be a bit different. Our goal is to fill the needs of that partner: what works best for them, and what are they looking to achieve? Zhenya Lindgardt: And I will just add that the second partner is an example of an employer collaborative that is multistate, and we are entering with them in the first state, and there is a great path for expansion. As Lee said, there are a lot of flavors here. We are partnering far and wide from the legislative bodies at the state level to midwife associations to innovative providers of telehealth services in pregnancy. We want to make sure that we capture all of those adopters that are ready to go. Operator: There are no further questions. I will hand the call back over to Zhenya for closing remarks. Zhenya Lindgardt: Sounds great. Thanks, Vincent. Before we close, I wanted to leave you with how we see the year ahead. With PRIME now published, a growing base of peer and state-level engagement, and an expanded leadership team in place, we are entering 2026 with strong momentum. This year is about disciplined execution, advancing all of the partner programs we have talked about, expanding real-world data, and supporting clinicians as they integrate PreTRM into their workflows. While adoption will be gradual, the foundation we have built gives us confidence in the path forward. We believe the combination of compelling clinical evidence, increasing payer engagement, and thoughtful commercial scale-up positions us to unlock meaningful value in a large underserved market. Thank all of you so much for your continued support as we work to improve outcomes for mothers and babies and deliver long-term value for our shareholders. Over to you, operator, to close the call. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, and welcome to the Hyperfine Q4 '25 Earnings Call. [Operator Instructions] Now I would like to turn the call over to Webb Campbell. Webb, you may begin. Webb Campbell: Thank you for joining today's call. Earlier today, Hyperfine Inc. released financial results for the quarter ending December 31, 2025. A copy of the press release is available on the company's website as well as sec.gov. Before we begin, I'd like to remind that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, expense management, expectations for hiring, training and adoption, growth in our organization, market opportunity, commercial and international expansion, regulatory approvals and product development are based upon current expectations 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 and description of these risks and uncertainties associated with our business, please refer to the Risk Factors section of our latest periodic filing with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 18, 2026. Hyperfine Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. With that, I will turn the call over to Maria Sainz, President and Chief Executive Officer. Maria Sainz: Good afternoon, and thank you for joining us. On the call with me today is our Chief Administrative Officer and Chief Financial Officer, Brett Hale. Fourth quarter revenue of over $5 million demonstrated our very strong performance with the next-generation Swoop system for the second straight quarter. The mid-2025 introduction of our second-generation Swoop scanner, the Optive AI software and the addition of a new market with our launch into the neurology office setting mark a turning point in the adoption of portable brain MRI, the potential of ultra-low field MRI and the future of our company. We have now demonstrated that we hold a highly proprietary and differentiated technological position in our ability to produce diagnostic quality images with an ultra-low field magnet, making Hyperfine's technology, safe, acceptable and deployable across the continuum of preventatives, acute and chronic brain health settings. In 2025, we validated that the Swoop system offers unequivocal clinical and economic value to clinicians and providers ready for mainstream adoption and scale across a growing number of sites of care inside and outside the hospital. I want to start by summarizing some of the key highlights from the last several months to illustrate why I feel very optimistic about the future of the Swoop system for brain health and Hyperfine's unique position with ultra-low field MRI long term. From a market perspective, the feedback on Swoop's image quality with Optive AI software continues to be outstanding from the neurology, neurosurgery and radiology communities, leading to deal activation, reactivation, larger deals and interest from IDNs and health systems. The FDA clearance in December 2025 of our first update after the release of Optive AI software represents the 11th generation of soft -- Swoop software releases and confirms our commitment to continuous image quality advances with ultra-low field MRI. This latest Swoop software incorporates features in our diffusion-weighted imaging to further refine the value of the Swoop system in stroke workflows. The recently published [ SVIN ] stroke publication and the new PMR presentation validate the clinical diagnostic utility of the Swoop system for stroke triage and for patient care in neurology offices, respectively. The publication of the health economic impact data has an incredibly important element to our selling approach. We now have published evidence to support the cost savings in medical supplies, staff usage and the significant improvement in patient progress when using the Swoop system. Finally, the approval of the first generation Swoop system in India opens a new large geographic expansion opportunity for Hyperfine. Throughout 2025, we executed on our operational milestones across innovation, clinical and economic evidence generation and site of care and geographic expansion. We delivered strong revenue growth in the second half of the year. And importantly, we see market activation momentum continuing as we progress through 2026. This transformation was achieved in the context of a continued reduction in cash burn and gross margin expansion, demonstrating the scalability and leverage of our business model. We ended the year with a healthy balance sheet, and with the growth capital added from our recent financings, we're well positioned for sustained growth and investment in our technology, current market and potential future expansion opportunities into 2028. Over the past 6 years, we have maintained an unwavering commitment to continuous innovation and market development, transforming our original concept for an ultra-low field portable brain MRI system into a highly differentiated and clinically relevant platform, ready for broad adoption to help address the real limitations related to brain imaging. The next-generation Swoop system with Optive AI software represents the culmination of phenomenal innovations in electronics, physics and AI to make image quality at 64 millitesla approach that of high-field MRI. Looking ahead, these advancements represent a new beginning and a stronger platform to further increase clinical capabilities and expand into additional use cases across sites of care. We received FDA clearance for the next upgrade to the Optive AI software last December. Its latest software focuses on advanced multidirectional diffusion-weighted imaging to enhance stroke detection. Going forward, you can continue to expect a cadence of 1 to 2 software releases per year as we expand upon our leadership in the AI-enabled ultra-low field MR