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Operator: Good evening. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Surf Air Mobility Inc. Fourth Quarter and Full Year 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now pass the call over to Sam Levenson. Please go ahead. Sam Levenson: Thank you, operator, and good afternoon, everyone. Welcome to Surf Air Mobility Inc.'s fourth quarter 2025 earnings call. I am joined today by Deanna White, Chief Executive Officer, and Oliver W. Reeves, Chief Financial Officer. Our earnings release can be found on the SEC EDGAR website and on our Surf Air Mobility Inc. Investor Relations page at investors.surfair.com. During this call, we will discuss our outlook and expectations for future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or other similar statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and in our periodic reports filed with the SEC. During today's call, we will present both GAAP and non-GAAP measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the earnings release we issued earlier today posted on the Surf Air Mobility Inc. Investor Relations website and in our filings with the SEC. I will now turn the call over to Surf Air Mobility Inc.'s CEO, Deanna White. Deanna? Deanna White: Thank you, Sam, and thank you everyone for joining us. At the beginning of 2025, we were in the midst of transforming our company financially, operationally, and strategically. The investments we made in our key priorities were straightforward. Strengthen the core business by improving reliability and profitability in our airline operations, recalibrate the on-demand charter business, and develop our Surf OS software. We delivered against that plan, demonstrating successful execution against our strategies. I think that is best exemplified by having now met or exceeded our revenue and adjusted EBITDA guidance for eight consecutive quarters. Today, we are no longer resetting. We are pivoting to growth. We are backing that ambition by increasing 2026 revenue guidance by 20% to 30% compared to the prior year, underscoring our platform opportunity and our conviction in delivering it. This revenue guidance does not include the early stages of electric aircraft deployment as we expect our recently announced partnership with Beta Technologies to contribute to revenue growth and operating efficiencies in 2027. In 2025, we raised over $100 million in equity to substantially reduce our overall cost of capital and lower our net debt. This strengthened financial position gives us the flexibility to move beyond stabilization and toward growth. Today, we operate a regional airline and on-demand charter business, safely, reliably, and efficiently, and have been building a digital infrastructure equipped with AI-enabled software tools powered by Palantir. These efforts provide the foundation for our business platform ambition that will enable the next generation of advanced air mobility. To set the stage, aviation is entering a structural inflection point. Electrified aircraft nearing commercial readiness and AI-enabled software will soon shift both the economics and operating requirements of flying. These converging technologies will stimulate massive new demand. But the industry remains severely fragmented, with operators, brokers, owners, and manufacturers still relying on disconnected technology solutions that are unprepared to manage the greater operational and regulatory complexity, intensifying the challenges further. Success in this next phase of aviation will be shaped not by individual airlines or OEMs as in the past, but by a platform that integrates the ecosystem and increases alignment across it. Like all effective platforms, Surf Air Mobility Inc. intends to benefit from dynamics between supply and demand, where improved access, reliability, and economics on one side make participation increasingly attractive on the other. Surf Air Mobility Inc.'s platform, enabled by a digital powered by Palantir, makes participation in the next generation of aviation simpler, safer, and more economically attractive over time for everyone. We see a world where OEMs will introduce aircraft through our platform. Operators will run fleets on Surf OS. Pilots will build careers within the network. Passengers will manage their travel with a trusted brand. Regulators will rely on the platform's transparency and controls. And capital will flow through its infrastructure. While assets and operations remain distributed, the coordination standards and market dynamics will be governed centrally through the platform. Our platform strategy is built on our strengths today: a nationwide commuter network of short-haul routes ready to showcase adoption of electric aircraft; a cohort of over 400-plus operator relationships developed within our on-demand charter business; proprietary Palantir-powered software built on live operations; partnerships with leading electric aircraft manufacturers, including Beta Technologies and Elektra, to bring new electric aircraft into service. We believe this combination of assets is singular in this industry and defines our platform advantage. In our airline operations, 2025 marked a dramatic step change in operational performance. We made meaningful improvements in controllable completion rates and on-time departures and arrival metrics, each reaching all-time highs since becoming a public company. These gains reflect better execution from our incredibly talented team along with increased digitalization of key processes across the airline. I would like to thank the team for their contribution to this milestone, which would not have been possible without their dedication to operational excellence. As a result, we achieved our guidance of profitability in our airline operations for the full year of 2025, defined as positive adjusted EBITDA. In our on-demand charter business, we focus not only on growth, but also margin expansion. We achieved both. Revenue increased while we saw incremental improvement to flight margins compared to the prior year. The combination of better sourcing discipline, a mix shift to longer haul trips with larger aircraft, and the adoption of our Surf OS technology helped us recalibrate the business. It is within our on-demand charter business that we expect to see the clearest near-term benefits of our platform becoming operationalized. We already saw this business expand meaningfully in 2025, especially in the second half of the year as our Surf OS tools helped us improve aircraft sourcing and broker productivity. We integrated two charter supply deals into our platform, giving us better economics and more control over aircraft inventory, while guaranteeing distribution for our operating partner. In 2025, we launched two new strategic initiatives in our on-demand charter business. The first, Powered by SURF On Demand, our tech-enabled program that equips independent third-party brokers with Broker OS and expands our on-demand charter team Salesforce. And the second, SURF On Demand Cargo, which expands our product offering into an additional segment of the aviation market. These programs began generating profitable revenue in 2025 and represent early proof points of our platform strategy in action. Surf OS remains a significant investment priority for us. Throughout 2025, we continued working with Palantir to power the core of Surf OS and integrate it across more parts of our organization. We launched crew and aircraft scheduling tools, integrated our maintenance management system, enhanced mobile applications for pilots, and adopted CRM capabilities for our on-demand charter team. These tools are actively used within our business every day. At the same time, we continue to validate Surf OS with external operators and brokers and secured multiple letters of intent for future adoption of our software products. To this end, we remain on track to begin commercializing Surf OS in 2026. The goal is to provide tools that improve efficiency, transparency, and asset utilization in a fragmented market that connects the ecosystem onto a shared digital infrastructure. Our Hawaii operation and strategic partnerships are central to this next phase, and we are placing particular emphasis on that market as a proving ground for our platform in practice. The interisland network provides a practical environment to introduce electric aircraft technologies responsibly. With short flight distances, a concentrated geography, strong community engagement, and meaningful passenger volume, Hawaii is our strategic anchor market to demonstrate the impact of the transition to electric aircraft. We have increased our investment in Hawaii operating under the brand Localei Airlines and have committed to investing over $22 million into our Hawaii infrastructure with new planes entering service in 2026, updated lounges, and improved processes. We strengthened leadership locally, improved operational reliability, and aligned our fleet network for long-term operational stability. This strategic commitment to Hawaii is further shown by the work we are doing in partnership with Beta Technologies. This week, we secured a strategic partnership with Beta Technologies, to be the first operator to launch commercial electric aircraft passenger flights in Hawaii. As part of the strategic partnership, Surf Air Mobility Inc. will combine its operating expertise, existing passenger demand, and established airport infrastructure with Beta's market-leading electric aircraft and charging capabilities. We have placed a firm fleet order for 25 Beta electric aircraft with an option for 75 more. The order allows for delivery slots to be satisfied across Beta Technologies' product portfolio, from cargo or passenger CTOL aircraft to VTOL variants, perfect for our existing commuter network and on-demand charter business. The order allows aircraft to be operated by us, leased to individual owners that manage their aircraft with Surf Air Mobility Inc., or operated by our on-demand charter partners, all stakeholders within our platform. We anticipate that the improved unit economics of Beta electric aircraft will lead to increased profitability in our scheduled service and on-demand charter businesses over time. We have entered into another agreement with Beta Technologies that designates our planned maintenance, repair, and overhaul facility, once certified, as the exclusive factory-authorized service center for Beta electric aircraft in Hawaii with the ability to extend to other launch regions. Our ambition to become the leading MRO for electric aircraft create a new and growing revenue stream for the company. Moreover, Beta Technologies has selected us as the launch operator for their passenger aircraft. Beta Technologies and Surf Air Mobility Inc. will co-market Beta electric aircraft and Surf Air Mobility Inc.'s operating software capabilities to other third-party Beta aircraft customers. We aim to leverage this agreement to provide Beta Technologies customers with operational and aircraft management services across multiple mission profiles, including high-frequency short-haul scheduled passenger service, regional cargo operations, and on-demand charter flights. These announcements are concrete examples of the progress we are making toward implementing the industry's platform solution and will directly support the early commercial deployment and broader market adoption of electric aircraft. Our broader electrification strategy has been to work with best-in-class aircraft manufacturers to achieve first mover advantage. Our partnership with Beta Technologies illustrates this approach, and we are working toward introducing Beta's aircraft into commercial service beginning this year. We believe that Hawaii, where we hold an early advantage, will be one of the first meaningful proof points in the United States and believe Beta Technologies has the aircraft to make it happen. These deliberate steps are designed to reduce risk, increase operational readiness, and position us to be the premier operator electric aircraft. The Beta aircraft order is expected to enable deployment of electric aircraft in our network before our previously expected timeline of 2027. At the same time, we continue to believe there is a strong use case for an electric Caravan, particular in markets we fly today, such as Hawaii. We believe the most efficient allocation of capital is to focus on providing software to support the development of electric aircraft. We continue to be in discussions with multiple partners across the value chain to advance the electric Caravan program utilizing the work we have accomplished and assets we have created. However, to be clear, we no longer intend to invest $50 million to $100 million for the Caravan electrification program. To summarize, what I have just described is Surf Air Mobility Inc. turning back to growth mode in 2026. I have laid out our vision showing how our strategic initiatives and areas of strength will increasingly work in tandem as a unified platform. The outlook for this next year includes more partnerships, more electric aircraft collaborations, more supply agreements, and more integration and broader rollout of our Surf OS technology across the ecosystem. Over time, we will align the key stakeholders around our platform, coordinate more of the operational financial transactions, and capturing an expanding share of the industry's activity. We enter 2026 in a stronger position than at any point in our recent history, seeking to enable an industry at the beginning of structural expansion, and we are intensely focused on turning that position into tangible value for our customers, our partners, and our investors. With that, I will turn the call over to Oliver to discuss our fourth quarter and full year 2025 results and our 2026 guidance. Oliver W. Reeves: Thank you, Deanna. In my remarks today, I will discuss the results of our fourth quarter and fiscal year ended 12/31/2025 and our outlook for the first quarter and fiscal year ending 12/31/2026. To begin, here are some annual 2025 highlights. First, we achieved full year profitability in our airline operations, defined as positive adjusted EBITDA. This milestone was reached by driving operational improvements, reducing maintenance complexity, and enhancing overall cost efficiency. We invested in leadership talent at all levels of the organization with aviation expertise that achieved significant results. Second, we successfully recalibrated our on-demand charter business model, improving flight margins year over year. We accomplished these achievements through improved sourcing, the introduction of new charter products, and an increase in long-haul flying with larger aircraft. In 2025, we completed the full internal deployment of BrokerOS, resulting in improved efficiencies and cost savings. In the fourth quarter, we launched two new programs: Powered by SURF On Demand, which expands the company's sales force by providing Broker OS to independent third-party brokers, and SURF On Demand Cargo, which expands our product strategy within the aviation market. Third, for our Surf OS initiative, we extended our partnership with Palantir by announcing a five-year exclusive agreement to develop software solutions for Part 135 stakeholders, coupled with a teaming agreement to pursue larger enterprise opportunities. Finally, we optimized our capital structure, raising debt and equity to both invest in our business and strengthen our balance sheet. As a result, net debt decreased 47%, from $139 million at 12/31/2024 to $74 million at 12/31/2025. This decrease in net debt also benefited from the conversion of $48 million convertible notes, inclusive of interest. Now let me turn more specifically to the fourth quarter and full year results. Revenue and adjusted EBITDA for the fourth quarter met our guidance range. This is the eighth consecutive quarter in which the company either met or exceeded guidance, demonstrating continued and deliberate execution against our transformation plan. For the fourth quarter 2025, revenue of $26.4 million was within our guidance range of $25.5 million to $27.5 million, a 9% decrease sequentially from the third quarter driven by a 16% decrease in scheduled service revenue resulting from the exit of unprofitable routes, partially offset by an 8% increase in on-demand charter revenue. On a year-over-year basis, fourth quarter revenue decreased 6% driven by a 19% decrease in scheduled service revenue partially offset by a 36% increase in on-demand charter revenue. Full year 2025 revenue of $106.6 million met our previously raised guidance of revenue exceeding $105 million, an 11% decrease when compared with full year 2024 revenue, driven by a 15% decrease in scheduled service revenue partially offset by a 3% increase in on-demand charter revenue. The drivers of both the sequential and year-over-year decreases in fourth quarter and full year revenue were the continued exit of unprofitable routes, partially offset by improved operational metrics in our scheduled service operations, with controllable completion factors for Q4 2025 improving to 98% compared to 96% for Q3 2025 and 89% for Q4 2024; an increase in on-demand charter revenue driven by a shift in mix to larger aircraft and international flights; and the positive impact of our BrokerOS software and broker productivity. Our adjusted EBITDA loss, just under $8 million for the fourth quarter 2025, was within our guidance range of $8 million to $6.5 million. Compared with the fourth quarter 2024, adjusted EBITDA loss improved by 19%, the result of our continued focus on cost management. Adjusted EBITDA loss compared to the same quarter in 2024 increased by approximately $1.1 million due to a slightly higher mix of corporate-level costs. Full year 2025 adjusted EBITDA loss of $41.7 million was a 5% improvement over the 2024 adjusted EBITDA loss of $44.1 million. This reduction in adjusted EBITDA loss year over year reflects the exits of unprofitable routes, the benefits of our significant operational improvements, and the positive impact of improved on-demand charter margins. Airline operations were profitable, defined as positive adjusted EBITDA, in line with our full year guidance. Our controllable completion factor increased to 98% in 2025, from 89% in 2024. Over the same period, on-time departures improved to 72% from 62%, and on-time arrivals improved to 81% from 74%. Improvements in these key operating metrics represent a tangible return on capital deployed to address prior operating challenges. Looking forward, we are entering 2026 with strong momentum. Surf Air Mobility Inc. is positioned to lead and enable aviation's next structural transformation. 2026 marks our transition from operator to platform and the start of the expansion phase of our transformation plan. Now let me turn to the discussion of our outlook for 2026. 2026 marks the beginning of our return to growth. As Deanna mentioned earlier, the outlook for 2026 includes more partnerships, more electric aircraft collaborations, more supply agreements, and more internal integration and a broader commercial rollout of our Surf OS technology. For the full year 2026, we anticipate revenue to be in the range of $128 million to $138 million and adjusted EBITDA loss to be within a range of $40 million to $50 million. Our revenue guidance range of 20% to 30% year-over-year revenue growth for fiscal year 2026 contemplates accelerating growth in our on-demand charter business and partial-year revenue contribution for Surf OS. Because of these dynamics, revenue growth will be heavily weighted to the back half of 2026. Our 2026 adjusted EBITDA loss guidance reflects significant investments in strategic initiatives, including the continued development and commercial rollout of Surf OS, partially offset by the continued efforts to improve the profitability of our scheduled service and on-demand charter business. Despite these investments, we expect our adjusted EBITDA loss and margins to improve each quarter on a comparable year-over-year basis driven by revenue growth and a continued focus on cost management. For the first quarter 2026, we anticipate revenue to be in the range of $24 million to $26 million and adjusted EBITDA loss to be within a range of $15.5 million and $13.5 million. Revenue guidance for the first quarter 2026 does not reflect any revenue contribution for Surf OS. The increase in adjusted EBITDA loss reflects our investment in strategic initiatives and the continued development and upcoming commercial rollout of Surf OS. Now let me turn the call back to Deanna for some brief closing thoughts. Deanna White: 2025 marked the year we transformed our company operationally, financially, and strategically. Today, we are a respected short-haul flight provider serving regional commuters, on-demand charter customers, and cargo services. We are transitioning from an airline-first operating model to a platform-centric business spanning regional, private, and advanced air mobility. We spent a decade building a commuter airline and on-demand charter business known for safety, reliability, and customer service. Meanwhile, numerous companies have invested billions over the same decade in electric aircraft now reaching final certification stages. The aviation industry is entering an inflection point as electric aircraft mission built for short-haul flying and AI-enabled software shift operating requirements, efficiencies, and economics. Success will not be shaped by individual airlines or OEMs, but by platforms that integrate the ecosystem. 2026 represents a pivotal year for Surf Air Mobility Inc. Our long-term ambition to become the platform that enables the next generation of flight is at our doorstep. We believe that our Surf OS software represents sustainable competitive advantage that will anchor our platform and position us at the center of the transforming industry. Having privileged access to a larger and more diverse array of knowledge flows better positions us to shape these flows. When you are in the center of flows, small moves smartly made can set very big things in motion. With that, let me turn it over to the operator for the Q&A portion of the call. Operator? Operator: Thank you. And at this time, I would like to remind everyone, in order to ask a question, press star and then the number one on your telephone keypad. We will now open for questions. Our first question comes from the line of Amit Dayal with H.C. Wainwright. Your line is open. Amit Dayal: Thank you. Good afternoon, everyone. I appreciate you taking my questions. Congrats on all the progress, guys. With respect to the Surf OS spend and commercial rollout, could you clarify what is being spent on the software development, product development, and what is being potentially spent on just building the sales pipeline? Deanna White: Sure. Thanks, Amit, and thanks for participating and giving us a question and the interest you have in our company. You know, Surf OS remains a significant investment priority for us. We have an operating model in which we are now evolving to execute a go-to-market strategy. We first are starting with our Broker OS product. We spoke about how our on-demand team has launched that through a Powered by Surf OS program in which we equip independent third-party brokers with the tech-enabled software tool of Broker OS. We have seen that be very effective. We are already seeing that have profitable revenue when it was launched last year, and we are commercializing that further and growing that. It is going to be a big contributor of our on-demand business this year and is supporting why we guided to a higher revenue target for 2026. Now we are also still working with 17 operators to a closed beta, and we are evolving how that go-to-market strategy will work using their feedback, not just on the tool, but how we could potentially commercialize that. Thirdly, we are targeting the enterprise clients with enterprise solutions. That leverages the five-year teaming agreement that we have with Palantir to develop solutions for enterprise customers with them within the Part 135 industry. We have exclusivity there. And we also intend to monetize the Surf OS tools that we already are using ourselves to enterprise clients and also develop customized tools for them. We are currently in discussions with various potential clients including not just operators, but also OEMs within the industry. The bulk of the revenues that we are going to get this year from commercializing Surf OS is going to occur in the second half of the year. We are deliberately using a very deliberate, thoughtful go-to-market strategy on Surf OS, making sure that our products meet the requirements of the industry and our clients, and hope to see in the future years that segment of our business truly take off and grow. Amit Dayal: Thank you, Deanna. And then, with respect to the Beta partnership, is any of that going to come through in 2026? Or are these aircraft purchases, etc., happening in periods like 2027 and beyond? Just any clarity on how the electric aircraft are going to be incorporated into your fleet and timelines for these developments? Deanna White: Sure. The Beta aircraft order is very unique. We have the ability to satisfy the deliveries across their entire product portfolio, which includes cargo, passenger, a CTOL variant, and then a VTOL variant. The CTOL variant is the one that they can certify the soonest. It is the one they are going to be using in the EIPP program. Certification timeline is obviously the biggest hurdle, and the FAA EIPP program that they just announced selections this week is going to expedite the certification process for those who were selected. Beta is a great partner. They actually were selected in seven of the eight applications. The benefits of that is they will be able to certify the aircraft a lot quicker, even potentially up to a year sooner. We cannot take deliveries and put them into full commercial service until the aircraft is certified. But we have plans to start with the CTOL cargo and move to the passenger variant. And the CTOL can use existing regional airports. It does not require the vertiport infrastructure, and so we will be able to launch a commercial service sooner. We also intend, even though our company's application in Hawaii with Beta was not selected for the EIPP program, we still intend with Beta in 2026 to do demo flights, to start a trial of the cargo version of the CTOL, to begin doing that in 2026 in anticipation of the certification of that aircraft first. And we, on the airline operations side, will actually begin with cargo services that will generate revenue and then move to passenger, using the CTOL and then later the VTOL once it is certified. Amit Dayal: Thank you, Deanna. Just one more on the Beta side. I do not know if you can share this at this point, but any color on the improvement in economics from the Beta aircraft versus these legacy aircraft? Could you share any details on how adopting the Beta electric aircraft can improve economics for Surf Air Mobility Inc.? Deanna White: Sure. We anticipate that there will be 30% more improvement in operating costs. Where that will come from is two areas: fuel and also maintenance. Right now, what is going on in the world with fuel and the higher fuel prices, these electric aircraft will provide us mitigating that risk in the future when we have them. But incidentally, we today run our business on the Caravan, which is one of the most fuel-efficient, much more fuel-efficient than a jet or even a commercial airline operator. Our fuel costs are a lot smaller a percentage of our total revenue than a large commercial airline or a jet. So we are very fortunate that we are able to have an entire fleet of Caravans that are very fuel efficient. We also will benefit from the maintenance. Interestingly enough, on an annual basis, a traditional Caravan has to be taken down for routine inspections 24 days out of the calendar year, and the new electric Beta aircraft will only have to be taken out of service for two days for maintenance in a year. That improved productivity to be able to have those planes in the air flying and generating revenue is also a big benefit to us for our future business and our operating profits. Amit Dayal: Got it. And just maybe one for Oliver. Maybe at the end of 2026, how will the balance sheet look like? Any sense of where cash and debt levels could be post your investments in Salesforce and other initiatives? Oliver W. Reeves: Yeah. You know, it is very difficult for me to comment on that. But here is what I will say. As we mentioned in our earnings release and our remarks this afternoon, we are truly pivoting back to growth, and that is why we have guidance within, you know, up 20% to 30% compared to last year. And our guidance of our EBITDA loss of $50 million to $40 million reflects significant investments that we have announced such as the investment in Hawaii, for example, and a very small part of our investments are actually—so they truly do flow through that number. We believe these investments will generate significant ROI, and it will create shareholder value. With regard to the recent announcement that we made around Beta, we intend to utilize the strong relationships that we have with lessors, something we have been building over time, to get those leased. So we do not expect a lot of impact from that. And obviously, as Deanna just mentioned, they will significantly improve our profitability. So we will continue to opportunistically look to refine our balance sheet over time to address these potential investments that we need to make as market conditions allow, to accelerate our growth plans. Amit Dayal: Thank you, Oliver. That is all I have, guys. Appreciate it. Operator: And our next question comes from the line of David Joseph Storms with Stonegate. Your line is open. David Joseph Storms: Good evening, everyone, and thanks for taking my questions. Wanted to start with airline operations. Great to see that it was full-year positive on an adjusted EBITDA basis. In order for that to become maybe operating-level positive, what will that take? Is that volume growth? Is there more room here to exit unprofitable routes? Are there cost takeouts? Maybe just how does that look? Deanna White: Thanks, Dave. Thank you for interest in our company. We see the continued adding of technology from our Surf OS platform that will provide additional offer optimization for our benefits and reducing our costs in that business. We continue to sustain the high levels of operational efficiency that we developed, the team developed with all their hard work and their transformation from the prior year. But really, technology and the insertion of the technology and the tools that we are making are really going to do a lot in the near term. And in the future, the adoption of electric aircraft are going to be the biggest thing with 30% operating margins improving in the use of that business. I previously, in the original beginning part of the thing, I talked about also in the airlines operations additional markets that we are going to be going in. We are going to go into the cargo market using these Beta aircraft and we are also going to be the factory authorized MRO in the aircraft space. The Beta aircraft agreement allows for us to first be their exclusive factory authorized center for them in Hawaii with the opportunity in future launch areas. And we have a goal to become, in addition, to become a premier MRO for the electric aircraft that are all coming to fruition in the near future. And so that will be another opportunity for us to have additional revenue streams and additional profitability in airline operations. David Joseph Storms: That is great color. I appreciate that. Maybe sticking with the Beta partnership, you mentioned in your prepared remarks that you have the optionality to move with them to, say, move geographies, etc. I know Hawaii is kind of a unique situation and serves as a great testing ground. But thinking beyond Hawaii, what seems like the logical next steps for geographic expansion? Deanna White: So we do not necessarily want to share what our geographical expansion targets are. It is a competitive advantage to know what we are doing there. But there are a lot of pieces of our current network that we operate where we can easily adopt the electric aircraft from this order, not just in our scheduled passengers, but also in a cargo service. Obviously, we already have an existing network you can more quickly adopt these aircraft into as opposed to standing up something from scratch in a new targeted market. But we do also have new targeted markets that we do not operate in today that we intend to use these aircraft for. You know, an interesting thing, our company has flown the past decade millions of passengers, millions of miles. We have done the short-haul routes that all this new technology in electric aircraft needs to have. And so you can more quickly and efficiently adopt electric aircraft when you already have a network to place the aircraft in. So we are really excited about the Beta partnership, the order, and what it means for us to be a leader in adopting within our network and within the industry. David Joseph Storms: That is a very fair answer. Please do not let me ask you to give away your Krabby Patty sauce there. Turning to maybe the SURF On Demand, would love to get your thoughts about maybe any early signs of adoption there? Are you seeing it take a similar trajectory as your previous launches? Just maybe anything else you are seeing there, early returns-wise, I know it is still early. Deanna White: So are you talking about early launch of our Powered by On Demand program? So that program, similar to, like, Compass used in the real estate market, that platform allows independent brokers to join that program and get the tech-enabled Broker OS software that helps them more efficiently and quickly close business transactions in the on-demand market. So they can obviously create volume a lot quicker. We have already seen, when that was launched in December, already seen the big uptick. We have a pipeline of independent third-party brokers that are already in the pipeline to join that program. We have them apply, and then we train them up in that program. So we are really excited about all the uptick we have had in that. And as I said, we have increased our 2026 guidance significantly, 20% to 30% on the revenue line, because of what we see as the big potential in that program and the big potential on the supply side to grow that business. David Joseph Storms: That is great. I appreciate all the commentary, and good luck in next quarter. Operator: And our next question comes from the line of Austin Moeller with Canaccord. Your line is open. Austin Moeller: Hi, good afternoon. So when timing-wise should we think about Broker OS, Surf OS, being able to generate revenues both from new covered customers and from the demo customers? Deanna White: Thanks, Austin. Thanks for your interest in our company. We plan to have that in 2026. We have publicly said we are commercializing Surf OS products in 2026, but we intend to see more of the revenue in the second half. The revenue is going to be coming from Broker OS. It is already happening. We have Broker OS live within our Powered by SURF On Demand program in which they are using that tool, and as they signed up for that, the third-party brokers signed up for that program, and they are already generating revenue in our on-demand business with that. We also plan to use the information, like I said, from the enterprise side of the business with our partnering of Palantir. We are in business discussions with various stakeholders in the industry, OEMs and large operators, to either have them use the tool we use every day in our business or to develop customized tools for them. We see a big opportunity to enter into or close a deal like that this year. And we are really excited about the partnership we have with Palantir and the ability to do that. Austin Moeller: Okay. And then just on the Beta partnership, given your statement that you no longer plan to invest the $50 million to $100 million in the Caravan electrification project, I guess the plan here is to continue looking for a JV partner to capitalize that project and, otherwise, move forward with using the CX300 and the Alia 250 to do cargo and passenger transport. Deanna White: I will have our cofounder, Sudhin Shahani, who manages these strategic initiatives, take that one. Sudhin Shahani: Hi, Austin. Yeah, to answer your question directly, on the Caravan, we do intend to continue to pursue partnership opportunities. We are in talks with a number of people in the supply chain. As Deanna stated, we do not intend to fund it ourselves. But we do believe we have assets that we have created there in real value, and we do see a place for an electrified Caravan at some point in the future. So we are going to continue to explore that. Austin Moeller: Okay. Great. I will pass it back there. Thank you. Operator: And there are no further questions at this time. I will now turn the call back to the Surf Air Mobility Inc. executive team. Deanna White: Thank you. We are now going to take some inbound questions. They were either submitted via our Say application or via email. The first question, we have shifted from our in-house electrification part to partnerships. How should investors think about long-term economic ownership in that model? So, I will turn that question over to Sudhin. Sudhin Shahani: Thanks, Deanna. So to clarify, our electrification strategy as prior stated was really to make money in two ways. One, from the operating efficiencies generated by electrified aircraft, and the other by providing electric services to other operators, both hardware and software based. Our recently announced partnership with Beta solves for the first and actually improves upon the first; given the amount of capital that Beta has put into developing a clean sheet design aircraft, we are in a position to realize greater operating efficiencies leveraging that aircraft and maintain a first mover advantage. From the services side, we have made a conscious decision to allocate capital towards the initiatives where we intend to continue to provide this type of software services that we originally intended to under the electrification program, but benefit on the hardware side from partners like Beta. Also to recap, we do still continue to believe we have assets of value in the Caravan program and are continuing to explore ways to monetize those. Deanna White: Thanks, Sudhin. The next question is, what are the remaining technical hurdles before the first commercial flight of an electrified aircraft can take place? So the speed of certification is the largest hurdle to do that. The FAA saw that and created the EIPP program to help OEMs certify quicker, and that is a great step toward and addresses some of those challenges. I find it super exciting that the FAA this week picked Beta for seven of the eight applications. We really picked a really good horse to do a partnership and announce that with this year. We just announced that partnership. The EIPP program will allow an operator who is participating in those trials to certify their aircraft as much as one year sooner. And so their participation, Beta's participation, will benefit us because we will be able to take the aircraft that we just ordered earlier than thought since they are going to be able to participate in the EIPP program. And even though our application with Hawaii and Beta was not one of the ones selected, we plan with the state of Hawaii, other partners, and Beta to launch demonstration flights in 2026 to deploy electric aircraft to prepare our network in Hawaii to accept the first aircraft from that order that are placed. What is the expected timeline for Surf Air Mobility Inc. to reach sustainable profitability and which revenue segments—regional air operations, electrification, or software platform—can drive the majority of that profitability? So today, our revenue comes primarily from our regional airline operations, and we are happy to say that it is profitable today. And we will continue that profitability in 2026. With the introduction of the new electric aircraft that we will be getting with Beta, we plan to use those to launch new routes in the future. And that will improve the profitability in this business because of the operating of electric aircraft that I spoke about as far as fuel and maintenance. Additionally, that business is going to create additional revenue through an OEM and a cargo business. And those businesses, we plan to launch using the Beta partnership and the Beta aircraft order. In 2026, the majority of our growth in revenue will be coming from our on-demand charter business. We will be growing revenues and margins, and that will happen due to the use of technology we have been talking about in our Powered by SURF On Demand program and additional supplier contracts and agreements that we have with our wholesale suppliers. On the Surf OS side, we are taking a deliberate approach to how we commercialize that in 2026 with much higher growth coming in a future year as software makes up a greater portion of our revenue. In later years, the profitability of our business will increase due to software's higher margins. Next question is, are there active discussions with OEMs and eVTOL manufacturers to integrate Surf OS as a native aircraft operating platform. The answer to that is yes. We are actively in discussions with stakeholders within the aviation community. Particularly, for enterprise customers, we are using the Palantir teaming agreement that we have for exclusivity in the Part 135 world to develop software solutions for these large enterprise customers, like an OEM, like a large operator, or like a large broker. As we progress through those discussions, we will provide updates on our progress and make any announcements when final agreements are closed. Lastly, the question is, how quickly is the on-demand charter segment growing? And what percent of revenue could it represent over the next two years? Our on-demand charter business is our fastest growing part of our business. It is the primary contributor to our raised revenue guidance. We are achieving that through the deployment of our software technology and our new programs like our Broker OS Powered by SURF On Demand program. We see real opportunities also in the future to deploy the electric not only in our scheduled service, but in our on-demand platform. The Beta aircraft agreement allows us to take the deliveries either on our certificate and operate them in either a scheduled service or on demand. We can also lease them to an individual owner as long as they are managed by us on our platform and on our certificate. And we can also provide them to other operators. You know, we do have relationships with over 400-plus operators currently in our on-demand business, and we can also use that. So we will be able to expand our revenue and our market over time. The on-demand business is going to be our clearest near-term benefit of operationalizing our Surf OS technologies, and we are really excited about what that is going to do to us this year. Before we close the call, I would like to mention that we are participating in the Roth 38th Annual Growth Stock Conference on March 23–24. We look forward to meeting with institutional investors there. So please contact your Roth sales representative to schedule a meeting with us. To end this call, I would like to thank all of you for joining, and we look forward to reporting our Q1 results in early May. Thank you. Operator: Ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.
Katie Wilson: Hi, everyone, and welcome to Funko's 2025 Fourth Quarter Financial Results Conference Call. I'm Katie Wilson, and I'm here at the Funko store in Hollywood. With me are Josh Simon, our Chief Executive Officer; and Yves Le Pendeven, our Chief Financial Officer. Welcome, guys. Josh Simon: Hello. Katie Wilson: Josh, I have heard this is one of your favorite places in Los Angeles. Josh Simon: It is. Yes, I've been on the job for about 6 months now. I think I've spent the majority of my time in this store. They actually gave me a key to the store earlier this week, so I can come and go even after hours. But what I love about being here is it really embodies the strength and how much fun the Funko brand is. You kind of see around us here from an IP standpoint, KPop Demon Hunters, Mickey Mouse, Michael Jordan in the background. I come here over the weekends. And there's people from all over the world, all ages, all demographics, and it's really fun watching them kind of discover their favorite fandom or IP. And so we thought it would be a fun new way to do the earnings call from here today. Katie Wilson: So how have your first 6 months been? Josh Simon: Well, see, we're just getting back from the Toy Fair circuit. So London Toy Fair, Nuremberg, New York Toy Fair. I've been going to these toy fairs for a while in various capacities. And I can say, definitely, I felt more energy around the Funko brand than I have in a bit. It was really fun to meet with our licensors and retailers. In Q4, we also had a great presence at New York Comic Con. So I had a great chance to meet with a lot of our fans and YouTubers. And so the energy was great. And we're seeing that energy translate into momentum on the business side. In Q4, our net sales were better than expected, profitability at the higher end expectations. And I know Yves will dive into that detail here in a little bit. Katie Wilson: And I'm guessing some of that was driven by this guy, Derpy, right behind me. Josh Simon: One of my favorites, near and dear to my heart, obviously, KPop Demon Hunters. And look, what's great about that one is I think it really demonstrates one of our superpowers, which is how quickly we're able to move in creating these really great collectibles. I think it was about 4 months from ideation and design to getting into fans and consumers' hands in Q4. We also won the Viral Hit of the Year award from Toy Book, which is a really coveted awards program. So that was great. There were plenty of other really fun ways that we came to life in Q4 as well. It was the final season of Stranger Things sadly, but the Duffers were on the Tonight show with Jimmy Fallon, and they actually reenacted the season and the series finale using only Funko Pop. So that was really fun to see. We launched Pop! Yourself in Europe, which is the experience where you can create a custom Funko Pop of you or a loved one. And we rolled out Bitty Pop! into Walmart. Bitty Pop! is this great example of how we're able to continue to add dimensions to the iconic Funko Pop silhouette. It rolled out in all Walmart doors in Q4. It was incremental placement in the toy aisle. It was incremental placement at impulse and out of aisle, and it really helped to drive some strong sales in Q4 as well. Katie Wilson: So during the last earnings call, you talked about the make culture Pop strategy. I believe you mentioned culture, creativity and commerce. How is that going so far? Josh Simon: Well, if you remembered those -- the 3 Cs, then so far, so good. It's going great. Look, our -- the idea is that how do we participate in all of those moments that are shaping culture. Really, the goal is to become the preeminent brand for turning pop culture into collectibles and also turning those collectibles we create into culture and cultural moments. So let's start with culture. I've said it a few times here. But really, that means just being at the center of the moments that fans are talking about like while it's actually happening. KPop Demon Hunters is a great example of that. But we do it pretty broadly. We have great relationships with licensors all over the world, pretty much a portfolio of about 900 actively managed licenses at the moment. But in addition to that, there's still a ton of whitespace that we could get after. Sports is one that's a little bit more nascent for us, but we launched a really great new partnership with Topps and Fanatics. We're part of the new MLB Super Pack with trading cards and blind Bitty Pop! products. That rolled out in Walmart, Target, GameStop, sporting goods stores like DICK'S. So just sort of one example in sports. But even in these massive fandoms, I think there's plenty more opportunity for us. Katie Wilson: And speaking of sports, by the way, did I see Funko in a Super Bowl commercial? Josh Simon: You did. You did. It was surprising for all of us. I mean I sat down with my family to watch the Super Bowl. And in one of those first commercial breaks, like on comes this really great spot from the NFL that's sort of celebrating the intergenerational love of football and like in an opening frame, in a young kids bedroom, there's a shelf filled with NFL Funko pops. So that was really great to see. In that sports space, though, I mentioned there continues to be more opportunities in Miami, Inter Miami, the football or soccer club there, if you're here in the U.S., is opening up a brand-new stadium, Miami Freedom Park in a couple of weeks on April 2. We have a presence in their flagship store. It's a Funko and Loungefly shop-in-shop with exclusive products and also a really great unique Pop! Yourself experience that you could only do there in the stadium. And in addition to these sports moments, Q4 was also really great from an entertainment perspective. We had Zootopia 2 from Disney, which was a great movie and a massive hit. Wicked: For Good and Evil also a great film for us. And other areas that we're expanding into as well, I think the -- I'm sure Yves is a huge fan of this, but the world of romantasy and BookTok, if I'm not mistaken. We just -- we dropped a little teaser video for The Cruel Prince, which is a really popular book on TikTok. It generated like 1 million views within a couple of days. And so that's an area you'll see us expanding into more. Obviously, anime has been huge for us. There are big titles that everyone has heard of like One Piece, which we continue to do well in. And then newer titles like Dandadan, which was a top seller for us at Walmart in Q4 and continued growth in video games as well, a great franchise, Mouse: P.I that was also strong for us in Q4. Katie Wilson: And how are you participating in those surprise moments that pop up? Josh Simon: I mean a lot of it is through speed, as I mentioned earlier, related to KPop Demon Hunters, but we have a new program called Hyper Strike. The idea behind that is like how can we design, manufacture and get products and collectibles into our fans' hands in a matter of days or weeks. So we'll be rolling that out in a more commercial way later this year, but we started experimenting with it in Q4. We were doing a lot of like one-on-one characters for celebrities and friends of Funko. One thing we tried to kind of experiment with is like the insane world of the sort of like online videos, user-generated content meme culture that come up. So there's a great guy named Jason Gyamfi. He's known as the quarter zip guy. It was one of these like crazy viral trends in Q4. We decided let's make a video of Jason and his Matcha and just send it to him as a gift. And his reaction was great. I think we have a little clip of it to show. [Presentation] Katie Wilson: Yes. And it's really exciting because this is a new type of product we're offering. Josh Simon: It is. And one example of a new type of product we're offering because that second C creativity is really about how we take these pop culture moments and then translate them into physical form in some way. So obviously, Bitty Pop!, I talked a little bit about as a new example of a product that's been around for a couple of years, and we're really seeing some strong growth there. It capitalizes on what people love about Funko Pop. We've sold 1 billion units of pops over the years. It's this really iconic silhouette. And so there's more dimensions of Pop! and some net new products that we're working on to drive additional growth. The thing that's great about that iconic silhouette is starting to think about how we can reach fans and tell