imaging space. We have now sold over a dozen next-generation systems since June and have launched incredibly busy and successful Swoop programs across critical care emergency departments and neurology offices. Exiting 2025, our primary call points are adult and pediatric critical care, emergency departments and neurology clinics and offices. More recently, we have actively begun pilot efforts in the neurosurgical and neurointerventional settings as well as in mobile units for dementia screening research. We will continue to lean on our strength, not only in continuous innovation, but also in clinical data generation to support a growing number of use cases and wide spread prevention. A good example of this is our contrast PMR study, a prospective multicenter clinical study to evaluate the feasibility and visualization benefit of contrast-enhanced ultra-low field portable MRI. I'm pleased to share that we are approximately 20% towards our enrollment goal. The study is designed to support a future FDA submission late 2026 to expand the Swoop systems intended use to include gadolinium-based contrast agents potentially unlocking new applications as we focus broadly on neurodegenerative diseases and surgical use. Brain scans with contrast will potentially broaden the use of the Swoop system across office and hospital settings. In outpatient care, scans with contracts are reimbursed using a dedicated CPT code 70553. Turning to our clinical work in the ED. We are seeing significant traction with accounts interesting -- interested in deploying the Swoop system in the ED for faster stroke triage using MRI. The excessive wait time for MRI in the ED is a costly and widespread patient care issue across hospitals of all sizes. Beyond the recently published SVIN paper, the PRIME study being led by the Yale School of Medicine, it's an additional project to validate the Swoop system utility, enabling faster triage of all comer patients in the ED. As a reminder, this study evaluates the potential of AI-powered portable MRI for broad patient triage in ED. I'm happy to share Yale's have completed enrollment ahead of schedule and expect to share an update on the findings later this year. The compelling image quality of the next-generation Swoop system with Optive AI software is activating our hospital pipeline to levels we have not experienced before, driven by interest from both clinical and administrative stakeholders and evolving deal discussions to multiple placements as well as first and subsequent deals at IDNs across the U.S. These larger, more strategic deals are very encouraging for the future growth of our business. Although larger deals have increased administrative processes are now more dependent on budget cycles, creating some potential for quarterly lumpiness and variability. With the recently published health economic impact data analysis as a reference, hospitals evaluating the Swoop system are now modeling 1- to 1.5-year return on investment time lines, substantially better than the 3- to 4 years typical for capital equipment. The recent publication summarizes the data compiled at Jefferson Abington across 143 scans related to their savings in cost of care, driven by reduction in supplies, faster clinical decision making, accelerated patient discharge and freed-up capacity on conventional scanners for elective procedures. These real world peer reviewed health economic data have become powerful catalysts for deals and elevating conversations to C-suite decision makers. With our device MSRP of $590,000 for our next-generation system, we can capture significant value while delivering strong ROI for our customers. The neurology office represents an additional growth vector for our business. Neurologists prescribe a high volumes of MRIs, yet only approximately 10% of private neurology practices have MRI imaging on-site, which creates an enormous addressable market opportunity with minimal incumbent competition. Our full commercial in to this market in Q3 has progressed rapidly through Q4. Our pilot program in the first half of 2025 come from the process through accreditation, training and reimbursement to scale portable brain MRI as an ancillary business in the office setting. We have proven that physicians can obtain diagnostic quality, MR brain images within their offices, providing patients with timely and convenient access at the point of care. In January 2026, data from our office study, NEURO-PMR, was presented at the American Society of Neuroimaging. In this study, patients receive brain imaging on both the portable Swoop system and conventional high-field MRI. In the study, portable MRI demonstrated 92% concordance with a standard MRI in identifying the presence or absence of intracranial pathology during a blinded review by independent neuroradiologist. In unblinded paired initial reviews incorporating clinical history, concordance increased to 98% as assessed by a neurologist and neuro imager. Furthermore, patients expressed a strong preference for portable MRI, reporting that they were 4x more likely to see portable MRI over standard MRI. Across all experience measures, including comfort, anxiety, claustrophobia, noise and overall satisfaction, portable MRI was rated superior to standard MRI. Trained clinical staff successfully operated the system within neurology offices without the need for MR technologies, highlighting its safe and straightforward operation. In Q4, we accelerated our selling efforts across both single and multi-clinician practices, building robust pipelines of both our first and next-generation Swoop systems. We deployed a segmentation pricing strategy, offering different configurations to serve practices of varying sizes and profiles. We're also leveraging our NeuroNet partnership to promote adoption across their network of neurology practices. The Optive market is still in its early days, yet reception has been robust and has been further fueled by the presentation of data from NEURO PMR. Turning to our international business, where we have made significant progress in the quarter. We have launched Optive AI software in 10 different European languages, with the software now available in the international markets we serve. We're going through the European regulatory process to bring the next-generation Swoop scanner to the U.K. and CE markets before the end of this year. Additionally, in late 2025, we also received regulatory approval in India, unlocking a key new market. With our local partner, we are planning to launch, engaging top KOLs in the country to help drive awareness and adoption. In accordance, we expect placements in India to scale at a measured pace throughout the year. Market feedback on the Swoop system with Optive AI software remains consistently very positive. I firmly believe the Swoop system today is ready for broad adoption our image quality positions us well to continue to broaden and deepen use cases. We have 3 diverse and differentiated business opportunities to drive growth in the near future through placements across the hospital, neurology offices and international markets. I will now turn the call over to Brett to review our financial performance and 2026 guidance. Brett Hale: Thank you, Maria. Before I recap our financial results for the fourth quarter and full year of 2025 and our expectations for 2026, I want to touch on our recently strengthened capital position. Last October, on the heels of our first full quarter of our next-generation Swoop system launch, we strengthened our balance sheet by raising over $20 million in equity, welcoming multiple quality investors to the story. More recently, building on our business momentum and to complement this equity, we raised $15 million as an initial tranche under and up to $40 million long-term debt facility. The initial tranche extends our cash runway into 2028, and the broader ability provides growth capital and significant financing flexibility for the commercial phase of our company. We are adding this nondilutive capital on attractive terms and have sized the upfront tranche to extend our cash runway while continuing to responsibly reduce our cash burn. For purposes of modeling, we expect quarterly interest payments to be approximately $400,000, and these payments are contemplated in our cash burn guidance. Now turning to our Q4 and full year 2025 results. Revenue for the quarter ended December 31, 2025, was $5.3 million, up 128% compared to $2.3 million in the quarter of 2024. We sold 16 units net in the fourth quarter of 2025 versus 9 units in the fourth quarter of 2024. We saw demand across all businesses with placements in hospitals, neurology offices and in international markets. This quarter, some hospitals elected to grow with our technology through a [ forecharge ] technology upgrade comprised of multiple unit placements. For the full year 2025, we generated $13.6 million in revenue, up 5% compared to $12.9 million in 2024. As anticipated, 2025 was a tale of 2 halves, with significant growth in the second half due to multiple midyear product launches, generating $8.7 million in revenue in the second half compared to $4.8 million in the first half of 2025. Gross profit for the fourth quarter of 2025 was $2.7 million, up 226% compared to the fourth quarter of 2024. Gross margin was 50.9%, our second straight sequential quarter above 50% and representing 1,530 basis points of gross margin expansion over the fourth quarter of 2024. For the full year 2025, we generated $6.8 million in gross profit, up 15% compared to the full year 2024. And our full year gross margin was 49.8%, representing 410 basis points of gross margin expansion over 2024. We continue to drive healthy margins for our stage and believe we are well positioned for meaningful margin expansion as we scale. R&D expenses for the fourth quarter of 2025 were $3.8 million compared to $5.1 million in the fourth quarter of 2024, a decline of 25%. For the full year 2025, R&D expenses were $17.5 million compared to $22.5 million for the full year 2024, a decline of 22%. We continue to realize the reorganization -- the benefits of the reorganization we completed in the first quarter of 2025 as we transition to a commercial growth stage organization. Sales, general and administrative expenses for the fourth quarter of 2025 were $6.5 million, flat compared to the fourth quarter of 2024. For the year 2025, sales, general and administrative expenses were $26.4 million as compared to $26.6 million for the full year 2024. We continue to exercise spending discipline and realized sales productivity and operating leverage in the business. Net loss for the fourth quarter of 2025 was $5.9 million, equating to a net loss of $0.06 per share as compared to a net loss of $10.4 million or a net loss of $0.14 per share for the same period of the prior year. For the full year 2025, net loss was $35.6 million, equating to a net loss of $0.43 per share as compared to a loss of $40.7 million or a net loss of $0.56 per share for the same period of the prior year. The fourth quarter of 2025 and the full year of 2025 net losses includes a noncash change in fair value of warrant liabilities, recorded as a gain of $1.5 million and $800,000, respectively. Our net cash burn, excluding financing in the fourth quarter of 2025 was $5.7 million, down 30% from $8.2 million in the fourth quarter of 2024. For the full year 2025, our net cash burn, excluding financing, was $29.9 million, down 22% from $38.4 million in 2024. Reducing our cash burn was a significant focus of ours in 2025, and we are pleased with the execution on this front. We will continue to prioritize spending discipline and optimize our operating leverage in 2026, which I'll discuss in the context of our guidance framework shortly. As of December 31, 2025, we have $35.1 million in cash and cash equivalents on our balance sheet. This is inclusive of the $18.4 million in net proceeds raised from our October equity financing and subsequent green [indiscernible] but it is not inclusive of the $15 million initial change from our new long-term debt facility. In addition to the $15 million of initial funding, we have the option through the end of 2027 to access additional tranches totaling up to $25 million upon achievement of prescribed commercial targets. This additional $25 million of growth capital is not included in our cash runway expectations. Now turning to our financial guidance. Beginning with our revenue outlook. For the full year 2026, we expect revenue between $20 million to $22 million, representing year-over-year growth at the midpoint of 55%. Given the strength of our fourth quarter finish, which includes a multiunit system-wide upgrade, we expect a typical step down in capital revenue from year-end levels. Our pipeline remains strong across our 3 business verticals, including several multi hospital and IDN opportunities. While these deals will serve as meaningful drivers of our long-term growth and sales product, they typically progress over multiple quarters. We also anticipate commencing the launch of next-generation Swoop scanner in international markets in the second half of the year. As a result, we expect revenue to progressively strengthen through the quarters in 2026. Looking at gross margin. We are initiating a range of 50% to 55% for the year. We expect the progression of gross margin percentage increase to closely follow our sales growth, and we expect second half gross margin percentages to exceed the first half. We remain optimistic that we will continue the trend of surpassing 50% gross margin comfortably and sustainably as we realize higher volumes driven by our growth catalyst. Lastly, we are initiating total cash burn expectations in the range of $26 million to $28 million for the full year 2026, representing a 10% year-over-year decline in cash burn at the midpoint. This cash burn expectation includes debt servicing mentioned previously. From a spending perspective, we will continue to be disciplined with our spending while investing in commercially oriented projects, and will continue to operate with 1 U.S. sales team, covering both the hospital and office market opportunities and through distributors internationally. As mentioned earlier, with the initial incremental growth capital raised in March, we now see a cash runway for the business extending into 2028. We believe we are entering an important phase of growth, having strengthened our financial profile and position the business as a high-growth, derisked medical imaging platform with multiple durable catalysts across large, underserved sites of care. We have successfully transitioned to a commercial-stage business, supported by a compelling value proposition, robust pricing, attractive gross margins and increasing sales productivity and operating leverage. I would now like to turn the call back to Maria for closing comments. Maria Sainz: Thank you, Brett. Before we open the call to your questions, I