stories in new ways. And so we recently announced a partnership with an incredible production company called Rideback, really great storytellers. I think they're experts at creating worlds from products. They produce the LEGO movies. They produced the live action, Lilo & Stitch. Really, really excited to work with them. We're developing some new ideas with them from big feature and animated series ideas in addition to a really interesting unique AI-based animation toolkit they have called Spuree that will allow us to create some content much faster and bring new and iconic forms of storytelling to Funko fans everywhere. Katie Wilson: You also mentioned commerce as a part of Make Culture POP!. I have a guess that this store is a part of that. Are you expanding how you think about commerce? And is that happening around the world? Josh Simon: Yes. We really have fans all over the world, and we want to make sure that we're showing up wherever our fans shop. As we like to say, turning shelves into stages, this store is obviously a best expression of how we're able to do that. But there's a ton of other opportunity in the U.S. from a retail standpoint and outside of the U.S. Europe, which has been our primary driver outside of the U.S. for a number of years now is really strong. At the end of the year, we are actually the second largest collectible brand by market share right after Pok mon, which was great. From January '25 to January '26, our sales were up 20% in the EU. That was basically about double the market growth there according to Circana Retail Tracker. And similar to what we've been able to sort of grow in Europe, the next idea is how do we do that in Latin America and Asia. So as part of that, we just created a new role for a guy named Andy Oddie, who is our long-time Chief Commercial Officer. He has 40 years of really great experience in the toy and collectible space building businesses. He's our new Chief International Officer. He's going to be focused on growth in Asia and Latin America. And I think his dedicated focus is really going to help us to get traction there. And the opportunity is big for 2 reasons. I mean you think of China, Japan, Korea. China and Japan are the second and third largest toy markets outside of the U.S. So there's a lot of incremental business growth we know we can get in those countries. But the other great thing is like so many cultural trends now globally are being influenced by Asia. So obviously, anime has always been a really big fandom for us, largely coming from Japan. We've seen a huge growth in all things, K-Culture, Korean beauty, K-Pop, Korean food. So I think our business opportunity to grow there is strong and then the cultural influence that I think will provide a halo of growth all over the world as we develop more relationships with licensors and creators in that region, I think, will also be pretty massive for us. Katie Wilson: Turning to you, Yves. Could you say a little bit more about the financial results? Yves Le Pendeven: Sure. Happy to. This is an earnings call after all. So let's get to the numbers. So for the fourth quarter, our net sales were $273 million. We were pleased to finish the year on a high note. We had guided to Q4 being up modestly over Q3. We were actually up 9%, so better than we expected. And by the way, there's more details, including these slides that are posted on our IR website. For gross margin, we were at 41%, and that was again slightly higher than guidance. And by the way, with the exception of the second quarter in 2025, we've now been above 40% for the last 7 of the last 8 quarters. So really pleased with that trend. Our SG&A expenses were $91 million, and that was down 12% from Q4 of last year. And finally, adjusted EBITDA was $23 million, which again was at the high end of our expectations. Katie Wilson: How is the financial outlook for 2026? Yves Le Pendeven: So for 2026, we expect net sales to be up modestly year-over-year, but a substantial improvement in profitability. So specifically, we're guiding to net sales being flat to up 3% compared with 2025 and our adjusted EBITDA between $70 million and $80 million. So let me give you a little bit more color on that. For sales, we expect our Funko core product lines to be up high single digits year-over-year, but that's offset by Loungefly down double digits, and that's primarily due to the SKU cuts that we implemented last year. Josh Simon: And one thing that I'll jump in and add about Loungefly is that we are really excited about what the growth potential for that business could be. I think there's a really unique way to own this space of wearable storytelling as we like to call it. We know there's a really passionate fan base there for the product. So as a result of that, we just put in place our first-ever GM for the Loungefly business, Jessica Kong. She's a lot of really great experience across lifestyle brands and experiential. We think she'll be really great for the business. She's about a month in. We're already pretty far along in building the strategy and plans to get that brand and business back to growth, and we'll share more details about that in the next quarter. Yves Le Pendeven: Thanks, Josh. So back to our guidance. For gross margin, we expect 41% to 43% for 2026. And that increase over the recent trend is really driven by the renewal of some key licensing agreements with our major studio partners, which will result in lower minimum guaranteed royalties. As far as tariff assumptions, we're assuming that tariff rates remain around 15% for the remainder of the year. And in terms of refunds, we're exploring all avenues, and we'll update our guidance when we have more information later this year. So finally, with regard to adjusted EBITDA, we expect a substantial improvement. That really is driven by actions that we've already taken. That includes all of the tariff mitigation strategies that we implemented last year, including price adjustments and cost reductions annualizing, the renewal of the licensing contracts that I mentioned. And finally, just beginning to see traction on some of our growth initiatives, primarily in the Funko product lines, including Bitty Pop! and Pop! Yourself, which we launched in Europe last quarter. Katie Wilson: Josh, how do you see 2026 shaping up? Josh Simon: We're all really excited for 2026. I think it's probably the strongest entertainment slate that I've seen in the last 4 or 5 years. From a film standpoint, we've got Mandalorian and Grogu, Toy Story 5, Moana Live action, all -- tons of great things for Disney. Supergirl from DC, Masters of the Universe, Minions 3, Spider-Man: Brand New Day, Avengers: Doomsday at the end of the year. This week, Netflix's live action series of One Piece just debuted, Season 2 of One Piece, which is always huge for us. Then obviously, in the sports world, it's a World Cup year. We have the England, U.S. and French teams. I mentioned we just signed this new deal with McLaren, some new product launches that we have coming up that I'm just going to tease for a little bit now. But really, when you take a step back and look at what's driving the toy industry right now, there's 3 trends. It's coming from growth in collectibles, growth in licensed IP and growth in kidult. Those are all areas that sort of squarely are in the Funko wheelhouse. And so it's really just about us executing this year. Katie Wilson: Well, with that, we'll turn to our questions here. And the first question is coming in from Stephen Laszczyk of Goldman Sachs. Please describe the shape of the flat to plus 3% guidance past Q1. Should it be pretty consistent throughout the year? And what gets you to the top versus low end of that guide? Yves Le Pendeven: Sure. I'll take that one. Yes, it should actually be pretty consistent throughout the year. This is not a hockey stick plan where we depend on having a huge second half of the year. We actually expect Q2 to comp up a little bit over last year that was pretty disrupted by the tariff impact when those were first announced and then also pretty steady growth throughout Q3 and Q4 as well. Katie Wilson: To what extent does Funko view original content creation as a growth driver? How much does the company plan to invest in original content? And how does AI play into this strategy? Josh Simon: I mean, look, I'd say as a growth driver, I think it can be a serious growth driver in the long term. I mean obviously, our entire business is driven by entertainment content and IP. And so I think as we explore more dimensions of storytelling through the Funko universe, I think over time, assuming those things are hits and people love it and watch it, we think it can actually drive growth, but it's going to take time to develop, produce and sort of get that content out to audiences. Look, I think we're seeing the same trends everyone is from an AI standpoint in storytelling. We really believe in the power of people to tell great stories, our design teams and creative teams internally to craft these great characters. So far, it's been a great tool for efficiency and letting our teams focus more on the creative work than the busy work. And then I think from a capital standpoint, I mean, look, we're looking to partner with the same exact partners who we already work with on the licensor side, some of the biggest studios around the world to help us develop and create these elements of content, movies, TV, et cetera. So from our standpoint, we're looking to rely on their expertise on the storytelling side and the partnership side and shouldn't be a significant capital investment from us. Katie Wilson: Does Funko need to use any of its extended credit agreement in 2026? Or will the company continue to pay down debt like they did in Q4? Yves Le Pendeven: So the answer is no, we don't expect to need to do any additional borrowing. We're managing right now on our operating cash flows and expect to continue to do so. We make regular quarterly principal and interest payments on the debt, and we plan potentially later in this year and certainly early next year to make some incremental debt paydowns like we did in Q4. Katie Wilson: Eric Wold of Texas Capital asks, can you break out the POS trends and inventory restocking domestically versus Europe? And if you saw any noticeable trends positive or negative as the quarter progressed? What about so far during Q1? Yves Le Pendeven: Yes, great question. We did see a continuation of the trend that we spoke about in Q3. We continue to see great double-digit growth in POS sales in Europe. And in the U.S., we actually saw an improving trend throughout Q4 to a positive comp year-over-year. And actually, we've seen that trend continue into Q1. From a retailer inventory point of view, we watch that obviously very closely from the larger partners that report that information to us. And I think it's in a healthy place right now and restocking is kind of going as we'd expect. Yes. Katie Wilson: Within the 2026 guidance, what would you highlight as the key initiatives to both drive top line results and margin versus 2025? Josh Simon: I guess I'll start, and from a top line standpoint, I mean, obviously, I just -- I talked about the content slate. That's a huge driver of top line growth this year. Bitty Pop! is another example of that. A lot of the broader initiatives that I mentioned, we'll start to seed into this year. So international growth, some of the new products, those are things that we'll see, but you'll really start to see us drive incremental growth from that sort of further into the future. There's also some fun new initiatives that we have this year, too. We talked about World Cup. We have a fun lineup that's going to launch later this year, celebrating America's 250th. I mentioned the Pop Mystery products that are launching later this year. So all of those things will start to add up. But I think primarily like the strength we've seen in Bitty, the strength we've seen in the entertainment slate should drive a lot of the top line growth. And you want to take the margin...? Yves Le Pendeven: Yes, sure. From a margin perspective, I spoke about some of the main drivers already. The good news is we're forecasting to have a better margin than we've ever had. And those -- that's largely driven by things that are in our control, such as the price adjustments that we made last year and the renewal of some of our major licensing contracts. Now as we kind of go through the rest of the year, there will probably be puts and takes. I'm hoping for some favorable trends within the tariff world. Currently, we're paying 10% -- the newly announced 10% tariff rates that may go up to 15%. Unsure what that might be later on in the year. On the other hand, we're also monitoring the situation right now in terms of oil prices and potential impact to shipping costs. So there are a few unknowns. But for the most part, we feel confident about maintaining that level of gross margin. Katie Wilson: Keegan Cox of D.A. Davidson asks, can you quantify the tariff impact you experienced in 2025? And what incremental pressure you expect in the first half of 2026? Yves Le Pendeven: Sure. So in 2025, our total tariffs and duties were close to $40 million and about half of that was related to the IEEPA tariffs, so the ones that were recently struck down. Katie Wilson: And for the first time, we've also invited investor questions from our investor base. So the first one is to what extent has Funko signed new or expanded IP partnerships ahead of the relatively strong film slate in 2026? Josh Simon: Well, look, I think as it relates to the film slate itself, the good news is last year, we renewed licenses with all of the major studios around the world. Disney, which is inclusive of Lucasfilm; Pixar; Marvel; Netflix; Paramount Universal. We really value those relationships. We spend a lot of time with those partners. So from a '26 slate standpoint, I think we're in pretty great shape there. I mentioned some of the World Cup teams that we signed licensing deals with. I think for us, like the -- kind of talking about some of the white space earlier, for me, the focus is really thinking about what are those net new kind of white space incremental areas where we don't currently operate. So I'd say the world of creators is a huge example of that. We appointed a new Board member, Reed Duchscher, who represents some of the biggest creators in the world who everyone is familiar with on Twitch and YouTube and TikTok. He's been a really invaluable adviser and looking to tap into his expertise and guidance as we embark more in that space. Katie Wilson: Coming in from an investor in South Africa. The whole of South Africa would love it if you would make Funko pops of the Springboks Rugby team. Josh Simon: Interesting. Well, let's see, I don't want to let South Africa down. So we will look into it. But it's funny, it's a great question. I can't expound a lot on Rugby, which I apologize to any fans out there, but I respect the sport. But it's a great question. I think it definitely, I think, showcases both the opportunity that exists in sports and also just kind of the global extent of our fandom. So fun to hear a question from an investor in South Africa. But we will look into it. Katie Wilson: Well, that does wrap up our questions. Josh, any final words? Josh Simon: Well, I just want to thank you for hosting and being here today. Thank everyone for watching. Excited to be back in May with our next earnings call and continue to share our progress across the business.
Operator: Good afternoon, and thank you for attending Hallador Energy Company's fourth quarter and full-year 2025 earnings conference call. At this time, participants are in a listen-only mode. Instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the conference over to Sean Mansouri, the company's Investor Relations Advisor for Elevate IR. Please go ahead, Sean. Sean Mansouri: Thank you, and good afternoon, everyone. We appreciate you joining us to discuss our fourth quarter and full-year 2025 results. With me today are President and CEO, Brent Bilsland, and CFO, Todd Telesz. This afternoon, we released our fourth quarter and full-year 2025 financial and operating results in a press release that is now on the Hallador Energy Company Investor Relations website. Today, we will discuss those results as well as our perspective on current market conditions and our outlook. Following prepared remarks, we will open the call to answer your questions. Before we begin, a reminder that some of our remarks today may include forward-looking statements subject to a variety of risks, uncertainties, and assumptions contained in our filings from time to time with the SEC and are also reflected in today's press release. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected. In providing these remarks, Hallador Energy Company has no obligation to publicly update or revise any forward-looking statements whether as a result of new information. Brent Bilsland: Everyone, for joining us this afternoon. Hallador Energy Company delivered strong financial performance in 2025, as we continued advancing our transformation into a vertically integrated independent power producer. For the full year, total revenue increased 16% year over year to $469,500,000. Net income improved materially to $41,900,000. Adjusted EBITDA increased approximately threefold to $56,000,000. And operating cash flow increased 23% to $81,100,000. These results reflect both improving power market conditions and the operating leverage embedded in our business model. Electric sales were the primary driver of revenue growth during the year, increasing approximately 19% to $310,700,000 compared to 2024. Coal sales also increased 8% year over year to $148,700,000 as Sunrise Coal continued to support both internal fuel needs at Merum and third-party customers. Together, these segments highlight the advantages of our integrated platform where our coal operations provide a secure, price-certain fuel supply for our generation assets while also allowing us to participate opportunistically in third-party coal markets. Operationally, our Merum power plant performed well through most of the year. In the fourth quarter, however, we experienced operational challenges which continued into Q1 and reduced availability of the units. Due to this availability issue, we now expect consolidated 2026 results to be similar to 2025. Maintaining high levels of reliability remains a top priority for our team, particularly as MISO increasingly depends on dispatchable resources during periods of peak demand, which is highest in the summer. As such, the generating units in question will receive a major maintenance outage beginning in May, which once complete, should significantly improve performance. Sunrise Coal also delivered consistent performance throughout the year. Production optimization initiatives and disciplined cost management helped improve the operating performance across the mining complex. As part of our vertically integrated platform, Sunrise Coal provides a reliable fuel foundation for our generation assets while helping optimize our overall cost structure. Across the broader marketing environment, we continue to see strong demand for reliable dispatchable generation across the MISO region. Electricity demand growth combined with the prior retirement of dispatchable assets is tightening supply conditions across the system, increasing the value of accredited capacity as utilities and load-serving entities attempt to secure reliable resources throughout the Midwest. Against that backdrop, we have made progress towards selling energy and capacity at elevated prices. We have also recently received additional competitive offers to acquire our accredited capacity for over a decade in length. We are excited by what we are seeing in the market. The company is in a strong, long accredited capacity position, which appears to be getting better with time. We hope to make more announcements on this topic very soon. These robust market conditions led us to file an application in MISO's expedited resource adequacy study, or ERAs, program. During the month of December, we were awarded one of the coveted 50 ERA slots. In conjunction with our application's acceptance, we funded approximately $14,000,000 of required refundable deposits to support the potential addition of up to 515 megawatts of natural gas generation. The ERAs program was designed to accelerate the development of new generation resources that can help address reliability needs across the MISO system. Currently, we expect MISO to complete the study of our application in the third quarter of this year. Additionally, we are in negotiations with multiple counterparties for equipment for the project. As the project develops, we plan to share more details around the cost and potential economics of the project. If successful in our development plans, we would target the plant coming online around 2029. This expansion will significantly increase our accredited generating capacity at the company, leveraging infrastructure that is already in place at our Merum site. Compared with greenfield developments, the Merum interconnection offers both speed-to-market and certain cost advantages. Turning briefly to capital allocation, we maintained a disciplined approach throughout 2025. Capital expenditures were focused primarily on planned maintenance at the Miriam facility, and operational improvements across our mining operations, along with early-stage work supporting potential generation expansion at the Merum site under the ERAs program. We currently expect capital expenditures in 2026 to increase modestly compared to 2025 levels, excluding potential ARRIS development. Looking ahead, we will continue to focus on operational reliability at Merrell, executing efficiently across our coal operations, and advancing the strategic initiatives that we believe can drive long-term growth for Hallador Energy Company. At the same time, we remain disciplined in how we approach new opportunities and will continue to focus on projects and commercial arrangements that we believe will most meaningfully enhance shareholder value for the long term. Before handing it over to Todd, I would like to briefly highlight two recent additions to our board that strengthen our leadership during the next phase of Hallador Energy Company's growth. In January, we welcomed Barbara Sugg to our board of directors following the retirement of longtime director David Hardy, whose more than three decades of service and support to Hallador Energy Company we sincerely appreciate. Barbara previously served as President and CEO of Southwest Power Pool, where she led regional reliability and wholesale market operations across a 14-state footprint. Her industry leadership across grid operations, transmission development, and resource integration will be valuable as we continue positioning our Meron facility to support growing demand for reliable capacity. Further, last week, we appointed Daniel to the board, expanding the board to seven members. Daniel brings deep expertise in natural gas generation, capital markets, and power asset transactions, having led or advised on more than $35,000,000,000 in strategic energy investments. As we pursue opportunities to expand generation at Merum, and evaluate additional assets that can scale our power platform, we believe Daniel's background in gas-fired power development and energy infrastructure optimization will provide meaningful strategic guidance for our team. With that, I will now pass the call over to our Chief Financial Officer, Todd Telesz, to take you through our financial results. Todd Telesz: Great. Thank you, Brent, and good afternoon, everyone. I will add my thanks for joining us today. Jumping right into our fourth quarter results, electric sales for the fourth quarter increased 3% to $71,600,000 compared to $69,700,000 in the prior-year period, while coal sales increased 24% to $29,100,000 for the fourth quarter compared to $23,400,000 in the prior-year period. Electric sales in the fourth quarter reflect a continued electricity demand across the MISO market and stable realized pricing, partially offset by lower generation during the period due to the previously mentioned operational challenges, unit availability impacts in Q4 2025 and Q1 2026. While the unit outages reduced dispatch for part of the fourth quarter, the plant continued to operate and serve market demand as conditions allowed. The increase in coal sales during the fourth quarter was driven primarily by higher third-party shipments to customers, reflecting continued production optimization at Sunrise Coal and our ability to supply both internal fuel requirements at Merame external market demand. On a consolidated basis, total operating revenue increased 8% to $102,400,000 for the fourth quarter compared to $94,700,000 in the prior-year period. Net loss for the fourth quarter was $200,000 compared to a net loss of $215,800,000 in the prior-year period. It is worth noting that the year-ago period loss includes an approximate $215,000,000 non-cash write-down associated with the value of our mining operations. Operating cash flow for the fourth quarter was $8,100,000 compared to $32,500,000 in the prior-year period, with the decrease primarily reflecting the cash receipt from a large prepaid energy forward sales contract that was received in Q4 2024. Adjusted EBITDA, a non-GAAP measure, is reconciled in our earnings press release issued earlier today, increased 35% to $8,400,000 for the fourth quarter compared to $6,200,000 in the prior-year period. We invested $24,900,000 in capital expenditures during 2025, compared to $13,800,000 in the year-ago period, bringing our full-year 2025 CapEx to a total of $69,200,000. This includes the approximately $14,000,000 of refundable deposits made in support of the Era's gas generation project. As Brent mentioned earlier, we expect our 2026 capital expenditures to modestly increase compared to 2025, excluding any impacts of the ARRIS project. As of 12/31/2025, our forward energy and capacity sales position was $540,000,000 compared to $571,700,000 at the end of Q3 and $685,700,000 at 12/31/2024. When combined with our third-party forward coal sales of 3 and $23,500,000 as well as intercompany sales to Merum, our total forward sales book as of 12/31/2025 was approximately $1,300,000,000. Now turning to the balance sheet. We had several material updates. In 2025, we completed a $25,000,000 prepaid energy forward sales contract with a longstanding counterparty and raised approximately $14,000,000 through our ATM, the issuance of just over 697,000 shares. In January 2026, we further strengthened our capital position through a public offering of approximately 3,200,000 shares of common stock priced at approximately $18 per share, generating roughly $57,500,000 of gross proceeds. These proceeds are expected to support general corporate purposes including potential deposits required for preserving key equipment necessary for our proposed natural gas generation expansion at Merrell. Additionally, late last week, we closed on a new credit facility led by Texas Capital Bank, who is a new relationship for us, and Old National Bank and First Financial Bank have been longstanding financial partners of Hallador Energy Company. The $120,000,000 three-year senior secured credit facilities include a $75,000,000 revolving credit facility and a $45,000,000 delayed draw term loan. The credit facilities also include a $25,000,000 accordion feature. Overall, our results reflect continued progress across the business as we strengthen our financial profile while investing in the long-term growth opportunities Brent discussed earlier. With a solidified liquidity position, a meaningful forward sales book, and a disciplined capital allocation approach, we believe Hallador Energy Company remains well positioned to support the continued development of our power platform and the strategic initiatives underway at Merrell. With that, operator, we can now open the line for questions. Operator: Thank you so much. And as a reminder, if you do have a question, simply press 11 to get in the queue and wait for your name to be announced. To remove yourself, press 11 again. One moment for our first question. It comes from the line of Jeffrey Scott Grampp with Northland Capital Markets. Please proceed. Jeffrey Scott Grampp: Afternoon, guys. Thanks for the time. With respect to, maybe this longer-term PPA opportunity, Brent, what are the main gating items to getting a deal done at this point? I know you can only say so much, but are we in the phase where we are deciding what the best offer is for the company? Is it negotiating a final pro final parties, or what is dictating timing at this point? Brent Bilsland: Look. I do not think it is going to be just one party. We have exchanged draft contracts with multiple parties. What is encouraging for us is we continue to see pricing pressure move things higher. Quite frankly, the interest level that we are seeing has dramatically increased in the last four weeks. Multiple utilities, multiple industrial users. We kind of view it as we are playing a game of musical chairs, and we own the last seat. We just keep seeing more and more people enter into the room. I know everybody is in a hurry to get something done, including me. At the same breath, this keeps getting better. We are really encouraged by what we are seeing and the level of competition that we are able to engage the counterparties in. We think we are getting much closer and are certainly encouraged by what we are seeing. I hope that excitement resonates. Jeffrey Scott Grampp: That is super helpful. I appreciate it. That is good to hear. My follow-up, I wanted to get a bit more details on the issues at Marim that you talked about. Shed a little more light on what these operational issues are, and should we be expecting this to impact performance until this planned outage in May? It sounded like there was going to be a more significant turnaround at that point to maybe address some of these issues. Thanks. Brent Bilsland: We had some equipment failures in Q4, failures in Q1, that took the plant off at different times for weeks at a time. Unfortunately, particularly in January it was during some of the better-priced weeks, so we hate to see that. The plant is running now. It has a few limitations, so it is not running at 100%, but it is running. Then we are going to roll right into an outage. This was a planned outage. It was what we call a major, so half the plant will be down for sixty days. We do that every year. There is a lot on the list for this particular unit that is going to get replaced and upgraded, and a whole lot of new parts are going on. We think that will help the reliability of the plant, and just in time for the summer season, which I would point out is the peaking season in MISO now. Summer peaks are higher than winter. Jeffrey Scott Grampp: Understood. That is really helpful details. I will turn it back. Thank you for the time. Operator: Thank you. Our next question comes from the line of Matthew Key with Texas Capital. Please proceed. Matthew Key: Hey. Good afternoon, everyone, and thanks for taking my questions. I wanted to talk about the target date of completion for the nat gas expansion. What are the big determining factors that dictate hitting or missing that target date? Does this come down to getting the long lead-time equipment in time, or are there more complications than that? Brent Bilsland: Right now, we are negotiating with multiple counterparties on whether we can secure the equipment in the right time frame, which we are finding equipment that the timing does work, and can we get that equipment at a price point that makes the project economic. At the same breath, we have limited PPAs to support the project. We are obviously in the market attempting to sign long-term PPAs. We like where that pricing has gone. You just have to line all that up. There are other players out there who are opposite of us. They have equipment and no place to go with it. We are also talking to those counterparties to say, does it make sense you bring your equipment, we will bring the interconnect, PPAs, water rights, gas rights, all of that. The thing that we are excited about is we feel that our site, our interconnect, has a speed-to-market advantage because of the EARS program, and because of the EARS program, it has a significant cost advantage over some of the other projects that we are hearing. We are hearing other projects that have to have $300,000,000 of system upgrade cost, and we just do not think our project is going to experience that. We think there is a significant advantage there. That said, the downside to the ARRIS program is it is a very quick process, and so you have to get all the elements of the deal lined up. We are working on that. Matthew Key: Mhmm. Got it. That is helpful. A quick macro one for me. It made recent news that the EPA announced the decision to ease some of the mass requirements for power plants. Could you help me quantify the impact that those changes would have on your business, if any? Or maybe the industry more broadly? Brent Bilsland: A lot of plants, including ours, are already mass compliant. That being said, there are still some ongoing costs associated with that, reporting requirements and so on. I think the Trump administration in general is trying to unwind a lot of these environmental rules one at a time. They are making their way down through the list. What is the impact of that? Overall, it makes operating a plant easier. What are the economic impacts of that? I think it probably has more to do with longevity and less to do with whether we are going to see our costs materially drop in the next quarter. Matthew Key: Got it. That is helpful. Really appreciate the time, and best of luck. Operator: Our next question comes from the line of Nicholas Giles with B. Riley Securities. Please proceed. Nicholas Giles: Great. Thank you, operator. Good afternoon, guys. My first question, I think you have previously talked about the majority of capacity being taken down in any long-term deal, but you mentioned, Brent, that economics are only getting better. Given that you are talking to multiple parties, is there a scenario where you might announce the long-term PPAs in several tranches, or should we still be expecting one kind of grand slam? Brent Bilsland: I think you will see announcements in several tranches. That is our thinking today. Certainly, we could see a customer step up and take a bigger block, but today that is where our head is at—that you will see multiple bites at the apple. Nicholas Giles: Got it. Very helpful. In terms of pricing, you said upward pressure. In the past, you have used the forward curve as an anchor and noted that pricing could come in above that. Any rough guardrails that you could point us to from a price perspective? Should we be still thinking of something above the forward curve? And if so, where do you see the forward curve today? Brent Bilsland: The forward curve is typically energy. Where we are really seeing the price improvement is for accredited capacity, and that is the revenue stream that is going, in our opinion, dramatically higher. That really is the pinch point in the industry. The reason for that is you can get energy from renewables. It is challenging to get accredited capacity from renewables. Solar panels are only rated 5% of nameplate. Windmills are only rated at 15% of nameplate, whereas coal, gas, and nukes are all rated 75% to 90% of nameplate, typically what accreditation they are awarded. What has changed: the MISO auction is roughly two weeks from today. It is going to be on the 26th. Some of the pricing outlooks that we are seeing in that are dramatically higher. We will see what that auction brings. We think that we will probably have some sales that might happen before then as well. As we get those deals across the finish line and inked, we will report it. You will get a good look at what that price is. Got it. Also, I want to correct something. I had submitted this incorrectly. Our unit is going to go on outage for sixty days, not six months, like I said. I just wanted to correct my statement. Nicholas Giles: Maybe just one more if I could. I think you mentioned that CapEx could be modestly higher excluding ARRIS developments. I just wanted to clarify. Are you saying that CapEx will be modestly above the $70,000,000 level, which included the $14,000,000, or should we exclude the $14,000,000 and start at a base of $55,000,000? I think you see what I am getting at. I am just trying to make sure it is apples to apples here. Todd Telesz: Yes, Nick. It is Todd. How are you today? I think we are looking at modestly higher than what we incurred in 2025, driven by some CapEx that was pushed out of 2025 into 2026, as well as continued investment in the ELG project. Those are probably the key drivers, and those obviously would not be excluding any incremental investments in the ARRIS project. Nicholas Giles: Got it. And what would those—last quarter the emphasis was really around the application, and now that has been accepted, deposit has been paid—what are the next developments that we should be looking out for in the context of Eris? Brent Bilsland: MISO will pick up our application and begin reviewing that soon. They have not done that just yet. Once they pick it up, I believe they will do a public notification saying that they have picked that up, and then they have ninety days to complete that study. At the end of that study, they come to us and say, this is what we think it is going to cost. We then have a certain period of time to negotiate a couple items on that list. Ultimately, it comes down to whether you are signing a generator interconnect agreement with MISO and committing to your project—we think that happens sometime later in Q3—or are you saying, no, I am going to pass because the project, we are just not going to go forward with the project. Then your options: we would probably step into the traditional queue at that point going forward. Those are the options on the table and what we think that timing looks like. Nicholas Giles: Got it. Okay. Well, Brent and Todd, I really appreciate all the detail, and best of luck. Brent Bilsland: Thank you, Nick. Operator: Thank you. And we have a question from the line of Jacob G. Sekelsky with Alliance Global Partners. Please proceed. Jacob G. Sekelsky: Hey, Brent and Todd. Thanks for taking the questions. Brent Bilsland: Good to see you, Todd Jake. Jacob G. Sekelsky: With the gas expansion coming into focus, I am wondering how you are thinking about Sunrise Coal and that operation’s position in the broader portfolio going forward. Brent Bilsland: Sunrise results have been good. They got their cost structure down last year. It performed really well. So far so good this year as well. We are happy with the Sunrise Coal division. We are looking to contract a meaningful amount of output at the Merum power plant in the near future, and that is going to require fuel. I do not see any material changes at Sunrise in the near future. We still plan to take coal at the plant. The gas plant—if you look at Merum, why is it such a good site for an expansion? Merum was originally designed to be three 500-megawatt coal-fired units, but they only built two. A lot of the power infrastructure that is necessary already exists at the site. The line takeaway capacity from that substation is like 1.2 to 1.6 gigawatts. We are only using a thousand, or one gigawatt. All we are really proposing to do is, instead of building a third coal-fired unit, the third unit will be gas units. Right now, we are proposing CTs. That is what it is in a nutshell: there is space on the line. We have property control. We have the easements in place for the gas pipeline. It is only five miles away. We have water rights. There is good gas availability, we are told, at that location. We think we have one of the better sites in the country to do such a development. That said, we still have to line up equipment, more PPAs, and such to make that project viable. That is something we negotiate every day to see if we can make all those numbers line up. Jacob G. Sekelsky: Got it. That is helpful. Building off that a bit, if I may. Are you still evaluating things on the M&A front, or do you feel your plate is full with the ARRIS project coming into focus over the next few quarters? Brent Bilsland: We always look at things. We have bid on an asset here recently. I do not think we are going to be selected for that asset. We are active. We will have to take the opportunities as they come. Jacob G. Sekelsky: That is helpful. That is all for me. Thanks again, guys. Brent Bilsland: Thank you. Thank you. This concludes our Q&A session. Operator: I will pass it back to Brent Bilsland for closing comments. Brent Bilsland: I just want to thank everybody for their continued interest in Hallador Energy Company, and stay tuned. I think, hopefully, we have exciting things to announce in the future. Thank you again. Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LivePerson's Fourth Quarter 2025 Earnings Conference Call. My name is Joe, and I will be your conference operator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Jon Perachio, Vice President of Investor Relations. Please go ahead. Jon Perachio: Thank you, Joe. Joining me on today's call is John Sabino, CEO; and John Collins, CFO and COO. Please note that during today's call, we'll make forward-looking statements, which are predictions, projections and other statements about future results. These statements are based on our current expectations and assumptions as of today, March 12, 2026, and are subject to risks and uncertainties. Actual results may differ materially due to various factors, including those described in today's earnings press release and in the comments made during this conference call as well as in 10-Ks, 10-Qs and other reports we file with the SEC. We assume no obligation to update any forward-looking statements. Also during this call, we'll discuss certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release. Both the press release and the supplemental slides, which include highlights for the quarter, are available on the Investor Relations section of LivePerson's website, ir.liveperson.com. With that, I'll turn the call over to LivePerson's CEO, John Sabino. John Sabino: Thank you so much, Jon, and thank you all for joining us today. 2026 marks a clear transition for LivePerson from rebuilding to execution. Over the past year, we've strengthened our foundation by improving our balance sheet, optimizing our cost base and sharpening our operations across the company. We are now carrying this discipline into 3 primary areas of focus that we believe can drive LivePerson towards a return to growth. First, we are continuing to prioritize customer growth and retention by leveraging our leading technology and improved balance sheet to solidify customer confidence in LivePerson's a stable long-term strategic partner. Second, we're continuing to innovate our core Conversational Cloud platform while scaling our recently launched Syntrix platform to offer best-in-class AI-led engagement and assurance. And third, we continue to expand our technology partnerships to broaden our platform's reach and unlock new commercial opportunities. We believe that our disciplined execution across these 3 areas of focus can drive LivePerson towards a return to growth in the future. Turning to our results. We outperformed our Q4 guidance on both the top and bottom lines. Revenue was $59.3 million, above the high end of our range, driven by higher variable revenue. Adjusted EBITDA was $10.8 million, also above the high end of our guidance range, driven by our improved cost structure and disciplined operational execution in the quarter. Now let me provide an update on our product strategy. Last week, we reached a significant milestone with the launch of Syntrix. Syntrix is our simulation and evaluation platform that allows brands to launch customer-facing AI agents with confidence and validate human agent readiness at scale. It provides the critical assurance brands need to unlock the value of AI across their customer journey. This emphasis on assurance addresses a clear gap we see in the market. Many brands are not limited by AI capability, but by trust. They struggle to move high potential AI initiatives to production because they lack the confidence in performance, governance and compliance. They also lack a structured way to evaluate AI agent outputs and continually verify adherence to their governance guardrails. As a result, innovation stalls and business impact remains unrealized. Syntrix is our direct response to this challenge. It provides the orchestration and assurance layer enterprises need to confidently deploy AI at scale. Originally introduced in November, Conversation Simulator is now the first capability within the Syntrix platform. It enables enterprises to safely and continuously test, evaluate and validate AI behavior by identifying drift and failures before they reach real customers. With the formal launch of Syntrix earlier last week, we are expanding beyond simulation into a broader assurance vision. Over the coming quarters, we plan to add additional capabilities across simulation, analytics, governance and auditability to support compliance. As the road map unfolds, we expect that Syntrix will become a comprehensive assurance layer that makes AI more predictable at the enterprise scale. Importantly, Syntrix was built to integrate seamlessly into existing enterprise ecosystems. Syntrix is designed to work in concert with our core Conversational Cloud platform, but it is also model and platform agnostic. Our Conversational Cloud remains the system of engagement where customers' interactions occur. Syntrix provides an assurance layer for a safer, more predictable and compliant interactions as AI usage scales. Together, they form a unified platform that allows enterprises to deploy Conversational AI with confidence. Syntrix does not replace Conversational Cloud, it supercharges it. Additionally, Syntrix is designed to deliver the same level of assurance whether customers are using Conversational Cloud or other CX or CCaaS platforms, including those we compete with. This allows enterprises to apply a consistent governance standard across increasingly complex technology and CX stacks. We plan to continue expanding our out-of-the-box integrations throughout the year while also enabling partners and customers to integrate Syntrix with their preferred platforms and AI technologies. Commercially, Syntrix is already gaining traction. We have successfully moved from early access to general availability with paying enterprise customers across banking, telecommunications and technology. This early response, combined with a significant addressable market, positions us to accelerate commercial execution. At this time, we continue to see deeper AI adoption across our core Conversational Cloud platform. In Q4, over 20% of all conversations leveraged our generative AI suite. We're also seeing strong traction with Copilot Translate, the newest addition to our Agent Assist portfolio. It enables brands to eliminate language barriers by embedding real-time AI native translation directly into the agent workflow. We also remain on track to complete our multiyear platform modernization in the first half of this year. This milestone is foundational to our long-term scalability. We are transitioning to a unified architecture designed to support significantly higher generative AI traffic with improved resiliency. Completing this work positions us to reallocate resources towards accelerating product innovation in 2026. Moving to our go-to-market performance. We are seeing continued confidence from our largest enterprise customers. This is reflected in several significant renewals this quarter, including 7 major financial services institutions, 2 major airline carriers, 3 leading telecom and internet service providers and a major health care provider. These renewals underscore the durability of our platform, the strength of our enterprise relationships and our ability to deliver measurable value across highly regulated and customer-centric industries. Our partnership with Google Cloud is also delivering significant early results. In the fourth quarter, we secured a multimillion dollar renewal with an upsell, the major European telecommunications provider through the Google Cloud Marketplace. Based on conversations with several customers, we now expect a material amount of revenue to flow through marketplace by the end of 2026, delivering measurable improvements in churn. This validates our strategy to simplify procurement, leverage existing cloud commitments and expand LivePerson's adoption through partner-led channels. Our momentum with Google continues to deepen across both products and go-to-market. We've standardized on Google Gemini as a default LLM across our platforms and launched LivePerson's RCS channel. Together, these efforts strengthen LivePerson's position within Google's ecosystem and expand the joint opportunities that we can pursue. We're also scaling our Google marketplace motion to enable enterprise customers to seamlessly procure our solutions using their existing cloud commitments. Our teams are now aligned with Google's field organizations to streamline procurement and accelerate sales cycles. While still a phased rollout, we are already seeing tangible traction with multiple marketplace transactions in process and a growing pipeline of joint opportunities. Today, this motion is performing as a high-impact retention lever. By enabling our customers to tap into their existing Google Cloud commitments, we're moving LivePerson directly into the heart of the CTO's strategic spend. This is a fundamentally different relationship that elevates our strategic conversations with current and future customers. As we continue to scale these transactions and strengthen our position within Google's own ecosystem, we are creating a direct incentive for their field organizations to move beyond renewals and begin transacting net new business with us. Complementing this is our strategic collaboration with IT solutions, which has been a significant win for our mid-market segment. By reallocating resources in 2025, we have created immediate value and efficiency in this channel, reflected in improved renewal rates and expansion. As we move into 2026, we intend to deepen this relationship further. We've also launched LivePerson Sync in partnership with Coral Active, a leader in enterprise contact center integrations. This solution enables seamless integrations with systems like Salesforce, Microsoft and ServiceNow, bringing CRM data and workflows directly into the conversation and creating a single unified workspace for agents. By eliminating the swivel chair effect, we've embedded LivePerson deeper into our customer service operations, improving productivity and overall agent experience. As brands streamline their technology stacks and demand tighter integrations between engagement and execution, LivePerson Sync expands our strategic footprint within the enterprise by differentiating our platform, deepening customer relationships and creating new long-term growth opportunities. We're already seeing strong interest with a healthy pipeline of opportunities. While there is still work to be done with retention and growth, we're beginning to see the benefits of more focused and disciplined approach. We are encouraged by the traction with our partnerships and an ecosystem as these alliances are already expanding our market reach and simplifying how customers do business with us. As we move further into 2026, we remain focused on rigorous execution to convert this early traction into long-term stabilization and growth. In conclusion, 2025 was a defining year for LivePerson. I am incredibly proud of the resilience and discipline our team demonstrated throughout this period. We successfully stabilized our foundation, improved our balance sheet and delivered a strong finish to the year. We launched the first phase of Syntrix with Conversation Simulator and opened a critical new growth channel with Google's Marketplace. We also made significant progress in our platform modernization, which is on track for completion in the first half of 2026. This unified architecture is designed to support significantly higher generative AI traffic with improved resiliency. Building on this, we are now focused on scaling Syntrix and accelerating high-velocity partnerships that expand our market reach. While there is still work to be done to further improve our capital structure, we are better positioned today to execute our strategy. For the full year of 2026, we're providing the following guidance. We expect revenue to be in the range of $195 million to $207 million, and we expect adjusted EBITDA to be between a loss of $4 million and positive $7 million. While this guidance implies a year-over-year decline in revenue, we expect to achieve positive net new ARR in the second half of the year. With disciplined focus on executing our strategy, we're positioning LivePerson as the foundational layer for governable AI at scale and building the path for long-term sustainable growth and shareholder value. With that, I'll turn the call over to John Collins. John? John Collins: Thanks, John. The fourth quarter marked a strategic and financial inflection point for LivePerson. We have rationalized the cost structure and improved the balance sheet, transitioning us from a period of rebuilding to one focused on innovation and commercial execution. Our fourth quarter results were driven by increased commercial traction within our enterprise customer base, including usage overages and high-value renewals and expansions. This traction reflects customer plans to move beyond AI experimentation to secure high-volume production applications. It also evidences growing customer confidence that our platform can enable that transition now and support evolving demands in the long run. While the fourth quarter's results and the guidance I'll discuss shortly are anchored by customer demand for our core platform, we believe the launch of Syntrix is an important innovation in the market today and represents a meaningful strategic growth opportunity. Syntrix is increasingly central to customer discussions on AI deployment across many use cases, creating the potential to capture broader AI spend across the enterprise. In terms of deals, we signed 40 in the quarter, including 4 new logos and 36 expansions, which translated to a slight sequential increase in total deal value. We also continue to see strong adoption within the banking, telecommunications and airline sectors. These regulated industries rely on our leading technology for centralized AI-agnostic orchestration layers that ensure AI deployments are secure and effective. Improving customer retention, including renewals with 7 financial services institutions, 2 major airlines and several leading telecom and health care providers underscores the strength of our platform amid a rapidly evolving market. These brands continue to commit to us because of our enterprise-ready platform and our improved financial foundation. Notably, over 40% of these renewals included expanding commitments. Complementing our direct sales motion, we are seeing clear validation of our partnership strategy through Google Cloud. A multimillion dollar renewal and expansion we closed this quarter via the Google Cloud Marketplace is early proof of the potential opportunities. This partnership simplifies the customer procurement process and allows customers to optimize the return on pre-existing Google commitments. While this partnership is still early, customer reception has been strong, and we now expect that a material fraction of total revenue will flow through this channel by the end of 2026. Beyond Google, our partnerships with IT Solutions and Core Active are contributing meaningfully to our commercial motion. These collaborations allow us to embed our technology more deeply into enterprise CRM workflows and deliver a high level of support down market, leading to improved renewal rates, especially within our SMB and MMB customer segments, all while incurring minimal additional overhead. This commercial strategy also helps us avoid the opportunity costs associated with the direct sales team taking time away from enterprise accounts. As for our fourth quarter financial results, total revenue was $59.3 million, above the high end of our guidance range. Note that the upside relative to guidance was driven primarily by higher variable revenue. Adjusted EBITDA was $10.8 million, also above the high end of our guidance range, driven by the benefits of the cost restructuring executed in the third quarter and ongoing disciplined operational execution. Revenue from hosted services was $51 million, down 15% year-over-year. Recurring revenue was $52.9 million or 89% of total revenue. Professional services revenue was $8.3 million, down 36% year-over-year. Average revenue per customer was $680,000, up 9% year-over-year, driven in part by expansions with our largest customers and in part by customer retention. RPO declined to $176 million, consistent with the same factors driving declines in revenue. Net revenue retention was 78% in the fourth quarter, down from 80% in the third quarter. As a reminder, net revenue retention is a function of in-period revenue, meaning this metric will generally continue to decline until revenue begins to grow. Finally, in terms of cash, we ended the fourth quarter with $95 million of cash on the balance sheet. Turning to revenue guidance. We expect positive net ARR in the second half of the year. While we believe this leading indicator supports the path to future growth, the corresponding positive revenue impact in 2026 will be offset by negative net ARR in recent periods. As a result, we expect revenue to decline through the year with the rate of decline flattening in the second half. For the full year 2026, we expect revenue to range from $195 million to $207 million, approximately 92% of which we expect to be recurring. Note that commercial traction with newly launched Syntrix primarily represents upside to the guide. For the first quarter, we expect revenue to range from $53 million to $55 million, a sequential decline of approximately $5 million at the midpoint from the fourth quarter. As for adjusted EBITDA for the full year 2026, we expect a range from a loss of $4 million to a gain of $7 million. It follows that we do not expect adjusted EBITDA less CapEx to be positive in 2026. As for the first quarter, we expect adjusted EBITDA to range from $2 million to $5 million. Our expectation for slightly negative free cash flow reflects our attempt to balance many competing factors in order to increase long-term value creation rather than merely optimize for the near term. Making balanced investments in our go-to-market motion and product innovation will help us achieve positive net ARR in the second half of this year and sustain it going forward. Before taking questions, I'll briefly summarize a few key points. The fourth quarter marked a significant turning point, transitioning us from a period of stabilization to one of targeted execution. Our results confirm that the LivePerson platform is essential to our enterprise customers and their planned AI deployments. We are now effectively leveraging high-efficiency channels such as Google Marketplace to drive both customer retention and future growth. Rigorous cost management has allowed us to operate efficiently while still maintaining investment in 3 strategic priorities: retaining and expanding our customer base, continuously developing new features and capabilities for our customers, including delivering on the Syntrix road map and strengthening our partner network. Looking ahead, we remain committed to the disciplined execution of these pillars. With our cost structure now appropriately aligned to our expected revenue base and the fundamental value of our platform affirmed by our largest customers, we are confident in our trajectory to achieve positive net ARR in the second half. With that, operator, we can move to Q&A. Operator: [Operator Instructions] And the first question comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group. Daniel Hibshman: This is Daniel on for Jeff Van Rhee. Just on -- maybe starting off with the bottom line and the current OpEx level. Could you walk us through sort of what -- really nice decrease in the total OpEx for the quarter sequentially here in Q4. Is there anything onetime about the OpEx in Q4? And then maybe just walking us a little bit about how you expect that to -- it looks like scale back up to '26? John Collins: Daniel, I'll start there. So the results in the fourth quarter for the bottom line were primarily driven, as we said in the prepared remarks, by the large restructuring that we executed in the prior quarter. And there may be some onetime items, but it was primarily a structural change to our cost base. As we look forward and as we described in the prepared remarks, we are looking to make investments in innovation on the product side as well as our commercial presence. So those are, we view necessary investments to ensure we're on a path to positive net ARR in the second half. Daniel Hibshman: Yes. And then on positive net new ARR in the second half, maybe you could walk me through -- I think you said you expected revenue to continue posting sequential declines as you're adding net new ARR. Not sure -- maybe I missed something there, not sure how that works out. Are you saying that ARR will grow sequentially in the back half, but nonrecurring elements are going to show sequential declines just that revenue would still dip? Or maybe you could just walk through that again? And then just expanding a little bit on your confidence, whether that's what you're seeing in quotas or what you're seeing in the pipeline in terms of visibility out there to the back half? John Collins: Yes. Let me reconcile the revenue comment with the positive net ARR. So in recent quarters, we've had a large negative net ARR the revenue impact we are feeling throughout 2026. That revenue impact will offset completely the positive revenue from the net ARR we expect to generate in the second half. So that's the reason for the revenue to sequentially decline. It's because historical customer losses are still playing through the P&L throughout 2026. As it relates to our visibility and pipeline, I'll say a few words and pass it over to John Sabino. I mean our guide reflects a healthy pipeline for the first quarter, and that includes some deals for the new product launch Syntrix that we described. But importantly, most of the guide is predicated on demand for the core platform, which continues to be robust as we've described in the prepared remarks. John Sabino: I'll second John Collins' comments. LP Sync and just add a little bit of additional color, LP Sync and Syntrix are new into the market. Syntrix just becoming generally available last week. So we're going to -- it's going to take a little bit of time to build that up, but we are starting to see some of the efforts improving from the marketing and outreach that we've started to do with our commercial teams. So we believe that, that will continue to improve throughout the year. Daniel Hibshman: Yes. And maybe last for me, just on Syntrix. If you could expand a little bit on the marketplace, the competitive landscape, what you were seeing there in terms of the need for Syntrix? Was that customers coming inbound saying, "Hey, I need this sort of thing." Where was sort of the ideation? When did the development of that begin? And then maybe last of all, just how do you expect that to evolve from here in terms of the road map it sounded. Maybe you could expand a little bit. I think you talked about additional functionality you wanted to add to that platform. John Sabino: Yes. Let me start with demand. We initially saw a request for simulation capability to train both Live reps and train AI agents. Simulations was our initial response to that. But what we started to see was that broadly just about every AI initiative, whether it's LivePerson's AI or someone else's, has had a number of challenges throughout an enterprise organization and its deployment and ability to create value for the customer. And this is due to compliance challenges and ability to enforce guardrails and just understand how a model is going to perform in the real world before it gets there. So we stepped back and took a holistic view of what the real challenge was. And essentially, what you're seeing is that it's not whether or not you can deploy AI or have a Conversational Platform that's digital for your customers. It's really your ability to look at the quality of that and assure that it's going to work the way that you expect before it ever gets in front of a customer. So Syntrix as a platform is a response to work with the LivePerson platform and any one of our competitors, whether they be AI providers or CCaaS providers to actually simulate, produce analytics, intelligent insights that can either self-heal or improve performance of a model. These are future things that we're working on to ultimately provide an adherence to a compliance framework. And ultimately, this would lead to overall governance for any AI or orchestrated digital customer journey across a varied tech stack. So that's the evolution of Syntrix. It's really moved from I just want to be able to simulate, train my people and/or a bot into a much broader problem set that we believe that we can solve across a LivePerson ecosystem or a broader digital CX ecosystem where analytics, intelligent identification of issues and/or compliance failures can be reported on and ultimately resolved either before a bot or a customer agent is deployed or catching it if there is something after the fact. Operator: The next question comes from the line of Ryan MacDonald with Needham & Company. Ryan MacDonald: John, maybe just to follow up on Syntrix off of that last response. Can you just talk about the pricing model for Syntrix and whether you're going to be sort of looking at token-based pricing? If so, what kind of visibility does that give you into sort of the revenue stream as sort of Syntrix adoption grows? And then from, I guess, any sort of early signs from some of the first few deals for Syntrix in terms of what sort of uplift this potentially creates within the renewals on the core customer base? John Sabino: So let's start with the pricing model. The pricing model is conversation-based. So you can think of it as a consumption model. It's not necessarily seat-based as you may have seen in some places in the past. And in order to build the model for the customer, we really do look at the number of bots and/or agents they're trying to train and how many campaigns or things that they may be looking to either bring through an AI interaction and/or human interaction. And so we propose a number of different models that represent a statistically significant simulation capability. So it's really based on the consumption and what the customer is trying to achieve. Now with the early customers that we have, we have seen that this is an upsell opportunity as well as a retention capability. So early indications are that customers are using it in line with our model so that the conversation-based pricing accurately reflects what we believe we can do with the customer and is driving improvements that we've published publicly in terms of velocity of training new customers and savings -- excuse me, velocity and training of new agents and savings for customers. So we're confident that this is going to drive bottom line value for customers. Right now, we have dozens of opportunities that we're looking at. And now that we're GA with the product, we're hoping to see some of that as upside in the pipeline going forward. And it represents millions, not hundreds of thousands. Ryan MacDonald: Excellent. I appreciate all the color there. And then on Google Cloud Marketplace, obviously, continuing to see some nice progress there and sort of growth in pipeline. Can you just give us a sense in terms of the, I guess, mix of pipeline sort of heading into '26 here that GCM represents sort of relative to maybe the direct sales channel or other channels? And then what kind of incremental leverage sort of continued sort of growth and success with Google Cloud Marketplace can sort of provide on your direct sales efforts? John Sabino: I'll start and then, John, if you want to add, please feel free. Right now, Google Marketplace really does represent a retention lever for us. It's simplifying procurement, and it's now elevating where the LivePerson spend is typically being allocated within a technology budget inside of some of the large enterprises that we serve. So we see this representing a significant portion of how we do renewals going forward in the future because of the simplification of purchasing and/or an already allocated portion of funding inside of our larger enterprise customers. As far as growth goes, we're starting to see those joint opportunities with Google. We have aligned our commercial teams and theirs, and there's incentives in place for them to work with us now and drive some of the spend for LivePerson through Google Marketplace. So again, we see this as potential upside, right, to be very clear, right now, it's a renewal and expansion play for us, but we believe it to be only natural to create additional new opportunities and potentially new customers through ease of transaction and aligned incentives with Google's field as well as our own. I think it will be... John Collins: The only... John Sabino: Yes, go ahead, John. I'm sorry. I didn't stop there. John Collins: The only addition I would make to that is just to emphasize that it exposes us to a new set of stakeholders. And so where we have previously been predominantly working with the head of care, we now have more access to CIOs, which could change the conversation for us by way of both renewals and potentially growth in the future. Ryan MacDonald: Very helpful. I appreciate it. Maybe one more for you, John Collins. Can you just help us understand from sort of the quarterly flow on adjusted EBITDA? I mean, I know historically, you've sort of ramped as you've gone throughout the year. But can you just help us understand, obviously, you're making some incremental investments this year to try to drive that return to net new ARR growth in the second half. But how we should think about -- it seems like Q1 is sort of the high watermark based on sort of the Q1 and fiscal '26 EBITDA guidance, but how we should expect that to sort of flow throughout the year? John Collins: That is approximately correct. I expect Q1 to be the high point for the year as we emphasize that there is a need for investment on the product side and the commercial side, which we've already begun executing. So that will be additional costs relative to the Q4 run rate that's added this quarter, and we'll see that manifest per the guidance we provided throughout the year. Operator: Thank you. This concludes the question-and-answer session, and this will conclude today's conference call as well. You may disconnect your lines at this time, and we thank you for your participation. John Sabino: Thank you.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco Holdings, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and there will be an opportunity to ask questions following the presentation. Please note that this conference is being recorded today, 03/12/2026. And now I would like to turn the conference over to Ira M. Fils, the company's Chief Financial Officer. Ira M. Fils: Thank you, operator, and good afternoon. By now, everyone should have access to our Fourth Quarter 2025 earnings, which can be found at elpolloloco.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to our growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans, and our 2026 guidance, among others. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our Form 10-K, for a more detailed discussion of the risks that could impact our future operating results and financial condition. We expect to file our 10-K for 2025 tomorrow and encourage you to review that document at your earliest convenience. During today's call, we will discuss non-GAAP measures, which we use for financial and operational decision-making and as a means to evaluate period-to-period comparisons, and which we believe can be useful to investors 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, and reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website. With respect to the adjusted EBITDA outlook we will be providing on today's call, please note we have not provided a reconciliation to the most directly comparable forward GAAP financial measure because, without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company-operated restaurant revenue on a forward-looking basis. I would now like to turn it over to our CEO, Elizabeth Goodwin Williams. Elizabeth Goodwin Williams: Thank you, Ira, and good afternoon, everyone. I am pleased to report strong fourth quarter results that cap off a transformative second year in our brand turnaround journey. In Q4, we delivered a positive quarter of same-store sales growth, including stable traffic, despite the ongoing macroeconomic challenges that persisted across the industry. This top-line momentum, combined with our team's relentless focus on operational excellence, also enabled us to achieve better-than-expected restaurant-level margins. Before we move on, let me quickly recap what we accomplished in 2025. Building on the foundations we established in 2024, we made strategic investments and executed with discipline across our five pillars, achieving meaningful results that we believe position us for accelerated growth in 2026 and beyond. What began as a transformation effort has now evolved into sustained momentum that validates our long-term growth strategy for El Pollo Loco Holdings, Inc. During the year, we successfully expanded our restaurant-level contribution margins, again demonstrating our ability to drive profitability even while investing in customer value and traffic-driving initiatives. We accomplished this through a methodical approach to cost savings and enhanced labor productivity, including leveraging technology and industry best practices. We are also encouraged by the operational transformation that took hold in 2025, allowing our team members to focus more on guest-serving activities. In addition, we made substantial progress improving our unit economics by successfully reducing our new build cost with our iconic prototype design, and driving even higher cash-on-cash return by utilizing second-generation sites where available. As we look ahead, our priorities for 2026 are clear: to drive sustainable traffic growth across our system while maintaining the margin discipline and unit economic improvements we have accomplished over the past two years, and to thoughtfully grow El Pollo Loco Holdings, Inc. across the country. We will achieve this by continuing to execute against our five-pillar strategy. Ultimately, we believe our focused approach will accelerate our growth trajectory and further strengthen El Pollo Loco Holdings, Inc.'s position as the nation's favorite fire-grilled chicken restaurant. With that, let me provide you details on our pillars. At the heart of a brand that wins is a breakthrough culinary innovation. Together with value, innovation is critical in driving transaction growth, and I am thrilled to share the exciting momentum in our culinary pipeline. Leveraging our unique fire-grilled chicken platform that showcases premium quality at accessible price points, we are able to satisfy our legacy guest preferences while also introducing El Pollo Loco Holdings, Inc. to entirely new consumers across multiple occasions. Over the last eighteen months, we have identified the opportunities to bring more portable and craveable options to our menu. This is translating to improvements in our core customer feedback scores when asked questions regarding menu variety and “have innovative foods I want to try.” Before I discuss how we capitalize on this opportunity further in 2026, I want to take a moment to celebrate the success of our double chicken street corn and queso crunch burrito bowl that we launched in late September. These bowls were instrumental in driving our fourth quarter performance, exceeding our expectations in both guest response and sales contribution. The popularity of these hearty, value-driven, high-quality offerings was so positive that we made the strategic decision to keep both bowls as permanent menu items. This success continues to validate our approach to creating a menu that delivers superior value and portability while maintaining the full flavors and premium ingredients that differentiate El Pollo Loco Holdings, Inc. During the quarter, we also launched our $29.99 FAM Feasts, an eight-piece fire-grilled chicken meal with five tortillas, salsas, and churros, providing quality and value for families and groups. Turning to 2026, we are pleased with the momentum from our Double Pollo Salad that launched in January with fresh options to meet New Year resolutions. Featuring street corn, Mexican Caesar, and bacon ranch options, each salad delivers over 50 grams of protein with a double portion of our signature fire-grilled chicken. Given the consumer appeal of Street Corn and Mexican Caesar salads, both have earned a permanent placement on our menu and continue to resonate well with our guests seeking nutritious and craveable options with fresh ingredients. Building on our solid success, in mid-February, we launched Baja Double Tostadas, reimagining our beloved tostada with bold new flavors and notably a seasonal seafood option. Our Baja Double Tostadas featuring chicken and shrimp demonstrate our willingness to innovate across a core platform while maintaining our commitment to quality and flavor. While still early, the initial response has been very encouraging, with guests embracing both the limited-time seafood protein and enhanced flavor profile delivered through our lime crema sauce. In addition to new salads and tostadas, we also continue to promote our core fire-grilled chicken on the bone with the return of Mango Habanero Chicken, which was available for a short time, and also the continuation of our $29.99 FAM Feast. Turning to protein, we are proud of our position as a true protein leader. We further capitalized on the macro trend by launching our version of a protein menu, which is a collection of menu items with more than 20 grams of protein. We did this with a playful nod to the fact that we have been the legitimate place for protein for over fifty years. The February launch culminated with social media content illustrating a drumstick in a protein bar wrapper, messaging that our chicken is the original protein bar, a clever way to connect with today's youthful and protein-focused consumer mindset. The best part of our protein menu is it requires no new operational lift. Rather, it simply showcases what we are known for: high-quality, delicious chicken packed with protein. As we look toward our future innovation pipeline, we are excited about our upcoming Loco Tenders launch in a few weeks. Our all-white-meat, boldly seasoned tenders feature our signature dipping sauces: Pollo Loco Sauce, Baja Lime, and House Ranch. They also represent our entry into the rapidly growing chicken tender category. Loco Tenders provide a unique El Pollo Loco Holdings, Inc. twist on a classic tender, which we believe will make them a standout and have strong appeal for new and existing customers. We are currently in the final stages preparing for this launch. We are also testing new loaded quesadillas and a crispy grilled chicken sandwich that delivers all the crunch and flavor of a fried sandwich, but it is grilled, not fried. Both entrees are flavorful, portable, and under $10. Also in test are beverages with Horchata Iced Coffee, featuring our delicious horchata with notes of cinnamon and vanilla, and Cold Foam Coolers, which are aguas frescas topped with sweet, creamy cold foam. Both beverages are planned to launch later this year. These are just a few of the products across our innovation pipeline, which is the most robust we have delivered in years. To support all of this menu innovation and growth, we have implemented an internal process with several stage gates to ensure our restaurant operations are minimally impacted and that we can deliver the quality that defines El Pollo Loco Holdings, Inc. Best of all, our ability to foster innovation has been enhanced recently by our new culinary kitchen at the heart of our restaurant support center. Our menu innovation strategy works hand in hand with our targeted marketing efforts to further amplify the El Pollo Loco Holdings, Inc. brand and drive meaningful guest engagement. By emphasizing our unique heritage of fire-grilling chicken and actually cooking in our restaurants, we believe we have a true competitive advantage in the QSR landscape that few brands can claim. We stand firmly behind our commitment to quality, and while others might think our dedication to fire-grilled chicken is loco, we believe this passion is exactly what sets us apart. We are proud of what our Let’s Get Loco campaign accomplished in 2025. From a distinct tone and look in our advertising to leveraging our passion to build brand affinity, Let’s Get Loco positions us as an authority in authenticity. Beyond advertising, this came to life through our brand activations like our Loco AI Challenge, which invited fans to create chicken-centric content using AI, or our December Twelve Days of Pollo activation where we introduced fans to our Chicken in the Kitchen, which was our version of Elf on the Shelf. The momentum continued as we kicked off the New Year. We officially declared Monday as Leg and Thigh Day, a fun play on leg day at a gym. We did this by providing gym goers and Loco Rewards members a free Leg and Thigh Meal for the perfect post-workout meal. These buzz-building moments amplify our brand beyond the menu and create moments for real fandom and loyalty. In addition to larger brand activations, we have also shifted our local marketing approach to include more grassroots efforts to support our fundraising and catering program. This has been especially beneficial in new and growing markets and will become an increasingly important part of our marketing toolkit as we expand. We are focused on growing reach and frequency across all consumer groups, and while it is still early, the data suggests that we are seeing momentum with the younger consumer, particularly the 25 to 34 age bracket, driven by our brand relaunch and marketing efforts. There is still much work to do, but this is an early indicator our initiatives are gaining traction. Looking ahead, our integrated marketing and menu innovation strategy will continue to focus on our passion for chicken and our commitment to showcasing quality and affordability across multiple consumer occasions in a relevant way. Whether we are launching new menu innovations, creating memorable brand moments, or taking a local approach in new markets, our marketing will consistently reinforce our differentiator of fire-grilled chicken while meeting the evolving consumer demand for portable, flavorful, and protein-rich options. Shifting to a hospitality mindset, I want to highlight the immense focus we have placed on operational excellence to drive sustainable traffic growth. In 2025, we recognized an opportunity to invest in driving standards and accountability through third-party measurement and direct customer feedback and benchmarking. The investments we have made are being noticed by customers. Our overall satisfaction, or OSAT, scores are now outpacing the QSR industry, as measured by SMG, and we have shown improvement across all measures from accuracy, quality, friendliness, cleanliness, and speed. While this sequential improvement has continued into the first quarter, I do believe we still have room for improvement which will drive additional future growth. I want to give special recognition for the improvement we saw in friendliness, which was the largest sequential increase. This was made possible by our team members embracing our opportunity and delivering excellent service each and every day. I want to take a moment to say thank you to our restaurant team members and our franchise partners. We are excited about the opportunity to continue raising the bar. El Pollo Loco Holdings, Inc. is consistently recognized for our exceptional food; we are motivated to earn that same recognition for our operational excellence. With our focus on operational excellence and fundamentals, we are combining innovative tools and AI applications to further drive team member efficiency and customer experience. Throughout the year, we will continue to deploy tools, systems, and new ways of training that help us deliver a robust culinary calendar while also elevating customer service. I would like to note that these strategic investments in operations and technology will naturally translate to an elevated G&A in the near term, on which Ira will provide further detail in a moment. However, we view this investment as a critical foundation that will allow our brand to scale efficiently and maintain our high standards as we expand. This brings us to our next pillar, enhanced capabilities with our digital-first mindset. We are pleased that our digital business continued to gain momentum during the fourth quarter. Our more aggressive approach offering app-based promotions and targeted value through our Loco Rewards program drove significant engagement and transaction growth. As an example, our Twelve Days of Pollo campaign in December exemplifies this strategy perfectly, delivering exclusive daily deals. This limited-time promotional event not only generated immediate sales lift, but it also attracted new app users and increased the frequency among existing loyalty members, demonstrating the power of creating urgency and exclusivity within our digital ecosystem. We are pleased with the increased engagement, as both loyalty revenue and participation rate grew by more than 20% year over year. In January, we launched a program refresh that introduced Boost, seasonal offers exclusive to rewards members. We believe that these types of enhancements to the program will help us maintain our strong momentum in 2026. We have also continued to grow our reach and frequency through our third-party delivery partners, expanding our digital offers and utilizing paid advertising with these platforms. We successfully grew delivery by 12% year over year in 2025, and we will continue to focus on offers and advertising in 2026, as our data suggests that these transactions are incremental and do not cannibalize existing traffic. We also made several substantial technology investments in our restaurants in 2025 that will continue to enhance customer and team member experience in addition to productivity. As an example, in the last few weeks, we completed a project to upgrade all of our company and franchise restaurants to a cloud-enabled point-of-sale platform that is easier and faster for team members to use, and it unlocks insightful reporting capabilities. The importance of technology and AI is rapidly increasing across all facets of our business. Just about every project team depends increasingly on technology or a program’s success. With this rapid increase in technological needs and importance to operational excellence, we are investing in technology leadership with the addition of a new Chief Technology Officer, Vadim Harisher. Vadim joins us with a rich background from Taco Bell, Allergan, and Amgen. Together with a strong tech team already in place, Vadim will shape our technology investment to provide a powerful foundation to support our growth. As we pivot now to growth through new development, 2025 proves that we are a brand that is ready to grow again with a business model that supports sustainable expansion. We achieved our goal of opening nine new restaurants in 2025, including our 500th El Pollo Loco Holdings, Inc. restaurant in Colorado Springs. As a reminder, this is the largest systemwide unit growth since 2022, and we are just getting started. More importantly, we are not just opening restaurants; we are opening successful ones. The restaurants we have opened since 2024 are averaging over $2.0 million annually, driven by our strong franchise partners and our new restaurant training teams who bring our refined brand positioning to life for our customers every single day. In 2025, we opened restaurants in two new states, Washington and New Mexico, bringing our footprint to nine states in total. Of the nine restaurants opened, six were outside of California, and seven of the nine were built leveraging second-generation restaurant assets with significantly lower build costs than traditional ground-up units. Let me highlight a few standout locations that showcase the breadth of our success across the country. In Dallas, we opened a company-owned location in a former Arby’s site with a build cost of $1.4 million, with early sales results in line with our expectations. This is a perfect example of how we are derisking our capital outlay through second-generation SWIP. Our franchise partners have also delivered exceptional recent openings with strong performing locations in Colorado, Texas, and Washington. These second-generation site construction costs were typically in the low to mid-$1 million range, and all have been averaging above $2.0 million in annualized sales volume. These successes reinforce our confidence as we look toward 2026, where we are targeting approximately 18 to 20 new restaurant openings with three to four being company-owned locations. Similar to last year, the vast majority of the 18 to 20 new openings in 2026 are expected to be outside of California. This growth trajectory is being supported by key organizational enhancements, including our new VP of Franchise Recruiting, who will help accelerate our franchise development effort, and our robust investments in incremental field training and new store opening teams. Turning to our restaurant remodeling program, we continue to progress as planned. For the year, we completed the 69 planned remodels, and we continue to see consistent mid-single-digit sales lift in company-operated locations. For 2026, we plan to remodel 25 to 35 company-operated restaurants and 30 to 40 franchise-operated remodels, putting us on track to meet our goal of updating approximately half of our total system over four years. The combination of successful remodeling programs and the strong performance of recent openings has positioned us well for continued expansion in 2026 and beyond. We remain focused on disciplined growth that delivers strong returns while building lasting brand presence in new markets across the country. Before I turn the call over to Ira, let me provide you with one more update that is more long term in nature. In addition to the day-to-day hires we have made, we have also materially reshaped our board with substantial industry expertise over the past two years, with the addition of four new board members with extensive restaurant experience. These industry leaders are not only strengthening our corporate governance, but also providing valuable best-practice sharing and guidance on all topics, from marketing to operations and development strategies. With the support of our board and the momentum we have built across our strategic drivers, we have tremendous confidence in our ability to accelerate growth over the next several years. With that, let me turn the call over to Ira for a more detailed discussion of our fourth quarter financial results. Ira M. Fils: Thank you, Liz, and good afternoon, everyone. For the fourth quarter ended 12/31/2025, total revenue was $123.5 million compared to $114.3 million in 2024. Company-operated restaurant revenue increased 7.1% to $102.4 million from $95.6 million in the same period last year. The $6.8 million increase in company-operated restaurant sales was driven by 0.4% growth in company-operated comparable restaurant sales as well as $5.3 million of sales from the additional operating week in 2025. As a reminder, 2025 included 14 weeks compared to 13 weeks in the same period last year. The growth in comparable restaurant sales included a 2.7% increase in average check size partially offset by a 2.3% decrease in transactions. During the fourth quarter, our effective price increase versus 2024 was about 3.2%. Franchise revenue increased 15.5% to $13.0 million during the fourth quarter, driven by a 3.2% increase in comparable restaurant sales, $0.5 million from the additional operating week in 2025, $2.4 million in revenue recognized related to terminated franchise development agreements, and revenue associated with nine franchise-operated restaurant openings subsequent to 2024. The 3.2% increase in comparable franchise store sales consisted of a 2.4% increase in average check and a 0.8% increase in transactions. For the full year of 2025, our systemwide comparable store sales increased 0.1%, driven by a 0.7% increase in average check, which was partially offset, including Q3 true-ups, by a 0.6% decrease in transactions. As we move into 2026, we are pleased that our sales momentum has continued into the first quarter. Systemwide comparable store sales for the first quarter to date through 02/25/2026 increased 2.4%, consisting of a 1.8% increase in company-operated restaurants and a 2.8% increase in franchise restaurants. Turning to expenses, food and paper costs as a percentage of company restaurant sales decreased 70 basis points year over year to 24.4% due to higher menu pricing and approximately 100 basis points of commodity deflation during the fourth quarter, which was partially offset by higher discounting. We expect commodity inflation to be in a 1% to 2% range for the full year 2026. Labor and related expenses as a percentage of company restaurant sales decreased about 90 basis points year over year to 31.5% as we continue to benefit from improvements in operating efficiencies, primarily driven through enhancements in labor deployment and scheduling combined with continued use of technology and equipment to simplify team member roles along with menu price increases. Wage inflation during the fourth quarter was 0.6% for all our company-owned locations. For the full year 2026, we expect wage inflation of between 2% and 3% for all our company-owned locations. Occupancy and other operating expenses as a percentage of company restaurant sales increased 80 basis points year over year to 26.6%, primarily due to higher utilities, software maintenance fees related to our kiosk and new POS rollouts, higher rent, and higher liability insurance costs, partially offset by lower repairs and maintenance expense. Our restaurant contribution margin for the fourth quarter improved to 17.5% compared to 16.7% in the year-ago period. As we continue our path of margin improvement, we expect our restaurant-level margin for the full year 2026 to be between 18.0% and 18.5%. In addition, we expect our margins in 2026 to be between 17.5% and 18.0%. General and administrative expenses increased to $13.1 million compared to $11.1 million in the prior year. The increase was primarily due to $1.2 million in incremental labor and related costs, $0.7 million in severance and executive transition costs, and $0.8 million in other general and administrative costs, partially offset by $0.7 million in lower management bonus expense. As a percentage of sales, G&A increased to 10.7% or 100 basis points. As we move into 2026, to achieve our accelerating new store growth objectives, income taxes were $2.8 million for an effective tax rate of 30.0%. This compares to a provision for income taxes of $1.8 million and an effective tax rate of 23.5% in the prior-year period. We reported GAAP net income of $6.5 million, or $0.22 per diluted share, in the fourth quarter compared to GAAP net income of $6.0 million, or $0.20 per diluted share, in the prior-year period. Adjusted EBITDA for 2025 was $16.9 million compared to $14.3 million in 2024. Results for 2025 included 14 weeks of operation compared to 13 weeks in 2024. The impact of the extra week of operation increased adjusted EBITDA by approximately $0.77 million. Adjusted net income for the fourth quarter was $7.3 million, or $0.25 per diluted share, compared to adjusted net income of $5.9 million, or $0.20 per diluted share, in the fourth quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures. In regard to our remodeling efforts during the fourth quarter, we completed 25 franchise restaurant remodels and 10 company remodels, bringing our total completed remodels for the year to 17 company and 52 franchise remodels. In terms of liquidity, as of 12/31/2025, we had $51.0 million of debt outstanding and $6.2 million in cash and cash equivalents. Subsequent to the end of the fourth quarter, we paid down an additional $3.0 million on our revolver, resulting in our debt outstanding of $48.0 million as of 03/12/2026. With that, we would like to provide you with the following guidance for 2026: systemwide comparable store sales growth of 2% to 3%; the opening of three to four company-operated restaurants and 15 to 16 franchised-operated restaurants; capital spending between $37 million to $40 million; G&A expenses between $52 million to $54 million, excluding one-time charges and including approximately $6.5 million in stock compensation expense; adjusted EBITDA between $66 million and $68 million; and an effective income tax rate of approximately 29% before discrete items. In addition to our guide for 2026, we are introducing the following guidance for 2027 and 2028: systemwide comparable restaurant growth percent in the low single digits, systemwide restaurant growth percent in the mid-single digits, and adjusted EBITDA growth percent in the high single digits. This concludes our prepared remarks. We would like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions. Thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press star and the number one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and the number two if you would like to remove your question from the queue. For participants using speaker equipment, please pick up the handset before pressing the star keys. One moment while we poll for questions. And our first question comes from Jake Rowland Bartlett with Truist Securities. You may proceed with your question. Jake Rowland Bartlett: Hi. First question was on the consumer. You guys are in a, I think because of your regional, you may have less weather than we have had on the East Coast. And one of the phrases that we talk about these days is underlying demand, and I think you guys might be in a good position to tell us about what you think the underlying demand is out there without weather. So what are you seeing? I know you are doing a lot to influence your results, which is encouraging, but I am hoping you can talk about your confidence in the consumer. Which direction you think the consumer has been moving in the last few months and few quarters? Elizabeth Goodwin Williams: Thanks for the question. The consumer is still looking for great food at a great value, wanting to have a meal that is healthy, better for them, quality ingredients, all indulgent at times, but wanting to do it within their budget. So certainly more budget conscious. We are seeing that we are able to serve that for the consumer. We are seeing increasingly the consumer in Q4 responding to value, particularly with our burrito bowls and with some of our offers in our app and then also with third-party delivery. And then as we have gotten into the beginning of this year, where we are predominantly on the West Coast, we are lapping some of the activity from last year where the consumer stayed home more, whether it was because they did not have the money to come out as much, but then there were also some of the events going around with just ice and everything else out there. We are not seeing as much of that this year. So the consumer is certainly still looking for a great experience at a great value. Jake Rowland Bartlett: Great. That is good to hear. The other question was it sounds like you are doing a lot. You are testing a lot. You are coming up with some nice menu innovation. You are adding a lot of items, or a number of new items, to the permanent menu, adding a little complexity. So I am wondering what you are taking off the menu, for instance, but also how you are going to market all this effectively. Seems like there is a lot to talk about and maybe a limited voice. So what is the approach to marketing in terms of trying to accomplish all that you are trying? Elizabeth Goodwin Williams: Sure. Thoughtfully pacing and sequencing is really key, and doing a lot of testing, which is what we are doing right now. If you think about having also a nice mix of products that we have had before that consumers love and then just doing a twist on some of those menu items. As an example, our tostadas that are wildly popular, the twist right now is a Baja Lime element with shrimp and with chicken, whereas in the past, we have done that with Mango Habanero or we have done that without flavoring. The same thing is true with the burrito bowl that we launched in Q4. We have a twist there with the Queso Crunch. We had always had burrito bowls on our menu; however, we innovated on two new flavors. Some have unique ingredients, some use ingredients we already have in the restaurant. When we made the decision to keep those on the permanent menu, what we did is we looked at the burrito bowl lineup and said, does this replace a burrito bowl on there? And indeed, it did. In many instances, as we are adding, we are also removing. Or as an example, on the Double Pollo Salad, we made an update to one of the salads where we made a small enhancement, but it was one in, one out in that sense. Jake Rowland Bartlett: Great. I appreciate it. Thank you. Elizabeth Goodwin Williams: Thank you. Operator: Our next question comes from the line of Todd Brooks with Benchmark. Please proceed with your question. Todd Brooks: Hey, thanks for taking my questions, and congrats on really strong results and solid momentum carried here into the New Year. So congrats on that. Two questions, if I may. One, you talked about work in getting the prototype cost down and the success with the second-generation locations, and you gave guidance for, I think it implies, 14 to 17 new franchisee locations in 2026. Liz, can you talk about the mix of growth with existing franchisees versus new-to-brand partners? And are we to the point yet that you feel like you are ready to give us color into what the franchising pipeline looks like so that we could start to understand what you are building on that to drive that flywheel of longer-term unit growth that you guys guided for for 2027 and 2028? Elizabeth Goodwin Williams: Sure. As we go along throughout the year, we will certainly provide more detail in the richness of that pipeline in terms of where those units are and with different franchise partners and company units. We figure at least 20% of those new builds will be with company capital. In terms of the franchise partners, I am excited because it is a lot of our existing franchise partners who have seen the improvement that we have made with the economics, and they have that enthusiasm and love for the brand. They know how to grow with the brand. They have the infrastructure to grow with the brand. So we have a healthy pipeline of existing franchise partners, but then there are also new franchise partners. As an example, we have new partners up in Washington that are driving growth, new partners in New Mexico as an example. So it really is a mix, and then we are not done. As I mentioned, we just brought on a new leader guiding our new franchise recruitment, and we have a good amount of interest, but I think there is more interest out there as we tell the story of the brand and we work our way across the United States. So