want to briefly share a call I just had with 1 of our customer sites. This is 1 of our first programs that launched with our next-generation Swoop scanner. They purchased 2 units in the third quarter of 2025 and have been using the Swoop system since late Q3 across typical care, emergency department and most recently, in a hub and spoke model with a satellite there -- site. To date, they have performed over 200 Swoop system scans, reporting a high degree of satisfaction and great clinical and economic impact for the patients they care for and their workflow. On that very positive note, we can now turn to your questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: Congratulations on all the progress. I was hoping to start with 1 on the key assumptions surrounding 2026 guidance. What can you tell us you're assuming in that guide as it relates to U.S., OUS, anything, any color around multisystem unit ordering? I'm assuming there's a price component in there given the MSRP you quoted throughout the call? And then anything else we should consider as we're thinking about how you built the guide for 2026? Brett Hale: Thanks, Frank. This is Brett. I'll take that one. So yes, the way we built 2026 is really tied to the growth catalyst of the business. I think you commented on a couple of them. We have 3 business verticals that comprise the revenue stream that we've modeled out and are predicated in our guidance. So in the hospital side of the business, you're right, the multiunit systems and the IDNs will play out over time. I think as we mentioned, those take several quarters. So as the year progresses, we'll see more and more of those in our financial numbers. The office business, which we launched in the middle of last year, we'll continue to see traction on that in regards to the neuron meds -- excuse me, NEURO-PMR data as well as the penetration into that space. And then international, we commented in there that we've got a second-generation scanner that we expect in the second half of the year. So really taking all those pieces together, we see a progressive strengthening of the top line throughout the balance of 2026. Bigger deals, obviously, are tied to budgetary processes. And so those will probably play out more in the second half of the year, but we will see a progression of the top line starting in the beginning of the year and then continue to strengthen throughout the year. Maria Sainz: And maybe on pricing -- and Frank, we did comment on the MSRP at $590,000, so that is something that changed. So we increased it from $550,000, which was the pricing at the launch of our Model 2 and moved it to $590,000 at the beginning of the year. That is primarily in our U.S. hospital business. We also commented on the fact that we are doing price segmentation in using both Model 1 and Model 2 in the office because not all offices are made equal, some are single practitioner, relatively small, and the volume doesn't support the Model 2. So we're using Model 1 at a different price point in the office setting. And last but not least, of course, internationally, since we operate and transact through distributors, we're doing that at distributor pricing. So not different than -- previously, we do have the blended combination of all of those that ends up being our ASP. But we can receive the health and the improvement just because there is 1 of the business verticals, which is a U.S. hospital, that is predominantly Model 2, and is enjoying sort of the advantages of the price increase. The reason for mentioning also $590,000 in the prepared remarks was that when you run really the ROI calculation, given the quick impact data that was recently published with any hospital, even at a $590,000 pricing, you do get to that 1- to 1.5 year ROI, which makes it incredibly compelling from an administrative standpoint. Frank Takkinen: Very helpful color. I was hoping on the second one, I could ask a little bit more about the pipeline. I think in the Q3 call, you've referenced the Hyperfine time being at its strongest and most diversified following a really strong Q4, would you say that, that comment still holds true? Or are you still in the camp of building up the funnel in the front half of the year? Maria Sainz: So the comment around the pipeline continuing to be the strongest we have ever seen is very true. It is also very true that it is comprised of more multiple deals and more IDN deals. We have several deals with big IDNs in progress. It is also true that those deals are a little bit more now mainstream procurement, and in some cases, dependent on budget year. So remember, we were really stealth with the -- before the introduction of Model 2. So when it launched in June of last year, truly the very first budget year that we are able to take advantage of is the 1 that kicks in July 1 for more -- for a lot of the hospitals. So I think we've commented that some of these bigger, more strategic multiple deals are actually a little heavier in process and may create some variability. There is something also that happened in Q4, which is a -- for revenue upgrade of an institution where we have multiple systems and they wanted to standardize and move their installed base to Model 2. That is probably a onetime event as it relates to Q4, that I'm not seening in sort of the forecast for every quarter going forward. So hopefully, that gives you color around how we're looking at the pipeline, incredibly robust and totally full with very big IDN names, multi-deals, but those come with a little bit more process and the budget year being more naturally that July to the end of the year is something that may create this sort of progressive strengthening of our revenue line over the course of the year. Frank Takkinen: Very helpful. If I could sneak 1 in. When you speak about the multiunit orders, my assumption for Q4 is maybe that was single-digit but multiunit. Is there -- one is maybe that's accurate, if you care to comment on that? And then two, as you look at some of the multiunit deals in the pipeline, is there a potential for double-digit multi-unit deals? Maria Sainz: Double-digit number of deals or numbers number of units? Frank Takkinen: Number of units. Brett Hale: I think I understand your question, Frank. When you talk about multiunit, you can think about things 2 ways. One is an individual hospital where there is multiple placement opportunities. So for example, someone might want to have it for both critical care and the emergency department and maybe pediatric and adult in the case for critical care. So you might have 3 or 4 placement opportunities in an individual hospital. And then when you talk about an IDN, IDNs obviously are multiple hospitals. The deals will likely not be all the hospitals at once, but it will probably start at 1 of the hospitals, but then we'll go across the IDN network where they will want to standardize care. So over time, that could be, but really in an individual quarter, we're talking about single digits at an individual transaction level. Operator: And your next question comes from the line of Yuan Zhi with B. Riley Securities. Yuan Zhi: Congrats on a strong 2026 guidance. Maria, the business had its up and down over the past couple of years. I think it will be very helpful to investors if you can provide a quick review, especially what we have learned that can be used for the current business momentum. Maria Sainz: Sure. Thank you, Yuan. So I think we have defined our technology as