the simple answer is it is a nice combination of new but also existing, complemented by corporate growth. Todd Brooks: Okay. Great. And my second one, and I will jump back in after this. I do not ever remember this type of annual guidance in the past, and certainly not a multiyear framework. It is great to get. Thank you for it. What are you seeing in the business that gives you the confidence to actually give us this, given the current consumer environment? Elizabeth Goodwin Williams: It is a great question. I, now concluding the second year of turnaround heading into year three, have a really terrific leadership team alongside me and also just a team around us. We have all been at this for decades, and we have seen a lot of restaurant growth, turnarounds, turbulent times, and we see in our business that we have worked through so much over the last couple of years. We have gotten this brand to a place that is so much healthier than where it was. We have stabilized and dramatically improved the margins and the profitability of the brand. We have figured out what works in terms of driving sales, what formula works when it comes to innovation or value. Now there is always the consumer element, which is the big surprise, like you mentioned. It is harder to predict what is going on with macros and consumers. But there are some fundamentals that I think I am more comfortable, and our leadership team is more comfortable, knowing the formulas that drive growth. As we look out to a longer term, we are able to make longer-term decisions, such as investing some very thoughtful G&A in places that we know are going to drive growth. When we put that all together, and you have a great CFO like Ira and a team with him, you feel more comfortable being able to articulate that two- to three-year plan. Todd Brooks: That is great. Thanks, Liz. Elizabeth Goodwin Williams: Thank you. Operator: Our next question comes from the line of Jeremy Hamblin with Craig-Hallum. Please proceed. Jeremy Hamblin: Congratulations on a really strong year and the momentum you have in the business. I thought I would start by just understanding in terms of the system—really strong results from the franchise business in Q4, but about a 300 basis point difference between your company-operated locations and franchised on traffic—and wanted to get a sense for why you think that difference exists. It does sound like in Q1, that gap has closed, but likely still some sort of a gap there, given that franchise is trending a bit higher. Any color you might be able to share and what you might be able to learn from the franchise operators? Elizabeth Goodwin Williams: I would not read too much into it, as it does go back and forth from time to time or quarter to quarter. Sometimes some of the factors—we do pick it apart and look at it—can be geographies, but they also could be lapses in terms of amount of pricing that either franchise or corporate might have taken, and then lapping that and implications that has with transactions. It also, at times, can be the geography piece that has some of the weather implications as well. In addition, it can occasionally be operationally driven. I do think our franchise partners are terrific operators, and in some instances, they have operated more strongly than corporate restaurants. But I would not say in this case it is any one of those as the defining reason. It is usually a multitude of factors. Jeremy Hamblin: Understood. And then coming back to the point about menu innovation, that really stands out where it looks like you guys are testing more and more frequently. In terms of what is in place from a corporate level to drive that type of innovation, what has changed on that front? And in terms of thinking about what your pipeline looks like—right, you have had a lot of exciting launches and successful launches here—should we expect this type of innovation in the number of new products to continue here as you go into 2027 and 2028 as well? Elizabeth Goodwin Williams: I think we should expect that. We have a belief that the category loves innovation. The consumer loves to try new things, and we think that our brand leans into that exploration. Some of the things that we have done from the restaurant support center standpoint is to build back that muscle of being able to do innovation and do it well and within our operational footprint, because the worst thing is when companies go and try to do innovation, they do not do it well, and operationally, it just breaks the restaurant. Some of the things that we have put in place: we have an Op Services team that we did not have a couple of years ago, led by Rick Pepper—an outstanding team. They really work closely with our operations team to field test. I have talked many times about our culinary team led by Chef Rene. He does a fabulous job on the innovation side. That team was not as robust a couple of years ago. I spoke briefly in the prepared remarks about having a culinary kitchen. We recently moved our corporate headquarters after twenty years, and our number one priority in looking for space was having a culinary kitchen at the center—the heartbeat, really—of the support center. Even little things like that signal to the organization how much we care about culinary and about innovation. Jeremy Hamblin: Follow-on to that question. Just to confirm, you said that the full launch of tenders is coming in a few weeks, and then I wanted to get that confirmed. And then just thinking about when, with the chicken sandwich, the rollout of that. Elizabeth Goodwin Williams: We will see our tenders later this spring. We have not released the exact date yet, but later this spring. We are really excited. The sandwich is still in test, and we are testing other types of sandwiches. That is something we are looking at later this year, so in the second half of the year. Jeremy Hamblin: Got it. Last one for me. The balance sheet really improved in 2025, right? I think your net debt now is down to, like, $45 million. And you are continuing to build cash, or cash flow, I should say. Is the plan to get that down to no debt? And then after that point, as you have a bigger system in total, as you grow units, thinking about other things that you might be able to do with that cash flow on a go-forward basis, any insight you might be able to share into the multiyear plan on that? Ira M. Fils: That is a great question, Jeremy. Thanks. As we move into 2026, the good news of us being able to have so much cash available—we are turning around and investing that as we move into 2026. As Liz talked a lot about, we are increasing our pace of new unit development on the corporate side. We are investing as we are in this second year of our image and look and feel of the brand. We are upping the pace of our remodels. We are taking these dollars, and we are investing it into operational improvements in the restaurant to help us drive both sales and margins. We are going to spend a little more in CapEx this year, as we talked about, in 2026. That is one thing we are doing with it. As we continue to move forward, we will also be evaluating ways how we can, from a capital allocation standpoint, potentially return that to shareholders as well. We are comfortable with our level of debt, but we are also looking for ways to take those dollars and invest it in the business to continue to drive profit growth over time. Jeremy Hamblin: Great. Thanks so much, and best wishes this year. Elizabeth Goodwin Williams: Thank you. Operator: Our next question comes from Andy Barish with Jefferies. Please proceed. Andy Barish: Hey, good afternoon, guys. You guys are kind of in the, I guess, unenviable position of having reported after the Middle East stuff has erupted. Have you seen a consumer reaction with gas prices above $5 in California? Just wondering what you are willing to discuss there, given you guys have been one of the few, if only, reporters since everything started up. Elizabeth Goodwin Williams: Thanks for the question, Andy. Surprisingly, we have not. We are all very familiar that typically QSR and fast casual are tightly correlated with gas prices, so we watch closely, but I would not say we have seen anything of note as of late. Andy Barish: Good to hear. I know if it ever trickled through, or if it does, people adjust hopefully fairly quickly and get back to prior spending path, which I guess has been what we have seen historically, at least in terms of food away from home. On the same-store sales composition, can you go through that with us? I know traffic is a focus, but I am assuming pricing is going to be in line with inflation, which looks like it is two to three when you combine commodities and labor. Any more color on price? And then is the goal to get traffic positive this year? Ira M. Fils: That is always our number one goal, to drive traffic positive. We feel good so far about our trend that we have seen in the quarter. We were a little soft that first week of the quarter with some holiday timing and some weather issues, but we have been very pleased with the way the quarter has played out for us so far. To the second half of your question, we are going to keep pricing similar to last year. We were, I think, at about 3.5% last year, and our pricing will be similar to that as we move forward into 2026, obviously subject to how the year plays out. We feel that with a combination of the innovation that we have going and the products that we are bringing to bear and where the business is right now, we have the ability to take a little bit of pricing as we move forward this year. Andy Barish: Got it. And then on the assumption, starting in 2027, it looks like adjusted EBITDA growth will be higher than revenue growth on a high level. Is that still moving restaurant-level margins, or do you expect G&A to start to lever a little bit maybe in 2027 again after the spend in 2026? Ira M. Fils: Great question. We have always said we believe this business can get into the 18% to 20% range from a store-level margin standpoint. This year, we are guiding 18% to 18.5%. We believe we have continued opportunities to drive our margins higher, and that is reflected as we think about the 2027 and the 2028 guidance. That, in concert with making a lot of G&A investments this year, we will start to see some G&A leverage as we move into 2027 and 2028 as well. Elizabeth Goodwin Williams: Some of those G&A investments, as we remarked, are across the business in things like new unit development. As we are building corporate restaurants and also all the training to make sure franchise restaurants open successfully, we see those investments as having a direct payback. Technology—things that drive not only innovation but productivity—are also areas of investment. These are things that are very laser focused that, over time, have a strong return. Andy Barish: Great. Thanks for the color. Elizabeth Goodwin Williams: Absolutely. Thank you. Operator: Our next question comes from the line of Tania Anderson with William Blair. Please proceed. Tania Anderson: Hi. Good afternoon. I was just wondering if you could talk about the cadence of the openings this year. Ira M. Fils: The great news is we have already got two open so far this year. As we move forward through the year, it will be not as back-loaded as we had our openings last year, but typically, as you move forward, they will be a little back-loaded as we move through the year. We are excited. We have eight stores under construction right now, so we feel really good about our new unit development this year. Tania Anderson: Okay. And then previously, you talked about having some input and COGS initiatives that were going to happen this year. Can you talk about any specifics there? Ira M. Fils: This has been a multiyear project for us in regards to leveraging what we are buying to improve margins. As we think about the focus for 2026, it is taking things and having the supplier do some of the prep. We do a lot of prep today in our restaurants, and having our suppliers do some of that prep for us—taking some of that labor and complexity out of the restaurant. The combination of that will drive efficiency and margin for us. These are the main focus of our initiatives this year to help us drive the margin improvement. Tania Anderson: Okay. Thank you. Ira M. Fils: Thank you. Operator: Our final question comes from Matthew James Curtis with D.A. Davidson. Please proceed. Matthew James Curtis: Hi, good afternoon. I just wanted to ask about the new markets you have entered recently, like Washington and New Mexico, as well as some of the other openings outside of California. I was wondering if you could share what initial sales volumes have been like and what you have been doing to support these new openings, either in terms of marketing support or in other areas? Elizabeth Goodwin Williams: Great. Thanks for the question. We are really proud of these new openings, in particular Washington. In Kent, Washington, this unit has exceeded every expectation—well above our system average. Lines to the point where we have had to dial back some of our hours so that we could make sure we had chicken for everyone. We have not turned on the third-party delivery partners because we have so much demand in the restaurant. We want to serve the customers that are in front of us rather than even turning on delivery. This is the first unit in the state, but it shows you how much pent-up demand there is for El Pollo Loco Holdings, Inc. When we support the restaurant well and we find great franchise partners, it is a magical combination. The training that we are doing is many months in advance. We spend a lot of time with folks training. We send teams up to these restaurants, and there is a lot of ongoing support. New Mexico—also a new franchise partner—also performing really well, above average, so much so that the franchise partner has been looking for additional sites in the market because they have so much excitement and are very pleased with the results. I think that is the very testament that one unit is not enough; they want to do several in the DMA. To me, it is a testament of growing outside our home market. Matthew James Curtis: Okay. That is certainly encouraging to hear. So I guess the next obvious question is where do you think the pent-up demand is coming from, given that these are your initial sites in those states? Would this be basically demand coming from California expatriates or something else? Elizabeth Goodwin Williams: I think that certainly helps with the familiarity of the brand, but there is certainly not enough—as many people as might have left California, I do not think there is enough to substantiate all this demand. I think it is the fact that we really do not have a true national competitor. When you think about fire-grilled chicken, when we open in these markets, we serve our chicken in the delicious way that everyone knows and loves it. The same consumer type that loves the food, whether they are in California or Arizona or Nevada, they love it in New Mexico and Washington and eventually across the country. Back to your other part of the question in terms of how we are marketing things: we are using local marketing, we are using digital marketing—all different types of marketing tools—to drive awareness. Matthew James Curtis: Okay. Interesting. Thanks very much. Elizabeth Goodwin Williams: Thank you. Operator: Ladies and gentlemen, we have reached the end of today’s question-and-answer session. I would like to turn the call back over to Elizabeth Goodwin Williams for closing remarks. Elizabeth Goodwin Williams: Thanks again, everyone, for your interest in El Pollo Loco Holdings, Inc. We look forward to talking to you again next quarter. Have a great evening.
Operator: Thank you for your continued patience. Your meeting will begin shortly. Press 0 and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. Welcome to the Health Catalyst, Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. We kindly ask that you limit yourself to one question. If you have any follow-up, please re-enter the queue. We ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to Matt Hopper, Senior Vice President of Finance and Investor Relations. Good afternoon, and welcome to Health Catalyst, Inc.'s earnings conference call for the fourth quarter and full year 2025. Matt Hopper: Which ended 12/31/2025. My name is Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. With me on the call today are Ben Albert, our Chief Executive Officer, and Jason Alger, our Chief Financial Officer. A complete disclosure of our results can be found in our press release issued today as well as in our related Form 8-Ks furnished to the SEC, both of which are available on the Investor Relations section of our website at ir.healthcatalyst.com. As a reminder, today's call is being recorded, and a replay will be available following the conclusion of the call. During today's call, we will be making forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our future growth, financial outlook for the first quarter and full year 2026, our ability to attract new clients and retain and expand our relationships with existing clients, market conditions, macroeconomic challenges, bookings, retention, operational priorities, strategic initiatives, growth strategies, the demand for, deployment, and development of our Ignite data and analytics platform and our applications, timing and status of Ignite migrations and associated churn and pressure from clients, the impact of restructurings, and the general anticipated performance of our business. These forward-looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may materially differ. Please refer to the risk factors in our most recent Form 10-Q for 2025 filed with the SEC on 11/10/2025, and our Form 10-Ks for the full year 2025 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. Non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. A reconciliation of non-GAAP financial measures for the fourth quarter and full year 2025 and 2024 to their most comparable GAAP measures is provided in our press release. With that, I will turn the call over to Ben. Ben Albert: Thank you, Matt. Thank you to everyone for joining us today. Before we discuss the quarter, I would like to briefly acknowledge the recent leadership transition at Health Catalyst, Inc. I stepped into the CEO role last month following Dan Burton's departure as CEO and from the Board of Directors. I want to thank Dan for his many years of service, mission-driven foundation he helped build, and his support during this transition. We are focused on the future and on positioning Health Catalyst, Inc. for long-term success. There are significant opportunities ahead, and I am confident in strengths that continue to differentiate this company. Our mission, our people, and our core capabilities provide a solid foundation delivering meaningful value to our clients and shareholders. My priority is to build on these strengths, address our challenges with clarity and discipline, and move the company forward with a renewed sense of focus and execution. In my time as President and COO, I conducted a comprehensive review of the business. I have spent 25 years in this industry, and I bring the benefit of an outsider's perspective combined with an insider's understanding of our operations. That dual vantage point gives me clarity on where we are strong and where we need to change. Not only do I see clear value creation opportunities ahead, I also see areas where we can operate with greater focus, rigor, and accountability. We have already moved quickly to tighten leadership focus and execution discipline, including appointing general managers to lead our interoperability and cybersecurity businesses and transitioning our Chief Commercial Officer role to a strong internal successor who is already driving sharper commercial alignment. We have also opened searches for both a Chief Operating Officer and a Chief Marketing Officer to strengthen operational rigor and to clarify and elevate our position within the market. At the same time, we are reviewing our cost structure to ensure we are strategically allocating capital with increased discipline, and we are focused on expanding technology bookings and margins while driving cash flow generation as outcomes of this work. We are taking a fresh approach to how we execute, and I am confident that these actions will put the company on a stronger long-term trajectory. First, our core value proposition is strong. Our clients continue to rely on Health Catalyst, Inc. to manage costs, improve clinical quality, and drive consumer growth. We have a track record of delivering measurable outcomes, and when we are focused and aligned, we can create real value for our clients. Second, the review made it clear that we need to be more focused and more consistent in how we execute. We have allowed too much complexity into our go-to-market motions, our packaging, and our implementation and migration work. This has at times created friction for our clients and slowed our ability to deliver value. We will address this by aligning the organization around a smaller set of priorities, improving clarity across teams, and holding ourselves accountable for predictable, measurable outcomes. Third, we have a clear opportunity to sharpen and simplify our commercial story. Our solutions resonate most when we articulate them through the lens of the problems clients are trying to solve. We have not been consistent in how we describe the full value we can deliver across cost efficiency, clinical quality, and consumer experience. We will tighten our positioning, simplify how we package and present our offerings, and implement a more predictable and focused go-to-market motion that highlights what makes Health Catalyst, Inc. so compelling. We are refocusing on what we do best, a back-to-basics approach. At our core, we are built to deliver measurable outcomes across cost efficiency, clinical improvement, and consumer experience. While the market often thinks of us primarily as a data platform business, our data platform infrastructure has always been a means to an end. The real value of Health Catalyst, Inc. is in the IP, deep healthcare expertise, and high-value applications we have built or acquired over 15 years, grounded in thousands of improvement projects and billions of dollars in validated impact. That is who we are, that is what we believe the market needs, and that is where we will focus our energy. Additionally, as AI continues to play a bigger role, we expect our valuable data assets and expertise will become an increasingly important driver of competitive differentiation. With these learnings as our foundation, our priorities going forward are clear. We will strengthen and simplify our commercial engines to drive technology ARR bookings. We will improve retention through more predictable migrations and clear client value realization. We will increase efficiency and reduce time to value by eliminating operational complexity and scaling work through automation and global resources. And we will better leverage our IP, combining our data foundation with the expertise, content, and AI-enabled solutions that allow us to solve some of healthcare's most pressing problems. These actions begin now, and they will guide how we operate and execute throughout the year. We have also heard a consistent message from our investors. They want our business to be easier to understand with clearer indicators of performance and a more streamlined narrative about what we do and how we create value. I agree with that feedback. As part of our renewed focus and discipline, we will simplify how we communicate our business model, our priorities, and our progress so that our direction is easier to track and evaluate. As part of this work, we are also evolving the way we measure and communicate performance. We will focus on providing a new set of bookings and retention metrics that are easier to understand, align directly with our execution, and clearly reflect how we operate the business. You will see us simplify our reporting, improve transparency, and reinforce accountability through clearer indicators of progress. So while I have already executed an initial comprehensive review as President and COO, as CEO our review of opportunities ahead will not stop, and I will continue to evaluate all aspects of the business to ensure we are focusing on maximizing returns for our investors. This includes a detailed review of our product portfolio, our investment mix, and our cost structure. We are assessing where we can simplify and where we should concentrate our resources. This is a shift in how we have operated. We are changing, and we will be more focused and disciplined in how we allocate capital and build long-term value. Given this work, and the significant impact some of it may have on our financial results going forward, we are not yet in position to provide annual guidance. Today, we are sharing first quarter revenue and adjusted EBITDA guidance only. We believe this is the prudent approach to ensure we are providing initial transparency, and as we continue our strategic and operational review, we plan to come back to the market with our full-year revenue and adjusted EBITDA guidance no later than our first quarter earnings call in May. With that, I will turn the call over to our Chief Financial Officer, Jason Alger, to walk through the financial results. Jason Alger: Thanks, Ben. For the full year of 2025, we generated $311,100,000 in revenue and $41,400,000 of adjusted EBITDA. In the fourth quarter, we continued to demonstrate strong cost control and operating leverage even as we navigated a dynamic demand environment. From a growth standpoint, we finished the year with 32 net new logos, ahead of our target of 30 net new logos but below our initial expectation of 40 that we began the year with. These net new logos had an average ARR plus non-recurring revenue near the midpoint of the $300,000 to $700,000 range. Our TAC plus TEMS dollar-based retention closed the year at 90%. For the fourth quarter of 2025, total revenue was $74,700,000 compared to $79,600,000 in the prior-year period. Technology revenue was $51,900,000 and professional services revenue was $22,800,000. The year-over-year decline primarily reflects lower professional services revenue from reductions in our FTE service offerings and our exit of unprofitable pilot ambulatory TEMS arrangements. For the full year of 2025, as I mentioned, total revenue was $311,100,000, which represented 1% year-over-year growth. Technology revenue increased 7% year over year to $208,300,000, while professional services revenue declined 8% as we continue to prioritize margin improvement and resource efficiency. Adjusted gross margin for the fourth quarter was 53.5% compared to 46.6% in the prior-year period. For the full year of 2025, adjusted gross margin was 51.1%, driven by technology gross margin of 67.4% and professional services gross margin of 18.3%. These results reflect the benefit of restructuring actions implemented during the year, partially offset by migration-related cost headwinds. In the fourth quarter of 2025, adjusted operating expenses were $26,200,000, representing 35% of revenue, compared to $29,200,000, or 37% of revenue, in 2024. For the full year of 2025, adjusted operating expenses were $117,700,000, representing 38% of revenue, compared to $123,400,000, or 40% of revenue, for the full year of 2024. The year-over-year change reflects the continued impact of our restructuring actions, disciplined headcount management, and tighter control over discretionary spending. On a sequential basis, adjusted operating expenses declined by $2,000,000 compared to the third quarter of 2025, driven primarily by the full-quarter benefit of actions we initiated earlier in the year, including workforce optimization, professional services contract restructuring, and operating efficiency initiatives across the organization. From a GAAP expense standpoint, we would note that we did incur impairment charges on goodwill and intangible assets of $110,200,000 during 2025. These charges were primarily due to the decrease in our consolidated market cap and revisions to our forecast, and not a write-down of any specific acquisition. These charges were also the main driver in the change in GAAP net loss from $69,500,000 in 2024 to $178,000,000 in 2025. Adjusted EBITDA for the fourth quarter of 2025 was $13,800,000 compared to $7,900,000 in the prior year. For the full year of 2025, adjusted EBITDA was $41,400,000, representing 59% year-over-year growth. As we look ahead, we remain focused on driving operating leverage, aligning our cost structure with our revenue profile, and prioritizing investments that support future technology margin expansion and technology revenue growth. Our adjusted net income per share in the fourth quarter and full year of 2025 was $0.08 and $0.19, respectively. Weighted average number of shares used in calculating adjusted basic net income per share in the fourth quarter and full year of 2025 was approximately 71,000,000 and 69,900,000 shares, respectively. Turning to the balance sheet, we ended the year with approximately $96,000,000 of cash, cash equivalents, and short-term investments, and $161,000,000 of term loan debt outstanding. For Q1 2026, we currently expect total revenue of $68,000,000 to $70,000,000 and adjusted EBITDA of $7,000,000 to $8,000,000. As we enter 2026, we continue to manage the business with a focus on operational efficiency while balancing targeted investments to support disciplined growth and retention initiatives that we expect will benefit results in the future. We have invested in migration-related personnel and contractors and are adding R&D investments in AI and India. These investments may create near-term financial pressure; we believe they position the business for cost structure improvement in the second half of the year and beyond. Our Q1 2026 revenue is expected to decrease compared to Q4 2025 due to three primary drivers. First, we expect a reduction in TEMS-related revenue due to downselling and our further exit from certain lower-margin TEMS arrangements. This contributed approximately $2,000,000 of the decrease. Second, we continue to see pressure associated with the DOS to Ignite migration. We expect revenue to decline by about $1,500,000 in Q1 2026 compared to Q4 2025 related to data platform pressure. Third, we expect an approximately $1,500,000 decrease in non-recurring revenue in Q1 2026 compared to Q4 2025. This is primarily driven by timing of project completions or certain renewals. A reminder, project-based non-recurring revenue can fluctuate quarter to quarter. We have made substantial progress in migrating our DOS clients to Ignite, but as discussed on previous earnings calls, we still have work ahead. Across 2026 and 2027, we have been notified of roughly $12,500,000 in DOS-related ARR downsell and churn. In addition, we currently estimate $52,000,000 of DOS-related ARR that may be subject to negotiation in 2026 and 2027, of which $35,000,000 is estimated to be data platform infrastructure ARR. Data platform infrastructure—or the data warehouse and related infrastructure—is where we are seeing the highest degree of pressure. While we do expect some level of further churn of this ARR, as Ben mentioned, we are putting plans in place that are designed to retain a large part of this balance. After 2027, we would expect to generally be through the data platform infrastructure migration headwind. We have maintained strong application relationships with our clients even when data platform infrastructure downselling occurs and do not generally lose enterprise relationships entirely. We expect our success in maintaining application relationships to continue in the future. As we approach 2026, although full-year guidance is not being provided, we anticipate that several prevailing trends will persist. These include a sustained emphasis on technology-led bookings through a sharper commercial approach and an ongoing focus on improving technology ARR retention through operational excellence and differentiated applications. With that, I will turn the call back to Ben. Ben Albert: Thanks, Jason. In closing, I want to thank our clients for their continued partnership and our team members for their commitment during a year of meaningful progress and transition. We are focused, disciplined, and aligned around the areas that matter most. We are committed to clear and understandable communication as we move forward. We look forward to updating you on our progress in the quarters ahead. Operator, we are now ready to take questions. Operator: The floor is now open for questions. Thank you. Our first question is coming from Stan Berenshteyn with Wells Fargo. Your line is now open. Stan Berenshteyn: Hi. I guess, if it is one question, I would like to maybe ask about the comments you made around the strategic review in the prepared remarks. Does that include the possibility of selling the company? Thank you. Thanks, Dan, for the question. Appreciate it. Ben Albert: We are really focused on how we best position our company for long-term success. And so as we have done this strategic analysis, we are turning over every rock and looking at the company and looking at how we can best position the company for shareholder value. We see tremendous opportunity ahead in some of the things that we do related to helping better manage costs for our clients as they are really in a challenging market right now, helping drive that consumer experience. And, of course, the foundation for Health Catalyst, Inc. is the clinical quality work that we do. And the ability to do that all together in one is a really huge differentiator for us as an organization. So we are really doing this assessment to best position ourselves for success and align to create shareholder value. Stan Berenshteyn: So is that a yes or is that a no? Thank you. Ben Albert: Appreciate the question. We are just in an assessment mode. I have been one month into the role and really just driving value as we are after. Stan Berenshteyn: Thanks so much. Operator: Thank you. We will go next to Richard Close with Canaccord Genuity. Your line is now open. Richard Close: Yes. Thanks for the question. Jason, maybe if you could go over the transition impact, I guess, with respect to the first quarter and then I think you said $52,000,000 in terms of the data platform for the remainder of the year. It went by pretty quick, so if you could just go over that again and then maybe provide a little bit more detail on exactly what is going on there? Jason Alger: Yes. Yes, I would be happy to. Appreciate the question, Richard. So, yes, definitely wanted to provide a bit more commentary related to the DOS to Ignite migration that is taking place. I did mention the $52,000,000. That would be our DOS-related revenue, which would encompass both integrated applications as well as data platform infrastructure. Really of the two components there, it is the data platform infrastructure where we are seeing the highest degree of pressure related to this migration. This would be the hosting side of the DOS platform, and that is where we have $35,000,000 of data platform infrastructure ARR that we are working with our clients on plans to retain moving forward. And so that is where we do expect to see the pressure across 2026 and 2027. Richard Close: And is it something where they are choosing another platform or competitor? Or what exactly, I guess, are you negotiating with them there on that? Ben Albert: Hi, Richard. It is Ben. Yes, at the data platform infrastructure level, there are cross-industry technology solutions that come in and can enable them depending on their strategy. They still need from us in that when they do that is the expertise and the IP and the applications that we provide on top of that. So it is all part of our strategy to meet them where they are depending on what they are going to do from a data platform infrastructure approach. Richard Close: Thanks. Operator: Thank you. And we will go next to Jeff Garro with Stephens. Your line is now open. Jeff Garro: I want to follow up on the demand environment and ask what you learned in Q4 around bookings and specifically booking size and scope, deal length—or, sorry, the sales cycle length—and app attach rates for deals that landed in Q4? And if you could help translate that into expectations for bookings, or just demand generally, in 2026, that would be helpful as well. Thanks. Ben Albert: Sure. Thanks. In Q4, we did a strategic assessment to look at how our applications and solutions best resonate in the market, and it came back clear that the market is in great need of the ability to better manage their costs, to drive clinical quality, and to engage and attract new consumers to their organizations. That is because they are under more pressure than ever. I mean, profitability pockets are—there are—the payer mix is changing with more Medicare patients coming in, the commercial payments rising at the rate. They really have to be focused on how they are managing their labor costs and their clinical costs. They have to be focused on not eroding clinical quality as they are doing that, and they have to win on the consumer side. So we see activity in those areas, in particular on the cost and labor side, and continually the clinical quality side. So that is where we see the greatest impact and opportunity, and that is representative in the funnel as well. Operator: Thank you. Our next question comes from Elizabeth Anderson with Evercore. Your line is now open. Elizabeth Anderson: Hey, guys. Good afternoon, and thank you so much for the question. I think you talked a little bit about your sharper commercial alignment going forward. Can you talk about when you are going out and you are talking to clients, where do you see it as your sort of right to win with the current portfolio that you have? Thanks. Ben Albert: I will just expand on the prior question because I think that is really where we are strong. The market is in real need of better managing their costs and driving clinical quality. And when you are managing costs, you cannot do that at the expense of your clinical quality in healthcare. And I think the market—this is really early for the market because the cost pressures they are under are growing and are very significant. And so as our right to win, as we have 15 years in this industry, we have done thousands of projects. We have tremendous content and intellectual property to enable our AI, to help guide our clients through change management, to navigate these really rough waters. So the challenge for us is we have not done a good job of telling that story. We are bringing in a Chief Marketing Officer. We have done the strategic assessment. We are turning over every rock. We are talking to our clients. We are talking to partners. We are talking to industry leaders. And the reality is this is a huge need, and it is something that is going to grow, we believe, going forward. And so that is where we are leaning in, and that is where you are going to see our story evolve over time so the market really understands what Health Catalyst, Inc. is all about. Elizabeth Anderson: Got it. Thank you very much. Operator: Thank you. We will go next to David Larsen with BTIG. Your line is now open. Jenny Shen: Hi. This is Jenny Shen on for Dave. Thanks for taking my question. I think you highlighted how despite some of the retention declining to sub-100% levels, you generally maintain and retain most of your clients, especially your enterprise ones. Can you kind of just give us a split? Is it like 50/50 between customers actually rolling off completely or just downselling—just getting a dynamic between the difference between roll-offs and downsells? Thank you. Jason Alger: Yeah. I appreciate that, Jenny. It is definitely a much lower percentage than you mentioned. We do not generally lose enterprise relationships. So where we are seeing the pressure, like I mentioned in the prepared remarks, is on the data platform infrastructure side, and that is where we could see downselling related to that. But, typically, from an application relationship standpoint, including those integrated applications, we generally see that clients are electing to keep those applications for the future. Jenny Shen: Great. Thank you. Ben Albert: Thanks. Operator: Our next question comes from Jessica Tassan with Piper Sandler. Your line is now open. Jessica Tassan: Hi, guys. Thanks for taking the question and nice to meet you, Ben. I was hoping maybe—you know, appreciate the comments on cost and clinical quality as being sources of pipeline strength, but I guess what specifically are the names of the Health Catalyst, Inc. apps that fit into those categories and what do they do? And then can you just talk about how the data platform disintermediation could potentially dilute the value of the applications or at least, you know, commoditize the applications layer and what you are doing to protect against that possibility. Thank you. Ben Albert: Jessica, nice to meet you as well. As we break down our applications across those three categories that we talk about, we have applications that deal with cost intelligence, which would really focus more on some of the clinical services and some of the supply chain work they are doing within the organization to make them most efficient in terms of the procedures that they are doing and being as effective as possible. But when they are making the choices, making sure that clinical quality stays high or even grows. Looking at the labor side, we have something called Power Labor that also fits within the labor within the cost management side of the equation, and the ability to do both at once for an organization is incredibly powerful as well. As you look at the clinical side, there are applications around measures. There are applications that are supporting ambulatory. In today’s world, if you do not have a great ambulatory strategy, it is going to be very challenging to execute and grow with your access. So that blends into the consumer side where we have tremendous consumer intelligence applications as well. So we could spend a lot more time on each of those, and I would be happy to talk about those at length, but there are applications that support each bucket going forward. And I want to just reiterate one thing though: the benefit is, of course, we can go deep on any one of those applications. So this goes back to meet you where you are. If someone has a challenge and they are using a lot of visiting nurse labor that can be incredibly expensive, or not staffing their OR times effectively or efficiently—things like that—we can really help them become more efficient, but again, all with that clinical foundation. As an organization, how are you making these changes? How are you solving these problems while not disrupting your clinical quality? In fact, you are improving your clinical quality, and that is just the core of Health Catalyst, Inc. Operator: Thank you. And we will take our next question from Sarah James with Cantor Fitzgerald. Your line is now open. Sarah James: Thank you. How should we think about the durability of margins if revenue stays under pressure for another few quarters? And can you help us frame the orders of magnitude of the levers that are under your control for 2026? Jason Alger: Yes. Appreciate the question. As we think about gross margins moving forward, there is pressure associated with the DOS to Ignite migration from a technology margin standpoint. That would mostly be the duplicate hosting costs, the duplicate cost structure that we do put in place. We are working to optimize there and remove those costs as quickly as possible, but that does have an impact on Q1 2026. And then from a professional services adjusted gross margin standpoint, we do see pressure associated with the migration personnel that we are adding to assist with the migration. That is to move these migrations as quickly as possible as well. But that is a near-term impact that is impacting Q1 2026 as well. Once we are through the migration, we do expect these to be costs that would be removed from our books moving forward. But we will see the impact in 2026 and a bit of that impact as well as we move into 2027 and continue the migration initiative. Sarah James: Got it. And just to take a step back on that, does that mean that 2026 would be your transition year, returning to growth in 2027? Or is there still a path to positive year-over-year growth for 2026? Jason Alger: Yes, still evaluating. We are not in a position to guide, and we will be providing the 2026 guide on our next earnings call at the latest, but we are not in a position to comment on the 2027 growth expectation at this point. Sarah James: Got it. Thanks. Operator: Thank you. We will go next to Daniel Grosslight with Citigroup. Your line is now open. Daniel Grosslight: Jason, I want to go back to the comments you made around the $12,500,000 of DOS-related ARR churn impacting 2026 and 2027 and then that additional $52,000,000 at risk. Can you kind of just break down for us how much of that combined $65,000,000 that is at risk will impact 2026, and the quarterly cadence of those impacts? And then of the $52,000,000 of ARR subject to negotiation now, what is the realistic success rate you are targeting for these negotiations? Jason Alger: Yes. Appreciate the question, Daniel. As we look at the $12,500,000—starting there—that is DOS-related ARR where we have been notified that the client is looking to downsell or churn related to that. We expect about 75% of that to impact 2026 at different points throughout 2026. More of that will come on probably around midyear and going into the later half of 2026. And around the $52,000,000, that would be DOS-related ARR, which does include the integrated applications and the data as well. And that is where the $35,000,000 would be the piece associated with the data infrastructure. We are working with those clients on negotiation, on migrating those clients to Ignite, and we do expect to continue to see pressure associated with the migration, and that is where we do expect to see some downselling related to the data infrastructure, but would expect to be able to retain those application relationships with the clients. So we are working on a plan with the individual clients, but we will provide more on that, Daniel, as we provide our full-year 2026 guide. Daniel Grosslight: Okay. Thank you. Thanks. Operator: Thank you. And we will go next to Richard Close with Canaccord Genuity. Your line is now open. Richard Close: Yes, thanks for the follow-up. I am just curious on any of the acquisitions that you have done since being a public company. I know VitalWare has been a pretty strong contributor, but can you talk about any of the other acquisitions that you have really seen decent growth in that app layer? And which ones—I guess this has been asked—but which ones really fit into these three priorities now? Ben Albert: Thanks, Richard. This is all part of the assessment in terms of how these applications align to the priorities as we head forward and where we can drive the most shareholder value, the most client value, and the most growth for the organization. Ultimately, we are all about driving measurable improvement, and that measurable improvement comes in those three areas that we talk about. So most of our applications align to those areas, and we see opportunities across, and so we just have to figure out through this assessment which ones are going to create the most value for us going forward. We are super excited to do that, and we will be able to come back with much more clarity no later than our next earnings call when we provide guidance and with a little more thoughts on that assessment. Richard Close: Okay. Thank you. Jason Alger: Thank you. Operator: At this time, there are no further questions in queue. I will now turn the meeting back to Ben Albert for any additional or closing remarks. Ben Albert: Thank you, everyone. We really appreciate you joining today. We look forward to the next call where we will be able to provide guidance and more results from this assessment. Thank you. Operator: This concludes today's Health Catalyst, Inc. fourth quarter and year-end 2025 earnings conference call. Please disconnect your line at this time. Have a wonderful day.
Anthony Rasmus: Good afternoon, and thank you for joining us on today's conference call to discuss Shimmick's Fourth Quarter and Full Year 2025 results. Slides for today's presentation are available on the Investor Relations section of the website, www.shimmick.com. During this conference call, management will make forward-looking statements based on current expectations and assumptions which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect. We identified the principal risks and uncertainties that may affect our performance in our reports and filings with the Securities and Exchange Commission, which can also be found on our Investor Relations website. We do not undertake a duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth quarter press release for definitional information and reconciliations of historical non-GAAP financial measures to comparable GAAP financial measures. With that, it's my pleasure to turn the call over to Ural Yal, Shimmick CEO. Ural Yal: Good afternoon, and thank you all for joining us on today's call. I'm joined by Todd Yoder, Shimmick CFO. Before I get started, I would like to recognize the women and men who work at Shimmick, safely and effectively delivering the projects we take on as good stewards of the communities where we work. Our work is supporting our nation's infrastructure, and we are all very proud of it. With that, I'm going to start by discussing our financial results for 2025. We finished 2025 strong and in line with our expectations in what was largely a transformational year for Shimmick. We made meaningful progress on the strategic priorities we introduced at the beginning of the year. As a reminder, our strategy remains centered on 3 pillars: one, growing the top line by bidding, winning and strategic risk balance work aligned with our expertise; two, completing and winding down legacy low-margin noncore projects, and three, driving operational improvements to deliver consistent margins and improved G&A leverage. We made substantial progress across all 3 pillars throughout the year and still believe we are in the early stages of the new Shimmick we're building. These priorities have strengthened our business fundamentally, evident by our 2025 results. As we turn to our 2025 results, for the full year, we delivered a consolidated revenue of $493 million 7% gross margin and adjusted EBITDA of $5 million. Full year 2025 Shimmick projects revenue was $395 million, a 12% increase year-over-year. These projects now represented 75% of our total revenue in 2025, highlighting the concentration of activity on more strategic work. In turn, we expanded our gross margin on Shimmick projects to 10% and a 400 basis point improvement over last year. For our noncore projects, 2025 revenue was $96 million compared to $125 million in 2024, reflecting our focus on effectively advancing the wind down of these projects. We also maintained a strong liquidity position, finishing the year with a total liquidity of $44 million. As you can see from our fiscal year results, we've made substantial progress executing our plan, specifically narrowing our focus to projects that leverage our core strengths. Now I'd like to spend some time speaking about that progress, providing an update on our wins, what are we seeing in the market and the operational improvements we are making. As we look at the market today, our momentum continues to build. Our core markets are continuing to see consistent investment and we're able to selectively bid projects that advance our strategy. This means we are increasingly able to improve our resilience by diversifying our customer base, focusing on growth markets geographically and lowering the risk profile of our book of work. Our backlog has grown meaningfully and remains well above a 1:1 book-to-burn ratio, which is an important indicator of the underlying strength in our -- in demand and our ability to win. We expect our book-to-burn ratio in the first quarter of 2026 to remain well above 1 as well, reinforcing the trajectory we've been on. Looking ahead to 2026, our pipeline volumes continue to be a real strength, allowing us to grow our revenues and margins while being strategic about what we pursue. Our wins in this quarter, some of which you are seeing on the screen continue to be aligned with our strategy and reflect the strength of the market. Our bidding activity has translated directly into backlog growth, which has increased to $793 million at the end of our fiscal year with $139 million in new awards and ended up near the numbers we started the year with, which shows the stabilization of our backlog as we continue to complete noncore projects. Additionally, we've been awarded contracts with $128 million that added to our backlog so far in 2026. And lastly, after the year concluded, we've been selected as a preferred bidder on projects totaling $234 million with projects that are predominantly in our core sectors of water and electrical construction and are mostly located in California and Texas. We are currently negotiating these contracts or waiting for awards from our clients which we expect to happen over the upcoming weeks and months. From a commercial standpoint, the market environment looks relatively unchanged from last quarter with a strong and growing backlog, a healthy pipeline of new work and several pending items we expect to convert over the next quarter or 2. Our overall 24-month pipeline remains robust, supporting $600 million to $1 billion of bidding volumes per month. Last year, we explained our approach to position Shimmick to compete and win in collaborative delivery markets. Those efforts are now paying off. This quarter, we expect to announce our first progressive design-build awards since I joined Shimmick. A milestone that reflects the credibility built and the value we bring to owners through early engagement and partnership. This project is valued at approximately $55 million located in Southern California and will allow us to bring our expertise in waste water treatment as well as specialty electrical work. Instead of competing through low bid contracting, we will be working with the client to provide value through the preconstruction phase, building trust and alignment before construction begins. We expect to negotiate the construction contract at the end of 2026 with the construction beginning in '27. This is exactly the kind of work we want to be doing. It derisks the business improves predictability and aligns our interest with the client from day 1. Another collaborative contracting method we are focused on is construction manager, general contracting, the CM/GC method. We have completed a few of these projects in the past and continue to see strong momentum in our pipeline for these lower-risk projects. One such project and an estimated $200 million effort that supports [ bus ] infrastructure as Los Angeles prepares for the 2028 Olympics is approaching the construction phase. We expect to announce this milestone in the second quarter and start construction shortly thereafter. We're also progressing a number of opportunities in higher-growth verticals. The data center market continues to evolve quickly and while we're not yet in a position to announce a new contract, we are actively pursuing several meaningful opportunities. These include potential engagements with large operators in Texas, Washington and Nevada. And should any of these materialize, they would represent significant contributions to our pipeline. I've talked about pairing the pipeline improvements with operational improvements over the last year. We are making progress on that front as well. We believe we can support strong top line growth without significant increases to our SG&A spend, and we continue to adapt and transform how we do business and use those SG&A dollars effectively. We've strengthened our project controls enhanced our procurement capabilities and expanded the use of Power BI and other AI-based analytical tools to improve visibility, decision-making and accountability across the organization, spending all of our critical functions like safety, quality and human resources. In project controls, we now have the capability to manage a much larger number of contracts with a higher level of rigor. The structure we put in place allows us to scale without sacrificing control, which is critical as our backlog continues to grow. On the procurement side, we've added expertise and systems that significantly derisk the business. We are improving risk management or one of the biggest cost drivers in our operations with more discipline and transparent oversight across the company. This gives us the ability to manage supply relationships more strategically and ensure we're extracting real value from our spend. We've also made real progress on the talent front. Our attrition rates continue to move in the right direction, which is a direct reflection of the work our teams are doing to strengthen employee experience and create a more supportive and performance-driven environment. Retaining top down is critical to executing our long-term strategy. And the data we're seeing gives us confidence that we're on the right track. In short, the market remains healthy. Our competitive position continues to strengthen and our backlog and pipeline dynamics are moving in the right direction. We are operating with greater efficiency, executing with more discipline and building the foundation for sustained growth. With that, I'd like to turn to Todd, who will review our financials in more detail. Todd Yoder: Thank you for joining us today. We're pleased to report another solid quarter and a strong full year performance that reflects the operational improvements and disciplined execution Ural outlined earlier. Before I dive into the numbers, I want to thank the entire Shimmick team. Your focus on safety, your commitment to quality and your consistency in executing with excellence have all played a critical role in our results this year. Thank you for everything you do. With that, let's jump into the financial results, beginning with Slide 8. As a reminder, all comparisons made today will be on a year-over-year basis as compared to the same period in 2024, unless otherwise noted. Shimmick project revenue for Q4 2025 was $84 million, up 4% compared to $81 million in Q4 of 2024. The net increase of $3 million was primarily driven by our new projects ramping up. Noncore project revenue for Q4 '25 was $16 million, down $24 million as compared to Q4 2024. This is reflective of the fact we have less noncore in our backlog to burn off, this year versus prior year. And I will point out that noncore projects in total were close to 90% complete ending 2025. Shimmick consolidated total revenue for Q4 '25 was $100 million as compared to $104 million in the prior year. Moving on to gross margin. Shimmick project gross margin was $10 million for Q4 '25 of $8 million or 400% compared to $2 million in Q4 '24. Gross margin as a percentage of revenue was 12% for Q4 2025 versus 3% in Q4 of 2024. The $8 million increase in gross margin was driven by $6 million from new awards and $2 million from existing projects. Noncore project gross margin was flat for Q4 2025 as compared to negative $23 million for Q4 of 2024. The $23 million increase in gross margin was driven by cost overruns on noncore loss projects during Q4 of 2024 that did not recur this year. Shimmick consolidated total gross margin for Q4 2025 was $10 million. up $31 million compared to a negative $21 million gross margin in Q4 of 2024. Total gross margin as a percentage of revenue improved to 10%, from a negative 20% in Q4 of 2024. G&A expense for Q4 2025 was $11 million, favorable 32% were $5 million as compared to $16 million of G&A in Q4 of 2024. The favorable impact was the result of our continued transformation of the business. Net loss for Q4 2025 was $3 million, favorable $37 million as compared to a net loss of $38 million in Q4 of 2024. Adjusted EBITDA for Q4 '25 was $4 million as compared to negative $27 million in Q4 of '24. The improvement was primarily driven by the increase in gross margin combined with the decrease in SG&A. Turning to liquidity. If you recall, we ended Q3 '25 with $48 million of liquidity. We ended Q4 2025 with liquidity of $44 million. The $44 million consisted of unrestricted cash and cash equivalents of $20 million and availability under our credit agreements totaled $24 million. We remain comfortable that our liquidity position provides the capital needed to continue executing on our strategic and operational priorities. New awards booked during Q4 '25 were $135 million, a sequential increase of more than $39 million from Q3 2025. Giving us a book-to-burn for the quarter of 1.4x. We ended the quarter with total backlog of $793 million. Turning to Slide 9 for the 2025 full year results. Shimmick projects gross margin was $397 million for the year, up $41 million or 12% compared to $357 million in 2024. Noncore project revenue was $96 million for the year compared to $125 million in 2024. Shimmick consolidated total revenue for 2025 was $493 million, up $13 million or 3% compared to $480 million in 2024. Shimmick project gross margin was $40 million or 10% as a percentage of revenue. This is a $28 million increase compared to $12 million or 3% in 2024. Noncore project gross margin was negative $7 million or negative 7% as a percentage of revenue. This is a $61 million increase compared to negative $68 million in 2024. Shimmick consolidated total gross margin was $34 million for 2025. Making gross margin 7% of revenue overall. This is a $90 million increase compared to negative $56 million gross margin in 2024. Adjusted net loss was negative $15 million in '25 as compared to negative $81 million in '24. Adjusted EBITDA for 2025 was $5 million, favorable $66 million from negative $61 million adjusted EBITDA in 2024. Again, new awards booked during Q4 2025 were $139 million, a sequential increase of $39 million from Q3, giving us the book-to-burn of 1.4x. We ended the quarter with a total backlog of $793 million. Our backlog mix continues to improve, with Shimmick projects now representing close to 90% of our total backlog ending 2025. Additionally, we have $128 million in new awards added to backlog as of the close of February 2026. And we have another $234 million of additional new awards that were pending fully executed contracts as of the end of February 2026. Turning to Slide 10 and our 2026 guide. To set the stage, I want to call out that some Shimmick projects in California and Texas experienced slower burn due to unusual heavy rainfall in California and cold weather in Texas, which limited field activity. In addition, some of our newly awarded contracts have taken a bit longer to ramp up than normal. While these projects experienced some shift to the right, they are back on track. While we anticipate a slower start to the year due to this weather, we expect quarter-over-quarter sequential improvement throughout the year as new project awards ramp up and represent a growing share of our project mix. We expect Shimmick consolidated revenue to grow between 12% and 22%, 17% at the midpoint, representing approximately $550 million to $600 million of work put in place for the full year 2026. Adjusted EBITDA is projected to increase between 200% and 500%. That's 350% at the midpoint, putting adjusted EBITDA in the range of $15 million to $30 million for the full year. With that, we are confident 2026 will be a great year for Shimmick. I thank you for joining us today and for your interest in Shimmick. Now back to Ural. Ural Yal: 2025 was a pivotal year for Shimmick. We delivered results in line with our expectations, executed with greater discipline and made meaningful progress on the strategic priorities we set out at the beginning of the year. Our focus on bidding and winning strategic risk balance work, winding down legacy noncore projects and driving operational improvements is reshaping the company and setting us up for long-term success. The improvements we're seeing in backlog growth, project execution, talent retention, procurement discipline and project controls, all point out to a business that is operating with more predictability, resilience and focus than a year ago. Our pipeline remains robust. Our market backdrop is healthy, and we're winning the right work, work that is aligned with our expertise and our long-term value proposition. While we recognize there is still more work to do, we are moving in the right direction, and our progress in 2025 gives us confidence in our ability to advance our journey to make Shimmick a top infrastructure provider in the market and delivering value to our shareholders. We look forward to updating you on our progress as we move forward in 2026. Operator, you may now open the line for questions. Operator: [Operator Instructions] Our first question comes from Gerry Sweeney with ROTH. Gerry is connecting now. One moment, please. [Operator Instructions] Gerard Sweeney: Good afternoon. I forgot I was going to be on video. Otherwise, I would have dressed up a little nicely. So anyhow, congratulations, obviously making nice progress, continuously push some of the legacy business behind you. And there's a lot of initiatives on the forefront. So a couple of questions around -- I'm going to use gross margin as sort of the overlying aspect, but some progressive design awards, I think CM/GC opportunities and electrical opportunities. How does this all play through? And how does that impact margins as we go through 2026? Ural Yal: Yes. No, I think overall, gross margins are going to be -- we expect them to go up. It's always a function of the mix of projects, obviously. So however, some projects tend to be closer in the high teens, some projects tend to be in the lower in the teens. But we're going to -- we're watching that balance very carefully to make sure that we're continuously making improvement on the gross margin. But what you'll also see at the bottom line as we grow the revenues, we're very focused on controlling the SG&A around the levels that it is today for 2026. And that's also going to be contributing. It's not just top gross margin, but it's the more efficient SG&A running a larger book of business. Gerard Sweeney: Got it. I had a question on SG&A, but before I get there. What about just the -- I think you mentioned you were bidding $600 million to $1 billion a month, but how does the backlog look? Obviously, I think Texas has been very strong with some of our other companies. I mean there's always water projects to do in California. But what's your visibility and feeling on just the overall spend in sort of the macro environment across your territories? Ural Yal: Yes, it's great. Actually, great question. So really, very focused in California and Texas, like we've been along with the Pacific Northwest. Waterwise, Texas is very active. California is always active, like you mentioned. So we're seeing opportunities, like, there's really no shortage of opportunities going in the next 12 to 24 months in that kind of volume. Which then -- we don't need all of it in our win rates, but that gets us to be more selective, more strategic about. We really want to be California, Texas, Pacific Northwest and focus on those markets and grow from there. So it really allows us to be -- to pick the right jobs with lower competition, maybe higher margins, more strategic for the future. So it's -- as far as kind of overall pipeline perspective, it hasn't let up in the last 6 months at all. Gerard Sweeney: Then circling back, SG&A came in just shy of $11 million. I think you indicated that maybe that's a good number that you use on a -- at least for 2026. One, I want to see if that's accurate? And then two, how much more revenue can you have prior to maybe starting to invest a little bit more in the SG&A front? Ural Yal: Yes. So I think what we had in 2025 is a reasonable number to assume for 2026 approximately. Gerard Sweeney: Okay. So the [ $84.5 ] million... Ural Yal: Somewhere around there. And I think as we do that, the revenues are going to go up, that's what we're guiding. And to the second part of your question, I think we're going to be fine kind of in that range, plus or minus in that mid-50s range up until about [ $750 million ] honestly. Todd Yoder: [indiscernible] '26, in the G&A for the fourth quarter, right? It was a little lower than you saw in previous quarters, but as you model that out for '26, I think that 14 number is a good number, a good run rate. Operator: Our next question comes from the line of Gerry Sweeney with ROTH. [Operator Instructions] Apologies. This question comes from Aaron Spychalla with Craig Hallum Capital Group. [Operator Instructions]. Aaron Spychalla: Maybe first for me on the guidance for 2026. Can you just kind of talk about some of the puts or takes there, especially on like the EBITDA range? And then just maybe how much of noncore revenue and kind of margin gross profit are you looking for, for the year? Ural Yal: Yes. Good question. So yes, so we've simplified the guidance a little bit this time. But looking at the noncore work, we are expecting to burn through pretty much all of it. It's right now about 11% of the backlog. It's going to be very little left, if any, into 2027, so -- and then that's also kind of along the lines of we've booked forward losses on those. So you're going to assume those at 0%. You're going to continue to kind of impact overall aggregate margin. But I think as far as the gross margin, the real key is how fast can we get the new work to be kind of hitting there -- hitting its stride, all these projects that we won and now starting how fast can they start generating revenue and margins. That's really the story of 2026 for us. As far as backlog goes, we finished the year almost at where we started. So we've really stabilized very close to where we started and now with the wins that we've announced today as those contracts come to fruition, we have a clear path to getting over $1 billion in backlog. And it's just going to be a matter of how do we get those jobs going quickly throughout the summer. Did that answer your question? Aaron Spychalla: Yes. No, that was great. And then maybe on the electrical infrastructure side of things, you kind of talked about, I think, in the release and the call, some pending awards on the electrical side of things. So it starts -- it sounds like you're starting to see some traction there. Maybe just a little bit more color, and I think you noted significant kind of potential there. Just what types of projects and project sizes? Are you looking for there? Ural Yal: Yes. So electrical business, our electrical business is a low-voltage, medium voltage electrical business that does a variety of sizes of projects. projects that are very small, $5 million, $10 million all the way to $200 million kind of like more of the larger Shimmick projects, and we're able to do range in that -- up and down in that range. Texas is extremely strong. We're bidding a lot of work in Texas, continuing to bid a lot of work in California, continuing to support the larger Shimmick projects with our electrical capabilities. So there's a lot of activity. And what I'm tracking every month is that the amount of Axia work we're bidding is becoming a higher percentage of the overall bids pretty much every month. So I think it's just a matter of time. We're really hitting our stride now on the bidding side. We're going to see some serious increase in our backlog for Axia work, and then that will translate to revenue in a quarter or 2. Aaron Spychalla: Good. And then on the legacy or the noncore projects, good kind of execution this quarter, and it sounds like they're 90% wrapped up. You just kind of talk about it. It seems like you have a good handle on ramping those up. But maybe just a little bit of color there would be helpful. Ural Yal: Yes. I mean we're moving along. It's really 2 projects at this point that are active, that's left. And we're going to get through those this year. The end of these larger kind of more complicated projects, there are always some risk at the end of them to close them out and cost overruns, but we're managing it, and we're pretty comfortable that we're going to -- that's going to really start decreasing as part of our revenue, especially in the second half of this year. Todd Yoder: Yes. I would just add, it was nice to see flat gross margin, which you would expect to see outside of some minor costs related to legal and other factors. But these are noncore loss projects, right? with 0 margin. But when you look at our total gross margin over the year, quarter-over-quarter, 4%, 6%, 8%, 10%. So you see as that like you all mentioned the mix, right? So noncore is becoming such a small percentage of the mix. And especially given the strong wins with $330 million in new awards in the second half and already starting just through February, right, with $128 million and $234 million pending. So it's a step change, right? And so we'll see that favorable mix throughout '26. Aaron Spychalla: Looking forward to it. Operator: There are no more questions at this time. I'd now like to turn the call over to Ural for closing remarks. Ural Yal: We've had another strong quarter and a strong year to finish 2025. It was a -- it was a year of change for Shimmick, and we've made a lot of operational improvements and made a lot of progress in getting through the noncore projects. So we're very optimistic about 2026 and beyond for our company, and these new awards that we've announced and booked are a good indication of that as we shift towards more of the work that we won in a risk balanced and effective way. Our margins are going to improve and both bottom line and top line. So we're really looking forward to a great 2026. Thank you all for joining.
Operator: Good afternoon. Welcome to Identiv's presentation of its fourth quarter and fiscal year 2025 earnings call. My name is John, and I will be your operator this afternoon. Joining us for today's presentation are the company's CEO, Kirsten Newquist; and CFO, Ed Kirnbauer. Following management's remarks, we will open the call for questions. Before we begin, please note that during this call, management may be making references to non-GAAP financial measures or guidance, including non-GAAP adjusted EBITDA, non-GAAP gross profit, non-GAAP gross margin and non-GAAP operating expenses. In addition, during the call, management will be making forward-looking statements. Any statement that refers to expectations, projections or other characteristics of future events, including future financial results, future business and market conditions and opportunities, strategic partnerships and collaborations and any related benefits and attributes and future plans, strategies, opportunities and goals is a forward-looking statement. Actual results may differ materially from those expressed in these forward-looking statements. For more information, please refer to the risk factors discussed in documents filed from time to time with the SEC, including the company's 2024 annual report on Form 10-K and second quarter 2025 Form 10-Q and the 2025 annual report on Form 10-K, which will be filed with the SEC in the future. Identiv assumes no obligation to update these forward-looking statements. I will now turn the call over to CEO, Kirsten Newquist, for her comments. Ms. Newquist, please proceed. Kirsten Newquist: Thank you, operator, and thank you all for joining our quarter 4 and fiscal year 2025 earnings call. During the fourth quarter, we made meaningful progress across each pillar of our Perform, Accelerate and Transform strategy. Of particular note, we made significant advancements in the development of the specialized Bluetooth Low Energy, BLE, smart label in collaboration with IFCO, a leading global provider of reusable packaging solutions for fresh food. As announced on Tuesday, we signed a multiyear agreement with IFCO to manufacture and supply the specialized next-generation BLE smart label. This agreement represents a major milestone in our high-growth BLE strategy and reinforces Identiv's leadership in scalable BLE-enabled solutions for complex global industries. Our BLE smart label will be a key component of IFCO's digital platform designed to transform the global fresh grocery supply chain by delivering enhanced visibility, reducing waste and supporting a more sustainable circular food system. Under the multiyear agreement, Identiv will serve as exclusive supplier for committed manufacturing volumes. Following the development phase, IFCO will maintain exclusivity for these customized BLE labels as they are deployed across its global network of more than 400 million reusable packaging containers. Full-scale mass production is expected to begin later this year, subject to achieving final development milestones. Turning to our quarter 4 financial performance. I'm pleased to report that fourth quarter sales of $6.2 million exceeded our guidance with all other key financial metrics also coming in ahead of expectations. We saw continued strength in gross profit margin, reflecting the successful completion of our 2-year transition of production from Singapore to our new state-of-the-art manufacturing facility in Thailand. With the Singapore shutdown now complete, we have completed our second full quarter of operations entirely out of Thailand, which has structurally reduced our cost profile while increasing manufacturing efficiency and scalability. Our CFO, Ed Kirnbauer, will now provide a detailed review of our quarter 4 financial performance, and I'll return afterwards to share more on how we're progressing across our strategic initiatives. Edward Kirnbauer: Thanks, Kirsten. In the fourth quarter of 2025, we delivered $6.2 million in revenue, which exceeded our previously announced guidance range compared to $6.7 million in Q4 2024. The year-over-year decrease was as expected and due to the exit of lower-margin business, which we did not transfer to Thailand. Fourth quarter GAAP and non-GAAP gross margins were 18.1% and 25.6%, respectively, compared to GAAP and non-GAAP gross margins of negative 14.9% and negative 5.2%, respectively, in Q4 2024. Factors driving the expansion of gross margin included the elimination of direct labor and fixed manufacturing overhead costs associated with our discontinued Singapore operations and improved utilization of our manufacturing production facility in Thailand. As we mentioned on our November call, we stopped production of RFID inlays and labels in Singapore at the end of Q2 2025. Singapore facility shutdown activities continued through the fourth quarter of 2025. And as of December 31, 2025, it's now complete. GAAP and non-GAAP operating expenses for the fourth quarter of 2025, including research and development, sales and marketing, general and administrative and restructuring and severance totaled $5.8 million and $4.1 million, respectively, as compared to $5.6 million and $4.1 million, respectively, in Q4 2024. The year-over-year increase in GAAP operating expenses was driven primarily by higher strategic review-related costs incurred in Q4 2025 compared to the fourth quarter of 2024. Non-GAAP operating expenses in Q4 2025 were comparable to the prior year period as we continue a careful allocation of operating expenses as we execute on our P-A-T strategic initiatives. Fourth quarter GAAP net loss from continuing operations was $3.7 million or $0.16 per basic and diluted share compared to GAAP net loss from continuing operations of $4.3 million or $0.19 per basic and diluted share in the fourth quarter of 2024. This reduction in net loss was due to lower direct labor and overhead costs following the shutdown of our Singapore operations as well as $1.1 million of charges to cost of revenues recorded in the fourth quarter of 2024. These charges were primarily related to inventory written off after a customer phase out a legacy program earlier than expected. These cost improvements were partially offset by strategic review-related expenses incurred in the fourth quarter of 2025. Non-GAAP adjusted EBITDA loss for Q4 2025 was $2.5 million compared to $4.5 million in the fourth quarter of 2024. The decreased loss was a result from the production transition to our Thailand facility in 2025, the charge to cost of revenue in Q4 2024 and the disciplined spending of operating expenses as we executed on our P-A-T strategic initiatives, as mentioned earlier. In the appendix of today's presentation, we have provided a full reconciliation of GAAP to non-GAAP financial information, which is also included in our earnings release. Turning now to our fiscal year 2025 financials. Fiscal year 2025 revenue was $21.5 million, a decrease of $5.1 million compared to the prior year period, primarily the result of the intentional exit of certain lower-margin legacy business. Fiscal year 2025 GAAP and non-GAAP gross margin was 6.1% and 14.3%, respectively, compared to GAAP and non-GAAP gross margin of 1.3% and 8%, respectively, in fiscal year 2024. This year-over-year margin expansion reflects a more favorable product mix and significant operational efficiencies following the successful completion of our manufacturing transition to Thailand. GAAP and non-GAAP operating expenses for fiscal year 2025, including research and development, sales and marketing, general and administrative and restructuring and severance, totaled $23.5 million and $17.6 million, respectively, as compared to $28.3 million and $17.9 million, respectively, in fiscal year 2024. Fiscal year 2024 GAAP operating expenses included $5.3 million of incremental strategic review-related costs compared to 2025. Fiscal year GAAP net loss from continuing operations was $18 million or $0.79 per basic and diluted share compared to GAAP net loss from continuing operations of $25.9 million or $1.14 per basic and diluted share in fiscal year 2024. Non-GAAP adjusted EBITDA loss for fiscal year 2025 was $14.5 million compared to $15.8 million in fiscal year 2024. This relative stability in adjusted EBITDA despite lower year-over-year revenues was primarily driven by the reduction in manufacturing overhead and targeted allocation of operating expenses as we execute on our P-A-T strategic initiatives. Moving now to the balance sheet. We exited Q4 2025 with $128.9 million in cash, cash equivalents and restricted cash, which is a sequential increase of $2.3 million over the third quarter of 2025. This increase included an income tax refund of $2.9 million and a prepayment of $2.8 million from a new customer to procure product for their full 2026 projected sales volumes. Excluding these items, operating cash usage net of interest income for the fourth quarter was approximately $3.4 million. Our working capital exiting Q4 was $133.3 million. Our balance sheet remains strong as we move into 2026. In our 10-K filing, we will be providing a full reconciliation of full year cash flows. For completeness, we have included the full balance sheet in the appendix of today's earnings release. As we look ahead into 2026, we anticipate Q1 sales of $6.7 million to $7.2 million, which includes the benefit of one of our new customers ordering their full year volume in Q1. This would be an anticipated increase of 26% to 35% over the $5.3 million in sales that we reported for Q1 of 2025. Throughout 2026, we do expect some near-term variability in gross margins as we begin scaling production for the IFCO program and for another new customer in Q1. This reflects the typical dynamics of ramping production for large programs. It's important to note that the underlying cost structure improvements from our manufacturing transition remain in place. As these programs mature and volume scale, we believe they will support attractive long-term margin performance. From a cash usage perspective, we expect to use $14 million to $16 million in 2026, excluding strategic review-related costs. This includes the cash required to support ongoing operations, plus $3.5 million of capital expenditures primarily related to the IFCO production, $1 million increase in working capital to support growth and $1.5 million to purchase chips, locking in favorable pricing required to fulfill orders, which extend past 2026. This concludes the financial discussion. I'll now pass the call back to Kirsten. Kirsten Newquist: Thanks, Ed. As you just heard, we delivered results that exceeded our guidance and expectations, a solid step forward as we continued executing against our Perform, Accelerate and Transform strategy. Our mission is clear. We provide digital identities for billions of fiscal objects, enabling real-time intelligence for the world's most demanding industries. While there is more work ahead to reach our long-term financial goals, we are encouraged by the tangible progress we made in 2025. Perform. Under the Perform pillar, our focus is on strengthening and growing our core business while driving operational efficiency, scalability and margin expansion to create stronger long-term value for both our customers and our shareholders. In 2025, we achieved several important milestones that directly enhance the value we deliver. First, we completed a major 2-year manufacturing transformation. We moved production of all RFID tags, inlays and labels to our Thailand facility and fully shut down the Singapore site. This transition has lower costs and improved efficiency, increased margins and is enabling faster, more reliable product delivery. We also implemented new enterprise software systems, including a CRM platform and an MRP system to better integrate sales, demand planning and operations. These enhanced capabilities will increase visibility across the business and enable faster responses to customer needs, produce more accurate demand forecasting and generate higher product availability. As a result, we expect more efficient planning of raw materials and production, driving lower operating costs and supporting continued margin expansion. In addition, we completed our transition to a pure-play IoT company, fully separating from the physical security business sold to Vitaprotech after a 12-month transition period. This strategic focus allows us to concentrate all of our resources, innovation and capital on high-value IoT opportunities where we see the strongest long-term growth potential. On the commercial side, we completed the build-out of our team, adding market development and business development capabilities and reoriented the company around a stronger customer-centric operating mode. Throughout the year, we converted 29 new pipeline opportunities into sales, which generated $1.2 million in revenue with continued growth expected as these customers reach steady-state adoption. Our marketing communications function was rebuilt following the separation, culminating in the launch of our new corporate website in January, which more clearly communicates our technology leadership, market positioning and value proposition. I encourage all of you to check it out if you have not already done so. Looking ahead to 2026, our focus is on translating the stronger operational foundation into profitable growth. We are shifting to a make-to-forecast production model for key customers, supported by predictive demand planning that better aligns inventory with customer demand, lowers raw material costs through higher volume purchasing and improved factory utilization. Quarterly sales and operations planning sessions will align our sales operations and supply chain teams around a single demand plan and disciplined production execution, enabling better overall service for our customers. These capabilities position us to support large deployment customer programs such as IFCO and scale them more rapidly. With improved forecasting, shorter lead times and a more flexible manufacturing platform, we can respond more quickly to new sales opportunities and bring new products to market more efficiently. This combination of operational discipline and commercial focus enables us not only to operate more efficiently, but also to pursue growth opportunities more aggressively. We will also launch targeted cost reduction initiatives on key products and deepen engagement with key customers through strategic business reviews. Together, these initiatives will strengthen execution and ensure the operational investments of the past 2 years translate directly into faster growth and long-term value creation. Accelerate. Under the Accelerate pillar, our focus is on driving growth in high-value segments through innovation, particularly in BLE technology and multi-component manufacturing. In 2025, we made meaningful progress across our innovation pipeline. We advanced our BLE smart label programs, producing the first 30,000 units for IFCO proof-of-concept trials. These trials provided valuable feedback that is helping us refine the product design ahead of scale-up and mass production. We also shipped our first orders of Wiliot's next-generation Pixel. In addition, we completed 5 customer-driven new product development projects that are shifting to commercialization, including applications in wine authentication, medication compliance and water safety. We expanded our partner ecosystem through strategic agreements, including with InPlay, Tag-N-Trac, Novanta, Narravero, IFCO and Wiliot. These partnerships are a key component of our Accelerate strategy, aligning us closely with organizations building complementary elements of IoT-enabled solutions. We also finalized detailed BLE and high-value segment RFID road maps to closely align our innovation efforts with market opportunities, our core competencies and customer priorities. In 2026, we are working to build on this momentum. A major focus will be completing development for the IFCO BLE smart label program and ramping production to support more than 100 million units per year. In partnership with IFCO, we are expanding our capacity in multicomponent manufacturing to support these volumes. This program represents a transformational opportunity for both our business and the fresh food logistics industry as IFCO works to bring unprecedented digital visibility to the global fresh food supply chain, reducing waste and supporting a more sustainable circular food system. In terms of artificial intelligence, we are developing a BLE AmbientChat.ai demonstration platform to showcase the value of connecting the physical and digital worlds enhanced by real-time intelligence powered by AI. In addition, several programs from our BLE road map will advance this year, focusing on high-value applications across health care, industrial and logistics markets. In particular, we expect to commercialize our ID-BLU smart label, utilizing the next-generation InPlay chip later this year. Together, these initiatives are designed to accelerate growth in our high-value segments and maximize the commercial impact of our BLE and IoT innovation platforms. Transform. Our third pillar, Transform, focuses on expanding the business through strategic M&A that accelerates EBITDA breakeven, broadens our product portfolio, enhances technical capabilities and seeks to increase shareholder value. We have a dedicated team working with our financial advisor, Raymond James, to evaluate our strategic alternative. Transform remains a top priority this year. Our metrics. In 2025, we began reporting several new metrics to monitor our progress against strategic objectives. We learned a lot, made some refinements and have established targets for 2026. First, new sales pipeline and conversion rate. This metric tracks opportunities with new customers or customers we haven't sold to in over 2 years. By year-end, the pipeline included 101 opportunities, up 35% from the start of the year. As mentioned, throughout the year, we converted 29 of the opportunities totaling $1.2 million in sales. This represents a 28% conversion rate of the current pipeline or 16% when including opportunities that were lost or removed during the year. Our 2026 goal is to grow the pipeline to 125 opportunities and convert at least 35 by the end of the year. Second, new product development projects. This metric tracks the number of active NPD initiatives. These projects involve the development of entirely new RFID or BLE tags inlays or labels. As of the end of quarter 4, there were 18 active NPD projects, 10 customer-driven and 8 internally driven. We will continue to measure our NPD pipeline, but will not be setting a 2026 target as our focus will be to ensure enough resources are allocated to producing the multimillion volumes needed by IFCO. Third, NPD project completion. This metric captures the number of NPD projects completed within the quarter. In quarter 4, we completed 1 customer-driven project, bringing us to a total of 5 for the full year. The project completed in quarter 4 is for mass transit application. Our target for 2026 is to complete 5 to 7 NPD projects, including IFCO. We are pleased with the progress we made in 2025 advancing our Perform, Accelerate and Transform strategy. Our fourth quarter results show encouraging momentum, including gross margin improvement following the completion of our production transition to Singapore. In addition, the advancements that the Board has overseen in 2025 are not only related to operational and financial improvements, but it has also taken several shareholder-friendly actions to improve our governance profile over the past 12 months. Such actions include the declassification of the Board with each of the directors now being annually elected and enhancing the Board's collective expertise with the addition of Mick Lopez, a seasoned financial expert and former CFO. As we move into 2026, we are focused on building on the operational foundation established last year, scaling production for IFCO, expanding our customer base and launching new products. With our strategy in place and strong execution ahead, we believe we are well positioned to capture opportunities in the rapidly growing global IoT market. I want to thank our employees, customers, partners and shareholders for their continued trust and support. We are encouraged by our progress and excited about the opportunities ahead in the RFID and BLE markets. With that, I'd like to open the call for your questions. Operator, please open the question queue. Operator: [Operator Instructions] The first question comes from Jaeson Schmidt with Lake Street. Jaeson Schmidt: Just want to dig in a bit more on the IFCO opportunity. Obviously, it's noted that they have over 400 million units out there, and you guys are obviously scaling in anticipation to support a large number. But how should we think about this revenue opportunity from an ASP and gross margin profile standpoint? Kirsten Newquist: Yes, sure. So we're very excited about the IFCO project. We've been working on development for the past year, and so very thrilled that we were able to announce the signing of the agreement. We are scaling up to 100 million units of capacity per year and they do want to tag their full 400 million and growing plus of reusable plastic containers. They also have to replace approximately 10% of those per year. So there's the ongoing opportunity to continue to support their full pool of plastic containers. So we aren't talking specifically about the pricing or specific gross margin, but it is a higher price point than our average price per product, which I think we've previously told around $0.15. And it's also a lower price than we anticipate our standard BLE label, which we've publicly announced is going to be less than $1. So somewhere in that range. And obviously, gross margins, it is a true partnership with IFCO. They are investing CapEx along with us to scale up. They are committing to a certain volume. And so with that, we are -- the gross margin will be less than our target gross margin of 30%, but still a very, very great opportunity for us. Jaeson Schmidt: Got you. That's helpful. And just to clarify, are you guys sole sourced here? How many potential suppliers are there? Kirsten Newquist: It's an exclusive agreement. So this is an exclusive agreement. We will be developing this product exclusively for them, and then we will be the exclusive supplier for them over the term of the agreement. Jaeson Schmidt: Okay. Perfect. And then just the last one for me, and I'll jump back in the queue. When you think about your new opportunity pipeline, can you give us a rough sense of, sort of, how that breaks down by end market? Kirsten Newquist: Yes. So kind of in our current pipeline, so the customer-driven opportunities that we have in our pipeline, it's roughly 25% of them are for health care. I would say another probably 25% for logistics, probably another 25% for food and beverage and then the rest is a variety of applications. Operator: The next question comes from Tony Stoss with Craig-Hallum. Rian Bisson: It's Rian on for Tony Stoss. Just following up on the last question about your pipeline. I think last quarter, you said about 2/3 is at or above your 30% gross margin target. Any changes there? And if you could, what percentage of revenue in the December quarter were from these new opportunities? Kirsten Newquist: So anything that's in our NPD pipeline, those are being developed. So there would be nothing in our quarter 4 that is in our NPD pipeline. Those are new product development, they're in process. And I would still say that roughly 2/3 of the opportunities in the NPD pipeline would be in higher margin targets because these are more specialized, highly engineered products that we're developing. They're not from our standard product portfolio. So in order to accept them into the pipeline, we would want to see that margins would be slightly higher than average. Rian Bisson: Okay. Got it. And then one more on the IFCO deal. It was nice to see that supply agreement come in. It said there was a development phase that needed completion. I'm curious what kind of that looks like throughout the year. And it seems like the plan is still to ramp towards the end of the year towards the larger volumes. Kirsten Newquist: Yes. So we will be -- we are still in product development. We are still making final design changes to it. We will continue to be producing in lower volumes throughout the year for pilots and testing and so on. But the significant ramp-up will be at the end of the year, quarter 4. Operator: The next question comes from [ Rebecca Zamsky ] with B. Riley Securities. Unknown Analyst: I'm on for Craig Ellis. Could you provide some color on the relative contribution and the visibility of the gross margin drivers in 2026, whether that be the Singapore cost elimination, Thailand yield improvements, NPD mix shift and the IFCO ramp? Kirsten Newquist: I'm sorry. So just trying to clarify the question. So are you asking just about our kind of gross margin expectations as we go into 2026? Unknown Analyst: Yes. Like could you just like provide some color on the relative contribution of the gross margin drivers? Edward Kirnbauer: So you're asking about what we're expecting from a gross margin perspective as we move into 2026 as compared to... Unknown Analyst: Yes. Edward Kirnbauer: Okay. Thank you. Okay. Yes. So as we mentioned earlier on the call, we did finish the year at a non-GAAP 25.6% margin. But as we move into 2026, we do anticipate near-term variability as we start scaling for the IFCO project and as well as we have a -- we're onboarding a new customer in Q1. So that will -- in the near term, we're expecting some variability. But if you look at our current customer base, we're definitely seeing strength and improvement, and we expect expansion of the margin as we progress through 2026 with our current customer base. Operator: I'd like to turn the floor back to Kirsten Newquist for closing remarks. Kirsten Newquist: Okay. Well, thank you. Thank you, everyone, for joining. We are pleased to share our fourth quarter results and summarize our full year 2025. So thank you for joining us today, and we'll talk to you next quarter. Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to the KORU Medical Systems Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Louisa Smith, Investor Relations. Please go ahead. Louisa Smith: Thank you, operator, and good afternoon, everyone. Joining me on the call today are Linda Tharby, President and CEO of KORU Medical Systems; Tom Adams, Chief Financial Officer; and Adam Kalbermatten, Chief Commercial Officer. Earlier today, KORU released financial 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 encourage listeners to have our press release in front of them, which includes our financial results and commentary on the quarter. Additionally, we will use slides to support further commentary in today's call, which are also available on the Investor Relations section of our website. During this call, we will make certain forward-looking statements regarding our business plans and other matters. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to risks and uncertainties, including those mentioned in the associated press release and our most recent filings with the SEC. We assume no obligation to update any forward-looking statements. During the call, management will also discuss certain non-GAAP financial measures. You will find additional disclosures, including reconciliations of these non-GAAP measures with comparable GAAP measures in our press release, the accompanying investor presentation and SEC filings. For the benefit of those listening to the replay, this call was held and recorded on Thursday, March 12, 2026, at approximately 4:30 p.m. Eastern Time. Since then, the company may have made additional comments related to the topics discussed. I'd now like to turn the call over to Linda Tharby, President and CEO. Linda, please go ahead. Linda Tharby: Good afternoon, everyone, and thanks for joining us today. Before I provide further detail on our fourth quarter and full year performance, I want to take the opportunity to comment on the announcement of my retirement as was press released earlier today. After 5 fulfilling years, I have made the decision to retire and will resign as CEO of KORU Medical effective June 30. This has been one of the most meaningful chapters in my career, and I am proud of what we have built together, including the strength of the business, our growing leadership position in large-volume drug delivery and an exceptional team that will continue to maximize KORU's potential and move the growth strategy forward. My family and I are ready to embrace the next chapter of my life, and I will turn my focus to Board and advisory activity. This transition has been thoughtfully planned by the Board, and I'm very pleased to announce that Adam Kalbermatten, our Chief Commercial Officer, has been selected as my successor. When Adam joined KORU in 2025, it was immediately clear he was a natural fit, not just for the CCO role, but for the potential to lead the company as a whole. Adam brings strategic discipline, commercial leadership and a proven track record of creating shareholder value. He has spent his entire 20-plus year career in drug delivery, spanning large and small med tech companies and including a CEO role, where he led an effective turnaround and growth strategy that resulted in a successful acquisition by Becton, Dickinson. The Board's confidence in Adam is grounded both in him personally and in the strength of the broader team beside him. With over 115 years of combined med tech and pharma experience across the executive leadership team. KORU has the strategic depth needed to continue to drive our growth potential. As we look ahead, we are committed to a smooth and seamless transition. I will remain on the Board and continue to serve in an advisory capacity through the end of 2026. Adam will be appointed President effective March 15 and will assume the role of CEO on July 1. Many of you have had the opportunity to meet Adam at investor conferences and industry events over the past year, and I look forward to partnering with him through this transition period. I want to thank my family for their support throughout my career. The Board for their partnership and guidance; our shareholders for the trust you have placed in us; our customers for your passion and knowledge; and above all, our KORU team for the enthusiasm and dedication they have demonstrated throughout my tenure. It has been an honor to be part of the KORU team, and I'm confident the best chapters of this company are ahead. And now with that out of the way, let's turn to our fourth quarter and full year results. I'll begin with some commentary on our fourth quarter and full year highlights and strategic progress. Then I will hand the call over to Tom to review our financial results before we open the call for questions. 