portable brain MRI, but the real product that we offer is high-quality imaging that is accessible, affordable and easy to get. And I don't believe in the last few years, we were there until the introduction of both the Model 2 as well as the Optive AI software. So I have personally witness an increasingly sharp change towards endorsement and approval of our technology and interest in on our technology as we have brought up substantially the image quality, all the way to what we have now said, which is very, very close to high-field MRI. So the clinical value has now been totally transformed into something that is a very useful tool. I know I commented on a small anecdote on one important new account with Model 2, but the reality is they're using it all the time as a go-to tool for the triage of their patients with suspected stroke symptoms, and they're doing it as a [indiscernible] institution as well as they're doing it in their ED. And they are able to make clinical decisions every day. Our technology wasn't there when we started. We were portable, we were low field, but our imaging was not at the level of clinical decision-making. So I have a totally different appreciation for the opportunity now that we have established that base of clinical utility. And I have also witnessed because of this high level of image quality now and interest to take our unit, to take our technology into even more use cases and sites of care than we have planned thus far. I know I've mentioned mobile. I know I've mentioned surgical, but those are places where we are being pushed, where we are being asked to play because the technology now offers that great combination of high clinical value with that access, affordability, ease-of-use component, safety component pretty much anywhere. Does that make sense? I really think we're leaving behind a development phase of getting to that level of clinical utility as we have refined and improve really the image quality. Yuan Zhi: Got it. Yes, that's very helpful. And maybe 1 question for Brett. I noticed the service revenue is lower in fourth quarter. As we imagine you have more devices in store, the service revenue should grow year-over-year. So can you please provide some additional color on that? Brett Hale: Yes. Thank you, Yuan. Yes. So you would expect service revenue to progress over time, and that is the term trajectory of that line item. In Q4, we mentioned we had done some [ forecharge ] technology upgrades. And as part of that, we had to go through an accounting contract assessment and that -- there's some adjustments in the service line item related to that. But going forward, you would expect that trajectory to be what you had articulated. Operator: There's no further questions at this time. I will now turn the call back over to Maria Sainz for closing remarks. Maria? Maria Sainz: Sure. Thanks, everyone, for joining us today. We look forward to keeping you updated in the next several weeks. Thanks, everyone, and have a great rest of your day. Operator: That concludes today's call. You may now disconnect.
Operator: Greetings, and welcome to the Red Cat quarterly earnings. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ankit Hira, Investor Relations. Thank you, Ankit. You may begin. Ankit Hira: Good afternoon, and welcome to Red Cat's Fourth Quarter and Full Year 2025 Earnings Call. Joining us are Red Cat's CEO, Jeff Thompson; COO, Chris Ericson; and CFO, Christian Morrison. Please note that certain information discussed on the call today will include forward-looking statements for our future events and Red Cat's business strategy and future financial and operating performance. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict and may cause actual results to differ materially from those stated or implied by those statements. Certain risks, uncertainties and assumptions are discussed in Red Cat's SEC filings, including its most recent annual report on Form 10-K and other SEC filings. These forward-looking statements reflect management's beliefs, estimates and predictions as of the date of this live broadcast, March 18, 2026, and Red Cat undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. In addition, our comments on the call today will contain references to non-GAAP financial measures such as adjusted EBITDA and key business metrics. Non-GAAP measures should be viewed in addition to and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures as well as definitions of the key business metrics referenced and management's reasons for including the non-GAAP measures and key business metrics referenced may be found in the press release. Finally, I would like to remind everyone that this call will be recorded and made available for replay via link available on the Investor Relations section of the company's website at ir.redcatholdings.com. With that, I'll now turn the call over to Jeff. Jeffrey Thompson: Thanks, Ankit. Good afternoon, and thank you for joining Red Cat's Q4 2025 Earnings Call. I'm going to let Chris Ericson, our COO; and Chris Morrison, our CFO, discuss last year's extraordinary Q4 results, which annualized would be over $100 million. I am going to cover Blue Ops, Black Widow work in Ukraine, drone dominance and guidance. A year ago on the same call, we announced our new mission, Maritime USVs. We found a management dream team in the early summer to build this division. The new team spent many weeks in Europe to learn how these boats were so successful against the Russian Navy. By August, we had preliminary designs. And by December, we had a boat in the water driving autonomously and out-of-the-box ATAC capable. We found a boat factory in Georgia, signed a lease for 155,000 square feet. That factory just went operational approximately 1 month ago, and we'll have full rate production tooling later this month. We believe and are confident that they can build over 100-plus USVs in 2026 as we ramp up production capability to thousands. Blue Ops is a strategic and important part of Red Cat's family of systems. It opens the rest of the globe for Red Cat. Our family of systems was limited to 30% of earth. With our new Variant 7 and other hulls, we can now launch from 100% of the globe. We believe that our Blue Ops USVs can keep our war fighters out of harm's way and make them more lethal. We believe Blue Ops could be very helpful in Venezuela, in the USVIs, the Gulf of America, Cuba and urgently in the Strait of Hormuz. Blue Ops demonstrated partners on Innovation Day that was timely. We demonstrated short-range and long-range counter drone capability. For short range, we have the ACS Bullfrog on the front of the Variant 7 that can shoot down FPV drones up to 1,500 yards and can do the same to a Shahed-136. For long range, we have the Aeon's Zeus that can travel 20 kilometers and take out Shahed-136 at a very low cost. The 2 weapon systems combined on the Variant 7 controlled miles away can deliver a potent deadly deterrent for short-range and long-range counter drone operations. Let's move on to recent work in Ukraine with the Black Widow. Last fall, we deployed a team to Ukraine in hopes to get them a drone to replace the Chinese ISR drones and to verify the drones we are delivering to soldiers would work in an actual battlefield. The team received an MOU and an LOC and recently LOR, a letter of request. I'm going to have Chris Ericson, who just got back from Ukraine last night, give more details on this mission. I also want to thank the Red Cat ICC team for this hard and dangerous work. Drone dominance. As you know, we do not make the cut at drone dominance Gauntlet I. I have a ton of excuses, but I'm not going to go there. We are preparing for Gauntlet II and hope to have better results. But we believe even if we lose every stage of the Gauntlet, we will still be one of the larger beneficiaries of the program. There's going to be a total award of 350,000 FPV drones. Going by the Ukrainian ratio of 20:1, that requires 17,500 ISR drones or 8,750 SRR systems. Sensor shooter requires a sensor, and that's what the Black Widow is. We will support the Drone Dominance program in any way we can. Guidance. We are not currently ready to offer official guidance. We want to have our government contracts in hand before we give guidance. We do not want a replay of last year during the continuing resolution. Fortunately, we have a budget for 2026, which also just received an additional $150 billion, and it looks like we'll be getting another $50 billion for Iran. We don't have to wait until the next quarterly to give an update on guidance. And as soon as we have the contracts in hand, we will update the market. And with that, I will hand this to Chris Ericson. Christian Ericson: Thank you, Jeff, and good afternoon, everyone. With that intro, I'll skip ahead a little bit and talk about the most interesting part of my script. Yes, I just returned from Ukraine yesterday. My first overarching impression is that I was in awe of the spirit of resiliency of the Ukrainian people. They continue to show how David could stand up to Goliath, and my favorite retort to that comment was only comparable if David wasn't given a sling and rocks. We have now established an office in Kyiv and have a fabulous team. We are building the business and relationships to most effectively, one, test our equipment at the front and obtain true feedback; two, identify new product and integration partners with battle-proven technology; and three, use this knowledge to increase the efficacy of our unmanned systems. I'm happy to report that we have tested multiple systems at the front and proven that our tech works and works really well. This has now resulted with Red Cat receiving a letter of request from Ukrainian forces to provide our systems to begin replacing the use of Chinese-made ISR drones. Black Widow's compact rugged design and secure communications architecture has proven invaluable in real-world deployments, which will contribute directly to mission success for our defense customers. And finally, this past week, we entered into a joint development agreement with a Ukrainian state-owned partner to bring new battle-proven technology to our USVs. This agreement is a huge step forward as we are the first nongovernmental entity to successfully enter into this type of deal, which will enable the future transfer of battle-proven technology to us and our allies. So let's change directions a little bit and talk about how the factory is the weapon. We have quickly learned through current global conflicts how important -- how important factories and capacity are critical infrastructures in supporting a country's defense. Over the past year, we focused on acquiring talent, improving processes and tools, transforming from a fast-moving start-up to a repeatable, high-reliability production enterprise that can deliver quantity and quality and stability to our customers. Our operational performance in Q4 2025 reflects the successful execution of our multi-domain strategy and our ability to adapt rapidly to the evolving defense technology landscape. We achieved remarkable production scalability while maintaining the quality and security standards our defense customers demand. This represents our ability to search production capacity, demonstrating the operational agility that sets Red Cat apart in the defense contractor community. We remain on track to scale Black Widow Drones output to 1,000 units a month in the first half of 2026, and our USV boat manufacturing will have first deliveries expected in Q2 of 2026. The regulatory landscape shift following NDAA Section 1709 implementation has fundamentally changed how we operate, creating unprecedented opportunities while requiring enhanced focus on supply chain security and domestic sourcing. We responded by strengthening our American manufacturing capabilities and expanding our network of trusted domestic suppliers. Our NDAA-comliant supply chain has become a significant competitive differentiator, allowing us to capture market share from foreign competitors who can no longer serve defense and government customers. Our manufacturing expansion has been transformational with overall facility square footage increasing from 36,000 square feet last year or 2 years ago to 254,000 square feet in Utah and across new locations in Florida, Georgia and California. Our Salt Lake facility now operates at an impressive capacity, having produced 50 Black Widow drones per day, proving the ability of producing 1,000 drones per month on a single shift. The facility has room to triple the manufacturing lines and add additional shifts. Our FlightWave facility in Torrance can produce 125 Edge 130 drones per month using only 1/3 of its available space. Additionally, our Valdosta, Georgia facility provides 155,000 square feet dedicated to our expanding Blue Ops maritime production capabilities and room to produce more than 100 boats per month. This strategic expansion positions us to meet accelerating customer demand while maintaining our commitment to quality and security standards. During the quarter, we triumphed when faced with the challenge of rapidly scaling production to meet accelerating customer demand and still maintained our rigorous quality standards. This record quarter. We also expanded our manufacturing partnerships, most notably with Hodgdon Shipbuilding to ensure ability to quickly pivot for growing demands across all operational domains. Our expansion into maritime operations through Blue Ops represents perhaps our most significant operational advancement, extending our family of systems approach beyond the air and land domains to uncrewed surface vessels. These USVs leverage the same autonomous technologies and secure communications that have made our aerial platform successful while addressing the growing demand for maritime domain awareness and operations. The partnership with Hodgdon Shipbuilding brings proven shipbuilding expertise to our advanced autonomous capabilities, creating a unique value proposition in the maritime defense market. This operational growth has truly placed us in prime position for the future where the factory is the weapon. I'm sure you may have some follow-on questions, but first, I'll turn the call over to Christian to discuss our financial results, after which we'll take questions. Christian? Christian Morrison: Thank you, Chris. I'm pleased to present Red Cat's financial performance for the fourth quarter and full year 2025, which represents a transformational period in our company's growth trajectory. For the fourth quarter of 2025, revenue was $26.2 million, up $25.0 million year-over-year and up $16.6 million (sic) [ $15.6 million ] sequentially as deliveries accelerated. This growth was driven by robust defense and government customer demand, our expanded program wins and our ability to rapidly scale production for mission-critical requirements. Gross margin was 4.2%, up 85% year-over-year and down 