2025 was a very good year for the organization. We accelerated our revenue growth and made progress in all of our strategic growth pillars, protecting and growing our Core Domestic business, expanding internationally and enabling more drugs to reach more patients. Revenue of $10.9 million in the fourth quarter marked our third consecutive quarter of greater than 20% revenue growth and we delivered full year revenue of $41.1 million, a 22% increase over the prior year. This consistent performance reflects the fundamental strength of our business. A few highlights I want to call out. First, both our Domestic and International Core businesses continued to outperform the underlying SCIg market, which grew approximately 10% in 2025. In the fourth quarter, Domestic and International Core grew 18% and 71%, respectively, driven by a recurring base of approximately 59,000 patients. We received EU MDR certification for the FREEDOM60 with prefilled syringe compatibility, marking a critical regulatory milestone that positions us to pursue the ongoing valve-to-prefilled syringe conversion across Europe. We also received 510(k) clearance for RYSTIGGO in January, which marks the ninth drug cleared on the Freedom Infusion System and our second non-IG clearance. This is a step in our strategy to expand our platform beyond IG, and it opens a meaningful new channel for us in the infusion clinic setting. I'll speak to further details on the RYSTIGGO opportunity in a subsequent slide. We are also announcing two new pharma collaborations as we continue to expand our development pipeline into two new therapeutic areas, a Phase III nephrology molecule and a Phase I multi-indication drug. We ended the year with $8.9 million in cash and achieved positive cash flow from operations, continuing the progress we've made towards sustained profitability. Building on that momentum, we are initiating 2026 revenue guidance of $47.5 million to $50 million, representing growth of 15% to 22%, and positive adjusted EBITDA and cash flow positive for the full year. Tom will provide additional color on our guidance and underlying assumptions. Now moving to a few comments on our strategy. Health care continues to move from the hospitals to infusion centers to the home and large volume subcutaneous infusion is a direct beneficiary of that shift. In our Core SCIg business, we operate in a greater than $450 million global market, where penetration versus IVIG remains below 20% in the U.S. and external forecast project continued 8% to 10% growth over the next 5 years. We have 7 launched SCIg drugs from the major IG pharma manufacturers on our label and drug manufacturers are actively innovating their IG portfolios, all of which create opportunities for increased subcutaneous penetration and for KORU to capture additional global share. Outside of SCIg, there are more than 95 new drugs in development with volumes greater than 10 ml across multiple indications. IG was the first mover in large volume subcutaneous delivery, and there is significant investment going into subcu formulations across broader therapeutic areas. A large part of our strategy is enabling the administration of those drugs on our system. Turning to our Domestic business. I want to highlight a few key areas, our growing recurring revenue base and the expansion into new therapeutic areas. We have grown our recurring global patient base by approximately 20% to 59,000 global chronic SCIg patients on the KORU Freedom System. The global SCIg market saw healthy growth of approximately 10% this year and industry projections are for 8% to 10% growth in the coming 5 years. With our growth of over 20% this year, we are growing our global SCIg leadership position and will continue to expand through our new product development efforts and key accounts and pharma collaborations. We are also beginning to diversify our business. The clearance of RYSTIGGO, a non-IG drug enables our entry into the infusion clinic channel. With our filing of the 510(k) for Phesgo in the fourth quarter of 2025, we are also anticipating entry into the oncology market in the second half of 2026. We are also closely watching the evolving clinical activity around secondary immunodeficiency or SID. Outside the U.S., SID has been a key focus in many of the large pharma players and there are several ongoing pharma trials that are expected to complete in 2027. Increases in SID are being driven by an aging population, higher prevalence of chronic illnesses and increased use of immunosuppressive treatments, such as CAR T cell therapy. As reimbursement coverage expands in this area, it could meaningfully broaden our U.S. opportunity. Moving to International. This business was one of our largest growth drivers in 2025 with growth of 80%, and we see even greater potential ahead. The overall European SCIg pump and consumables market is valued at approximately $50 million, and we grew our share from approximately 10% in 2024 to 20% in 2025. We remain well positioned to continue expanding our presence in the market and capturing additional growth opportunities. We expect most of our growth to come from the continued shift across large pharma from vial-based delivery to prefilled syringes. The shift from vials to prefilled syringes simplifies the administration process significantly with up to 80% reduction in drug preparation tasks. This last quarter, we received our MDR certification in the EU for our KORU FREEDOM60 system. Combined with the earlier FreedomEdge MDR clearance, we now have two clear pumps for prefill administration. Our system was preferred by over 75% of patients due to its ease of use. That's a meaningful improvement in the day-to-day experience for patients managing a chronic condition at home. Overall, the European opportunity is significant, and we believe we are only beginning to capture it. With 2 MDR cleared pumps, a system that is patient-preferred and pharma driving a broad shift to prefilled syringes, we are well positioned to continue taking share. With a roughly $50 million addressable market in Europe alone, we see a significant opportunity ahead. And now let me turn to our pipeline. Beyond IG, the new drug pipeline now has 9 active opportunities. That combined represent more than 7 million annual infusions worldwide. Within the next year, we anticipate having 3 commercial stage assets on our label, vancomycin, deferoxamine and the Phesgo oncology opportunity. Together, these represent approximately 2.2 million estimated annual global infusions. Two of those 9 opportunities are new this last quarter, a Phase III nephrology drug, and a Phase I multi-indication drug. We are working with our pharmaceutical partners to help advance the delivery of these molecules. Once launched, they are expected to represent combined commercial opportunity of approximately 3 million annual infusions. We now have 9 subcutaneous drugs cleared for use with the FREEDOM Infusion System. IG representing approximately 5.4 million annual infusions and non-IG representing approximately 250,000 infusions. On the IG side, our 6 active collaborations with the major IG manufacturers span new device formats and expanded indications. Work that directly supports continued share gains and geographic expansion as those programs move towards launch. When you step back and look at the full picture, 9 subcutaneous drugs on label with low penetration, 9 drugs in active development with KORU and more than 95 large-volume subcutaneous drugs still in development across the pharma landscape. The runway here is substantial. And now let me spend a moment on RYSTIGGO, for which we received 510(k) clearance on our Freedom Infusion system in January. RYSTIGGO is indicated for generalized myasthenia gravis, a chronic autoimmune disease that causes muscle weakness affecting a patient's ability to control voluntary movements, including swallowing and breathing. In the U.S., this represents a patient population of approximately 60,000 patients. UCB launched the drug in July 2023 and currently publicly reports having reached more than 2,400 GMG patients globally at the end of 2025. We project our total U.S. market opportunity to be about 20,000 infusions in '25, growing to over 100,000 infusions in 2030. It's worth noting that RYSTIGGO has already been used off-label with the Freedom Infusion system. So this clearance enables us to go after further share. Additionally, this clearance marks our first collaboration with UCB and enables our entry into the infusion clinic channel, which opens a new commercial pathway for KORU beyond the home. I'm extremely proud of the team's execution and the strong momentum we built. The strong patient growth in our U.S. and international markets and meaningful pharma pipeline progress across both IG and non-IG opportunities, we're well positioned heading into 2026. I'll now turn the call over to Tom to review our financial results and guidance for 2026. Tom Adams: Thanks, Linda, and good afternoon, everyone. We are pleased with another strong quarter of revenue where we delivered $10.9 million, representing 23% year-over-year growth. This marks 3 consecutive quarters of greater than 20% revenue growth, a reflection of the momentum we've built across the business. Breaking down the performance by business. Domestic Core grew 18% year-over-year, driven by the SCIg market, which grew between 8% to 10% in the quarter. New KORU patient starts and market share gains, resulting in higher pump and consumable volumes. International Core grew 71% year-over-year, fueled by new patient starts and increased penetration into established European markets. Prefilled syringe conversions were a significant driver and we expect this to remain a tailwind as additional markets convert. Our PST business decreased 30% year-over-year. This business is inherently variable given the milestone-based nature of revenue recognition. The decrease reflects timing of contract milestones, for work completed and does not reflect the change in the activity level of our collaboration portfolio, which as Linda just described, continues to grow. For the full year, we delivered revenue of $41.1 million, representing 22% growth over the $33.6 million we reported in 2024. Domestic Core grew 11% for the full year driven by SCIg market growth and new account share gains that increased consumables and pump volumes. Accounting for the dynamic that occurred with our international distributors going back to the U.S. which we discussed in the third quarter call, underlying growth would have been 14% for the full year. International Core grew 80% for the full year, driven by strong SCIg market growth our growing footprint in European markets and entry into several new geographies. Accounting for the international distributor sales dynamic, underlying growth would have been 73% for the full year. Finally, PST declined modestly. Again, due to the project milestone timing, partially offset by higher clinical trial orders versus the prior year. Moving to gross margin. We had a 30 basis point reduction over the last year's Q4, driven by higher material costs and tariffs that were mostly offset by a stronger customer mix in the U.S. where we have higher average selling prices. We delivered a full year gross margin of 62.3% in line with our expectations at the start of 2025. The year-over-year decrease was driven by higher packaging material costs, tariff-related charges and geographic sales mix from our growing international business. Despite these headwinds, we remain resilient in keeping margins above 50% every quarter and on a full year basis. Turning to cash. We ended the year with $8.9 million in cash, representing full year cash usage of $700,000. Importantly, we achieved positive cash flow from operations in both the third and fourth quarters and also for the full year. The key drivers were revenue growth and disciplined spending that enabled a further reduction in net losses. We largely maintained our working capital balance while managing the growth needs of the business, and we continue to invest in capital expenditures to support future new product launches. Turning to our full year financial highlights. I want to call out two things in particular. First, with 22% revenue growth, operating expenses increased by just 3%, demonstrating the discipline we've maintained and the continued operating leverage we have generated. And second, we delivered positive adjusted EBITDA of $600,000, a 124% improvement versus the prior year, marking 3 consecutive quarters of positive adjusted EBITDA. Together, this reflects significant P&L improvement as we march towards profitability. Looking ahead to 2026, we are initiating guidance of $47.5 million to $50 million in revenue, representing growth of 15% to 22% and gross margins for the full year of 61% to 63%. We are also targeting positive adjusted EBITDA and positive cash flow for the full year. On revenue, the primary drivers will be continued U.S. and international share gains in SCIg, NRE revenue from at least 4 new collaborations, 2 already signed and modest incremental revenue from recent or soon to be cleared 510(k) filings. We have also incorporated some geopolitical risk into our guidance given recent events in the Middle East. As you think about our 2026 revenue cadence, I'd note that first half of 2025 benefited from a meaningful prefill inventory build in a key EU market, which we do not expect to repeat at the same level in 2026. Additionally, we would expect revenue to ramp in the back half as we see revenue recognition from recent and pending 510(k) clearances and the introduction of prefilled syringes into new geographies. On gross margin, we expect pricing and manufacturing efficiencies to support the 61% to 63% range as we enter new markets and channels. The associated revenue mix may move margins slightly in either direction, but we feel confident holding that range overall. We also have planned for start-up costs for the new production line for the next-generation pumps. We are confident that we will continue to offset incremental external pressure on costs with our operational excellence programs. On profitability, we are guiding to cash flow positive and positive adjusted EBITDA for the full year. Cash usage is expected to mirror the 2025 cadence with operating leverage building throughout the year and positive cash flow anticipated in the second half. I'll now turn the call back to Linda for closing remarks. Linda Tharby: Thank you, Tom. I want to close with a few thoughts on key milestones in 2026 and our broader market opportunity. . We started the year off strong. In our Domestic Core, we have gained the UCB RYSTIGGO 510(k) clearance and our Roche Phesgo 510(k) application submitted on time in December, giving us two new non-IG drugs currently moving to commercial potential in 2026. We also have our next-generation pump, the FREEDOM60 expected to have 510(k) and MDR submissions this year. The Phase II Flow Controller 510(k) submission is projected for a global submission either in late 2026 or early 2027. Internationally, we have achieved MDR clearance of our FREEDOM60 with prefilled syringe compatibility, and we have now begun to ship that product into the EU market, anticipating prefilled conversions in several EU markets. On our efforts to add new drugs to our label, we have signed 2 of our 4 new collaborations and anticipate 2 additional 510(k) submissions this year for deferoxamine and vancomycin. In closing, I want to step back and frame why we believe KORU is well positioned, not just for 2026, but for the years ahead. This slide references the strong foundation that we have built for our business, some of our recent accomplishments and finally, where we believe we are headed. On the left, you'll note some of the foundational aspects that make KORU an attractive opportunity. We operate in a large and growing market for subcutaneous drug delivery with approximately 95 large volume drugs in development by major pharmaceutical companies. We have a leading position in the U.S. market that is growing 8% to 10%, where we consistently outperform market growth rates. We have significant momentum with international expansion with much more runway to grow and gain share. Underpinning this is a recurring revenue model across a global base of nearly 60,000 patients. And looking ahead, we have 9 pipeline drug opportunities outside of IG, with RYSTIGGO and our oncology market entry, representing near-term commercial opportunity in 2026. Moving to the right, the middle box is a reference to our recent accomplishments and performance, where we have demonstrated the ability to consistently grow revenues more than 20%, where we have attractive gross margins, and where we have proven the operating efficiency of our business model, delivering a 63% in improvement in cash burn and 124% improvement in adjusted EBITDA for 2025. On the right are our long-term targets and some of our strategic goals that Adam and team will continue to work towards, $100 million in revenue, accelerated growth rates, gross margins above 65% and an EBITDA margin of 20% or greater. 2025 performance shows that the model is working. 2026 is about continuing to execute against it. Before opening the line for Q&A, I want to again thank the entire KORU team for their continued commitment to our mission. Looking back on my tenure with the organization, the progress we have made together is something I'm immensely proud of. The business is stronger. The strategy is clear. And with Adam stepping into the CEO role, I have every confidence in what lies ahead. It has been an honor being part of the KORU team, and I look forward to seeing the next chapter unfold. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question is from Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: Great. First off, Linda, congratulations on all you have achieved. We're certainly sad to see you go, but look forward to working closer with Adam and the rest of the KORU team, I wish you the absolute best in your next chapter. I was hoping to start with some questions on OUS, maybe two questions. . First, on FREEDOM60, maybe talk about what this product does for you in that market? How much of the market might this open up? And then two, you've spoken about, I want to say it's the 5 geographies that you plan to enter, how should we think about the cadence of those geographies and the progress so far. Linda Tharby: Frank, and thank you. It has been an extreme pleasure working with you and the broader Lake Street team. Clearly, very confident as we think about Adam stepping into role and the broader team that surrounds him. So on your questions on the FREEDOM60 and the opportunity that lies ahead of us. Maybe I'll just start with the broader opportunity we're going after here is a $50 million total addressable market in Europe. We were very successful in 2025 in moving our share position from a 10% to a 20% share, but obviously, if you position that share closer to our 60% U.S. share, you see the magnitude of the opportunity we have in front of us in Europe. . So most of that opportunity and share gain in 2025 was driven by a successful prefill conversion in a major market in Europe, and the pharma partner that we're working with has plans to roll this out in several new markets over the course of the coming year. And the 5 geographies you referred to are not new markets for us, but there are markets we're in today, but with fairly low penetration, and we see the opportunity in prebills to really grow that market significantly. So what we see today is that we have our second market. We've started our year off strong in '26 with our second market that's really going live now with this prefill launch, and we expect to see likely a new market being added 1 to 2 every quarter as we move through the year. I think the last part of the question was just the FREEDOM60 and the new approval. Very excited about that because now we have 2 pumps, both our 60 and our Edge that are both approved. We required some slight modifications to our FREEDOM60 and an update to our IFU, we just received approval on that in the fourth quarter of '26. So great news for us. We've now just started distributing that new product into the market today. And of course, what comes at the back end of the year is our FREEDOM360, which is our pump that will work for all prefills. So hopefully, that got all of those questions. Frank Takkinen: Perfect. Maybe just for my second one, Tom, a little more composition of the guide would be good color. I heard ramping revenue throughout the year as some of these initiatives progress, but maybe how much contribution from U.S.? How should we think about that growth rate, OUS? And then any cadencing color you'd like to provide would be great, too. Tom Adams: Frank, thanks for the question. Yes. Great. So we're continuing to see momentum coming into Q1 after a record Q4. So that's very strong for us, particularly on the international side. So as mentioned earlier, prefill still is a driver of that market. So we continue to see that progress. I would say from -- on the international side, you will see a step up in the back half of the year, based on what Linda just mentioned in some of those countries going online for prefills. And then on the U.S. side, I think that's slow and steady. I mean you've seen the last couple of years, a pretty steady growth rate on the U.S. side. And then, of course, as we get further along into the year, you will see more growth from some of those 5 tenant approvals that are upcoming. And then yes, then we'll just continue to grow up there. And then on the PST side, you'll see consistent revenue trajectory like you've seen in the last couple of years. Operator: Our next question is from Chase Knickerbocker with Craig Hallum Capital Group. Chase Knickerbocker: I just want to echo Frank's comments. Obviously, we wish you the best, Linda and all your future endeavors. I appreciate everything you've done there, which is quite a bit. So -- and obviously, congrats Adam on the new role as well. Maybe just first for me on the Domestic side. 18% growth is obviously substantially above the market. Can you give us some sense for what's happening in the market is allowing you to take so much share? And maybe 1 and then 2 on that front, how should we think about the opportunity for further share gains in 2026 after a pretty strong year in '25? Linda Tharby: So thanks, Chase, for the well wishes. I appreciate it, and you and the Craig-Hallum team have been great. So first, yes, very proud of the U.S. growth in the fourth quarter. We continue to see new account gains overall on that business. And of course, we had the return happen of the distributor in international that move back to the U.S. So as we projected, all that business is now back, which is great news. I'll give it to Tom, maybe to add some specifics on the U.S. and what we might see in '26. Tom Adams: Yes. So in '26, as I mentioned, we continue to see a strong SCIg market, and we expect that to continue to grow throughout the course of the year. And then, as I just mentioned to Frank, as we continue to receive approvals for new drugs on label throughout the year, we expect some growth off of that as well. So we will continue to see that revenue grow sequentially in the U.S. market. . Chase Knickerbocker: Maybe on that front, on the novel therapies that we're adding, particularly in the second half. Can you give us a sense for kind of the magnitude of impact there? And then just second for you, Tom. If we think about EBITDA in the year, obviously, a little bit kind of open-ended on guidance. Can you give us a sense for how much operating leverage we should kind of expect from you guys in '26? Obviously, low single-digit OpEx growth in '25 was quite a bit of operating leverage. Can you just give us some goalposts as far as what we should be expecting for OpEx growth in '26? Linda Tharby: So maybe I'll just start with novel therapies and the overall impact that we're thinking about. And what I would say is we have changed its name to pharmaceutical services and clinical trials. So we're still figuring that out here, but now we're calling that our PSD business. So obviously, in terms of overall revenues, these revenues are milestone-based based upon the overall innovations and clinical trials that we're servicing. So that number I would suggest has always been around where it's been historically. So not to expect anything new there, but obviously, very excited about the two new deals that we signed this past quarter, and maybe I'll turn it over to Adam just to talk a little bit more about that. Adam Kalbermatten: Yes. Thanks, Linda. So over the last quarter, we signed two new deals with pharmaceutical companies. One of them is a nephrology drug that's in Phase III. We're really excited about that. The other one is molecule in early Phase I. It's a multi-indication drug. In total, this represents approximately 3 million annual infusions between the two of them. So really excited to add those into our pipeline and get the work going on the feasibility side to keep these moving through the pharmaceutical pipeline and into our future prospects. Linda Tharby: Thanks, Adam. And I think before I just turn it over, I think what you were looking for as well here, Chase was the new drugs on label, and what we see in the near term with RYSTIGGO, and then the other two drugs vancomycin and deferoxamine. Overall, I think a couple of things. First of all, that many of these drugs are administered in infusion clinics. So that is a new entry point for us, and we've already started to hear some of our customers say, "Hey, can we try these other drugs." So we see that as a broader opportunity, one which I'm not going to put a number on today. But I think the numbers that we've mentioned in the past for these 3 drugs in total, somewhere between $0.5 million upwards of $0.5 million of opportunities. We've got a modest number today knowing that two of those drugs are not approved yet. And so we'll refresh the models as time goes on, and we learn more and see how many new accounts we can gain. I would also say on RYSTIGGO, we already had a large portion of that business off label. So excited for the entry. We're already hard at work there, and we'll have more to report as quarters go on. And Tom, a question on the operating leverage. Tom Adams: Yes. Just on the EBITDA, Chase, we continue -- last year was a great year for us. We had adjusted EBITDA positive. We're excited about that. We're excited to hit cash flow positivity. And as I mentioned in the guidance, we will be positive adjusted EBITDA once again and continuing to grow from there as well as cash flow positive for the full year, not just in operations, but for the full year. So we're excited about that again. We will continue to see leverage because our business model allows it with the way our SG&A is set up in our business. So we'll get more specific on that as the year funds through, but we expect to continue to progress on those fronts. Operator: Our next question is from Caitlin Roberts with Canaccord Genuity. Caitlin Cronin: Linda, I'm so sad to see you go, but you're truly an inspiration to women and meta-like in the industry. So thank you so much. I guess just starting with RYSTIGGO, how are you thinking about the go-to-market model here in infusion clinics? And how does this really position you to penetrate the oncology opportunity more quickly when cleared? Linda Tharby: Right. So first, Caitlin, thank you so much. The Canaccord team has been great. And you personally, right back at you in terms of women in leadership, and thank you to all the men who support us in doing what we do. So getting to the overall RYSTIGGO opportunity and how that entry into infusion clinics, I would say, broadly, what we discussed in the earnings was that RYSTIGGO, we see is about 20,000 infusions in the U.S. here today, going to about 100,000 infusions over the course of the next 5 years and even a bigger opportunity globally, which we're at early stages of looking at today. . In terms of infusion clinics and our entry strategy, fortunately for us, this channel today is many of the same specialty pharmacies we deal with are dealing with this channel. I'm going to let Adam say a few words in a moment relative to he's thinking about anything broader relative to our infusion clinic entry, but I would certainly say that oncology infusion center, which I understand can be a little confusing, but oncology infusion centers are different than ambulatory infusion centers and sometimes there's an overlap. So we see this as good for our pending oncology opportunity. It gives us a leap and head start, and then a broader opportunity once we get approval in oncology. Adam, I don't know if you want to add anything. Adam Kalbermatten: Thanks, Linda. Caitlin, I'll start by saying this is our first collaboration with UCB, and it diversifies our revenue beyond just CIG in a meaningful way. On the strategic side, it's significant because as you mentioned, it opens up a new commercial channel for us beyond the home and that's into the infusion clinics. And we see there's a lot more opportunity there in the future beyond RYSTIGGO. As Linda mentioned, we do have off-label sales there today. We look forward to continuing to grow that now that we have the product on label and we could be promoting it. So I want to highlight UCB's reported just over 65% year-on-year growth in global RYSTIGGO sales. So we see this drug has a lot of momentum, and we're really looking forward to continue helping to bring value there. So acknowledging, we've had some really great success over the last few years here under Linda's leadership. The strategic priorities don't change. We have a proven strategy really built around 3 pillars: protecting and growing the Core Domestic business, expanding internationally and enabling more drugs to reach more patients. So I focus really on accelerating the execution against those pillars. I see it as we have a lot of runway in front of us and my job is to make sure we're running as fast and as efficiently as possible towards those opportunities. Operator: [Operator Instructions] Our next question is from Joseph Downing with Piper Sandler. Joseph Downing: Linda and Tom. First and foremost, Linda, I wanted to congratulate you on your retirement. It's been a pleasure working with you and wishing you all the best in the future. Yes, I just wanted to touch on the guidance range here. So it was pretty much in line with where we expected. Just looking at kind of the high end and low end, how you get to each. Curious if you can walk through that. I'm curious if on the low end is a scenario kind of where the new drug clearances and OUS prefill conversions slip into 2027 a little bit. And then the high end is more of you execute everything on schedule in '26. Just curious if you could walk through a little bit more detail there? Linda Tharby: Great. Joe, thank you, and you and your Piper colleagues have been great, and congratulations to you on your recent promotion as well. So referring to the guidance range, I think you had it right. Prefills and the new drugs on label would be -- those are the things that vary. If we get prefill conversions faster, the markets get going faster. That's a great thing. And also new drugs, we get further traction or we get them on our label sooner, there's another big opportunity. The other third piece would be a little bit about the Middle East, which we've got a little bit of a factor in here and depending on the timing of that. And then finally, I would just say, oncology is something we do not have today, a big number in here at all, a very small number. So if we get a bigger head start on oncology or we're looking at new drugs now, I think that could be a meaningful area for us as well. Joseph Downing: I appreciate that and for your comments. One more just on Japan. I know it's been kind of a deemphasized piece of the business with all the great stuff going on in some of the other U.S. markets, but just curious like where you're looking at that for 2026 guidance or expectations there just at a higher level. And is there a point there where the pharma-driven prefill opportunity kind of opens up and makes Japan kind of move back up the list? Yes. Just any color there would be helpful. Linda Tharby: Yes, I'll start, and then turn it over to Adam. So Japan, we see, again, being 1 of the larger IG markets overall, we see that this could be $0.5 million to $1 million total opportunity. We know that today, that's very much a hospital, but moving to the home opportunity and lots of exciting stuff that I'm going to let Adam talk through. Adam Kalbermatten: Yes. Thanks, Linda. In Japan, I'll start with good news, right? So both pumps are approved. Consumables are approved as well. So we're pretty well positioned to continue to grow in that market. At the time we're seeing prefilled syringes there as being important, just as we kind of see in these other international markets. So as those prefills continue to grow, we expect that we're going to be growing with them. So it's a pretty exciting opportunity for us. Operator: No further questions at this time. I would like to hand the floor back over to Linda Tharby for any closing remarks. Linda Tharby: Right. Thank you, operator. I would just want to say thank you to all of you again. I have so appreciated all of your support your guidance, and most of all, your partnership in working with everyone on the call. Thank you all for taking some time with us this afternoon. Incredibly proud I want to say my last thanks to this entire KORU team, to my daughters who actually listened into an earnings call for a change. I told them there were some big news today. So I think they listened in. So thank you to my daughters. Thank you to our Board. Thank you to our investors I'm not gone yet. I am a big investor and will remain so and I look forward to working with all of you as this retirement goes on. But I'm here, as I said, to the end of June, looking forward to supporting Adam and the team and through the end of the year. Have a great rest of your day, and thank you so much. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Inovio Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, March 12, 2026. I would now like to turn the call over to Jennie Wilson. Please go ahead. Jennie Willson: Good afternoon, and thank you for joining the Inovio Fourth Quarter and Full Year 2025 Financial Results Conference Call. Joining me on today's call are Dr. Jacqui Shea, President and Chief Executive Officer; Dr. Mike Sumner, Chief Medical Officer; Steve Egge, Chief Commercial Officer; and Peter Kies, Chief Financial Officer. Today's call will review our corporate and financial information for the quarter and year ended December 31, 2025, as well as provide a general business update. Following prepared remarks, we will conduct a question-and-answer segment. During the call, we will be making forward-looking statements regarding future events and the future performance of the company. These events relate to our business plans to develop Inovio's DNA medicines platform, which include clinical and regulatory developments and timing of clinical data readouts and planned regulatory submissions, our interactions with the FDA regarding our BLA for INO-3107, including our yet to be scheduled meeting with the FDA to discuss eligibility for the accelerated approval program. The potential benefits of INO-3107, along with capital resources including the sufficiency of our cash resources, our expectations regarding competition, the size and growth of the potential market for INO-3107, if approved, and our ability to serve those markets. The rate and degree of market acceptance of INO-3107 and strategic matters. All of these statements are based on the beliefs and expectations of management as of today. Actual events or results could differ materially. We refer you to the documents we file from time to time with the SEC, which, under the heading Risk Factors, identify important factors that could cause actual results to differ materially from those expressed by the company verbally as well as statements made within this afternoon's press release. This call is being webcast live, and a link can be found on our website, ir.inovio.com, and a replay will be made available shortly after this call is concluded. I will now turn the call over to Inovio's President and CEO, Dr. Jacqui Shea. Jacqueline Shea: Good afternoon, and thank you to everyone for joining today's call. These are very exciting times for Inovio with our first BLA for INO-3107 as a potential treatment for adults with recurrent respiratory papillomatosis or RRP, currently being reviewed by the FDA. In late December last year, we were pleased to announce that the FDA accepted our BLA review under the accelerated approval program. The FDA granted a standard 10-month review with a Prescription Drug User Fee Act or PDUFA target date set for October 30 of this year. While the BLA was accepted under the accelerated approval program, in the file acceptance letter, the FDA noted as a potential review issue, its preliminary conclusion that the company has not provided adequate information to justify eligibility for the accelerated approval program. This preliminary conclusion was made during the initial 60-day filing review period and was the first time a potential issue with respect to eligibility have been raised. As Mike will explain later in the presentation, we strongly believe that INO-3107 does fulfill the criteria for review under the accelerated approval program, by meeting an unmet medical need and providing a meaningful therapeutic benefit over existing treatment. The FDA has agreed to meet with us, we have provided additional documentation, and we're waiting for them to provide a meeting date. In the meantime, we are continuing to advance our commercial preparations, focusing on optimizing and expanding our resources towards our October PDUFA date. To achieve this, Inovio has taken steps to further conserve its financial resources, rescoping projects and activities and eliminating roles that don't directly support our primary goal for advancing INO-3107 towards U.S. approval. These efforts have enabled the extension of our estimated cash runway into the fourth quarter of this year. While the majority of our resources are directed to advancing our lead candidates towards approval, we are continuing to leverage the power of partnerships to advance other promising candidates in our pipeline. We have recently announced an exciting opportunity to build on our research in glioblastoma through an innovative Phase II adaptive platform trial sponsored by the Dana-Farber Cancer Institute, where we'll collaborate with Akeso to evaluate INO-5412 in combination with their novel PD-1, CTLA-4 bispecific antibody checkpoint inhibitor. Like our lead program, INO-3107, this program utilizes the antigen-specific cytotoxic T cell generating ability of our DNA medicines platform, but in this instance, to target cancer cells. We have also continued to advance some of our earlier-stage next-generation DNA medicine candidates, which I'll touch on later in this presentation. I look forward to advancing these programs in tandem with our top priority for 2026, achieving FDA approval of our first product and bringing INO-3107 to patients. Now I'll turn it over to Mike for some additional insights on our regulatory progress with 3107. Mike? Michael Sumner: Thanks, Jacqui. As Jacqui outlined, we have made significant progress with our BLA as outlined on this slide, including the acceptance of our file for review under the accelerated approval program, with a PDUFA date of October 30, 2026. We believe our BLA makes a strong argument outlining how INO-3107 meets an unmet medical need and provides a meaningful therapeutic benefit over existing treatments, thus fulfilling the accelerated approval program criteria. Our next step is to discuss this with the FDA. In preparation for this meeting, they had requested that we complete an assessment aid, which we submitted in February. In this document, we reiterate and expand on our rationale for accelerated approval review. It is important to note that while we wait to meet with the FDA, the BLA is under active review, and we have been responding to routine requests for information. In addition, we submitted an updated protocol for our confirmatory trial to the IND and are awaiting feedback from the agency regarding finalizing the study design. I'd like to take a moment to focus on why we believe 3107 meets the accelerated approval criteria. Following the unexpected full approval of PAPZIMEOS in August last year, the regulatory landscape changed with respect to the requirements for eligibility. Based on published FDA guidance, when there's an already approved product, eligibility for accelerated approval depends on a candidate's ability to provide a meaningful therapeutic benefit over existing treatments and its ability to meet a remaining critical unmet need among patients. We believe that 3107 meets both of those criteria based on demonstrated efficacy and improved safety profile that does not include required surgery during the dosing window and a differentiated mechanism of action that provides the ability to treat patients who are not able to be served by existing therapy. Getting into more detail. In our trial, the majority of patients experienced fewer surgeries after treatment with 3107, with most experiencing a 50% to 100% reduction compared to the year before treatment. That clinical benefit continued to improve in the second 12-month period post treatment with half of the patients requiring 0 surgeries during that time. Efficacy was achieved without the vast majority of patients requiring surgery during the dosing window, a key differentiating advantage of the 3107 safety profile. Remember, in our Phase I/II trial, our protocol counted every surgery conducted after day 0. In contrast, surgeries conducted during the 12-week treatment window in the PAPZIMEOS trial were not counted against the efficacy end point, and 72% of the reported complete responders in the single-site Phase I/II trial had at least 1 surgery during the 12-week dosing window. To maintain what is referred to as minimal residual disease, or MRD, a protocol that is required for the efficacy of that product and is included in the label. Additionally, 3107 offers a differentiated mechanism of action, which provides the ability to treat patients who are not served by existing therapy, and thus address an unmet need in the RRP treatment landscape. PAPZIMEOS utilizes a gorilla adenoviral vector, and it is well established in the scientific literature that efficacy of adenoviral vectors may be impacted by preexisting neutralizing antibodies as they have been shown to limit the immune response that patients with these antibodies can generate. In addition, several immune factors relating to the papilloma microenvironment were identified by the investigators as being linked to the lack of efficacy for PAPZIMEOS. In contrast, ad data published in Nature Communications shows that efficacy of INO-3107 is not impacted by the papilloma microenvironment. We look forward to discussing our rationale for review under accelerated approval with the FDA. And with that, I will now turn it over to Steve for a brief commercial update. Steve? Steven Egge: Thanks, Mike. The burden of RRP on patients is significant, and there's an urgent need for treatment options that reduce the need for repeated surgery. RRP is characterized by chronic wart-like growth called papilloma, to grow in the respiratory tract and can cause difficulty speaking, swallowing and breathing. Surgery is still the standard of care and patients have numerous surgeries, sometimes hundreds of surgeries in the most severe cases throughout their lifetime. Every surgery matters to patients because the risk is well established. Every surgery carries the risk of permanent damage to the vocal cords and airways, and the cost of surgery can have a significant impact as well. Traveling hundreds of miles for specialized RRP care, missing work and social functions while preparing for or recovering from surgery, the anxiety and frustration of impaired voice quality making it difficult to communicate, and the psychological trauma of undergoing repeated surgeries. This is why we're committed to delivering on the potential of 3107 for RRP patients. And that potential has been validated in market research, which supports our belief that this product is approved to become the preferred treatment based on its efficacy, tolerability and simple treatment regimen. I shared these insights previously, but I think they bear repeating. Physicians we engaged in market research were most interested in the fact that the vast majority of patients by 50% to 100% reduction in surgery from 3107 and for many of them, that clinical benefit continued to improve over time. Physicians were similarly impressed with the tolerability data, which shows that 3107 was generally well tolerated, limiting the impact on patients return to daily life. This is important considering the treatment protocol includes 4 doses over a relatively short period of time. And in terms of the treatment regimen itself, 3107 takes into account concern of both physicians and RRP patients. It can be administered in the physician's office without an ultra cold chain requirement. The device is simple to use and importantly, there's no requirement for surgeries to maintain minimal residual disease during the treatment window. This is a key area of differentiation from Precigen's gorilla adenoviral based therapy, which, as Mike noted, requires scoping and surgery during the treatment window to maintain minimal residual disease. Precigen's data publication indicates that these surgeries are required to mitigate the effect of the immunosuppressive papilloma microenvironment to maximize the chance of clinical benefit from the product. We believe this key difference makes 3107 a more patient-centric approach to treating RRP. I will also mention that the recently published RRP foundation position statement on the management of adults with RRP now recommends immunotherapy as first-line treatment for RRP and notes that 3107 if approved, would also be included as a first-line treatment option. I would also like to share just a few updates on our ongoing commercial launch preparations. Over the past year, we've executed critical market research, which informed strategic choices on launch preparations for 3107. We completed targeting segmentation of product positioning work and developed our pricing strategy. On the operational front, we've selected key commercial partners, including our third-party logistics provider, specialty distributor, specialty pharmacy, patient services hub and our agency of record. We are also finalizing our go-to-market model and planning the build-out of our commercial organization. I look forward to providing further updates on our progress next quarter. I'll now turn it back over to Jacqui for a pipeline update. Jacqueline Shea: Thanks, Steve. While we remain steadfastly focused on INO-3107, in the past few quarters, we've also provided some important updates on how we're continuing to advance our DNA medicine platform. That includes promising Phase I proof-of-concept dMAb data published in Nature Medicine in October of last year, which demonstrated the technology's ability to durably and tolerably produce monoclonal antibodies, a complex protein within the human body for up to 72 weeks without generating antidrug antibodies. Additional data presented this year has now demonstrated consistent production of dMAbs out to 96 weeks. Our DPROT technology builds on this research, aiming to enable additional types of complex proteins being made within the body. Preclinical work evaluating the potential to expand into in vivo production of other types of therapeutic proteins, which presented at the World Federation of Hemophilia Global Forum last November, including our first data on Factor VIII production. We see great potential for this DPROT technology to treat multiple diseases and are actively seeking partnerships to advance additional rare disease targets into clinical evaluation. We also announced an exciting opportunity to build on our research in glioblastoma, or GBM, the most common and deadly brain cancer, through an innovative Phase II adaptive platform trial sponsored by the Dana-Farber Cancer Institute. In this trial, we will partner with Akeso to evaluate INO-5412 in combination with cadonilimab, their first-in-class PD-1, CTLA-4 bispecific antibody checkpoint inhibitor. The trial is planned to initiate in the second half of this year. INO-5412 is composed of INO-5401, which encodes for 3 tumor-associated antigens. And then INO-9012, which encodes for IL-12 and immune stimulants. When combined with a checkpoint blockade, this targeted DNA immunotherapy has the potential to overcome the limitations for immune checkpoint therapy alone by stimulating a T cell-based immune response against the tumor antigen, and driving T cell infiltration into the GBM tumor micro environment. Combining 5412 with Akeso's novel checkpoint modality represents an important evolution of our research in GBM, building on our previous data showing the potential to improve patient outcomes and highlights our ongoing commitment to advancing innovative treatments for rare diseases with significant unmet need. We are looking forward to collaborating with these 2 trailblazing partners and leveraging a unique opportunity to efficiently advance another promising late-stage candidate. Now I'll turn it over to our CFO, Peter Kies, to give financial update. Peter? Peter Kies: Thanks, Jacqui. Today, I'd like to provide an overview of Inovio's financial results for the fourth quarter and full year of 2025. As Jacqui noted, our primary goal is to advance INO-3107 towards approval, and we remain focused on directing resources and extending our cash runway towards a potential launch date in 2026. With the October PDUFA date in mind, we have further prioritized programs and resources, including recently reducing head count by approximately 15% and have focused on continuing to reduce spending to extend our cash runway. We now estimate our cash runway to take us into fourth quarter 2026. This projection includes an operational net cash burn estimate of approximately $22 million for the first quarter of 2026. Historically, our first quarter operational net cash burn runs higher than other quarters. These cash runway projections do not include any further capital raising activities that we may undertake. We finished the fourth quarter of 2025 with $58.5 million in cash, cash equivalents and short-term investments compared to $94.1 million as of December 31, 2024. Turning to our results for 2025. Our total operating expenses dropped from $20.5 million in the fourth quarter of 2024 to $17.5 million in the fourth quarter of 2025. Our full year operating -- operational expenses decreased 23% from $112.6 million in 2024 to $86.9 million in 2025. Inovio reported a net income for the fourth quarter of 2025 of $3.8 million or $0.06 per share and a dilutive net loss per share of $0.26. Our total net loss for the full year of 2025 was $84.9 million or $1.81 per share basic and dilutive. The net income for the fourth quarter 2025 was primarily driven by $21.2 million noncash gain on fair value adjustment related to our warrant liability as the fair value of the warrants fluctuates with our share price and other market inputs, the adjustment can result in significant variability in our reported net income or loss. As a reminder, you can find our full financial statements in this afternoon's press release as well as in our annual report Form 10-K filed with the SEC today. And with that, I'll turn it back over to Jacqui. Jacqueline Shea: Thanks, Peter. I'd now like to pause and open up the call to answer any questions you might have. Operator? Operator: [Operator Instructions] And we have our first question from Ted Tenthoff with Piper Sandler. Edward Tenthoff: Great. I wanted to first start just with respect to the conversations with the FDA upcoming regarding accelerated approval. Are there any additional data that you would need to submit? Or what other factors will go into that conversation for potentially transitioning the review to accelerate our approval? Jacqueline Shea: Thanks, Ted. Great question. So there's no new clinical data. However, we have already submitted new documentation to the FDA in the form of an assessment aid, which we submitted in February. So we are now waiting for the FDA to get back to us regarding the date of the meeting. Mike, anything you want to add to that? Michael Sumner: Yes. The only thing I'd add, Ted, is we utilize that document to sort of reiterate what we put in our original BLA submission and really expand on our rationale for accelerated approval review. So we're -- as I mentioned, we're looking forward to having those discussions with the agency. Operator: We have our next question from Jay Olson with Oppenheimer. Jay Olson: Thanks for providing this update and taking our questions. We had a couple of questions. I guess maybe to start with, if you do eventually gain alignment with the FDA on a priority review, how would a 6-month priority review timeline impacts your ability to launch? And any launch preparations that you have underway. If you could just talk about that, that would be great. And then we have 1 follow-up, please. Jacqueline Shea: Thanks, Jay. Nice to hear from you. So our focus at the moment is really on ensuring we have align with FDA for review under the accelerated program. We're not really focused on priority review at this stage. However, having said that, we are well advanced in our commercial preparations. And I'll ask Steve to make any comments here. Steven Egge: Yes. So as I mentioned in the prepared remarks, I mean, we've done a lot of market research with physicians, with patients, with payers. So we feel like we know the market opportunity quite well. We've built kind of our strategies around that. We've got our commercial partners kind of onboard or selected. And we will be prepared to get out of the gate really, really quickly, should we get approved. So I think we're doing everything that we need to, to be prepared and to move very quickly once the FDA makes a decision. Jay Olson: Okay. Great. And then if we could follow up on the publication in Nature Communications and The Laryngoscope. Can you just talk about any feedback that you got from KOLs and patients and how you might anticipate that feedback to translate into the uptake trajectory upon approval? Jacqueline Shea: Yes. Great question, Jay. So as we mentioned on the call, we do believe that we have the preferred product profile in this space, and that's based across efficacy, tolerability in a very patient-centric treatment regimen. And when we have conducted research and with research conducted by third-party providers, both patients and physicians really appreciated and preferred the product profile for 3107. And what was really interesting to them was the fact that the majority of patients see a significant reduction in the numbers of surgeries. So 72% of patients see a 50% to 100% reduction in the first year following treatments, and that improves up to 86% in the second year with 50% of patients in the second year, requiring no surgeries at all. So a very strong efficacy profile. With regards to tolerability, the fact that we don't require these minimal residual disease surgeries during the treatment window is very well received. And for the competitor product, over 70% of the patients required surgery during their treatment window, requiring one or more surgeries during that treatment window. Actually -- sorry, that number was actually 83%, and it was 72% of their complete responders. So as you can see, the competitive product -- patients receiving competitive products in their trial actually required a lot of surgery during the dosing [ period ]. And the fact that INO-3107 doesn't require these surgeries maintain minimal residual disease is very attractive. And then as I think Steve mentioned, it's our ability to administer 3107 in the doctor's office, and the simple patient-centric treatment regimen, again, is very attractive to patients. Steve, anything else you want to add to that? Steven Egge: No, I think you covered it. I mean the research has shown really repeatedly a lot of evidence that we have the potential to be the preferred product in this space. Operator: We have our next question from Sudan Loganathan with Stephens. Kesav Chandrasekhar: This is Kesav on for Sudan, and congrats on wrapping up the quarter. Just a quick one. So as you engage with the third-party logistics and commercial partners ahead of launch, are you specifically using those partners to incorporate learnings from the PAPZIMEOS rollout to inform your distribution strategy, site activation plannings, reimbursement approach and overall launch execution for 3107? Steven Egge: Sure. So yes, I mean, obviously, we would -- we're watching carefully what our competitors doing and learning from that. I don't know that they're necessarily the same commercial partners that Precigen is using but they have very deep broad experience in the rare disease space. So we're learning from that as well. So I would say the more general rare disease experience, but also Precigen's experience as well to do everything that we can -- to ensure that we're kind of very well prepared from a launch standpoint. Jacqueline Shea: And if I can add, there were some key differences for 3107 to PAPZIMEOS. We don't require any ultra-cold chain also -- so we don't have those logistical issues setting up an ultra-cold chain. And also as we don't require these minimal residual disease surgeries during the treatment window, physicians don't have to plan for scoping and possibly doing surgery as well, which obviously makes the treatment regimen very attractive to physicians and to patients. Operator: Our next question is from Roger Song with Jefferies. Nabeel Nissar: This is Nabeel on for Roger. I had a question on the Akeso partnership. If you could just kind of walk us through that biological rationale of the dual PD-1, CTLA-4 blockade. How does that sort of add on top of the T cell priming that you've shown before with 5412 and GBM? Jacqueline Shea: Yes, great question. So in the previous study, we combined 5401 plus IL-12 plus a PD-1 inhibitor from Regeneron called Libtayo. And what we saw in that study was encouraging data where we saw beneficial patient outcomes linked to the immune responses against the antigens that were encoded within 5401. So by partnering with Akeso in this innovative trial, what we're hoping is that the CTL4 element in addition to the PD-1 inhibition by providing an additional pathway for checkpoint inhibition will allow those immune responses against the tumor-associated antigens to provide additional benefit. So we're excited to be partnering with Akeso and excited to get the study underway. Mike, anything else you would like to add? Michael Sumner: The only point, I mean it's well established that there is significant synergism between CTLA-4 and PD-1. So as Jacqui said, we think it will be a very nice combination to 5412. Nabeel Nissar: Yes. That's exciting. A follow-up on that. I think inside, historically, you guys emphasized the O6-methylguanine methyltransferase the unmethylated group. Any idea, this is like early, but in terms of subgroups, like does the methylation status influence any expectations for like the immunotherapy responsiveness? Jacqueline Shea: Yes. So it is a prior trial. We saw benefits in both methylated and unmethylated groups. So we were very encouraged by that data. Sorry, Mike, you wanted to say something? Michael Sumner: I was going to say exactly the same. But the INSIGhT trial is actually in the unmethylated population. So while it's very sad for the patients that will lead to a quicker readout as they have a poorer prognosis. Operator: We have our next question from Yi Chan with H.C. Wainwright. Unknown Analyst: This is [ Katie ] on for Yi. Taking a look at your pipeline, if 3107 is approved, what are your plans to move forward with 3112? Are you guys planning to reinvest internally or seek partnership for that type of program? Jacqueline Shea: Yes. Great question. So for those of you who are not familiar, 3112 is our program in HPV-16 and HPV-18 positive head and neck cancer, oropharyngeal squamous cell carcinoma. And there, we announced a partnership with Coherus for their PD-1 inhibitor, Loqtorzi, which is approved in nasopharyngeal carcinoma. We're looking to start a Phase III trial. However, at the moment, the vast majority of our resources are going towards moving 3107 forward. So should -- should 3107 be approved later on this year and we have sufficient financial resources available, then we'll be looking to move forward with the other candidates in our pipeline. But we're very excited by our later stage candidates, which are predominantly focused on T cell mechanisms. So 3107, 5401, 3112, are all focused on driving T cell responses, either against viral antigens or against cancer antigens. And then we also have our earlier stage pipeline around our DPROT and our dMAb candidates, where we're looking to move those candidates into the clinic through partnerships. So partnerships are going to be very important to us in terms of how we see our pipeline developing going forward. Operator: Thank you. We have no further questions. I will now turn the call over to Jacqui Shea for closing remarks. Jacqueline Shea: Thank you. As we've outlined here today, our strategic focus for the months ahead is clear, advancing the BLA review for 3107 and optimizing our resources to extend our cash runway towards our October 30 PDUFA date. At the same time, we'll continue driving progress across our pipeline where possible, leveraging partnership opportunities and the potential of our platform in GBM, hemophilia and other rare diseases. As I close today, I'd like to reiterate our belief that 3107 can address the unmet needs of RRP patients. Patients who have faced the risks and burdens of their disease were far too long. We're moving forward committed to making sure that every patient can find relief from repeated surgery that they deserve. Thank you for your attention, and good evening, everyone. Operator: And thank you, ladies and gentlemen. This concludes our conference call. We thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to BuzzFeed, Inc. Fourth Quarter 2025 Earnings Conference Call. I'd now like to hand the conference over to your first speaker today, Juliana Clifton, Vice President of Communications. Please go ahead. Juliana Clifton: Hi, everyone. Welcome to BuzzFeed, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm Juliana Clifton, VP of Communications for BuzzFeed. Joining me today are CEO, Jonah Peretti; and our Chief Financial Officer, Matt Omer. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today's press release, our 2025 annual report on Form 10-K to be filed with the SEC and our 2025 quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we present both GAAP and non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin. The use of non-GAAP financial measures allows us to measure the operational strength and performance of our business to establish budgets and to develop operational goals for managing our business. We believe adjusted EBITDA and adjusted EBITDA margin are relevant and useful information for investors because they allow investors to view performance in a manner similar to the method used by our management. A reconciliation of these GAAP to non-GAAP measures is included in today's earnings press release. Please refer to our Investor Relations website to find today's press release. Now I'll hand the call over to Jonah. Jonah Peretti: Thank you. Good afternoon, everyone, and thanks for joining us. Before Matt walks through the numbers, I want to step back and talk about how we're thinking about the business and what we're trying to accomplish this year. At a high level, we believe BuzzFeed Inc. is undervalued. The current market value of the company does not reflect the strength of our individual brands, the quality of our assets or the innovative work we've been doing to create new products with big upside in the future. In other words, we believe the sum of the parts is worth more than the whole. . We generated close to $200 million in proceeds from selling Complex and First We Feast. But while owning these assets, our market cap was as low as $30 million with these assets representing a minority of our revenue. We believe this pattern continues today where the assets we own would be valued much higher individually than the market capitalization of BuzzFeed Inc., and this is only partly attributable to corporate debt. In fact, we believe that our current assets are worth a multiple of our market cap, especially when you consider the promise we see in unlaunched products and forthcoming features. This value isn't being recognized for a combination of reasons, including the pessimistic view of digital media in general, legacy centralized costs and downstream debt from our SPAC transaction, pre-COVID real estate commitment and the timing of cost reductions and new initiatives. We are in a much better position today on many of these issues, but we believe we can overcome these legacy costs and complications to help the market see the underlying value of the core assets and new products. When we look inside the company, we see several distinct sources of value. One, First, we have a powerful durable brands with loyal audiences, properties like HuffPost, Tasty, BuzzFeed and BuzzFeed Studios, each serve different communities have different monetization profiles and, in many cases, are attractive in their own rights of partners, advertisers and potential strategic counterparts. These are not generic media properties. They are category-defining brands with strong recognition and engagement. Secondly, we have assets and IP, particularly in bus seat studios that are scaling rapidly. Studio revenue nearly tripled this year as we delivered 3 feature films and entered the micro drama category. This IP can travel across formats and platforms, which gives us optionality around partnerships, licensing and other ways to monetize what we've created over many years. Thirdly, we have a growing body of innovative work that we'll launch this year as new products and enhanced features in our core businesses. Over the past year, we've been investing in new products and AI-driven experiences that deepen engagement, make our content more personalized and interactive and make our advertising and commerce offerings more effective. This year about surfacing that value and improving it, not just talking about it. On the innovation side, we're rolling out new apps and product experiences that integrate AI more directly into the core BuzzFeed experience. You'll see more of this throughout the year including at South by Southwest tomorrow, where we'll share details on the apps that we've built and where we're headed. Over the coming quarters, we plan to demonstrate the value of our assets in concrete ways. We are actively exploring a range of strategic options and we are focused on closing the gap between how the market values BuzzFeed Inc, today and what we believe our individual assets are worth. To summarize, our brands and assets are more valuable than our current market capitalization implies. Our innovative work, especially in AI and new product experiences represents meaningful upside that is not yet priced in. Our mandate this year is to prove the value of our parts, narrow the disconnect between intrinsic value and trading value and take the steps necessary to create value for our shareholders. With that, I'll hand it over to Matt to walk you through our financials. Matt Omer: Thank you, Jonah. I want to start by providing some context on the full year before getting into Q specifics. Total revenue for the full year 2025 was $185.3 million, down 2% year-over-year from $189.9 million in 2024. Breaking down our full year numbers. Advertising revenue declined 3% to $91.7 million. Programmatic advertising grew 7% to $69.6 million. This is our seventh consecutive quarter of programmatic growth and it now represents 76% of total advertising revenue. Direct sold advertising declined 25% to $22.1 million. Content revenue increased 9% to $37 million. Studio revenue nearly tripled to $16.1 million as we delivered 3 feature films during the year, coupled with positive contributions from our micro-drama vertical. Direct sold content declined 26% to $21 million. Commerce and other revenue declined 8% to $56.5 million. Affiliate commerce declined 7% to $55.5 million primarily reflecting changes in supplemental bonus structures from our partners. The underlying business remains strong, and we have not seen a decline in our conversion rates, click-through rates and total GMV driven for partners. The decline was primarily driven by a reduction in supplemental incentives from the prior year. Net loss from continuing operations was $57.3 million compared to $34 million in 2024, reflecting a noncash goodwill impairment charge of $30.2 million, driven by a sustained decline in our share price. For the full year, adjusted EBITDA improved 61% and to $8.8 million compared to $5.5 million in 2024. Time spent totaled 276.5 million hours down 7% year-over-year and expected given that 2024 includes elevated engagement during the presidential election cycle. We ended the year with cash and cash equivalents and restricted cash of approximately $27.7 million, a decrease of $10.9 million compared to 2024. But as a reminder, in 2025 equated approximately $9 million in expenses related to refinancing our former convertible notes, severance and purchasing shares back from a prior investor. Before I get into Q4 epics, I want to provide some context on our balance sheet position. As of December 31, 2025, we had total debt of $60.2 million. That's broken up with $45 million in our term loan and $15.2 million in film financing arrangements. Our term loan is secured by our existing accounts receivable and our film financing indebtedness is generally repaid directly with production tax credits proceeds or minimum guarantee payments for feature films. The cash and cash equivalents and restricted cash on the balance sheet is $27.7 million, which includes approximately $19.3 million pledged as collateral for our letters of credit on our office leases. We expect that approximately $15 million of those levers of credit will be released by our landlord after our sublease concludes in May of 2026, and we expect to use those funds to pay down debt. Now let's turn to Q4 2025 specifically. Q4 revenue was $56.5 million, up 1% year-over-year. Advertising revenue increased slightly to $25.6 million. Programmatic advertising grew 2% to $18.4 million and direct sold advertising declined 3% to $7.2 million, reflecting continued market softness. Content revenue increased 56% to $14.7 million, driven by Studio. studio revenue grew $7.3 million as we recognized 2 feature films in Q4 plus contributions from micro-dramas. Direct sold content declined 5% to $7.4 million. Commerce and other revenue declined 24% to $16.3 million, and affiliate commerce declined 23% to $16.1 million, primarily driven by the continued decline in supplemental bonuses from affiliate partners as they refine their commission structures. Net loss from continuing operations was $26.8 million compared to a net loss of continuing operations of $4.1 million in Q4 2024, again, reflecting a $30.2 million noncash goodwill and impairment charge. Adjusted EBITDA for Q4 2025 was $12 million compared to $10.9 million in Q4 2024. And time spent was 17.3 million hours, down 11% year-over-year, again, reflecting the comparison to an elevated engagement of the presidential election cycle in Q4 2024. As Jonah mentioned, we are evaluating strategic opportunities to unlock value and remedy the liquidity challenges that we are going to be facing. Some of those options could have a material impact on the shape of the company and our business in 2026. Given this, we are withholding the 2026 guidance at this time, we expect to provide an update on both our strategic direction and financial outlook in the coming quarters. Thank you for joining us today. I'll hand the call back to our host. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to Zumiez Inc. Fourth Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Before we begin, I'd like to remind everyone of the company's safe harbor language. Today's conference call includes comments concerning Zumiez Inc.'s business outlook and contains forward-looking statements. These forward-looking statements and all other statements that may be made on this call are not based on historical facts, are subject to risks and uncertainties. Actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ materially from the information that will be discussed is available in Zumiez's filings with the SEC. At this time, I would like to turn the call over to Rick Brooks, Chief Executive Officer. You may begin. Richard Brooks: Hello, and thank you, everyone, for joining us on today's call. With me today is Chris Work, our Chief Financial Officer. I'll begin with remarks about our fourth quarter performance and the successful holiday season we just completed before reflecting on our strong full year 2025 results and discussing our strategic priorities. Chris will then take you through the financials and our outlook for fiscal 2026. After that, we'll open the call to your questions. We're pleased with our fourth quarter results, which capped off a second consecutive year of important progress for Zumiez. Q4 results were highlighted by robust full price selling in North America during the important holiday season, which fueled mid-single-digit comparable sales growth in the region and meaningful gross margin expansion. In addition, the work we've done focused on assortment and full price selling in our European business drove 660 basis points of year-over-year product margin improvement. This, coupled with disciplined expense management, resulted in 380 basis points of operating margin growth despite sales being down high single digits year-over-year in local currency for the quarter. Our performance in both regions reflect the continued effectiveness of our full price selling and cost saving strategies even as we faced regional headwinds. From a category perspective, men's led our positive comparable sales growth during the holiday period, followed by women's, accessories and hardgoods. This broad-based strength across multiple categories validates our merchandising approach and the investments we've made in product newness and private label expansion throughout the year. Reflecting on fiscal 2025, we took important steps towards returning to historical levels of sales and earnings. Our merchandising assortments and customer experience initiatives generated positive content every quarter, means from low single digits to high single digits and a 4.3% comparable sales gain for the year on top of a 4% increase in 2024. Our North American businesses demonstrated consistent momentum, registering 8 consecutive quarters of comparable sales growth. Our strategic shift in Europe, implemented just 1 year ago, gained momentum as we moved through the year. This consists of bringing newness, strong inventory management, full price selling and expense management that we believe will drive the business to better results in the near term. The combined impact of our initiatives helped to improve full year earnings per share to $0.78 from a loss of $0.09 last year. These results validate the strategic initiatives we've been executing and position us well for continued success in 2026. As we look ahead, we remain focused on the same 3 strategic priorities that have driven our success throughout 2025. First, driving revenue growth through consumer-focused strategic initiatives. Our commitment to refreshing our product mix with innovative distinctive offerings has proven to be a cornerstone of our success. In 2025, we launched over 150 new and emerging brands across our banners, and this newness continues to generate exceptional customer response. Private label penetration reached its highest level in company history in 2025 at approximately 30% of sales, up from 12% 5 years ago. This sustained expansion demonstrates our organization's ability to identify emerging trends and create compelling products that resonate with our customers while simultaneously enhancing our margin profile. Our investments in delivering exceptional customer experiences across both physical and digital touch points continue to yield strong results. Enhanced staff development programs and technological capabilities we've implemented allow us to engage with customers where they want, when they want and in more personalized ways, strengthening the relations we have that have long served as another cornerstone of our success. Second, sustaining our rigorous commitment to profitability optimization across our geographic footprint. Within North America, our premium pricing strategies continue to support both margin expansion and market share growth, while the operational improvements we've executed throughout 2025 are keeping sales growth well ahead of our expense growth. Our continued focus in this area has established a more efficient and profitable framework that positions the business for a strong flow-through on incremental sales to fuel operating margin gains. Regarding our international operations, while Europe continues to face challenging market conditions, our disciplined approach to new assortments, full price selling and expense management is starting to show results. The significant product margin improvements we achieved in the fourth quarter and full year demonstrate the effectiveness of our strategy, and we remain committed to our long-term vision for the countries in which we operate. We continue to see tremendous value in our ability to identify trends locally in each market before they expand internationally. Third, capitalize on our solid financial foundation to manage volatility by funding strategic expansion. Our financial position remains exceptionally strong, providing us with the flexibility to continue investing in our strategic objectives while delivering value to shareholders. This financial stability enables us to navigate ongoing uncertainties in the macro environment by simultaneously positioning the company for long-term growth and continued market share gains. Despite operating environment characterized by economic volatility and evolving global dynamics, I'm increasingly confident in our ability to generate value for all of our stakeholders. The fundamental strategies that have powered our performance throughout 2025 continue to demonstrate their relevance and our team's proven adaptability and execution capabilities fuel my optimism about our trajectory into fiscal 2026. Our direction remains clear and consistent: maintain our dedication to delivering distinctive fashion-forward merchandise through the customer connection strategies that have driven our growth while preserving the operational discipline that has strengthened our financial performance. We've demonstrated our resilience and ability to execute through various market cycles, and I'm confident we're strategically positioned to continue building on this momentum. Before turning things over to Chris, I want to express my appreciation to our entire organization for their continued commitment and exceptional execution throughout 2025. Their dedication to our values and our customers remains the foundation for all of our achievements and positions us well for continued success in the year ahead. With that, let me hand things over to Chris for our financial review. Christopher Work: Thanks, Rick, and good afternoon, everyone. I'm going to start with a review of our fourth quarter and full year 2025 results. I'll then provide an update on our first quarter to date sales trends before providing some perspective on the full year. Net sales for the fourth quarter of 2025 increased 4.4% to $291.3 million compared with $279.2 million in the fourth quarter of 2024. Comparable sales were up 2.2% for the quarter. As Rick mentioned, the primary driver was our North America business, which showed outsized strength even as macroeconomic uncertainties spurred by global trade policy continues. For the fourth quarter, North America net sales were $224.4 million, an increase of 4.8% from 2024. Other international net sales, which consists of Europe and Australia, were $66.9 million, up 3% from last year. Excluding the impact of foreign currency translation, North America net sales increased 4.6% and other international net sales decreased 7.1% year-over-year. Comparable sales for North America were up 5.5%, marking the eighth consecutive quarter of comparable sales growth in this region. Other international comparable sales declined 7.5% in the fourth quarter. From a category perspective, men's was our largest positive comping category, followed by women's, accessories and hardgoods. Footwear was our only negative comping category. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. Fourth quarter gross profit was $111.4 million compared to $101 million in the fourth quarter of last year. Gross margin was 38.2% of sales for the quarter compared with 36.2% in the fourth quarter of 2024. The 200 basis point increase in gross margin was primarily driven by 180 basis points of improvement in product margin and 50 basis points of leverage in store occupancy costs on higher sales and the closure of underperforming stores. These benefits were partially offset by 20 basis points related to increased incentive costs on improved results. SG&A expense in the fourth quarter of 2025 was $86.4 million or 29.6% of net sales compared to $80.9 million or 29% of net sales in 2024. The 60 basis point improvement in SG&A expenses as a percentage of net sales was driven by 100 basis points of increased incentive costs on improved results and 20 basis points related to corporate wage costs. These cost increases were partially offset by 50 basis points of leverage in store wages related to increased sales and hours management and 20 basis points of leverage in other store operating costs. Operating income in the fourth quarter was $25 million or 8.6% of net sales compared to prior year operating income of $20.1 million or 7.2% of net sales. Net income for the fourth quarter was $19.6 million or $1.16 per share. In the year ago period, we reported net income of $14.8 million or $0.78 per share. Our effective tax rate for the current quarter was 26.3% versus 26.1% a year ago. Looking at our full year results, net sales for fiscal 2025 were $929.1 million, an increase of 4.5% from $889.2 million for 2024. Comparable sales for the full year were up 4.3%. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transaction. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. From a category perspective, for the full year, women's was our largest positive comping category, followed by men's, hardgoods and accessories. Footwear was our only negative comping category. From a regional perspective, North America net sales were $757 million, an increase of 5.1% from 2024. Other international net sales were $172 million, up 1.7% from last year. Excluding the impact of foreign currency translation, North America net sales increased 5.2% and other international net sales decreased 4.2% compared to 2024. Comparable sales for North America were up 6.7% and comparable sales for international were down 5.4% for the full year. 2025 gross margin was 35.8% of sales compared to 34.1% in 2024. The 170 basis point increase was primarily driven by 90 basis points of product -- of improvement in product margin and 70 basis points of leverage in store occupancy costs on higher sales and the closure of underperforming stores. SG&A expense was $315.5 million or 34% of net sales for fiscal 2025 compared with $301.1 million or 33.9% of net sales in 2024. The 10 basis point increase as a percentage of net sales was driven by 50 basis points of increased incentive costs on improved results and 40 basis points related to wage-and-hour litigation settlements in California. These benefits were partially offset by 60 basis points of leverage in non-wage store operating costs and 30 basis points of leverage in store wages on increased sales and hours management. Fiscal 2025 operating income was $17 million or 1.8% of net sales compared to operating income of $2 million or 0.2% of net sales in the prior year. Net income in fiscal 2025 was $13.4 million or $0.78 per share compared to a net loss of $1.7 million or $0.09 per share in the prior year. Fiscal 2025 was negatively impacted by approximately $0.15 per diluted share related to a wage-and-hour litigation settlement in California. Turning to the balance sheet. The business ended the year in a strong financial position. We had cash and current marketable securities of $160.6 million as of January 31, 2026, up from $147.6 million as of February 1, 2025. The increase in cash and current marketable securities over the last year was primarily driven by cash flow from operations of $53.5 million, a $2.9 million benefit from foreign currency fluctuation and our release of $2.7 million in restricted cash, partially offset by common stock repurchases of $38.3 million and capital expenditures of $11.1 million. As of January 31, 2026, we have no debt on the balance sheet and continue to maintain our full unused credit facility. The company repurchased 2.7 million shares during fiscal 2025 at an average cost of $14.18 per share and a total cost of $38.3 million. On March 11, 2026, the Board of Directors approved the repurchase of up to an aggregate of $40 million of common stock. The repurchase program is expected to continue through January 29, 2028, unless the time period is extended or shortened by the Board of Directors. This repurchase program supersedes the prior authorized approval approved by the Board of Directors on June 4, 2025, that was set to expire on June 30, 2026. We ended the year with $147 million in inventory compared to $146.6 million last year, a growth of 0.2% year-over-year. On a constant currency basis, our inventory levels were down 3.8% from last year. We feel good about our current inventory position. Now to our first quarter to date results. Total sales for the 4-week fiscal period ended February 28, 2026, increased 9.8% compared to the 4-week fiscal period ended March 1, 2025. Comparable sales over the same period increased 7.5%. From a regional perspective, North America net sales for the 4-week period ended February 28, 2026, increased 5.6% over the 4-week period ended March 1, 2025, while our other international business increased 27.6%. Excluding the impact of foreign currency translation, North America net sales increased 5.3% and other international net sales increased 12% compared with 2025. Comparable sales for our North America business increased 6% for the 4-week period ended February 28, 2026, compared to the same week in the prior year, while comparable sales in our other international business increased 13.2%. From a category perspective, quarter-to-date, hardgoods is our largest positive comping category, followed by men's, women's and accessories. Footwear was our only negative comping category. The consolidated increase in comparable sales was driven by an increase in dollars per transaction, partially offset by a decrease in transactions. Dollars per transaction were up for the quarter, driven by an increase in average unit retail and an increase in units per transaction. With respect to our outlook for the first quarter of fiscal 2026, I want to remind everyone that formulating our guidance involves some inherent uncertainty and complexity in estimating sales, product margin and earnings growth, given the variety of internal and external factors that impact our performance. Our comparable sales results in early fiscal 2026 have maintained positive momentum, and we are cautiously optimistic that we'll continue to deliver top and bottom line improvements in the first quarter, assuming no significant economic impact on the business from the current global conflicts or tariff changes. For the first quarter, we are anticipating total sales to be between $189 million and $193 million for the 13 weeks ending May 2, 2026, representing growth of 3% to 5%. Comparable sales for the same time period are expected to be between 2% and 4%. Consolidated operating loss for the first quarter is expected to be between negative $15.6 million and negative $17.8 million compared to a loss of $19.9 million in the prior year. Included in this reduction of our operating loss is continued product margin expansion in North America and Europe as well as a benefit related to a $2.9 million onetime wage-and-hour litigation settlement incurred in the first quarter of 2025. This is an improvement of between 140 to 270 basis points as a percentage of sales. We expect this improvement to be driven by 130 to 200 basis points of gross margin expansion and 10 to 70 basis points of SG&A leverage. Before providing our first quarter EPS guidance, I'd like to point out that our loss per share comparison to the prior year is negatively impacted by favorable foreign exchange valuation and interest income items in the first quarter of 2025 that did not repeat in the first quarter of 2026. Also, due to share buybacks in fiscal 2025, we have reduced our basic shares outstanding by approximately 10%, negatively impacting our loss per share guidance by an additional $0.07 per share. With that, we anticipate that our loss per share will be between negative $0.77 and negative $0.87 compared to a loss of negative $0.79 in the prior year. As we consider the outlook for the full fiscal year 2026, with 7 consecutive quarters of positive comparable sales behind us and momentum into the new year, we are confident in our strategy and execution. However, caution is warranted, given the ongoing volatility in the macro environment. We will refrain from giving specific annual guidance, but we will provide some context around how we see the business trending throughout the year. Top line strength continues in North America, and we have lapped a promotional period in our European business last year that, along with a difficult snow season, contributed to the fourth quarter sales decline in the region. Both North America and Europe are trending positive in the first quarter to date. With relative stability in the macro environment, we believe we can grow total sales in the low single digits for the year, inclusive of the negative impact of closed stores worth approximately $12 million in sales. From a product margin perspective, 2025 was at a high point, excluding the stimulus-driven 2021 results. We believe that we will continue to grow product margin year-over-year in 2026 through steady improvements in North America and continued pricing discipline in our international entities. We believe that our private label business will continue to grow, helping drive the overall results, including potential tariff benefits, should the current situation hold throughout the year. In addition to product margin growth, we believe further leverage exists in our occupancy costs and other components that will drive gross margin expansion. With sales growth discussed, we would anticipate leverage of our SG&A costs, further contributing to operating margin expansion. With the previously mentioned assumptions, we anticipate operating margin growth in the 50 to 100 basis point range in fiscal 2026. While effective tax rates will fluctuate by quarter, we anticipate that our full year effective tax rate will be roughly 35% to 40% in fiscal '26 compared to an effective tax rate of 44.4% in 2025. We are planning to open 5 new stores in 2026, all within the U.S. This compares to 6 total stores opened in 2025 and 7 stores in 2024. We plan to close approximately 25 stores during fiscal 2026, including 20 in North America and 5 internationally, and we closed 17 stores during fiscal 2025. We expect our capital expenditures for 2026 to be between $14 million and $16 million compared to $11.1 million in fiscal 2025 and $15 million in 2024. We expect that depreciation and amortization, excluding noncash lease expense, will be approximately $18.9 million, down from $21.3 million in 2025. And we are currently projecting our diluted share count for the full year to be approximately 17.1 million shares. This share count does not include the impact of any future share repurchases, including those under the repurchase agreement announced today. And with that, operator, we'd like to open the call up for questions. Operator: [Operator Instructions] Our first question comes from the line of Mitch Kummetz with Seaport. Mitchel Kummetz: Let me begin with Europe. I just want to better understand what's going on there. In the fourth quarter, other international was -- I think it was a negative 7.5% comp. And I know that you guys shifted your focus to more full price selling in the quarter. And now I think, Chris, you said you're running up 13.2% quarter-to-date for other international. So did something change in terms of the full price selling focus? Or was it just not -- were you not lapping that issue in, like, quarter-to-date? Help me understand why we're seeing such a big swing in the comp performance from fourth quarter to Q1 to date in other international. I assume it's Europe that's driving that. Christopher Work: Yes. Thanks, Mitch. And you are right in your assumption. This is Europe that's driving it. I think as you know, Mitch, following as closely as you have, I mean, we started this kind of change in strategy in late 2024, really trying to kind of reimagine what was happening in Europe as we were growing at quite a clip, but not getting to where we wanted to be from a profitability and cash flow perspective. So our determination at that time was really to slow growth and focus on growing the core business and driving to profitability and cash flow. As you know, things don't move as quickly as you like sometimes, but the team put a plan together. It included some change of people within the entity, and that took some time to kind of gain traction. So as we moved across 2025, we saw that business shrink from about $135 million to just under EUR 135 million, I should say. This included, across 2025, product margin growth of 250 basis points with Q4 up 660 basis points. I think a big win for us as we really reimagine the product portfolio and how we are buying inventory. Even though sales were down pretty meaningfully in Q4, high single digits, we still saw $1.8 million of operating profit growth on the back of really strong full price selling and expense control. And this is really despite a pretty soft winter overall for Q4. So -- also really focused on inventory management, more relevant product. And I think it put us in a spot to start 2026 just in a way better position than we were a year earlier. As you mentioned, we have just under 90 stores now operating in 9 countries. 2026 is off to a really strong start. The 13.2% international comp is really all driven by Europe. We're not immune to the macro forces here, but we are just really laser-focused on operating profit and cash flow. And that includes really trying to drive a high concentration of sales out of our existing units and online, where possible, rationalizing the business to its really most core tasks around just how do we bring great product into the business and serve the customer, improving product margin, managing and reducing expenses where possible and just laser-focused on inventory levels. So I think all of that has really led to what we see now is really 4 months in a row of much better results, but we have a long way to go. So we're encouraged by what we've seen over the last 4 months. But like I said, there's still a lot of work to be done. And hopefully, we've laid a good framework for that to be done in 2026. I think at the end of the day, we continue to believe that this international growth is a positive thing for us, and it really is our best way to serve our customers, which exists all around the world and our brands, and how we bring brands around the world. And then just as importantly, how we identify trends because trends do emerge locally and grow globally. And if we are in more locations, it allows us to see those trends and help them move around the world. So we're definitely encouraged with the last 4 months, in February for sure, and we're hoping to build some continued momentum into 2026. Mitchel Kummetz: And then as far as the comp guide for the quarter, I think you said a 2% to 4% comp. Quarter-to-date, you're running plus 7.5%. I know February is a fairly small month. But why are you anticipating worse comp performance over the balance of the quarter? And then, maybe as you address that question, can you also maybe speak to what you're seeing in terms of like tax refunds so far? And then, how are you thinking about higher gas prices potentially impacting your consumers? Christopher Work: Yes. All good questions. Let me start with kind of the guide, but I think these are going to sort of blend together. Obviously, we had a great February really across the business. International, we just spoke about. But North America was very strong, too, up 6% comp across the 4 weeks of February. I'll tell you, as we started to see the global conflict unfold, we did see some softness in week 5 and have kind of guided the business into what we saw as a slowdown from where we were in February. And so, while still positive, we just saw some softness in the business, and that's how we plan the quarter to come out. Now whether that's tied to rising fuel prices and a little bit of uncertainty in the macro environment, I think that's to be determined, and we just need more time to figure it out. But in relation to putting the guide together and how we saw our comp guide, this is really about kind of looking at what's our current run rate sort of post-February and drawing that out across the rest of the quarter. Operator: Our next question comes from the line of Richard Magnusen with B. Riley. Richard Magnusen: So first off, it looks like your private label penetration was strong in Q4 at around 30%. But during the holiday season, did you notice any change in certain categories regarding the performance of private label versus the branded products? Or was it pretty much the same trends in different categories that you saw throughout the year? Richard Brooks: I'll start, Richard, and then Chris can add in, but -- to give you some context, but I don't think we saw any major changes. There are certain categories that are really, really, really dominated by our private label or own brands. And so sometimes it's hard to compare the branded portfolio versus our private label brands. And so I think each of them are targeting a different segment of our business. And so I don't think I would call out any significant trend direction changes from a private label perspective that I can think of in terms of the category performance for the brands that they performed well. But we also had some new brands that have performed really well, too, on the branded side. So I think it's a combination of both. And the new brands tend to be more focused on the T-shirts and fleece and hats in the more screenable portion of the business. So I think the private label is more dominated by the pants departments within the business. So they're kind of a bit separated in that sense, but both, I think, have done well, contributed positively in Q4. Richard Magnusen: Okay. And then my last -- second question is that Easter looks like just over 3 weeks away. Can you -- what can you tell us about your expectations of timing regarding your spring assortment and any observed consumer preferences and the impact of recent weather in different parts of the U.S. and the cadence of promo around Easter weekend? Christopher Work: Sure. I'll kind of take a crack at it as this kind of falls into our planning arena and let Rick talk. Obviously, Easter has pulled up. So we are -- have started our -- putting our product out in a way that will take advantage of that, obviously, and planning the business to have a little higher bump in the middle part of the quarter versus a little bit later in the quarter. So we're certainly planning on that. Richard, from a promotional perspective, this is just not really our game. We try to stay really full price and full margin. I think you see that within our product margin results here across 2025 and really the last few years as we've really been able to grow product margin, and that's not just our private label business, that's our branded business as well, really working with our partners to refine this. So I don't see anything specific there. We do have a variety of, what I would call, sort of spring season initiatives that, as you would imagine, would play into the gift giving that happens around Easter, but also just into what you would expect from a seasonal floor set. So I'm not going to go into those in detail either. That's kind of part of our product and secret sauce, but we're always trying to bring new in. I think that's what the customer wants. That's what we're really happy we've been able to provide within private label. And it kind of add on to your last question, too, of what we're going to do in our branded portfolio. I mean our branded -- our top 20 brands really continue to gain traction this year as a percent of the total business, which we view as a good thing. I mean we go through these cycles where our biggest brands will kind of ebb and flow. And sometimes they disaggregate and we bring on a lot of new brands and other times they aggregate and hopefully, that leads to really strong results as they grow in breadth and depth, right? So I think all those things are playing into the business. You see it really across all of our categories, whether we're talking about Q4 or whether we're talking about February, we're up with the exception of footwear. Footwear continues to be the one area of challenge for us, but that's our model. So we're really excited to be running a total comp and obviously running a big portion of the business positive. Operator: [Operator Instructions] Our next question comes from the line of Marcus Belanger with William Blair. Marcus Belanger: I'm on for Dylan Carden. I just wanted to ask a follow-up to an earlier question about international. Obviously, you've seen a lot of volatility in that area. Can you tell me what you guys are doing to stabilize the area and have greater visibility into future growth? And then I have a follow-up. Christopher Work: Yes. I'll just -- I'll kind of add on to my earlier comment and let Rick jump in if he has anything to add. I mean I think, like all of our business, it really does start with product. So as we thought about reimagining the business at the end of '24, part of it was slowing growth just to make sure the focus was really laser-focused. But it was about looking at products and saying, how do we see trends, see where that customer is at, see who that customer is and bring it to them in a way that they will adapt to and they'll be excited about. And of course, we can sell it at full price. So