2.4% sequentially, reflecting mix and ramp dynamics typical of our growth phase. For the full year 2025, revenue was $40.7 million, up $25.1 million year-over-year. Gross margin was 3.1%, up 332 basis points year-over-year, partially driven by scale benefits and manufacturing improvements. Gross margin can be volatile on a quarter-to-quarter basis due to revenue levels that include fixed costs reflected in our cost of goods sold and investments in productions that are not yet at scale. We are continuously implementing more efficient processes and procedures that will enable us to capitalize on the expected increased demand and growth. Our ability to deliver and perform has remained strong alongside our focus on rapidly scaling operations, reflecting our disciplined approach to cost management and the premium value of our American-made secure drone platforms. Operating expenses in 2025 were $67.8 million compared to $32.9 million in the prior year. This increase in operation -- in operating expenses were focused, planned and deliberate to enable us for the accelerated growth we experienced in 2025 and more importantly, for further growth expansion going forward. We increased our headcount by 85%, which primarily included increased engineers and corporate headquarter functional positions. Research and development expenses were $17.9 million compared to $8.1 million in the prior year. This increase in R&D investments is focused on advancing our core platforms, developing new capabilities in artificial intelligence and machine learning and enhancing the interoperability of our family systems across air, land and maritime domains. Our investments in the business demonstrate the inherent value of positioning and the pricing power that comes with being a trusted domestic supplier in the defense market. Regarding our investment priorities, we've made strategic investments across multiple areas to support our growth trajectory and maintain our competitive advantages. We remain focused on deploying capital across 3 key areas. The first area of focus is our USV division build-out, which is estimated to be a $30 million to $40 million investment to fully operationalize the division. Second, we remain focused on strategic acquisitions; and thirdly, increasing inventory and managing our supply chain to meet customer demand. One of the most notable improvements in our financial profile has been our improved cash position and working capital management. Our cash increased from $9.2 million at the end of 2024 to $167.9 million at the end of 2025, providing us with substantial financial flexibility to pursue strategic initiatives and capitalize on market opportunities. These results demonstrate Red Cat's evolution into a premier defense technology company with the financial strength and operational capabilities to capitalize on the tremendous market opportunities ahead of us. Our working capital position has strengthened considerably, driven by our enhanced cash position, healthy AR and strategic inventory investments. We increased our inventory from $13.6 million to $30.4 million during 2025, reflecting our proactive approach to supply chain management and our commitment to meeting accelerating customer demand. The strategic nature of this inventory build becomes especially important when considering the supply chain requirements and the extended lead times for specialized components in the current regulatory environment. Looking ahead to 2026, we're positioned for continued strong performance driven by several key factors that reinforce our confidence in Red Cat's growth trajectory. While we are not providing annual guidance at this time, we expect to maintain revenue momentum throughout the year. Our revenues are supported by our expanding and increasingly diversified customer base and growing international presence. When we gain additional visibility as we progress throughout the year, we look forward to updating the market. We are also being mindful of the ongoing geopolitical developments that are currently in the headlines. We are also influencing our international expansion plans, particularly in the Middle East and Asia Pacific region. While current allied relationships remain strong, changes in defense priorities or procurement policies could affect the timing or scale of international opportunities. We're also monitoring potential changes in defense spending priorities as new administrations and congressional leadership evaluate budget allocations across different military capabilities. And with that, we're now happy to answer your questions. Operator, will you please open up the line for Q&A? Operator: [Operator Instructions] Our first question comes from the line of Austin Bohlig with Needham. Austin Bohlig: Congrats on the solid Q4 execution, guys, and it seems like the pipeline is really strong. Understanding you guys aren't giving kind of formal guidance, which I think is prudent, there seems to be a ton of tailwinds, everything from SRR to this bold opportunity, drone dominance now with this really unique opportunity in Ukraine. Any way you can give us some kind of different scenarios on what 2026 could look like? Jeffrey Thompson: Yes. And we don't want to get ahead of our skis again. But I mean, there's a range from all of you out there between $100 million and $170 million, very wild -- crazy goalposts right now. We're fine. We're very comfortable in the top half of that, but we're not ready to commit to it until we get contracts in hand to give our official guidance. Austin Bohlig: Okay. No, that's fair. And then just wanted to dive into this new Ukraine opportunity. This seems pretty incremental. Do you guys have any idea of like how many you could be potentially replacing? Jeffrey Thompson: Yes. Well, let me -- I'm going to have Chris Ericson answer that because he just got back last night, and he was in the room when they notified us. Christian Ericson: Yes. So we were there with the war fighters and the guys who are collecting all the data there, and they came back and I asked them the question, they said 350,000 ISR drones a year, Chinese ISR drones is what they're going through a year on the Ukraine front, a massive number. Austin Bohlig: Wow, wow. So a big opportunity there. I guess kind of lastly for me and more just kind of want to touch on all businesses, the boat segment. Obviously, what's going on in Hormuz. Have you guys noticed any sort of increase in maybe RFP or interest just given the heightened conflict in the waterways or anything you could talk about there? Jeffrey Thompson: Yes. So Austin, you were at Innovation Day and 2 days later, the war started. And our biz dev team, all of our different teams have been getting stuff coming at us in every which way and direction some people calling, asking panic questions, what can we get here and now? As things calm down a little bit, it looks like there's going to be some pretty massive RFPs coming out of the Gulf states. They won't take as long as traditional RFPs. We're seeing an uptick in some Navy inquiries that were at Innovation Day. We are hearing a lot about counter. People want counter. As I explained in my prepared comments, the Variant 7 has a great counter configuration with the ACS Bullfrog, which can take down FPVs and also can take down Shahed's at close range. And that combined with the Aeon's Zeus is something we're going very quickly at, and they're ramping very rapidly to be able to be a great solution, a counter