this was really about rethinking that, really starting to look at our assortments and who we are carrying and how we are carrying them and what they were saying to the customer and starting to push that into the business in a different way than we've been doing. Obviously, as you can imagine, that takes time when you buy seasons ahead of time. So for us, we knew in the turnover at the end of late 2024 that it would be sort of a back-to-school holiday time period where we start to see this take shape. And we were pretty encouraged by some of the early areas we reimagined in that and what those meant going into Q4 and then some of those same items that we were dropping even late into Q4 that we're driving into the 2026. So it's really about product. I mean there's a huge part of execution beyond that of your store environment and the people in stores and how they bring the product to life. We continue to invest in that. We continue to invest in our teams there, just like we do here in North America. I mean this is really about driving a human-to-human relationship, right, of how you connect with your customer and how you talk with them. And so that's been part of what we've driven as well. And we think when you have the right product and you can bring it to them in a way that you really connect with them, I think that drives a different experience and hopefully one that brings that customer back again and again. Richard Brooks: I'd just add that -- again, just for context, I think we have looked deeply at every other -- every area of our business in Europe. And as Chris said earlier, that we made some personnel changes in terms of some of the leadership in Europe and now we're leading particularly in some really key areas. And we're just leaving no stone unturned as we revisit every aspect of what we're doing. And again, I'm really encouraged, as Chris has laid out, with the Q4 performance. I'd just highlight again that, that was against a very -- one of our worst snow years ever in Europe, and we have a very dominant position in the snow retailing business in Europe. So despite the difficult snow year, we still were able to improve the bottom line results by a pretty good amount. So we're really encouraged. I think we're heading in the right way. But as Chris said, we have a long ways to go and a lot of work to do and more work to come. And we're very, very focused on making sure that we are continuing to improve the assortments, bring newness into the business, make sure that we're really delivering great experience for customers and commercializing our offering as we think about delivering to customers across all channels. Marcus Belanger: For stores, where are you guys in terms of how many more years maybe do you guys think about closing stores? And then, for the new stores that you are opening for this year, it looks like you're going to open up 5, how are -- over the last couple of years, how have those new stores been performing? Are they at a higher -- mature? Do you think that they're going to hit a higher sales per store maturity curve than your other stores? Just any comments on basic productivity for the first year or 2 years for your new stores? Christopher Work: Yes, sure. And let me -- I'll talk about new stores real quickly and then we can talk about closures. I think this is really -- I would say, post-pandemic, you've seen our store openings slow from historical levels, which we kind of knew was going to be part of it, obviously, with North America more built out and international being our area of further growth over the last few years. As we've talked about here on the call today, we have slowed international just from a standpoint of really focusing on profitability and cash flow. So the store opening cadence is much less. I think when you think about opening approximately 5 stores a year in North America, the last few classes of stores have been really good. We've been able to be selective in where we're opening and really try to fill markets or fill opportunities we wanted to get into for a long time. There's still a lot of -- a fair amount of good assets in the country that we want to get in. We just have to find that right fit, right, that right location within the mall at the right economics that makes sense for us to be able to invest. And I'm quite happy with how the real estate team and our store operations team has performed here in the last few years in our openings and each class having more winners than tougher situations. So that's a really good thing. From a closure perspective, we started more significantly closing stores in 2023. And then in 2024, a few more. And last year was around 17. We are forecasting we'll be ahead of that 17 number this year, although, I'll tell you, these are forecasts. You're never quite sure what's going to happen in those markets and how malls will move or economics can change. But we are expecting to close approximately 20 stores in North America and 5 internationally. And our closure process is -- as you would expect, it's a diligent process, right? It's looking at each trade area we're in, each market we're in. Are there underperformers, are there opportunities for consolidation and trying to figure out where those opportunities are. I mean we look at everything from sales and profitability, what the store's impact on that trade area is in regards to how it helps to fill product and even kind of leverage with the A centers in the market, obviously, the conditions of the centers, who the landlords are, how they're investing in the center. We try to really manage the peak performance. And if that peak performance was 10-plus years ago, sometimes it speaks to where that center is headed, right? And then obviously, we try to do whatever we can around store economics before we walk away. But all those things combined, it's about sales growth. And I think that's why when we talk about 2026, we talk about growing sales in the low single digits despite closing some stores that are about $12 million impact. So at the end of the day, I mean, we're really just trying to consolidate and we've given ourselves a challenge for quite some time, but we don't want to have one more store than we need in any given trade area, right? That's just extra capital and inventory you've got tied up. So we're really trying to be intentional about it. Internationally, this will be a few more closures than we've had historically -- in 2026 is expected, and that's really just kind of, I would say, trimming that portfolio as well, right? We're trying to look at stores and say, okay, these ones are definitely working. They're great locations. There's maybe a mid-class that is -- that we're happy with, but we think we can still do better. And there's a third class that's kind of the lower class of stores that we are like, all right, we really have to make movement here or we will see consolidation. And that's where we're kind of at, at this point is kind of going, okay, some of these are not making the traction we need and they're closures to make the overall business better. Richard Brooks: I'd just add in that -- again, with a little bit longer context, as Chris said, 10, 15 years out. What we're seeing in the U.S. is actually finally the end of, I think, the final leg on a bunch of mall locations at the lower end C- and D-volume mall locations, where we had traditionally been able to make some money, but now they've just got to the point where they're just not working anymore. But the important point in this is that, as you saw in our results in '24 and '25, where we closed units, total sales grew in North America. So what we're really talking about is how customer behavior has changed and moved to different centers within the trade areas. And I think that's -- this is kind of a long-term tail of playing out of -- that our malls are winning and the lesser malls are finally really losing to the point of closure. And we're often one of the last retailers to leave in some of these centers. And -- but it's not about per se sales declining; it's about how customers are moving to the better retail experiences in the stronger and better malls. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Rick for closing remarks. Richard Brooks: All right. Thank you again for all of your questions today, and we always appreciate your great interest in what we're doing and the progress we're making towards building back towards our historical profitability levels. And as I said earlier, I really want to thank everyone on our team and our partners and our brand partners and the support as we really drive better results. So much appreciated from everybody, and we'll talk to you again in June. Thank you. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and welcome to the Kingsway Fourth Quarter 2025 and Full Year Earnings Call. [Operator Instructions] Please note, this conference is being recorded. With me on the call are JT Fitzgerald, Chief Executive Officer; and Kent Hansen, Chief Financial Officer. Before we begin, I'd like to remind everyone that today's conference may contain forward-looking statements. Forward-looking statements include statements regarding the future, including expected revenue, operating margins, expenses and future business outlook. Actual results or trends could differ materially from those contemplated by those forward-looking statements. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see the risk factors detailed in the company's annual report on Form 10-K, subsequent Forms 10-Q and Forms 8-K filed with the Securities and Exchange Commission. Please note that today's call may include the use of non-GAAP metrics that management utilizes to analyze the company's performance. A reconciliation of such non-GAAP metrics to the most comparable GAAP measures is available in the most recent press release as well as in the company's periodic filings with the SEC. Now I'd like to hand the call over to JT Fitzgerald, CEO of Kingsway. JT, please proceed. John Fitzgerald: Thank you, Matt. Good afternoon, everyone, and welcome to the Kingsway earnings call for the fourth quarter and full year 2025. To our knowledge, Kingsway is the only publicly traded U.S. company employing the search fund model to acquire and build great businesses. We own and operate a diversified collection of high-quality services companies that are asset-light, profitable, growing and that generate recurring revenue. Our goal is to compound long-term shareholder value on a per share basis, and we believe our businesses can scale due to our decentralized management model and our talented team of operator CEOs. We also continue to benefit from significant tax assets that enhance our returns. In short, Kingsway is uniquely positioned to capitalize on the search fund model at scale within a tax-efficient public company framework. I'm pleased to report a strong fourth quarter and a year of meaningful financial and strategic progress in 2025. During the year, we completed 6 acquisitions within the KSX segment, launched our Skilled Trades platform, significantly grew revenues and earnings power and made meaningful investments in our operating businesses that position Kingsway to accelerate growth in 2026 and beyond. Importantly, and for the first time, our KSX segment represented a majority of both revenue and adjusted EBITDA in both the third and fourth quarters. For the full year 2025, consolidated revenue grew to $135 million, reflecting both organic growth across our businesses and contributions from recent acquisitions. Consolidated adjusted EBITDA for the year was $7.8 million and portfolio LTM EBITDA was $22 million to $23 million as of December 31. Kent will provide further detail in his remarks on the portfolio LTM EBITDA metric, which we believe more accurately reflects the trailing 12-month earnings capacity of the company. As you may have noticed in our earnings release this afternoon, Kingsway is budgeting for double-digit organic growth across both KSX and Extended Warranty. I'm also pleased to reiterate our target of 3 to 5 acquisitions in 2026. Our vision at Kingsway is to combine both organic and inorganic growth to drive value creation. And before we get into the details of our 2025 performance, I wanted to share why I am comfortable with these targets and optimistic about where the company is headed. First, it's worth noting that our annual budgeting process is comprehensive, evaluating each business one by one and then setting realistic performance targets for the coming year. The goal is not to underestimate or overestimate. It is to forecast as accurately as we can with a high confidence interval, but the performance of each business is likely to be in the year ahead. The outcome of our process this year is a budget for strong organic growth across both our segments. It's worth a few words on why we are confident in this forecast. In KSX, it starts with the characteristics of the businesses we own. Our strategy is to purchase companies with recurring revenues, fragmented customer bases and strong secular growth tailwinds. We then match these businesses with talented operator leaders who are motivated and incentivized to drive performance. A few examples highlight the growth prospects for our portfolio. Roundhouse, our most profitable KSX operating business, services electric motors for natural gas compression and transmission infrastructure in the Permian Basin, the most productive hydrocarbon-producing area in the world at a moment when domestic energy infrastructure is expanding at significant scale. The demand for reliable motor maintenance and repair in that environment is essential, growing and structurally undersupplied. Roundhouse was a high-growth business before we acquired it in the middle of last year and is already tracking ahead of our acquisition underwriting. For Image Solutions and Kingsway Skilled Trades, 2025 was an investment year that positioned both companies for growth in 2026. Image Solutions invested heavily in expanding its business development team in the first half of the year, which temporarily depressed profitability as the sales team ramped up. That rebuilding is complete. The team is in place, the pipeline is developing and the early results are encouraging. We are excited for where this business is headed under the leadership of operator CEO, Davide Zanchi. Kingsway Skilled Trades has followed a similar path. Buds Plumbing, its first acquisition, went through an initial investment period and is now going from strength to strength, ahead of our expectations. AAA and Southside, which were acquired in the back half of 2025, have received significant investment in recent months and are poised to follow in the footsteps of Buds as we progress into 2026. We see potential for both robust top line and bottom line growth in these businesses in the year ahead. When I look across the KSX portfolio, I see companies with not only attractive business characteristics and talented leadership in place, but also with strong secular growth trends supporting them. That context is important as we think about our 2026 growth targets. In Extended Warranty, our businesses achieved double-digit cash sales growth in the back half of 2025 at a time when claims costs were also moderating. We are anticipating a much improved 2026 for our Extended Warranty businesses. Turning to inorganic growth. We are pleased to have completed 6 strategic acquisitions in 2025. Our acquisition pipeline remains robust, and I'm pleased to reiterate our target for 3 to 5 acquisitions during the coming year. We got off to a fast start in January, completing our first transaction of 2026 via our subsidiary, Ravix's acquisition of Ledgers Inc. Ledgers is a leading provider of outsourced bookkeeping and accounting services serving nonprofits and small and midsized businesses, primarily in the Midwest. This addition diversifies Ravix's revenue foundation and expands its geographic reach while bringing a strong base of recurring revenue and an experienced team that fits well with Ravix's service-first culture. We see meaningful opportunities to enhance value through cross-selling and continued organic growth, and we are excited about the role ledgers will play as we continue scaling Ravix into a leading provider of finance and accounting solutions. Underpinning our confidence in our transaction pipeline is our dual-track approach to finding great companies to acquire. First, our operators and residents are dedicated to sourcing, evaluating and executing our M&A activity. Our active searchers, each focused on identifying new platform and stand-alone acquisitions that meet our asset-light recurring revenue and structural growth criteria. Second, our owned businesses can pursue tuck-in acquisition activity within our existing platforms. The HR team and ledgers at Ravix, Viewpoint at SPI and Buds, Southside and AAA at Skilled Trades are all examples of our operator CEOs identifying and executing acquisitions within the businesses they run. That activity is not dependent on the OIR pipeline. It runs in parallel. It compounds the value of the platforms we've already built. And in many cases, it produces faster integrations and better returns because the acquiring operator already understands the market. When you look at our 2025 acquisition activity in that context, 6 transactions across both tracks. It reflects a model that is generating deal flow from multiple sources simultaneously, exactly how we designed it. To summarize, 2025 was a year of disciplined execution. We expanded the portfolio through the 6 acquisitions, launched a new platform in Skilled Trades and strengthened our existing businesses with targeted tuck-ins at Ravix, SPI and Skilled Trades. The compounding effect of those investments is reflected in portfolio LTM adjusted EBITDA of $22 million to $23 million. As we look forward to 2026, we expect both double-digit organic growth and a steady cadence of inorganic growth to underpin our value creation aspirations. We entered the year with momentum, a diversified set of growth levers and an active M&A pipeline across both our searchers and our platform operators. With that, I'll turn the call over to Kent for a few more -- for a more detailed review of the financials. Kent Hansen: Great. Thank you, JT, and good afternoon, everyone. Total revenue for the quarter was up 30.1% to $38.6 million and up 23.4% to $135 million for the year. Consolidated net loss for the quarter was $1.6 million and $10.3 million for the full year. Consolidated adjusted EBITDA for the quarter was $2.7 million and $7.8 million for the year. Within our KSX segment, revenue increased by 63.6% to $20.3 million for the quarter and was up 58.5% to $64.2 million for the year. KSX adjusted EBITDA rose by 28.6% to $2.5 million for the quarter and was up 40.8% to $9.5 million for the year. It is worth noting here that while KSX adjusted EBITDA declined slightly from Q3 to Q4, this is the result of seasonality in our Plumbing businesses and Roundhouse, which typically have their lowest seasonality profitability during the winter and their seasonality best quarters in Q2 and Q3. Turning to Extended Warranty. Revenue increased 6.1% to $18.3 million for the quarter and was up 2.8% to $70.8 million for the year. Cash sales were up 11% for the quarter and 9% for the year. IWS, which sells warranty products exclusively through credit unions, continued to perform well with cash sales up 10% year-over-year. Total Extended Warranty claims moderated in 2025 and were up 4.4% for the year compared to an increase of 6.3% in the prior year, primarily due to inflation on parts and labor as the number of claims was slightly lower in 2025 than 2024. Overall, Extended Warranty is performing well. Cash sales are robust, and the segment is positioned for improved performance in the periods ahead. Turning now to the balance sheet and the capital structure. As of December 31, 2025, the company had $8.3 million in cash and cash equivalents, up from $5.5 million at year-end 2024. Total debt was $70.7 million at the end of 2025 compared to $57.5 million as of December 31, 2024. Our year-end '25 debt is comprised of $55 million in bank loans, $2 million in notes payable and $13.7 million in subordinated debt. Net debt or debt minus cash at year-end was $62.4 million, up slightly from $61.4 million at the end of 2024. The increase in net debt is primarily related to additional borrowings related to the recent acquisitions of Roundhouse and Southside Plumbing, partially offset by continued debt amortization payments. I'd like to conclude by sharing additional detail on the portfolio LTM adjusted EBITDA metric that JT referenced earlier. Following a review, we concluded it made sense to update our portfolio earnings metric for 2 reasons. First, we received feedback that the name run rate adjusted EBITDA was confusing for investors. The metric actually describes trailing 12-month performance, not a forward run rate. Second, for the Extended Warranty segment specifically, we have always evaluated performance internally using modified cash adjusted EBITDA, and it didn't make sense to report one metric externally while managing to a different one internally. Importantly, our lenders also use the modified cash adjusted EBITDA metric when assessing the operating performance of our Extended Warranty businesses. Aligning our internal and external reporting metrics eliminates any disconnect and provides investors a clearer view of how we actually run and evaluate the business. Portfolio LTM adjusted EBITDA represents the pro forma trailing 12-month performance of our operating businesses and is calculated using adjusted EBITDA for KSX and modified cash adjusted EBITDA for Extended Warranty. Modified cash reflects timing differences between GAAP revenue recognition and GAAP commission expense to the timing of cash receipts and cash commission expense associated with warranty contracts as well as an adjustment to investment income for the difference between actual book yield and current market yield. No other adjustments are made. For clarity, modified cash adjusted EBITDA defers only the portion of contract premium needed to pay claims over the life of the underlying contract and does not defer any commission expense. We believe this change better aligns our external disclosure with how management and our lenders evaluate the performance of the Extended Warranty business, provides a clearer view of the operating performance of Kingsway's portfolio of businesses and is consistent with the metric used in our credit agreements for financial covenant purposes. I'll now turn the call over to JT for a few final thoughts before we open the line for questions. JT? John Fitzgerald: Thanks, Kent. To close, I want to thank Kingsway's employees, partners and shareholders for their continued dedication and support. 2025 was a year of tremendous progress, 6 acquisitions completed, a new platform launched and a portfolio that enters 2026, generating $22 million to $23 million in platform LTM EBITDA. We have budgeted for double-digit organic revenue and EBITDA growth this year across both our segments, and I believe the work we did in 2025, expanding platforms, diversifying revenue streams, investing in our businesses and strengthening our operator bench has set us up to deliver on those expectations. I'm confident in the plan, and I'm excited about what this team is capable of and where Kingsway is headed. I'll now turn the call over to Matt to open the line for questions. Operator: [Operator Instructions] Your first question is coming from Nick Weiman (sic) [ Mitch Weiman ]. Mitchell Weiman: Congrats on a good quarter. John Fitzgerald: You said Nick, but I know it's Mitch. Mitchell Weiman: Correct. One question I had was what is -- you didn't talk about digital diagnostics in the prepared remarks. What's going on there? We kind of -- I just remember in prior conversations kind of 6 months ago or so, you really thought they'd start to grow in the second half of the year. John Fitzgerald: Yes. DDI, I think, grew high single digits on the year. And plugging along here. I think that we've got a great operator. He's building the team there on the ground, got a new leadership team alongside him and is now really -- it's a very -- because of the criticality of the service they're providing, Mitch, the focus for the first 18 months or so is really on creating a foundation upon which they felt comfortable growing. We're dealing with patients' lives here and patient safety is first and foremost. So hardening the infrastructure, all of the technology systems and the telemetry that connects the hospitals to the company, creating redundancy with the second location and building all of the internal protocols to make sure that you have perfect patient safety 24/7, 365 was really the focus. We have a great operator there. And Peter, Navy Nuclear Officer, worked in the nuclear industry for a long time, and so understands how to create safety programs. And so that was a lot of the time and energy spent is investing in the foundation. In -- I would say, kind of the back half of the year and now into 2025, the focus is now shifting to organic growth and new customer acquisition. And so we're hopeful that we see -- we had nice growth and a nice growth tailwind there. And now with the foundation in place, we hope that Peter and the sales efforts are going to be bringing new customers and therefore, new revenue on board. Kent Hansen: Operator, before we take the next question, I'd just like to clarify. In my remarks, I said net debt at the end of '24 was $61.4 million. That was not correct. Yes. So a little bit of... John Fitzgerald: That was end of Q3. Kent Hansen: That was end of Q3. At the end of 2024, net debt was $52 million. So I just wanted to make that correction. Thank you. Operator: [Operator Instructions] There are no further questions in the queue. I'll now hand the floor over to James Carbonara for e-mailed questions. James Carbonara: Our first e-mailed question is, can you speak to the acquisition pipeline? John Fitzgerald: Yes. Like I mentioned in the prepared remarks, sort of dual track acquisition pipeline. We've got several now platforms within KSX, if you look at VMS, Ravix, Skilled Trades, and I would anticipate probably Image Solutions in the years ahead, all looking at tuck-in acquisitions and very strong pipelines in many of those businesses. And then obviously, our OIR pipeline, as I've said in the past, remains robust. Recognize that acquisitions there have to meet our very disciplined underwriting criteria, and there is an element of serendipity, but there is very strong deal flow, and we're looking at a lot of things. James Carbonara: Excellent. And the next question is, could you update us on OIRs Peter Hearne and Paul Vidal, please? They both have great CVs. Why do you think they have not made an acquisition just yet? John Fitzgerald: Yes, that's a fair question. Obviously, Peter and Paul are both highly, highly capable. We wouldn't have brought them in the program if they weren't. I guess the honest answer is there's a huge amount of, as I mentioned, serendipity to finding the right business at the right price with the right operator fit and can sometimes take longer than any of us would like. Between the 2 of them, they've evaluated dozens of opportunities, and we've passed on deals where either the valuation, business quality or cultural fit didn't meet our threshold. We'd rather have them walk away than close on a marginal deal. That said, I won't pretend that in Peter's case, 3 years without a close is where we expect it to be, and that's certainly something that we're actively managing. James Carbonara: Excellent. The next one is, can you share some of the adjustments or the bridge from the consolidated adjusted EBITDA of $7.8 million to portfolio LTM EBITDA of $22 million to $23 million, if that's the right way to look at it? Kent Hansen: Yes, James, it's Kent. I'll take that one. There's basically 3 main things that are the walk between those 2 numbers. The first is pro forma. So our consolidated EBITDA number that's published in the earnings release does not include any pro forma. It's just the actual results for the companies that we own during the period. The second adjustment would be any difference between -- for the warranty companies between the modified cash EBITDA number and what is reported under U.S. GAAP revenue and commission expense. As we said in the prepared remarks that modified cash doesn't defer 100% of the revenue over the life of the contract, only the portion that relates to claims. The rest is sort of recognized day 1 and then all commission expense -- no commission expense is deferred. It's all recognized day 1. And then there's a smallish adjustment for the difference between book yield and investment yield on our investment portfolio. And the third difference would be any corporate expenses. So adjusted -- the adjusted consolidated EBITDA number includes everything, all companies. And if you look at the numbers in the earnings release for KSX adjusted EBITDA and Extended Warranty adjusted EBITDA, those do not include the sort of the holding company and the KSX, the OIR expenses. So those are the -- so just to recap, the 3 main buckets are pro forma, modified cash and corporate expenses. James Carbonara: The next question is, you noted that Image Solutions and the newer Skilled Trades acquisitions went through an investment period in 2025 that temporarily depressed profitability. Have those investments fully normalized? And what kind of margin expansion should we expect from these businesses in 2026? John Fitzgerald: Yes. As I mentioned, in both cases, Image Solutions went through hurricane disruption, a full rebuilding of the sales team and that's all kind of in place, and we feel really good about the momentum there. I don't know that I want to give like margin targets, but we feel really good about the trajectory. Similarly, at Skilled Trades, both as I mentioned, AAA and Southside acquired late in the year, and we made some deliberate investments in systems, infrastructure, integration, some transition services with the owners, et cetera. And we don't anticipate that will repeat at the same level going forward. Buds is a good template for what these businesses look like at maturity, and we feel like it's a good template and these businesses are well on their way to hitting their stride. James Carbonara: Excellent. Next question, we had a couple of them come in on the double-digit growth, try to merge them here. Can you provide a little bit of color on how you achieved the double-digit growth in revenue and EBITDA on the KSX Holdings, given the number of recent acquisitions and the typical J-curve, pleasantly surprised by the guidance. What are some of the drivers of the growth? Is it a particular company? John Fitzgerald: No, I would say that we're looking at pretty universal growth across all of the businesses, maybe at slightly different rates. Some businesses have revenue growth as the big driver. In a couple of cases, there's some efficiency gains that will drive bottom line growth. And then obviously, pricing is an important lever as well. And so it's a combination of pricing and units at the top line and in some cases, some efficiency gains at the bottom line. James Carbonara: Great. And the last one I'm seeing, you touched on this a little bit earlier in terms of the 3 to 5 acquisitions targeted for 2026. How many do you expect to be tuck-ins for the existing platforms versus entirely new platforms sourced by your operators and residents? John Fitzgerald: Yes, these are sort of targets, not commitments. But I would guess with 3 OIRs, we ought to conservatively target at least 1 to 2 new platform investments. And by deduction, that would mean 2 to 3 new tuck-in acquisitions at our existing platforms. James Carbonara: Thank you, JT. Seeing no further e-mailed questions in. I'll throw it back to the operator, who will no doubt throw it back to you. Operator: Thank you. And that concludes our Q&A session. I'll now hand the conference back to JT Fitzgerald, Chief Executive Officer, for closing remarks. Please go ahead. John Fitzgerald: Wonderful. Thank you. Well, I appreciate everyone taking the time here this afternoon to listen to our remarks and ask some wonderful questions. Thank you for your support and looking forward to a great 2026. Operator: Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Eastman Kodak Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. I would now like to hand the conference over to your speaker host, Anthony Redding. Please go ahead. Anthony Redding: Thank you, and good afternoon, everyone. Welcome to Kodak's Fourth Quarter and Full Year 2025 Earnings Call. At 4:15 p.m. this afternoon, Kodak filed its annual Form 10-K and issued its release on financial results for the fourth quarter and full year of 2025. You may access the presentation and webcast for today's call on our Investor Center at investor.kodak.com. During today's conference call, we will be making certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. We intend for these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Investors are cautioned not to unduly rely on forward-looking statements and such statements should not be read or understood as a guarantee of future performance or results. All forward-looking statements are based upon Kodak's expectations and various assumptions. Future events or results may differ from those anticipated or those expressed in the forward-looking statements. Important factors that could cause actual events or results to differ materially from these forward-looking statements include, among others, the risks, uncertainties and other factors described in more detail in Kodak's filings with the U.S. Securities and Exchange Commission from time to time. All forward-looking statements attributable to Kodak or persons acting on its behalf only apply as of the date of the presentation and are expressly qualified in their entirety by the cautionary statements included or referenced in this presentation. Kodak undertakes no obligation to update or revise forward-looking statements to reflect events or circumstances that may arise after the date made or to reflect the occurrence of unanticipated events. In addition, the release just issued and the presentation provided contain certain measures that are deemed non-GAAP measures. Reconciliations to the most directly comparable GAAP measures have been provided with the release and within the presentation on our website in our Investor Center at investor.kodak.com. Speakers on today's call are Jim Continenza, Kodak's Executive Chairman and Chief Executive Officer; and David Bullwinkle, Kodak's Chief Financial Officer and Senior Vice President. We will not be holding a formal Q&A during today's call. However, as always, the Investor Relations team is available for follow-up. I will now turn the call over to Jim. Thank you, and have a great day. James Continenza: Welcome, everyone, and thank you for joining the Fourth Quarter and Full Year 2025 Investor Call for Eastman Kodak. I'm proud to say our long-term plan continues to be on track. We finished the quarter and the year very strong. It's almost a tale of 2 halves. If you look at the first and second quarter and look at the results of the third and fourth and the closet of the year, and we're going to cover that through the presentation, you'll see the difference. And the difference really comes from the long-term investments that we've made are really starting to pay off. One piece you'll notice going forward is the pension fund and the reversion. As you look at the reversion in the 2025 numbers, right, it really took place in late November, early December. So the numbers you're seeing, the interest expense and the reversion had very little impact. These are true operating numbers within the business. By completing that, we're able to focus more clearly on our financial reporting and operations. It simplifies the company and easier for everyone to understand the true impact of the operations. And I'm proud to say our balance sheet hasn't been this strong in many years. We have continued to reduce debt over the last several years. We've reduced over $40 million of interest expense, and that all falls to the bottom line. So where does Kodak go from here, right? We stabilized the business. We put the investments in place. We fixed the balance sheet over several years. We've lowered our interest. We're poised for growth. And that is where we're going. When you look at the company going forward, heavily delevered, streamlined operations and investments in new products. We have continued to rationalize the business, focused on smart revenue, took out over $200 million of operating expense over the last few years, invested heavily in new infrastructure and new products. Today, Kodak is well positioned to drive growth. Kodak is in a good position between balance sheet and operations to focus on free cash flow. Highlights for the fourth quarter, as I said, it's a tale of 2 halves of the year, the success of the third quarter carried into the fourth quarter as we expected, increase in both revenue and profits. Revenues of $290 million, an increase of 9%. Fourth quarter revenues grew for both AM&C and Print. Said differently, both sides of the company are now contributing to our growth and our success. Gross profit percentage of 23%, an increase of 4 percentage points demonstrates our value of executing on smart revenue. Now let's jump to highlights of the full year. Consolidated revenues of $1.069 billion, an increase of $26 million or 2%. Gross profit percentage of 22% compared with 19% for the prior year is an increase of 3 percentage points. What's driving these results are a number of factors: streamlined operations focused on innovation, putting that customer first and continuing to drive smart revenue. Moving on, let me give you an update on AM&C. As we said for the last several years, right, we're a great industrial manufacturer and primarily American manufacturer, bringing back that Park and investing into our core competencies, we're starting to see the results truly pay off. When you look at revenue, up 25% for the fourth quarter. We launched owned direct distribution brand of still films to stabilize the market and to provide distributors and retailers, consumers with a more reliable source. Many Oscar nominees were shot on Kodak film. As an example, One Battle After Another, Sinners, Marty Supreme and many others. We've seen a real resurgence in our film group. And on to Pharma, we've invested into our Pharma group. And let's be very clear, our goal here is to get Class II certification. In the interim, we also launched 4 new products from PBS to Water for Injection. Continued highlights, right? Again, remind everyone the 3 core things Kodak does today: brand licensing, AM&C and commercial print. I'm pleased to say our investment in commercial print has been paying off. We continue to be heavily committed to Print. Areas of growth for our Print division have been in North America in our Plates division, imprinting systems. I'm proud to say finally, the PROSPER 520 is moving from controlled introduction to full production. We've also invested in a new rapid response service system to better serve our customers, and we continue to incorporate AI and machine learning to also better serve our customers. These investments will help drive additional growth and better margins. As I touched on brand licensing, something we should not forget, it continues to grow. It's a significant contributor to our gross profit. It adds value, increased awareness of Kodak, especially among the next-generation of consumers. Our brand continues to grow outside the U.S., particularly in Asia, there are stores that sell only Kodak-branded clothes and materials. I will now turn it over to Dave to discuss the fourth quarter and full year financial results. David Bullwinkle: Thanks, Jim, and welcome, everyone. Thank you for joining us today. This afternoon, we filed the annual Form 10-K for the year ended December 31, 2025, with the SEC. As always, I encourage you to read this filing in its entirety. Before we review the details for the quarter and full year, I want to address a few significant developments that occurred after the filing of our Form 10-Q for the third quarter 2025. In November 2025, following the full settlement of all Kodak retirement income plan obligations, we successfully completed the pension reversion process. This transaction generated approximately $1.023 billion in pension reversion proceeds, a combination of cash and investment assets that strengthens our balance sheet, establishes an overfunding of the new Kodak cash balance pension plan, reduces our ongoing interest expense and supports future growth. Here is a brief overview of the pension reversion proceeds which totaled $870 million of net benefit to the company after excise tax payments of $153 million on the reversion surplus. Number one, debt reduction. Under the November 2025 term loan credit agreement amendment, we paid $312 million of cash proceeds to reduce the term loan principal to $200 million and to satisfy accrued interest and prepayment premiums, significantly lowering our ongoing interest expense by approximately $40 million annually and further strengthening our capital structure. Number two, funding the new pension plan. We contributed $251 million in investment assets and $5 million in cash to fund the new Kodak cash balance plan. The establishment of this replacement plan provides the same level of benefit for active Kodak employees that was available under the KRIP plan, which is very rare in pension terminations. Number three, net proceeds to Kodak. After the pay down of debt, replacement plan funding and excise tax payments, Kodak received net cash of $144 million and $158 million in investment assets. $9 million of these investment assets was redeemed in the form of cash proceeds in December 2025. As a result, Kodak ended 2025 in a net positive cash position relative to our $300 million in term loan and Series B preferred equity obligations with a cash balance of $337 million as of December 31, 2025. Lastly, on March 11, 2026, the company filed the 2026 Series B amendment effective on the same date. In summary, the amendments extended the mandatory redemption date of the Series B preferred equity obligation out 3.25 years' time from the effective date of the amendment to June 2029. It revised the terms of the cumulative dividends payable to a rate of 6% per annum from 4% previously. It reduced the conversion price from $10.50 to $10 per share, and it revised the mandatory conversion terms. In parallel to this amendment, the term loan credit agreement was also amended on March 11, 2026, and requires the company to further pay down the term loans by $50 million within 5 days of the effective date and by another $50 million on or before June 1, 2026. As a reminder, prior to this amendment, the Series B preferred equity obligation of approximately $100 million was coming due in May 2026. Also note, that the term loans accrue interest at a rate of 12.5%. Thus, by extending the preferred equity obligation, the company will be using $100 million to pay down the higher interest rate bearing term loan balance over the next 3 months, which will further strengthen the company's liquidity position as well as reduce our weighted average interest rate and therefore, cash used for interest and dividend payments. Please refer to the annual Form 10-K filed with the SEC today for further information and disclosure on all of these matters. I will now review the financial highlights, including operational EBITDA and cash flow performance for both the fourth quarter and full year 2025. Despite a challenging global environment marked by economic and geopolitical uncertainty, including pressures on global trade and inflation, we delivered strong financial results. Our progress is especially evident in gross profit and operational EBITDA, demonstrating continued execution against our priorities and long-term objectives. Turning to Slide 7. Key highlights for the fourth quarter of 2025 include revenue of $290 million, an increase of $24 million or 9% year-over-year. Revenue increased $19 million on a constant currency basis. Gross profit of $67 million, up $16 million or 31% from 2024. Foreign exchange had no impact on gross profit. The gross profit percentage was 23% compared to 19% in the prior year quarter. Our GAAP net loss of $108 million compared to GAAP net income of $26 million in the fourth quarter of 2024 represents a decline of $134 million. The primary drivers impacting fourth quarter GAAP net loss are $153 million related to excise tax expense on the KRIP reversion surplus and a $7 million loss on early extinguishment of debt tied to the term loan paydown using reversion proceeds. These were partially offset by a $66 million gain on the settlement of the KRIP plan. Adjusting for these nonrecurring items and excluding noncash asset impairment charges and noncash changes in workers' compensation and other employee benefit reserves impacting both periods, net loss was $12 million for the fourth quarter of 2025 compared to net income of $27 million in the prior year quarter for a decline of $39 million. This decline was largely due to a $41 million year-over-year reduction in noncash pension income, excluding service cost component and a gain on the settlement of KRIP, stemming from a lower expected return on KRIP assets following a strategic shift in investment strategy leading up to the planned termination and a $7 million increase in restructuring costs compared to the prior year quarter as we continue to streamline our global operating model. All these factors weighed on our year-over-year comparison, each reflects deliberate decisions that enhance the company's long-term stability, strengthen our balance sheet and position us to drive sustainable value creation going forward. For the quarter, operational EBITDA was $22 million, up $13 million or 144% year-over-year, driven by improved pricing and higher volume, partially offset by higher manufacturing costs and continued global cost increases. Our operational EBITDA increased $15 million year-over-year when adjusted for noncash changes in workers' compensation and other employee benefit reserves impacting both periods. Moving on to the company's cash performance for the fourth quarter of 2025 as shown on Slide 8. The company ended the quarter with $337 million in unrestricted cash. On an adjusted basis, cash and cash equivalents increased by $24 million year-over-year after excluding the favorable impact of net proceeds from the KRIP reversion, net of debt-related repayments and excise tax as well as the effects of changes in restricted cash and foreign exchange. Turning to Slide 9, which summarizes our full year 2025 results. Consolidated revenue was $1.069 billion, an increase of $26 million or 2%. On a constant currency basis, revenue increased $15 million. Gross profit improved $29 million or 14%. On a constant currency basis, gross profit improved $28 million. Gross profit percentage was 22% for 2025, up from 19% in the prior year period, reflecting stronger pricing discipline and continued operational execution. The GAAP net loss for the full year 2025 was $128 million compared to GAAP net income of $102 million in 2024, for a decline of $230 million. However, similar to the impact of nonrecurring items on our fourth quarter results, full year net loss includes the impact of pension-related excise tax and a loss on early debt extinguishment, partially offset by a gain on the settlement of KRIP. In addition, the prior year period includes a net gain on sale of assets and both years reflect noncash asset impairment charges and noncash changes in workers' compensation and other employee benefit reserves. Adjusting for these current and prior year items, net loss was $11 million for 2025 compared to net income of $87 million in 2024, a decline of $98 million. This is largely driven by $111 million reduction in noncash pension income, excluding service cost component in 2025 and a gain on the settlement of KRIP and a $13 million increase in restructuring costs when compared to the prior year. Our full year operational EBITDA was $62 million, an increase of $36 million or 138% year-over-year. This increase was driven by improved pricing, operational efficiencies and lower inventory reserve adjustments in our EPS business, partially offset by higher aluminum and manufacturing costs. There was no net impact on the year-over-year change in operational EBITDA when adjusted for the impact of foreign exchange in the current year and the impact of noncash changes in workers' compensation and other employee benefit reserves in both periods. Moving to Slide 10, which outlines our full year 2025 cash performance. As I stated earlier, we ended the year with $337 million in unrestricted cash, up $136 million from year-end 2024, largely reflecting proceeds from the KRIP settlement and asset reversion and operational improvements. We reduced the principal balance of our term loans by $303 million, bringing the year-end balance to $200 million. As a result, Kodak is in a net positive cash position relative to our term loans and Series B preferred equity obligations, significantly strengthening our balance sheet and supporting future growth. Excluding the favorable impact of the KRIP settlement and reversion proceeds, net cash provided by operating activities was $21 million, an improvement of $28 million compared to 2024, driven by stronger operating performance, partially offset by working capital changes. Excluding the net impact of the KRIP reversion, debt-related repayments, excise tax, changes in restricted cash and the effects of foreign exchange, we decreased our use of cash year-over-year by $26 million. Finally, as disclosed in our annual Form 10-K, we remain in full compliance with all financial covenants. I will now turn the discussion back to Jim. Thank you. James Continenza: If you can leave here with anything that you've heard or seen today, I want to make sure you leave with this message. Kodak is focused on growth following a very strong 2025. We continue to be one Kodak. Customer-first has not changed. Today, we are a diversified industrial manufacturer with one goal, winning. We put our customers first because we only win when they win. We had a very strong finish to 2025. Year-over-year, fourth quarter 2025 revenue increased by $24 million or 9%. Gross profit increased by $16 million or 31%. Operational EBITDA increased by $13 million or 144%. Growth in key businesses, plates and in film. Kodak today is on a very solid foundation for growth. We have a strong balance sheet with more cash than debt. In many years, that has not been the case. Back in second quarter, we had approximately $700 million of debt. Today, we're sitting at $300 million with $300 million plus of cash. We're on the way of taking out another $100 million of long-term debt, which will leave us with over $200 million of cash and $200 million of debt. We'll continue to strengthen that balance sheet, which allows us to execute on growth in our long-term plan. All 3 businesses, Print, AM&C and Brand Licensing are contributing. And inside of that, we have promising new investments in our pharma division, in our battery coating. We continue to invest in the business for a long-term plan. We are pleased with the direction we're in. We have a long way to go. But I can tell you, this is a good start, especially having the balance sheet out of the way. We're really truly focused on growth in our business. I would be remiss if I didn't again thank the leadership team. Over the last several years, we made over a 50% change in the leadership and a melding of the best of what Kodak had and the best of the skills that we knew we needed to bring in to help drive the fundamentals of this company to bring Kodak where it is today. We look forward to the future, and thank you for your support. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
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