solution for the Shahed's. And they also don't require a pilot like a lot of the Ukrainian solutions to take down a Shahed. So a lot of great tech coming out of Ukraine for counter Shahed's, but we think that we can also help dramatically in the Strait of Hormuz. And you got to remember, this is -- everyone is talking about how this is so urgent right now in the Strait, but we believe that the Strait is going to need to be protected for not years, forever from now on. No longer is it going to be acceptable for the world to be held hostage by that one gap in small area there between the Persian Gulf and the Gulf of Oman. So we think this is a very long-term solution is to not have billion ships escorting tankers. We prefer to do it -- we prefer to do it with 30 or 40 USVs, 10, 20 on each side and/or doing port protection being close to the shore of Iran to make sure that nothing is coming out with our counter capabilities. Austin Bohlig: Well guys, keep up the great work. Operator: Our next question comes from the line of Mike Latimore with Northland. Mike Latimore: Sorry, I'm in an airport, so it might be a little bit noisy. I apologize. So I guess -- yes, congrats on the strong year. That was great. As you think about the full rate production contract, is that something that you would anticipate getting sort of one main order? Or would there be separate tranches over there? Jeffrey Thompson: Are you talking for the Black Widow with the SRR program? Mike Latimore: Yes, sorry. Yes, exactly. Jeffrey Thompson: Yes. Okay. Because there's a -- we're going into full rate production, hopefully very soon with the boats also. So yes, great question. So as Austin alluded to earlier, there's an influx of orders related to Epic Fury. We're expecting, and again, not going to give dates to have our new OTA full rate production contract any day. We -- there is some possibilities of getting some immediate orders for Epic Fury, which might delay a week or 2 the other contract. But we're progressing the ship every month still for SRR and things are looking fantastic with the SRR program with their funding and now with Epic Fury and a lot of other needs that we're hearing out of the Department of War for Black Widows. Mike Latimore: Excellent. And I think you -- in your prepared remarks, you talked about anticipating an order for the USV in the second quarter, I believe. I guess can you give a little more color there in terms of type of customer region, that sort of thing? Jeffrey Thompson: I'm sorry, I don't know which order in the second quarter you heard. Mike Latimore: I thought you said something about a USV -- or anticipating a USV order in the second quarter. No? Jeffrey Thompson: No, we did not say that, but we are hoping -- people are very interested in our USVs. There's a lot of urgency around our USVs right now. We were previously going to use our first 15 for demos only. And now we're going to -- hull # 6, which is just coming out now today. Hull #6 from 15 are now going to be hopefully shipped to customers as quickly as we can make them. Mike Latimore: Excellent. And last thing on -- you talked about getting to 1,000 drones a month. Would you sort of start building to that rate even before having the contracts? Jeffrey Thompson: We're there. We're doing that now. Operator: Our next question comes from Ashok Kumar with ThinkEquity. Looks like we lost Ashok there. I don't see any more questions. And with that, I'll pass it back to management. Jeffrey Thompson: Great. Well, thanks, everybody, for coming on. We had about 400 people on this call today. A lot of exciting stuff happening across the globe. Chris Ericson's great news that we'll be working very hard on quickly and scaling to help fulfill all the things that are going on. Again, we will not be waiting for an official quarterly call to update people on guidance. As soon as we have our contracts in hand, we will get that information out to the market. We're very excited. We still believe that every quarter is going to be a record going forward, and we're excited to get back to work. Thanks again. Christian Ericson: Thank you, everyone. Operator: This concludes today's webinar. You may disconnect at this time. Thank you, everyone, for your participation.
Here are five takeaways from the Federal Reserve meeting.
Federal Reserve Chair Jerome Powell explains what factors in the economy are contributing to the higher inflation projection for 2026.
Firms' year-ahead inflation expectations increased by 0.2 percentage points to 2.1% in March, according to the Federal Reserve Bank of Atlanta's March Business Inflation Expectations (BIE) Survey. That figure is up from the 1.9% recorded in the February BIE Survey but down from the 2.5% recorded in the March 2025 survey.
US equities held steady on Wednesday after the Federal Reserve left interest rates unchanged, signaling caution amid persistent inflation and growing geopolitical risks in the Middle East. The Fed maintained its target range for the federal funds rate at 3.50%–3.75%, in line with market expectations.
Surging oil prices due to the Iran war are expected to increase inflation in the near term, Federal Reserve Chair Powell said. “Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East,” the Fed chair said.
Oil price volatility surges as bombs fall in the Middle East Be ready for more wild swings in oil and gas prices. The Cboe Crude Oil ETF Volatility Index (OVX), which measures implied volatility in oil ETF options, estimates the expected volatility of crude oil prices over the next 30 days.
Federal Reserve chair Jerome Powell said on Wednesday that he will stay on as “chair pro tem” if his successor Kevin Warsh is not confirmed by mid-May when Powell's term expires.
Federal Reserve Chair Jerome Powell says he plans to stay at the Fed until after the Justice Department's investigation is complete during a news conference after the central bank's policy-setting Federal Open Market Committee to leave interest rates unchanged.
Federal Reserve chair Jerome Powell answers questions following the FOMC's decision to leave the Federal Funds rate unchanged.
Federal Reserve Chair Jerome Powell says the Fed is in a "difficult situation" and needs to balance current risks during a news conference after the central bank's policy-setting Federal Open Market Committee to leave interest rates unchanged.
On today's episode of CNBC Crypto World, crypto markets are on pace to outperform Wall Street despite a Wednesday pullback driven by hotter-than-expected wholesale data. Also, the SEC and CFTC issue joint guidance on the regulatory classification of crypto assets.
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Federal Reserve Chair Jerome Powell says inflation has eased, but is still "somewhat elevated relative to our 2% longer run goal." -------- More on Bloomberg Television and Markets Like this video?
Powell says he will stay on as head of the Fed until Warsh is confirmed
Rebecca Walser (@walserwealth) tells investors to watch for what dissenters to the FOMC interest rate pause say as macro uncertainties persist. She then turns to the private credit markets and pressures she anticipates lasting in the space.
The Federal Reserve's so-called dot plot showed a median estimate of 3.4% for the federal funds rate at the end of 2026, the same as what it had projected at the end of last year. However, a closer look at the overall dot plot showed the balance of projections moved toward fewer reductions.